Results presentation for the year ended 31 December 2019 2019 in - PowerPoint PPT Presentation

Results presentation for the year ended 31 December 2019

2019 in context Financial review Operating review Financial performance Outlook 2

2019 in context  One of Mpact’s toughest years with the trading performance impacted by  Sales volumes under pressure across most sectors  Improved safety performance  Good progress in transformation initiatives  Achieved B-BBEE level 1  Dalisu recognised at President’s investment summit  Successful introduction of innovative sustainable packaging alternatives  Recognised with 4 gold pack awards  Closure of Mpact Polymers  Selling price of rPET at similar levels to 2015, unsustainable  Impairment of goodwill, plant and equipment – R1.3bn  Successfully refinanced R2.6bn debt facilities 3

2019 in context Financial review Operating review Financial performance Outlook 4

Financial review from continuing operations¹ Group revenue  Revenue up 5.1% to R11.1bn 12,000 11 076 10 543 10 053  Higher average prices, offset by 10,000 8,000 5,944 5,595 lower volumes R million 5,257 6,000  EBITDA of R1,276m in line with prior 4,000 year (excl. IFRS 16, R1,374m) 5,132 4,948 4,796 2,000 0  Underlying operating profit down 3.7% 2017 2018 2019 to R724m (R720m excl. IFRS 16) HY1 HY2  Higher Paper gross margin offset by Underlying operating profit 800 decline in Plastics 751 724  Underlying EPS of 192 cents (2018: 7.1% 600 530 6.5% 248 cents) (excl. IFRS 16, 206 cents) 469 R million 5.3% 545 400  Gearing 32.8% (2018: 27.9%) 331 200  ROCE at 11.8% (2018: 11.9%) 255 206 199  Total dividend 60 cps (2018: 70 cps) 0 2017 2018 2019 HY1 HY2 margin 5 1. Excluding Mpact Polymers. Actual 2017 and 2018 has been restated to exclude Mpact Polymers

2019 in context Financial review Operating review Financial performance Outlook 6

Paper business Segment revenue 10,000 8 733 8 286 7 745  8,000 Revenue up 5.4% to R8.7bn 4,655 R million 6,000 4,370  4,025 Higher average selling price partially 4,000 offset by lower sales volumes, down 3.1% 2,000 4,078 3,916 3,720 0 2017 2018 2019 HY1 HY2 Underlying operating profit 800  Underlying operating profit up 3.1% to 716 694 R716m 600 8.2% 8.4%  420 Good contribution from recent capital 443 R million 475 investments – Felixton mill and PE 400 5.7% 266 corrugator 200  296 Higher gross margins offset by 219 177 commercial downtime in paper mills 0 (10% annual capacity) 2017 2018 2019 HY1 HY2 margin 7

Focus on Environmental Footprint – Felixton mill Total Energy Consumption 105 Total Energy Input per tonne of paper 100 produced (Indexed GJ/T) 95 90 85 80 75 70 2012 2013 2014 2015 2016 2017 2018 2019 Electricity Consumption Carbon Reduction Electricity consumption per tonne of paper 110 Total carbon dioxide emitted (Indexed 110 tonnes of carbon / tonne of paper 105 100 produced (Indexed kWh/T) 100 90 produced) 95 90 80 85 70 80 60 75 50 70 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019 8

Focus on Sustainable Development – Felixton mill Water Consumption Water Consumption per tonne of paper 120 110 produced (Indexed kL/T) 100 90 80 70 60 50 2014 2015 2016 2017 2018 2019 Wastewater Quality Improvement Total Suspended Solids in Wastewaster 120 100 (Indexed Tonnes/day) 80 60 40 20 0 2014 2015 2016 2017 2018 2019 9

Plastics business - Converting Segment revenue  3,000 Revenue up 3.2% to R2.4bn 2 388 2 386 2,500 2 313  Volumes up 4.2% due to growth in 2,000 R million preforms & closures 1,267 1,310 1,251 1,500  Average price down 1% due to lower 1,000 polymer prices 1,121 500 1,076 1,062 0 2017 2018 2019 HY1 HY2 Underlying operating profit 150 142 130  Underlying operating profit of R83m (2018: R130m) 100 85  83 R million Solid performances in preforms & 104 closures and bins & crates 5.9% 5.6% 50  83 Trays & films restructure completed 57 3.5%  26 Negative sales mix in FMCG 0 2017 2018 2019 HY1 HY2 margin 10

2019 in context Financial review Operating review Financial performance Outlook 11

Financial summary from continuing operations¹ Revenue R11.1 billion 5.1% Underlying operating profit R724 million Underlying EPS 192 cents per share Total dividend 60 cents per share ROCE 11.8% 4.9 Gearing² 32.8% 1. Excluding Mpact Polymers 2. Gearing % excludes lease liabilities (IFRS 16) 12

Variable costs from continuing operations Benchmark recovered paper prices (OCC) 120 +5.4% 8,000 (December 2017 = 100) 6 875 100 7,000 6 521 6 433 6.7% 637 Index 597 652 6,000 80 869 1.1% 879 825 5,000 R million 1,173 60 2.4% 1,146 1,151 4,000 736 7.0% 688 40 627 Dec-17 Dec-18 Dec-19 3,000 ZAR US$ 3,460 2,000 3,211 7.8% Source: RISI – PPI Asia, Old Corrugated Containers (OCC), CNF China US$, 3,178 converted to ZAR 1,000 Benchmark polymer prices 150 0 (December 2017 = 100) 140 2017 2018 2019 130 Paper business raw materials Energy Index(ZAR) Plastic raw materials Selling & distribution costs 120 Other 110 100  Virgin paper cost increased above inflation 90 80  Inclusion of WCPT 70 Dec-17 Dec-18 Dec-19 Notes: 1. Paper business raw materials include purchased paper, wood, pulp and recovered paper P1 P2 P3 2. Plastic raw materials include styrene, PET, HDPE, PVC and polypropylene and post consumer PET bottles 3. Other variable costs include chemicals, packaging costs and stock movements. 13 Source: Mpact

Fixed costs from continuing operations  +6.5% Fixed costs up 6.5% 4,000  3 479 Depreciation up 4.7% 3,500 3 268 3 106 650 22.2%  excl. IFRS 16 - R93m 3,000 532 514  Net operating expenses down 2,500 1.2% 999 1.2% 1,011 988 2,000  Lower rental costs (IFRS 16) 1,500 offset by increase in bad debt provision (R43m) 1,000 1,830 6.1% 1,725  1,604 Personnel cost increased 4.8% 500 before WCPT acquisition 0 2017 2018 2019 Depreciation and amortisation Maintenance and net operating expenses Personnel costs 14

Financial review 2019 R million 2018 2019 change before Change IFRS 16 vs 2018 Underlying profit before tax 571 494 (13.5%) 527 (7.7%) Tax charge before special items (116) (128) 9.8% (136) 17.2% Non-controlling interests (34) (38) 11.8% (39) 14.7% Underlying earnings 421 328 (21.6%) 352 (16.4%) Special items, net of tax (39) (1,086) >100% (1,086) >100% Basic earnings/(loss) for the year 382 (758) (>100%) (733) (>100%) from continuing operations Loss from discontinued operation (66) (64) (5.1%) (64) (5.1%) Reported basic earnings/(loss) for 316 (822) (>100%) (797) (>100%) the year Underlying earnings per share from 247.7 191.8 (22.6%) 205.8 (16.9%) continuing operations (cps) 15

Impairment charged on goodwill, plant and equipment reported under special items Cash generating units Goodwill Plant & Total R’m equipment charge Springs mill 197 202 399 Piet Retief mill 160 277 437 Trays & Films 192 253 445 Other - 10 10 Gross impairment charge 549 742 1,291 Tax and non-controlling interest effect - (211) (211) Net impairment charge 549 531 1,080 16

Mpact Polymers – Discontinued operation  Placed into business rescue on 10 December 2019  Disclosed as a discontinued operation  Deconsolidated from Mpact R’m 2019 Trading loss 79 Net finance cost 12 Loss before tax 91 Impairment on plant and equipment 232 Gain on deconsolidation (160) Effects of non-controlling interest on loss before tax and impairment charge (99) Net loss on discontinued operations 64 17

ROCE and net debt from continuing operations Return on Capital Employed (ROCE)  15% ROCE of 11.8% (December 2018: 11.9%)  Reflects marginally lower earnings 11.8% ROCE % 11.9%  Higher working capital levels 10% 8.9% 5% 2017 2018 2019  Net debt Net debt closed at R1,972m before IFRS 16 lease liabilities adjustment of R321m 2,500 2,292 R million  Gearing increased to 32.8%, excluding lease liabilities 1,960 1,972 2,000 (December 2018: 27.9%) 1,830 1,500 2017 2018 2019 Net debt - as reported Net debt excl. IFRS 16 Return on Capital Employed (ROCE) is based on underlying operating profit plus share of equity accounted investees’ net earn ings divided by average capital 1. employed. 18

Net finance cost and net debt from continuing operations Change vs net Change 2018 2019 debt vs net debt R million after IFRS 16 Lease Net debt liabilities Net debt after (IFRS IFRS 16 16) Net debt – close 1 830 1 971 321 2 292 7.7% 25.3% Net debt – average 2 096 2 140 410 2 550 2.1% 21.7% Net finance cost 209 207 38 245 (1.0%) 17.2% Gearing 27.9% 32.8% 5.4% 38.2% 4.9 10.3 Interest cover (underlying EBIT) 3.6 3.5 3.0 (times) Net debt to EBITDA (times) 1.4 1.4 1.7 19

Trade working capital from continuing operations Trade working capital % of revenue  Trading working capital increased by R393m 3,000  Lower trade payables at end of Q4 due to sales not meeting 2,500 expectations 21.7% 2,000 R million 19.1% 17.1% 1,500 2,409 1,000 2,016 1,719 500 0 2017 2018 2019 20