Mpact warns of profit slump amid electricity disruptions

Paper and plastics packaging group Mpact is expecting a sharp fall in profits for its half year to end-June amid electricity disruptions and weak international demand for some of its paper products.

The group said it had faced weak economic conditions in SA, lower margins in the paper business due to weak international demand for recycled containerboard, as well as persistent electricity disruptions, notably at its Springs paper mill.

That mill lost 22 production days in the period, at a cost of about R27m, due to the catastrophic failure of a municipal substation in Ekurhuleni, the group said in a trading update.

“While an insurance claim has been submitted, no insurance proceeds have been received or accounted for in the results to date,” the statement read.

Earnings before interest, taxation, depreciation and amortisation (ebitda) are expected to fall 31% in its half-year to end-June from the prior period's R575m, while headline earnings per share (heps) could fall as much as 87.2%.

Ebitda is a measure of the underlying profitability of a company’s operations, excluding items such as finance costs.

In afternoon trade on Monday, Mpact’s share was down 3.75% to R7.70, having lost 48.32% so far in 2020.