Results presentation for the six months ended 30 June 2020 1 - PowerPoint PPT Presentation

Results presentation for the six months ended 30 June 2020

1 Half-year 2020 in context Impact of Covid-19 Group review Segmental review Financial performance Outlook 2

Half-year 2020 in context  Unprecedented events  Persistent and prolonged electricity supply disruptions  Covid-19 and impact of lockdown  Subdued economy  Recycled containerboard oversupply globally  Improved fruit volumes  Key management appointments  MD Paper Converting and Company Secretary  B-BBEE level 1 retained 3

2 Half-year 2020 in context Impact of Covid-19 Group review Segmental review Financial performance Outlook 4

Impact of Covid-19  Government imposed lockdown  Level 5: 27 March to 30 April , 35 days  Level 4: 1 May to 31 May, 31 days  Level 3: 1 June to date…  Restaurants: closed completely for 35 days; home deliveries only for 31 days; opened with restrictions for 30 days in period  Alcohol ban: 65 days in period. 88 days to date and counting  Tobacco ban: 95 days in period. 133 days to date and counting  Mpact listed as an essential service provider from the onset  Stringent safety and hygiene practices across all operations  Business adapted quickly  Excellent response from all employees, customers and suppliers  Non-essential production lines shut as required  QSR, beverage, tobacco and recycling sectors 5

Impact of Covid- 19…continued  Liquidity  Increased borrowing facilities  Postponement of 2019 final dividend  Debtors collections and inventory levels (make to order)  Non-essential capex postponed  Costs well contained  Rentals, salary reductions, reviewed non-essential contracts, temporary plant closures  Employees  Safety, health and wellness  Revised shift arrangements for business continuity  UIF Ters / leave  Making a difference in our communities 6

3 Half-year 2020 in context Impact of Covid-19 Group review Segmental review Financial performance Outlook 7

Financial review from continuing operations¹ Group revenue  Revenue down 1.4% to R5.1bn 12,000 11 076 10 543  Lower average selling prices in the 10,000 Paper business 8,000 5,944 5,595 R million  Impact of lockdown 6,000  External sales volume down 4.7% 4,000 5,132 5,062  Q2 2020 down 6.4% 4,948 2,000  EBITDA of R396m 0 2018 2019 2020  Lower paper mill margins HY1 HY2  Inventories and bad debt provisions up Underlying operating profit R41m 800 751 724  Electricity interruptions 600  Underlying operating profit of R127m 545 R million 469  Underlying EPS of 9.0 cents (June 400 2019: 57 cents) 5.0% 200  Operating cash flow of R698m 4.2% 255 206 2.5%  ROCE at 9.4% (June 2019: 11.5%) 127 0 2018 2019 2020  No interim dividend declared HY1 HY2 HY1 margin 8 1. Excluding Mpact Polymers. Actual 2018 and 2019 has been restated to exclude Mpact Polymers

4 Half-year 2020 in context Impact of Covid-19 Group review Segmental review Financial performance Outlook 9

Paper business  Revenue down 1.7% to R4bn Segment revenue 10,000  Lower average prices 8 727 8 261 8,000  Volumes down 4.8% 4,649 R million  6,000 4,360 Paper converting down 6.7%  4,000 Paper mill sales up 1.9%, excluding rolled pulp, Recycling 2,000 4,078 3,901 4,006 sales down 11.8% 0  2018 2019 2020 Q2 2020 volumes down 6.5% HY1 HY2  Good growth in fruit sector Underlying operating profit 800  Underlying operating profit down 716 694 37.8% to R184m 600  420 Lower gross margin - product and R million 475 400 market mix  7.3% Springs mill power outage - R27m 200 5.6%  296 4.6% Impact of lockdown 219 184 0 2018 2019 2020  Strong operating cash flow of R564m HY1 HY2 HY1 margin 10

Plastics business  Revenue of R1.1bn in line with prior Segment revenue  Average prices increased by 3.4% 3,000 2 386  2,500 2 313 Sales volumes declined by 3.9% 2,000  Good growth in FMCG, Bins & R million 1,310 1,251 1,500 Crates offset by declines in 1,000 Preforms & Closures, Trays & Films 500 1,076 1,062 1,071  0 Q2 2020 volumes down 5.3% 2018 2019 2020  Underlying operating loss of R18m HY1 HY2  Inventories and bad debt provisions Underlying operating profit up R37m and R5m, respectively 150 130  Contraction in Preforms & Closures in Q2 2020 100 83  Improvement in Trays and Films post R million 104 50 restructuring 83  Solid performances in FMCG and Bins 26 0 -18 & Crates  Strong operating cash flows R193m -50 2018 2019 2020 HY1 HY2 11

5 Half-year 2020 in context Impact of Covid-19 Group review Segmental review Financial performance Outlook 12

Variable costs from continuing operations Benchmark recovered paper +3.9% prices (OCC) 140 120 3,500 3,295 (June 2018 = 100) 3,172 85.6% 386 100 208 Index 3,000 3.8% 420 436 80 2,500 341 0.9% 344 60 R million 2,000 563 5.2% 534 40 Jun-18 Jun-19 Jun-20 1,500 ZAR US$ Source: RISI – PPI Asia, Old Corrugated Containers (OCC), CNF China US$, 1,000 2.7% converted to ZAR 1,595 1,640 Benchmark polymer prices 500 140 130 0 (June 2018 = 100) 120 HY1 2019 HY1 2020 Index(ZAR) 110 Paper business raw material Plastics business raw material Energy Selling & distribution costs 100 Other 90 80 70 Jun-18 Jun-19 Jun-20 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  Fixed costs down 3.9% -3.9%  Depreciation down 15.7%  1,800 Impairment on plant and 1 707 1 640 1,600 equipment end 2019 15.7% 319 269 1,400  Personnel cost decreased 1,200 477 2.6% 484 1.5% 1,000  Lower overtime cost and 800 performance bonus 600 2.6% 911 887  400 Voluntary salary 200 reductions between April and June 0 HY1 2019 HY1 2020 Depreciation and amortisation Net operating expenses Personnel costs 14

Financial review from continuing operations HY1 HY1 R million 2019 2020 change Underlying operating profit 255 127 (50.3%) Net finance costs (123) (95) (22.8%) Loss from equity accounted investees and impairment charge (2) (7) >100% Underlying profit before tax 130 25 (80.3%) Tax charge before special items (25) (7) (70.9%) Non-controlling interests (7) (3) (51.7%) Underlying earnings 98 15 (84.2%) Special items, net of tax 1 - (>100%) Reported earnings for the period 99 15 (84.4%) Underlying earnings per share 57.0 9.0 (84.2%) (cps) 15

ROCE and net debt from continuing operations Return on Capital Employed (ROCE)¹ 14% 11.8%  ROCE of 9.4% (June 2019: 11.5%) 11.5% 12% 9.4% 10%  Reflects lower earnings ROCE % 8% 6% 4% 2% 0% 2019 2020 HY1 Full Year Net debt² 3,000  Net debt closed at R1,938m 2,695 2,500 2,292 1,938  Improved working capital R millions 2,000 1,500  Gearing decreased to 34.8% 1,000 500 0 2019 2020 HY1 Full year Return on Capital Employed (ROCE) is an annualised measure based on underlying operating profit plus share of equity accounted i nvestees’ net earnings divided 1. by average capital employed 2. Net debt includes lease liabilities 16

Net finance cost and net debt from continuing operations Change HY1 2019 Full year HY1 HY1 vs HY1 R million 2019 2019 2020 2020 Net debt - close 2 292 2 695 1 938 (28.1%) Net debt - average 2 550 2 638 2 349 (11.0%) Net finance costs 245 123 95 (22.8%) Gearing % 38.2% 35.9% 34.8% (1.1) Interest cover (underlying EBIT) (times) 3.0 2.1 1.3 Net debt to EBITDA (times) 1.7 2.1 1.7 17

Trade working capital from continuing operations Trade working capital % of revenue  Trade working capital decreased by 3,000 R453m  Lower inventory levels 2,500 24.9%  Decline in raw material 2,000 stock due to lower R million 20.4% collection of recovered 1,500 paper 2,520  Lower stock holding of 2,067 1,000 containerboard 500 0 HY1 2019 HY1 2020 18

Movement in net debt from continuing operations 500 394 304 0 (20) (64) (99) (161) -500 R million -1,000 -1,500 -2,000 (1 938) (2 292) -2,500 Net debt at Cash Working Capital Interest paid Income tax Other items Net debt at December generated from capital inflows expenditure paid June 2020 2019 operations before working capital 19

Taxation HY1 HY1 R million 2019 2020 change Taxation charge 25 7 (70.9%) Effective tax rate 29.6% 28.6% (1.0) Tax paid 32 20 (38.6%) 20

Capital expenditure cash flows Paper business Plastics converting business 126 96 138 79 106 35 2019 2020 2019 2020 HY1 HY2 HY1 HY2 1. Excludes Corporate capital expenditure of R20 million (June 2019: R8 million) which comprise spends related mainly to the purchase of Land and Buildings. 21

Dividends  No interim dividend declared  Uncertainty of the impact of the lockdown and Covid-19 pandemic  Final cash dividend of 42 cps for the year ended 31 December 2019 will be paid on 7 September 2020  Details announced on SENS on 30 April 2020 22