Zimbabwe plant to hit Mpact earnings
The closure of Mpact’s plastics manufacturing facility in Zimbabwe, which will cost the company about R40m, is expected to contribute to considerably lower headline earnings for the packaging business when it reports its results for the 2016 financial year.
Mpact was expecting headline earnings to come in "at least" 30% or lower for the year to December 2016, placing it at about at least 109.7c a share, it said in a trading statement
on Monday. Earnings were expected at 110.1c a share.
The group, spun out of industrials group Mondi in 2011, is unable to provide a more precise guidance on these numbers, however, and has committed to publish a further trading statement in February, closer to the publication of its results.
Mpact’s closure of the Zimbabwe plant, which it has already initiated, is expected to cost it 6.47% of the entire group’s R617.8m after-tax profit for the 2015 year.
The firm did not say when it decided to close the plant, for which it reported a turnover of R87m last year, less than 1% of the group’s income.
It recorded an after-tax loss of R3m. This appears to have surprised the market, with Mpact’s share price shedding 6.94% on Monday.
Most of the decline occurred after the release of the trading update, and trades peaked at 2.36pm, six minutes after the release of the trading update.
Other factors that have previously negatively affected earnings — lower container-board sales, a higher effective tax rate, higher finance costs and losses at subsidiary Mpact Polymers — also contributed to the dip in expected earnings.
Analysts covering Mpact did not respond to questions by the time of publication, but one changed his recommendation to "outperform" on Monday.
Of the analysts polled, all expected Mpact to report average earnings of 263.44c a share for the full-year period. The lowest estimate was 257c.
But Mpact executives did point towards a weaker second half during its interim results presentation earlier in 2015.
They warned there was excess container board capacity and Mpact Polymers would only turn a profit in 2017.
The group’s effective tax rate and net finance costs were expected to be higher in the second half.