149-year-old company to close down only factory of its kind in South Africa

Mpact has said that its Springs Mill is set to run until the end of May 2026, with the company running the factory until all open orders have been completed. 

This was revealed in the company’s financial results for the year ended 31 December 2025, which showed declining profit due to tighter margins. 

Mpact explained this has been driven by a weak local economy and a global oversupply of containerboard and cartonboard. The oversupply in particular led to lower margins and intensified competition from imports. 

The competition from imports was exacerbated by a stronger rand in the second half of 2025, which made it cheaper for Mpact’s customers to source products from overseas rather than locally. 

Mpact, founded in Port Elizabeth in 1877, was forced by a combination of these factors to announce the contemplated discontinuation of operations at Springs Mill. 

“Subject to the consideration of alternatives, production at the Springs Mill is likely to be discontinued once all open orders have been completed,” Mpact told shareholders in its results. 

“Based on current information, the Mill is likely to run until the end of May 2026.” 

Mpact alluded to some of the underlying reasons for manufacturing’s uncompetitiveness in South Africa, saying the Springs Mill has suffered from utility disruptions and customer attrition. 

The company has previously pointed to electricity and water disruptions as major drags on the productivity of its Springs Mill. Many of Mpact’s other mills are largely self-sufficient, being located close to bodies of water and having alternative energy sources. 

“This action reflects the Group’s commitment to disciplined portfolio management and is expected to be cash positive and margin accretive over time,” Mpact said. 

Mpact’s Springs Mill is the only domestic producer of cartonboard and currently employs 377 people in the region. The company’s board has approved the commencement of a section 189A process pending the mill’s closure. 

“The mill is the only domestic producer of cartonboard and competes directly with imports from several countries,” Mpact said in a SENS statement in February. 

The company estimates that its customers are able to import cartonboard at prices approximately 20% below its cost of production. 

Thus, they have turned to imports to meet their demand. The tipping point for Mpact came in January 2026 when its largest customer notified the company that it would no longer purchase cartonboard from the mill and turn to imports instead. 

“Despite extensive efforts, Mpact is unable to bridge the cost gap and is unlikely to secure sufficient demand from other customers at sustainable prices,” the company said.

The Springs mill, comprehensively rebuilt in the 1980s, is no small operation, with two machines having a combined capacity of over 130,000 tonnes per annum. 

Perhaps most famously, the mill produces the cartonboard takeaway packaging for KFC in South Africa, as well as boxes for Blitz firelighters and Freshpak rooibos.

Mpact’s financials

Mpact’s financial performance reveals a company under pressure, with relatively muted revenue growth combined with declining margins. 

“2025 was a demanding year, marked by sustained economic pressure and difficult trading conditions across several of our markets,” CEO Bruce Strong said. 

“While overall performance was mixed, we made progress in strengthening Mpact’s strategic position through disciplined capital investment, portfolio optimisation and operational improvements.”

Strong explained that the company has already conducted the majority of its investment cycle, including the upgrading of its Mkhondo Mill. 

This will enable the company to shift its focus to using its assets to produce stronger earnings, generate more cash, and improve shareholder returns. 

Some of the company’s headwinds were offset by strong growth in the fruit sector, which is one of the largest consumers of paper-related products.

“Record citrus export volumes in 2025 reinforced the structural attractiveness of this market and validated the Group’s strategic focus on investing in export-oriented growth sectors,” Mpact said. 

Mpact said it achieved good volume growth in containerboard, citrus cartons, jumbo bins, agricultural crates, and plastics, supported by recent investments at the Felixton mill, Bins & Crates and Paper Converting operations. 

These gains were partially offset by lower volumes in cartonboard, industrial corrugated packaging and beverage crates. 

In the paper business, sales volumes increased, contributing to higher revenue, but margin pressure resulted in a decline in operating profit. 

The reduction in the paper division’s profitability is mostly attributable to manufacturing, whereas the converting business delivered a notable increase in operating profit in a competitive market. 

Despite lower sales volumes, the plastics business delivered a significant increase in operating profit, supported by an improved product mix, lower input costs and improved performance from all the plastics businesses.

Group revenue from continuing operations for the year ended 31 December 2025 increased by 5% compared to the prior year to R14.0 billion. 

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 1.2% to R1.52 billion, while underlying operating profit decreased by 1% to R914 million.

Return on capital employed declined to 10.9% primarily due to the substantial recent capital investment in Mkhondo, which has not yet contributed to earnings. 

Mpact’s headline earnings per share declined to 307 cents. The company declared a total dividend per share of 60 cents.