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New package on the block

Jun 09 2011 00:00 Svetlana Doneva

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Bending flexibles to profit

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Mondi [JSE:MND] Packaging released a pre-listing statement last week ahead of its proposed debut on the JSE in mid-July, which revealed not only a new name for the independent company – Mpact – but also impressive operating margins at the company’s two key divisions. In fact, one equity analyst rated the group’s income-generating capability over its two listed competitors – Astrapak [JSE:APK] and Nampak [JSE:NPK] – on the basis of efficiency and sound management.

The group’s audited financial statements for the past three years were provided in the pre-listing statement and the statements showed a steady increase in both revenue and earnings. Revenue has increased 125% over the five years leading up to 2010, when revenue was R6,3bn. Earnings before interest, tax, depreciation and amortisation (EBITDA) have increased by 28% over the same period, with EBITDA at R805m last year.

As far as its dividend policy is concerned, Mpact has announced its intention to commit to a “dividend policy that reflects its strategy of creating value and growth” – translating to a dividend cover target of two to three times over a cycle, with payout ratios varying based on the business cycle.

Mpact manufactures two key products: recycled corrugated paper boxes, which made up 77% of its R6,3bn revenue in its 2010 financial year, and rigid plastic containers. The latter is a key driver of the company’s growth ambitions.

“The primary rationale for seeking a separate JSE listing for Mpact is it will allow it to pursue its own growth strategy without the constraint of a shareholder that has differing strategic priorities,” states the pre-listing statement. Mpact’s intent to establish partnerships with existing market players and through organic growth in its rigid plastic container division may appear to be a direct threat to Astrapak, which is the listed specialist in that sector. However, Mpact’s involvement is differentiated by its focus on large volume containers as opposed to Astrapak’s centring on smaller containers.

At the date of listing – planned for 11 July – the authorised share capital of Mpact will be 217,5m shares with a stated capital of R2,3bn. Analysts Finweek spoke to valued the company between R4,4bn and R6,4bn.
 
astrapak  |  mondi  |  nampak  |  packaging
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