Key message: Increased local demand for containerboard boosted revenue, and margins increased despite cost pressures. Some once-off items impacted results (floods, fruit export delays).
- Mpact released a Trading Update for 1H FY22.
- HEPS of 153-164c is expected from total operations (discontinued operations added 19.3c), up approx. 32%.
- Revenue is expected to increase by 5% (+13% excluding the sales of Baywhite where the distribution agreement ended in Dec 2021).
- EBIT from continuing operations increased by approx. 21%. Costs increased well above inflation and operations were impacted by ongoing water and power supply issues.
- The update indicates an EBIT margin for total operations of approx. 7.5% (up from 6.3%).
- Containerboard: strong domestic demand reduced exports, improving the sales mix.
- Paper Converting: increased consumer demand in the industrial and QSR sectors improved sales, which were partially offset by lower sales in the fruit sector (supply chain and market uncertainties). New product sales improved – home delivery and courier bags, Freshpact punnets and trays.
- Plastics: sales volumes declined in Bins and Crates (delays in new equipment and operational issues, lower bin sales to fruit sector), FMCG was flat (flood affected) and Preforms and Closures up marginally.
- Net debt increased to R2,206m due to expected capital projects and working capital outflows.
- A further R47m was received for the Springs insurance claim. R16m of costs are included for flood impact.
- We maintain our target Price at R37.00.