The paper and packaging firm has come up against weak local and international demand
Mpact, the largest paper and plastics packaging business and recycler in Southern Africa, has written down the value of its various assets by a total of R1.3bn as the group battles low demand for its products.
“It is a view on the future demand and pricing prospects in those businesses. We took that view after evaluating the businesses. They can still generate cash and we do not intend to dispose of any of them. But the carrying value on the balance sheet was more than the amount of cash that they can generate. We had to impair the difference,” Mpact CEO Bruce Strong said on Wednesday.
Mpact’s full-year revenue increased 5.1% to R11.1bn, compared with R10.5bn. Operating profit, however, fell 3.7% to R724m. Earnings per share were also down from the previous 248c to 192c per share. Total cash dividend was 60c, down from the previous 70c per share. Working capital at the end of the period remained high due to sales not meeting expectations. The paper mills took commercial downtime equal to about 10% of their annual capacity. “That is something completely abnormal. The last time we had downtime anywhere near this level was in 2009 during the great recession,” he said.
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