South African packaging giant under pressure

Mpact was under significant pressure in its 2024 financial year, citing South Africa’s weak economy, with no recovery expected anytime soon.

Mpact is the largest paper and plastics packaging and recycling business in southern Africa.

The company released its results for the year through December 2024 on Monday, 10 March 2025.

These results revealed a struggling performance for the packaging giant, which saw its basic earnings per share decline by nearly 30% to 342.3 cents per share.

While the company’s revenue grew by 3.67% to R13.29 billion, its profit for the year dropped by nearly 24% to R592.1 million.

Mpact explained that its revenue growth was primarily driven by a 3% increase in sales volumes in its Paper business and an improved product mix in its Plastics division.

The company’s Paper business delivered a solid performance in the period, reporting an increase in revenue and volumes.

However, the company reported that lower selling prices hurt this segment’s profitability in the period, which operating profit down to R909 million compared to R1.2 billion the year prior.

Mpact explained that its Springs paper mill faced water and electricity issues in the 2024 financial year, which impacted production downtime.

The company further reported that, while growth in fruit sector packaging supported this segment, unrest in Mozambique over the past few months has cost the company R20 million in lost sales.

Mpact’s Plastics business did not fare much better. Its revenue grew by 8%, driven by strong demands for Bins and Crates.

However, its FMCG Wadeville profits fell after the expiry of two supply contracts in June 2024.

This division also faced R90 million in restructuring costs, which pulled down the Plastics segment’s operating profit by 52.7%.

A positive sign for this segment is that it acquired a 305 stake in Africa Tanks, one of South Africa’s leading water tank manufacturers, during this period for R73 million.

Mpact completed the sale of its Versapak business in this period, for which it received sale proceeds of R255 million and approximately R50 million in recovered working capital.

This was used to reduce the company’s bank debt, marking a significant improvement in Mpact’s balance sheet.

As of 31 December 2024, the company’s net debt was R2.4 billion, down 11% from R2.7 billion in the prior year.

Mpact CEO Bruce Strong said the company experienced a challenging trading environment for most of the 2024 financial year.

“Trading was hampered by a weak economy underpinned by high interest rates, cost inflation, load-shedding and other service delivery failures, negatively affecting consumer and business confidence,” the company said.

“While the positive outcome of the national election in May 2024 improved confidence, early signs of economic recovery were only observed towards the end of the third quarter after inflation declined and interest rates were cut for the first time in several years.”

Looking forward, Mpact said it is well-positioned to capitalise on any economic recovery in South Africa.

“However, based on our most recent trading, the domestic economy remains subdued despite lower interest rates and reduced inflation,” it said.

“We remain confident in our value-enhancing strategy and committed to executing it effectively. Mpact’s strategy focuses on growth sectors and investments in innovative, higher-margin, and sustainable products.”

Mpact declared a final dividend of 75 cents per share, bringing the total dividend for the year to 105 cents.