Mpact Limited’s Strong Financial Performance in 2023
Mpact Limited, a key player in the packaging and paper industry, has released its preliminary summarised consolidated results for the year ended December 31, 2023. The company also announced its cash dividend declaration, showcasing resilience amidst a challenging economic environment.
The company’s headline earnings per share (HEPS) rose by 8% to 512 cents, compared to 475 cents in the previous year. This growth was supported by an 11.2% increase in net asset value per share, reaching R33.63 from R30.24 in 2022. Notably, Mpact generated a record R2.0 billion in cash from operations, highlighting its strong financial management practices.
According to data from the Johannesburg Stock Exchange (JSE), the company’s underlying operating profit increased by 7% to R1.3 billion for the year, up from R1.2 billion in 2022. The total dividend per share for the year also saw a 4% rise, reaching 120 cents from 115 cents in the previous year.
Strategic Focus and Operational Resilience
Bruce Strong, CEO of Mpact, highlighted the company’s strategic focus on expanding into market growth sectors and aligning with a circular economy business model. This approach has yielded positive results despite difficult trading conditions. Mpact’s operational resilience has been strengthened through investments in new capabilities and alternative power and water supply infrastructures.
Despite facing challenges such as a weak economy, load shedding, and public infrastructure failures, which led to reduced consumer spending, Mpact managed to achieve improvements in underlying operating profit and strong cash generation from operations. These outcomes were driven by improved margins that offset a decline in sales volumes.
Business Performance Across Segments
In the paper business, revenue increased by 3.3% to R10.7 billion, even though sales volumes declined by 11.2%. The plastics business also saw a 5.9% revenue increase to R2.2 billion, with sales volumes dropping by 3.8%. The completion of strategic projects, including upgrades to the Felixton Mill and Mbombela Corrugated, contributed to these operational improvements.
Net finance costs rose to R284.0 million due to higher average net debt and interest rates. However, the effective tax rate decreased to 24.7% thanks to the recognition of a deferred tax asset. Net debt increased to R2.67 billion, reflecting stringent working capital management and significant capital investments.
Future Outlook and Leadership Changes
Looking ahead, Mpact anticipates continued constraints on consumer spending and the broader South African economy, influenced by upcoming national elections. Despite these challenges, the company remains confident in its strategy, which focuses on growth sectors and investments in innovative, higher-margin, and sustainable products.
In terms of corporate changes, Ms. Neo Phakama Dongwana retired from the Board, and Chief Financial Officer Brett Clark is set to retire in May 2024. The Board has initiated the process of recruiting a new CFO.
Dividend Declaration
Mpact declared a final gross cash dividend of 75 cents per ordinary share for the financial year ended December 31, 2023. This brings the total dividend for the year to 120 cents per share.