Mpact warns of Covid-19 earnings impact


Mpact warns of Covid-19 earnings impact

Published Date: 2020-06-24 | Source: Stephen Gunnion | Author: Stephen Gunnion

Mpact warns of Covid-19 earnings impact

The packaging group says the lockdown resulted in reduced demand for its packaging, while some non-essential lines stopped operating.

Mpact says it will report a sharp decline in first-half earnings after the Covid-19 lockdown resulted in reduced demand for its products.

In a trading statement, the paper and plastics packaging group said while all its divisions were designated as essential service providers during the lockdown some non-essential product lines stopped operating. It continued to produce paper and packaging for food, pharmaceuticals and other essential products but its operations supplying packaging for quick-service restaurants and alcoholic beverages ground to a halt. Additionally, it said the lockdown resulted in reduced demand for other paper and plastics packaging products.

Total sales from continuing operations fell by around 9% in April and May compared to the same two months last year, while five-month sales to the end of May declined by 3.2%. It said it had implemented a number of measures to cut costs and conserve its cash, including negotiating reduced rentals, employees agreeing to salary reductions and reviewing non-essential contracts. Still, for the six months to end-June, it expects underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to decline by at least 50% from the R255 million reported for last June, while earnings and headline earnings per share would fall by at least 80%.

The group said its debt facility headroom at the end of May was around R700 million and that it expected to meet its debt facility covenants.

It said it would provide a further trading statement once it had a reasonable degree of certainty on its earnings ranges for the six-month period.

Its shares rose 4.2% to R11.14 yesterday.

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