Picture: MPACT
Picture: MPACT

Paper and plastics packaging group Mpact says it managed to reduce debt and saw healthy cash flows in 2020, partly due to an improved second half as there was some recovery for businesses  affected by strict Covid-19 lockdown levels.

The group, which is valued at about R2.5bn on the JSE, said in an update for its year to end-December operating profits were under pressure during the year, but net debt fell almost 40% to R1.4bn, while finance costs fell almost a third.

Mpact had operated as an essential service during Covid-19, but had moved to temporarily close certain nonessential product lines in its first half, such as tobacco-related products and packaging for fast food restaurants. It had also reviewed nonessential contracts, and pursued salary reductions.

The group said on Monday that during its second half it had seen improved demand in SA for containerboard, which is used for making corrugated boxes.

Earnings before interest, taxation, depreciation and amortisation (ebitda) from continuing operations is expected to fall 15%, or R206m, in the year to end-December, Mpact said, partly due to electricity-related plant disruptions.

Ebitda is a measure of the underlying profitability of a company’s operations, and during the year, the group's Springs paper mill lost more than 50 production days due to the catastrophic failure of a municipal substation in Ekurhuleni.

This resulted in a loss of gross profit for the group of approximately R91m and other related direct costs of R9m.

An insurance claim has been submitted and an interim settlement of R35m has been approved by the insurers, of which the net proceeds of R25m have been included Mpact’s results.

The balance of the claim has not yet been settled or accounted for, the group said.

Lower average net debt and interest rates reduced net finance costs by approximately 31% from the R245m that was paid in 2019, Mpact said, adding it had also benefited from tax incentives, including those related to energy efficiency initiatives.

In afternoon trade on Monday, Mpact’s share was up 3.05% to R16.90, having risen 10.89% over the past 12 months.

gernetzkyk@businesslive.co.za

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