MPACT LIMITED - Unaudited Interim Results for the Six Months ended 30 June 2021
5 August 2021 8:00
Unaudited Interim Results for the Six Months ended 30 June 2021

Mpact Limited
(Incorporated in the Republic of South Africa)
(Company registration number 2004/025229/06)
Income tax number: 9003862175
JSE Share Code: MPT        JSE ISIN: ZAE 000156501
("Mpact" or "the Group" or "the Company")

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

SALIENT FEATURES

- Revenue increased by 16.3% to R5.9 billion (June 2020: R5.1 billion)
- Underlying operating profit increased by 165% to R337 million (June 2020: R127 million)
- Underlying earnings per share up 13 times to 120.8 cents (June 2020: 9.0 cents)
- Successfully repurchased 10% of issued shares during the period returning R257
  million to shareholders
- Return on Capital Employed (ROCE) improved to 15.6% (June 2020: 9.4%)
- Gearing improved to 27.6% (June 2020: 34.8%)
- Retained B-BBEE Level 1 rating for Mpact Operations (Pty) Ltd
- Investments of over R500 million approved to support customer focused growth,
  innovation and sustainability

Bruce Strong, Mpact Chief Executive Officer said: "Mpact continues to show tremendous
resilience, firmly anchored in our purpose of making a difference, providing our customers with
sustainable packaging and giving effect to the circular economy through our integrated
business model.

This is demonstrated by the pleasing financial results for the first half of the year announced
today. The Group's operating profit increased 165% to R337 million and ROCE increased to
15.6%. Underlying earnings per share increased to 121 cents from 9 cents in the same period
last year.

Strong cash flow from operations resulted in net debt decreasing to R1.47 billion (30 June
2020: R1.9 billion) despite returning R257 million to shareholders in January 2021 through a
successful share buy-back.

Our strong financial position and proven strategy enables us to take advantage of the
significant changes in the global economy as it begins to recover from last year's slump.
Customers continue to look to more sustainable solutions sourced locally, instead of relying
on imports and unsustainable packaging formats. They are also demanding even higher
environmental, social and governance standards from their suppliers, which positions Mpact
extremely well as a customer-focused business that is resolute, trustworthy and responsible.

To take advantage of this increase in customer demand, the Board recently approved over
R500 million in investments to support our growth and innovation, improve margins, and
ensure the resilience and sustainability of our operations."

OVERVIEW

Trading for the six months ended 30 June 2021 was robust, with underlying profit exceeding
pre-pandemic comparatives in both the Plastics and Paper businesses.

Group revenue for the six months increased by 16.3% compared to the same period last year
to R5.9 billion, while underlying operating profit increased by 165% to R337 million. The Paper
business benefited from improved global containerboard prices and increased local sales at
higher average prices while the Plastics business also experienced increased demand in most
sectors.

Supply chain constraints across most sectors put pressure on raw material availability and
costs. Recovered paper costs increased dramatically during the period, partly offsetting the
benefits of higher containerboard prices. Similarly, the Plastics business was negatively
impacted by higher polymer costs and the timing of passing these cost increases to customers.

Mpact continues to operate effectively under Covid-19 related protocols and conditions, and
remains vigilant, upholding the highest standards of health and safety at our operations.

Paper business

Revenue of R4.6 billion was 15.8% higher than the same period last year (June 2020: R4.0
billion), with sales volumes increasing by 12.7%. Paper manufacturing benefited from strong
local containerboard demand during the period, improved production performance and a
favourable product mix due to low margin rolled pulp not being produced nor sold in the current
period.

The recovery in the industrial and Quick Service Restaurant sectors and the continued growth
in the agricultural sector benefited the Paper Converting business. Good growth in citrus
volumes is anticipated in the second half, despite the late start to the season.

Underlying operating profit of R347.1 million was up 88.6%, due to improved trading and
operational efficiencies. A second interim payment of R25 million relating to the Springs Mill
electricity supply interruption in 2020 has been approved by insurers and included in the
interim results as sundry income.

Plastics business

Revenue in the Plastics business increased by 18.3% to R1.3 billion with a strong recovery in
sales volumes. Gross profit increased by 23% due to improved sales and a stock write-down
in the prior comparable period which was not repeated.

Plastics showed a significant improvement in profitability, with underlying operating profit
increasing to R34.6 million from a loss in the prior period of R17.7 million due to good
improvements in most businesses.

Net finance costs

Net finance costs of R67.9 million (June 2020: R94.8 million) were lower by 28.3%
compared to the prior comparable period due to lower interest rates and average net debt
over the period.

Earnings per share

Headline earnings per share increased to 120.5 cents (June 2020: 8.4 cents) while basic and
underlying earnings per share increased to 120.8 cents (June 2020: 9.0 cents).

Net debt

Cash generated from operating activities during the six months was R592 million, after a
working capital outflow of R11 million. The cash generated from operating activities more
than offset capital expenditure cash flows of R250 million, payment of interest of R70 million
and shares repurchased of R257 million.

Net debt at 30 June 2021 was R1.465 billion with gearing improving to 27.6% (June 2020:
34.8%).

OUTLOOK

Strong demand experienced in the first half is expected to continue across most businesses
but may be partially offset by the recent unrest experienced in KwaZulu-Natal (KZN) and
parts of Gauteng as well as supply chain constraints across most sectors. Margins are
expected to improve as raw material cost increases are recovered through increases in
selling prices.

Working capital management will remain a key focus area, but it is anticipated that working
capital levels will increase in the current period as inventories are replenished.

Decisive actions were taken by management and staff of operations affected by the unrest in
July 2021. There were no injuries to employees nor any damages to Mpact's assets
attributable to the unrest. All of the KZN operations were closed for up to 8 days which resulted
in lost gross profit due to reduced production of approximately R20 million. In addition, current
indications are that gross profit may be negatively affected by a further R20 million due to lost
sales which may be partially recovered by year-end.

The third wave of the Covid-pandemic which started early in June has had limited impact on
business continuity to date. Relevant health and safety protocols are well entrenched and
upheld across all of the Group's operations.

Mpact has a proven strategy, substantial financial capacity and an experienced management
team. The Board recently approved over R500 million in investments to support customer
focused growth, innovation and sustainability; and to build on our integrated business model
which is uniquely focused on closing the loop in paper and plastic packaging, contributing to
the circular economy, and benefiting society.

DIVIDENDS

During the past 12 months, R345 million has been returned to shareholders in the form of a
share buy-back at an average price of R13.71, of which R257 million was returned during the
current period, equating to 1.4 times earnings for the period. The net asset value per share at
30 June 2021 was R24.10.

The Board has therefore resolved not to declare an interim dividend.

Mpact will continue to focus on creating value for shareholders over the long-term through
prudent capital allocation in the context of growth opportunities; and cash returns to
shareholders by dividends, share buy-backs or a combination thereof.

Financial summary

R'million                                     Six months     Six months     Change
                                                ended 30       ended 30          %
                                               June 2021      June 2020
Revenue                                            5,887          5,062      16.3%
Underlying operating profit (1)                      337            127       165%
Underlying earnings (2)                              180             15      >100%
Net debt                                           1,465          1,938    (24.4%)
Return of capital employed (%)                     15.6%           9.4%        6.2
Basic earnings per share (cents)                   120.8            9.0      >100%
Basic underlying earnings per share (cents)        120.8            9.0      >100%
Basic headline earnings per share (cents)          120.5            8.4      >100%

(1) Underlying operating profit is the Group operating profit before special items.
(2) Underlying earnings is defined as basic earnings before special items.

This short-form announcement is the responsibility of the directors and is only a summary of the
information in the full unaudited announcement. Any investment decision should be based on the
full unaudited announcement which is available on our website https://www.mpact.co.za/investor-
relations/financial-results/2021/HY2021.pdf, and on
https://senspdf.jse.co.za/documents/2021/JSE/ISSE/MPT/HY2021.pdf

The financial information on which the outlook statement is based has not been reviewed and reported
on by Mpact's external auditors.

The full unaudited announcement is also available at our registered offices at no charge during
office hours.

AJ Phillips                                                               BW Strong
Chairman                                                                  Chief Executive Officer

5 August 2021

COMPANY PROFILE

Mpact is the largest paper and plastics packaging and recycling business in Southern Africa
with customers that include packaging converters, fruit producers and FMCG companies.
Mpact's integrated business model is uniquely focused on closing the loop in plastic and paper
packaging through recycling and beneficiation of recyclables.

As at 30 June 2021, Mpact employed 5,153 people (June 2020: 5,026 people) and had 46
operating sites, 22 of which are manufacturing operations, located in South Africa, Namibia
and Mozambique. Sales in South Africa account for approximately 88% of Mpact's total
revenue for the current period while the balance was predominantly to customers in the rest
of Africa.

DIRECTORS

Independent Non-Executive:
AJ Phillips (Chairman), NP Dongwana, NB Langa-Royds, PCS Luthuli, M Makanjee,
TDA Ross, AM Thompson

Executive:
BW Strong (Chief Executive Officer), BDV Clark (Chief Financial Officer)

Company secretary:
DM Dickson

Registered office:
4th Floor, No.3 Melrose Boulevard, Melrose
Arch, 2196
(Postnet Suite #179, Private Bag X1, Melrose Arch, 2076)

Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Bierman Avenue, Rosebank, 2196
(Private Bag x9000, Saxonworld, 2132)

Sponsors:
The Standard Bank of South Africa Limited
30 Baker Street
Rosebank
2196
(PO Box 61344, Marshalltown, 2107)

Auditors:
Deloitte & Touche
5 Magwa Crescent, Waterfall City, Waterfall,1685
(Private Bag X6, Gallo Manor, 2052)
Date: 05-08-2021 08:00:00
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