Mpact Group management is focused on converting its asset base of paper and plastic packaging operations into improved earnings, cash generation, and returns from recent strategic investments.
CEO Bruce Strong said on Monday that the six months to June 30 was characterised by subdued economic activity, weak consumer demand, and low business confidence.
“Mpact’s focus has shifted from capital expansion to realising the full potential of its modernised asset base. Key priorities for the rest of 2026 include optimising returns from recent investments, accelerating the commercialisation of SLS (semi-chemical softwood pulp), driving efficiency improvements, and advancing portfolio optimisation,” he said.
Trading conditions deteriorated materially in the second quarter following the escalation of conflict in the Middle East, which increased fuel, freight, and certain raw material costs, placing further strain on consumer spending and industrial activity, he added.
Structural global oversupply in containerboard and cartonboard markets continues to put pressure on selling prices despite rising input costs.
The JSE-listed paper and plastics packaging group’s revenue from continuing operations increased by 1.1% to R5.96 billion for the six months, supported by higher volumes in Paper Manufacturing, Paper Converting, and Plastics Bins & Crates, as well as an improved product mix in Plastics FMCG Wadeville.
Gross profit increased by 3.1% to R2.35bn. Earnings per share from continuing business fell to 50 cents from 105 cents. Net debt reduced to R2.6bn from R3bn in the prior period. Earnings before interest, tax, depreciation, and amortisation (EBITDA) from continuing operations fell to R614m from R642m.
Operating profit from continuing operations fell to R284m from R337m at the same time a year before. An interim dividend per share halved to 15 cents from 30 cents. Net debt reduced to R2.6bn from R3bn in the prior period.
Strong said an improved performance in Paper Converting and Plastics reflected the benefits of a focus on growth sectors and higher-margin sustainable products.
Stronger cash generation, together with disciplined capital allocation and operational efficiency initiatives, contributed to a stronger balance sheet.
“Mpact’s Paper Converting and Plastics businesses delivered volume and profitability growth, supported by progress on strategic projects in selected growth sectors and continued investment in innovative, higher-margin, and sustainable products.”
However, these improvements were impacted by margin pressure in Paper Manufacturing, where lower selling prices, higher input costs, and increased depreciation—resulting from the capitalisation of the Mkhondo mill upgrade—weighed on profitability.
He said economic activity is expected to remain stagnant, while elevated fuel, freight, polymer, and other input costs are likely to continue affecting margins, supply chains, and customer demand.
“Municipal infrastructure constraints, double-digit water and electricity tariff increases, as well as an influx of imported products, continue to apply further pressure. Pricing and margins in Paper Manufacturing are expected to remain under pressure in the third quarter, with any improvement in the fourth quarter dependent on the level of price increases,” he said.
Agricultural demand remains a positive driver, supported by the medium-term outlook for citrus exports, although there may be short-term setbacks due to the flooding in the Eastern and Western Cape earlier this year.
This should support demand for corrugated cartons and plastic crates. The Plastics business is expected to deliver an improved full-year result compared with the prior year, with the extent of improvement dependent on polymer price stability linked to developments in the Middle East.
At Mkhondo, the pulp mill is delivering on its throughput and quality objectives, and the sodium lignosulphonate (SLS) quality improved significantly following interventions in the first half, although market development and orders remain below initial projections.
edward.west@nationalmg.co.ca
The National