Our opinion on the current state of MPACT(MPT)
Mpact (MPT) is a large producer of paper and plastics packaging in Southern Africa. It recycles paper and cardboard and makes corrugated cardboard containers for a variety of industries as well as polystyrene trays for the food industry. It has 20 manufacturing operations, with South African sales accounting for 86% of its business. It employs over 5000 people.
The business is impacted by the general level of consumer spending (which has been depressed because of COVID-19 and was improving at least until the advent of the Ukraine crisis) as well as weather considerations which affect the demand for corrugated containers for fruit and other agricultural products, especially in the Cape. Like many businesses in the current environment, Mpact has been working to preserve cash, but it has benefited from a switch to local suppliers during the pandemic.
In its results for the year to 31st December 2023, the company reported headline earnings per share (HEPS) up 8% and net asset value up 11.2% at 3363c per share. The company said, "The weak economy, weighed down further by load shedding and other public infrastructure failures, impacted many businesses and consumers who were already struggling because of high interest rates and a prolonged period of high inflation."
In a trading statement for the six months to 30th June 2024, the company estimated that HEPS from continuing operations would fall by between 32.5% and 37.8%. The company said, "The Group's operating profit margin for the six-months ended 30 June 2024 decreased from the high levels achieved in the six months ended 30 June 2023 ('prior period'), which benefited from a strong recovery in Paper margins following selling price increases at the end of 2022."
The share fell from a high of R51 in April 2016 to levels around R8 in March 2020 but has since recovered to 2970c. At the current level, it is on an earnings multiple of 5.8 - which looks cheap. Technically, the share looks like it may be entering a new upward trend but it has been moving sideways since August 2022. On 1st August 2024, the company announced that it had sold its Versapak business for R267.7m.
The business is impacted by the general level of consumer spending (which has been depressed because of COVID-19 and was improving at least until the advent of the Ukraine crisis) as well as weather considerations which affect the demand for corrugated containers for fruit and other agricultural products, especially in the Cape. Like many businesses in the current environment, Mpact has been working to preserve cash, but it has benefited from a switch to local suppliers during the pandemic.
In its results for the year to 31st December 2023, the company reported headline earnings per share (HEPS) up 8% and net asset value up 11.2% at 3363c per share. The company said, "The weak economy, weighed down further by load shedding and other public infrastructure failures, impacted many businesses and consumers who were already struggling because of high interest rates and a prolonged period of high inflation."
In a trading statement for the six months to 30th June 2024, the company estimated that HEPS from continuing operations would fall by between 32.5% and 37.8%. The company said, "The Group's operating profit margin for the six-months ended 30 June 2024 decreased from the high levels achieved in the six months ended 30 June 2023 ('prior period'), which benefited from a strong recovery in Paper margins following selling price increases at the end of 2022."
The share fell from a high of R51 in April 2016 to levels around R8 in March 2020 but has since recovered to 2970c. At the current level, it is on an earnings multiple of 5.8 - which looks cheap. Technically, the share looks like it may be entering a new upward trend but it has been moving sideways since August 2022. On 1st August 2024, the company announced that it had sold its Versapak business for R267.7m.
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