Picture: MPACT
Picture: MPACT

Packaging manufacturer Mpact said on Wednesday that it took write-downs that represent more than half of its market capitalisation in the year to end-December, as it battled with the effects of load-shedding and global oversupply of the material that is used to make corrugated boxes.

The group wrote down some of its operations by a total of R1.3bn, which compares unfavourably to its R2.2bn market capitalisation on Wednesday morning.

The group swung into a loss of R880.4m from a profit of R317m previously. Accounting changes, which bring leases on to the balance sheet, decreased pre-tax profit by R33m.

The group said there is still no indication of any meaningful improvement in SA’s economy, which “is aggravated by debilitating power outages”.

The group said its paper mills took commercial downtime equating to approximately 10% of their annual capacity.  

The group intends to prioritise cash preservation and mitigating the effects of the weak economy through cost savings, efficiency gains and product innovation in the year ahead, said CEO Andrew Strong.

“The global oversupply of containerboard and cartonboard persists, while we expect the dynamics supporting recycled fibre availability to continue for the remainder of the year,” he said.

Mpact’s paper business reported a 5.4% increase in revenue for the year to R8.7bn, due to higher average selling prices. External sales volumes decreased due to lower export and local demand, the group said.

In afternoon trade on Wednesday, Mpact’s share was up 0.16% to R12.77, having fallen 45.89% over the past 12 months.

Update: March 4 2020
This article has been updated with comments and share price information.