Mpact Limited (JSE:MPT) News - Trading Statement

Mpact Limited
(Incorporated in the Republic of South Africa)
(Registration number 2004/025229/06)
JSE share code: MPT ISIN: ZAE000156501
(“Mpact” or “the Company” or “the Group”)


TRADING STATEMENT

In terms of the JSE Limited Listings Requirements, listed companies are required to publish
a trading statement as soon as they are satisfied that a reasonable degree of certainty exists
that the financial results for the period to be reported on next will differ by 20% or more from
the financial results of the previous corresponding reporting period.

As reported in the 31 December 2021 annual results released on SENS on 7 March 2022,
the plastic trays and films business, Mpact Versapak, is anticipated to be sold as a going
concern, and as such Mpact’s Group results include separate disclosures in the financial
statements for discontinued operations and assets and liabilities held for sale.

Continuing operations

Mpact’s trading for the six-months ended 30 June 2022 improved mainly on the back of
strong local containerboard and cartonboard demand, good growth in new product sales and
higher selling prices implemented at the end of 2021 to cover sharply escalating input costs.

As a result of strong domestic containerboard demand we reduced exports, which led to a
favourable sales mix variance compared to the six months ended 30 June 2021 (“prior
period”). Comparative sales of Mondi Baywhite declined as the distribution agreement
expired on 31 December 2021.

In Paper Converting, increased consumer demand compared to the prior period resulted in
improved sales volumes in the industrial and quick service restaurant sectors. These were
partially offset by lower sales to the fruit sector as producers delayed orders due to supply
chain and market uncertainties arising from port constraints in South Africa and sanctions on
Russia. However, sustained growth was experienced in new product sales, albeit off a low
base, including home delivery and courier paper bags; and Freshpact punnets and trays.

Sales volumes in the Plastics business declined due to a reduction in Bins and Crates, while
FMCG was in line with the prior period and Preform and Closures up marginally. Production
of bins and crates was lower than the prior period due to delays in the arrival of new
equipment and in part to operational issues, impacting sales. This equipment was required
to offset the planned relocation of equipment between plants as part of the establishment of
the new Castleview factory in Gauteng. Additionally, bin sales to the fruit sector declined for
the same reasons as in Paper Converting. FMCG was affected by seven days of downtime
at the Pinetown factory attributable to the floods in KwaZulu-Natal (“KZN”).

Revenue for the period is expected to increase by approximately 5% when compared to the
prior period. Excluding the sales of Baywhite, revenue is expected to increase by
approximately 13%.

During the period costs of recovered paper, pulp, plastic polymers, electricity, coal and
several process chemicals increased well above inflation. Operations continued to be
impacted by ongoing power and water supply interruptions and other municipal infrastructure
related challenges.
Mpact expects to report an increase in underlying earnings before interest and tax
(“underlying EBIT”) of approximately 21% (June 2021: R318.7 million). In the current period,
Mpact received a final settlement of R47 million (June 2021: R25 million) from the insurers
relating to the Springs municipal electricity supply interruption in 2020. The costs associated
with the KZN floods of R16 million are included in the current period results, while the
insurance claims are being finalised by insurers.

Net debt increased to R2,206 million (December 2021: R1,756 million) mainly due to
investments in capital projects and working capital cash outflows, which were both
anticipated.

Business held for sale / discontinued operations

For the six-months ended 30 June 2022, Versapak reported revenue of R510 million (June
2021: R428 million), and net earnings of R28 million (June 2021: R18 million), which equates
to basic earnings per share of 19.3 cents (June 2021: 12.3 cents). Versapak’s net asset
value as at 30 June 2022 was R337 million (June 2021: R202 million).

The Company is in discussions with potential buyers for the business. It is anticipated that
the sale could take several months to complete.

Continuing operations and total operations

Based on the above, Mpact expects earnings per share (“EPS”), headline earnings per
share (“HEPS”) and underlying EPS to be in the following ranges:

                                                                       Six-months ended 30 June
                                Six-months ended 30 June 2022
                                                                                   2021
                                                                       Continuing       Total
                     Continuing operations              Total                     1
                                                                       operations     operations
                                                        Operations
                                                                          Cents per share (cps)
 EPS                 Between       132 and 145 Between 151 and
                     cps, an        increase of 164 cps, an increase
                                                                            108.5          120.8
                     between        21.7% and of between 25.0%
                     33.6%                      and 35.8%
 HEPS                Between       133 and 148 Between 153 and
                     cps, an        increase of 166 cps, an increase
                                                                            108.3          120.5
                     between        22.8% and of between 27.0%
                     36.7%                      and 37.8%
 Underlying          Between       132 and 145 Between 151 and
 EPS                 cps, an        increase of 164 cps, an increase
                                                                            108.5          120.8
                     between        21.7% and of between 25.0%
                     33.6%                      and 35.8%
1.
     Restated to exclude the discontinued operations.


Mpact’s unaudited results for the six-months ended 30 June 2022 will be released on SENS
on or about 8 August 2022.

Shareholders are advised that the financial information on which this trading statement is
based has not been reviewed nor reported on by the Company’s external auditor.

Melrose Arch

28 July 2022
Sponsor

The Standard Bank of South Africa Limited

Date: 28-07-2022 01:56:00
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