Mpact Limited
(Incorporated in the Republic of South Africa)
(Company registration number 2004/025229/06)
Income tax number: 9003862175
JSE Share Code: MPT JSE ISIN: ZAE 000156501
(“Mpact” or “the Group” or “the Company”)


UNAUDITED INTERIM RESULTS AND CASH DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 30
JUNE 2023

HIGHLIGHTS FROM CONTINUING OPERATIONS

    •   Operating profit increased by 37% to R531 million (June 2022: R387 million)
    •   Strategic growth projects contributed positively to results
    •   Headline earnings per share up 33% to 188 cents (June 2022: 142 cents)
    •   Return on Capital Employed (ROCE) improved to 18.7% (June 2022: 18.0%)
    •   Interim dividend declared of 45 cents per share (June 2022: 40 cents per share)
    •   Implementation of strategic projects on track


COMMENTARY FROM CONTINUING OPERATIONS
OVERVIEW
Mpact reported a strong performance for the six months ended 30 June 2023 with operating profit
increasing by 37% to R530.7 million when compared to the prior period.

Bruce Strong, Mpact Chief Executive Officer, said: “It’s been a very pleasing performance despite the
tough economic conditions. Our revenues, profits and interim dividend are all up, which validates our
investment thesis, and our prudent growth strategy. All operations reported improved performances,
underpinned by our successful investments in both new capacity and alternative power and water
supplies, which have increased our operational resilience. Executing on our value-enhancing strategy,
and deliberately pursuing innovation, has enabled the Group's expansion into new, higher-margin
product areas domestically and for the offshore market. We have strategically positioned Mpact and
our products to capitalise on the global push towards a circular economy. Our unwavering
commitment to closing the loop in paper and packaging places us at the forefront of this
transformative movement and is improving profitability while giving the Group a sustainable growth
trajectory.”

While inflation has reduced from the high levels of last year, costs still remain elevated. Towards the
end of the period, there was some relief in the cost of some plastic polymers, recovered paper and
pulp, which partially offset the increases in other costs, such as electricity, coal, fuel, and certain
imported raw materials that were affected by the weaker rand. The significant global supply chain
constraints that hindered the sourcing of raw materials last year, have now improved.

Load shedding has increased considerably compared to the first half of last year. As previously advised,
Mpact’s paper mills and most converting operations have demand curtailment agreements with
Eskom rather than being subject to load shedding schedules. The required curtailment is linked to load
shedding stages implemented by Eskom, but thanks to our installed solar generation capacity and
process designs we have been able to respond to the curtailment requirements up to stage 6 load
shedding without materially reducing production. Some converting operations remain affected by
load shedding and still need to amend production schedules. To mitigate these effects, where feasible,
generators are used to meet customer requirements.

New solar generation installations totalling 6.7 Megawatts peak (MWp) at our Springs mill and
Castleview factory are on schedule to be completed during the second half of this year. They will bring
the Group’s solar capacity to approximately 16.1 MWp.

Mpact Operations (Pty) Ltd, the Group’s main trading entity in South Africa, retained its Level 1 B-
BBEE status.

FINANCIAL REVIEW
Group revenue for the six months increased by 8.7% to R6.2 billion compared to the prior period,
despite sales volumes decreasing by 10.2%.

Operating profit (EBIT) increased by 37.1% to R530.7 million (June 2022: R387.1 million) mainly due
to an improvement in profitability of the Plastics business, higher selling prices in the Paper business
implemented in October 2022, and the benefits of recently completed investment projects.

Paper business

Revenue of R5.3 billion was 7.2% higher than the same prior period (June 2022: R4.9 billion), due to
higher selling prices which were partly offset by lower sales volumes in both paper manufacturing and
converting.

Paper manufacturing sales volumes decreased, due to subdued consumer demand and to the late
arrival of imports of containerboard and cartonboard ordered by customers last year when there were
global shortages. The slowdown in containerboard sales and high customer inventories necessitated
production downtime at the containerboard mills to avoid unnecessarily locking up cash in working
capital. As such, the Mkhondo and Felixton Mills took commercial downtime amounting to
approximately 13% of their capacity during the period.

In Paper Converting, both agricultural and industrial sales volumes were down compared to the prior
period. In the agricultural sector, good growth in citrus, avocado, tomato, and banana packaging
volumes was offset by declines in grapes, pome fruit and stone fruit which were affected by adverse
weather in the Western and Eastern Cape growing areas in late 2022. Industrial sector volumes
declined due to subdued consumer demand and the negative effects of load shedding.

Despite this, the business performed well with operating profit up 19.8% to R548.3 million as a result
of higher selling prices and a recovery from the impact of the 2022 floods in KwaZulu-Natal (KZN).
While there were no insurance proceeds received in the current period, the prior period included
insurance proceeds of R47 million.

During July, the Springs Mill experienced 18 days of production downtime due to supply interruptions
of water and electricity from the City of Ekurhuleni, which have since been resolved.
Plastics business

Revenue in the Plastics business of R992.5 million increased by 17% (June 2022: R848.6 million) with
operating profit increasing to R63.2 million (June 2022: R3.5 million). This was on the back of recent
investments in the Bins & Crates business and the consolidation of the Preforms & Closures sites in
2022. This strong performance was achieved despite lower volumes in FMCG, and Preform & Closures
businesses due to lower consumer demand as the financial health of the consumer continues to
deteriorate.

Insurance proceeds of R6.5 million associated with the KZN floods were recognised in June 2023. In
the prior comparable period, R11.6 million was incurred for asset impairments and other costs relating
to the floods.

Net finance costs

Net finance costs increased to R131.7 million (June 2022: R81.8 million) due to higher average net
debt and interest rates compared to the comparable prior period.

Earnings per share

Headline earnings per share increased 32.5% to 188.2 cents (June 2022: 142.0 cents), while basic
earnings per share increased 37.3% to 190.7 cents (June 2022: 138.9 cents).

Net debt

Net debt increased to R2,640 million (December 2022: R2,327 million) with strong cash generation
from operations offset by outflows of R843 million for capital investments, in line with the Group’s
strategy.

DISCONTINUED OPERATIONS
As previously advised, Mpact’s Board will sell its Plastics’ Trays & Films business, Versapak, as a going
concern. Versapak currently forms part of the Plastics Division of Mpact Operations. Mpact’s Group
results include separate disclosures in the financial statements for discontinued operations and assets
and liabilities held-for-sale. As at 30 June 2023, the sale of Versapak was still in progress.

For the six months ended 30 June 2023, Versapak reported revenue of R545 million (June 2022: R510
million), and net earnings of R34 million (June 2022: R28 million), which equates to basic earnings per
share of 23.4 cents (June 2022: 19.3 cents). In December 2022, a decision was taken to exclude
Versapak’s trade receivables, cash balances and trade payables from the assets and liabilities held-for-
sale in order to reduce the complexity of a transaction. This has resulted in Versapak’s net asset held-
for-sale decreasing to R173 million (June 2022: R337 million).

OUTLOOK
Globally, the supply chain constraints that affected our business during 2022 have improved, and we
expect the related cost inflation to continue declining. However, in South Africa, input costs are likely
to remain elevated with consumer demand expected to be muted due to factors such as Eskom load
shedding and the weakening of the rand compared to 2022. These factors could, in turn, affect
demand for some of our products and put pressure on margins.
Despite the challenges, our strategy of investing in innovative, higher-margin, and sustainable
products is expected to consistently yield tangible benefits for the business, leading to improved
returns for our shareholders. We have strategically targeted sectors that are projected to grow in the
foreseeable future, and these sectors are also somewhat insulated from South African consumer
spending patterns. Some of our key areas of focus include fruit exports, convenience shopping,
recycling, and waste management.

For the rest of this financial year, the Plastics business is expected to benefit further from recent
investments in the Bins & Crates business, and continued portfolio optimisation and cost
improvement initiatives.

The Paper business’ profitability during the second half of the year will be affected by planned
downtime at the Felixton Mill and the Mbombela paper converting plant for the implementation of
capital projects, which will benefit the business in future. The Felixton Mill upgrade project is aimed
at increasing the production of quality lightweight recycled containerboard by an additional 16,000
tonnes per annum and is expected to be commissioned by the end of September. The Mbombela
paper converting project, which is scheduled to be completed by the end of December, entails
equipment upgrades to meet the growing needs of our fruit customers in the region, who are
expanding.

Our management team is dedicated to executing our value-enhancing strategy, designed to optimise
our business portfolio and drive both organic and inorganic growth. We will continue to focus on the
management of costs and working capital, including through carefully calibrated commercial
downtime if and when necessary.

BOARD CHANGES
Ms Neo Phakama Dongwana retired by rotation at the Annual General Meeting of Mpact on 1 June
2023. The Board would like to thank Neo for her valuable contribution, dedication, and commitment
to Mpact during her tenure.

DIVIDENDS
The Board has resolved to declare an interim gross cash dividend of 45 cents for the six months ended
30 June 2023 (36 cents net of dividend withholding tax) per ordinary share (June 2022: 40 cents per
ordinary share). A dividend withholding tax of 20% will be applicable to all shareholders who are not
exempt. The dividend has been declared from income reserves.

The Company's total number of issued ordinary shares at the date of this announcement is
149,453,688. Mpact's income tax reference number is 9003862175.

Salient dates for the cash dividend distribution


 Event                                                                                           2023

 Publication of dividend declaration                                               Thursday, 3 August

 Last day of trade to receive a dividend                                          Tuesday, 29 August
 Shares commence trading “ex” dividend                                      Wednesday, 30 August

 Record date                                                                   Friday, 1 September

 Payment date                                                                Monday, 4 September



All times provided are South African local time.

Share certificates may not be dematerialised or re-materialised between Wednesday, 30 August 2023
and Friday, 1 September 2023, both days inclusive.

Financial summary from continuing operations




                                                   Six months ended     Six months ended
 R’million                                              30 June 2023         30 June 2022      Change
 Revenue                                                       6,240                5,743        8.7%
 Operating profit                                                531                  387       37.1%
 Profit before tax                                               409                  311       31.4%
 Net debt                                                      2,640                2,206       19.7%
 Return of capital employed (%)                                  18.7                 18.0         0.7
 Interim gross dividend per share (cents)                        45.0                 40.0      12.5%
 Basic earnings per share (cents)                              190.7                138.9       37.3%
 Basic headline earnings per share (cents)                     188.2                142.0       32.5%


This short-form announcement is the responsibility of the Directors and is only a summary of the
information contained in the full unaudited announcement. Any investment decision should be based
on the full unaudited announcement which is available on our website
https://www.mpact.co.za/investor-relations/financial-results/2023/HY2023.pdf,       and        on
https://senspdf.jse.co.za/documents/2023/JSE/ISSE/MPT/HY2023.pdf

The financial information on which the outlook statement is based has not been reviewed and
reported on by Mpact’s external auditors.

The full unaudited announcement is also available at Mpact’s registered office at no charge during
office hours and may be requested by emailing: DDickson@Mpact.co.za.




AJ Phillips                                                    BW Strong

Chairman                                                       Chief Executive Officer

3 August 2023
COMPANY PROFILE
Mpact is the largest paper and plastics packaging and recycling business in Africa with customers that
include packaging converters, fruit producers and FMCG companies. Mpact’s integrated business
model is uniquely focused on closing the loop in plastic and paper packaging through recycling and
beneficiation of recyclables.

As at 30 June 2023, Mpact employed 5,194 people (June 2022: 5,106 people) and had 42 operating
sites, 24 of which are manufacturing operations, located in South Africa, Namibia and Mozambique.
Sales in South Africa account for approximately 91% of Mpact’s total revenue for the current period
while the balance was predominantly to customers in the rest of Africa.

DIRECTORS
Independent Non-Executive:

AJ Phillips (Chairman), PCS Luthuli, M Makanjee, TDA Ross, DG Wilson and ABA Conrad


Executive:
BW Strong (Chief Executive Officer), BDV Clark (Chief Financial Officer)

Company secretary:
DM Dickson

Registered office:
4th Floor, No.3 Melrose Boulevard, Melrose Arch, 2196


Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Bierman Avenue, Rosebank, 2196
(Private Bag x9000, Saxonworld, 2132)

Sponsors:
The Standard Bank of South Africa Limited
30 Baker Street, Rosebank, 2196
(PO Box 61344, Marshalltown, 2107)

Auditors:
PricewaterhouseCoopers Inc. (PWC)
4 Lisbon Lane, Waterfall City, Jukskei View, 2090
(Private Bag X36, Sunninghill, 2157)