HANNA BARRY: Paper and plastics packaging group Mpact reported an 11% climb in revenue this morning to R4.4bn for the half-year to June. Operating profit up very strong, 27%, to R342m.
We are joined on the line now by Mpact CEO, Bruce Strong. Bruce, thanks for your time. Healthy fruit exports, it seems, to European nations helped to boost these results. Mpact packs fruit for table-grape exporters, among others. How many boxes of fruit does Mpact pack on average each month?
BRUCE STRONG: Well, Hanna, it’s hard to say on average but the South African fruit industry is well over 200m cartons a year, and we pack a fair percentage of that. So it is an important part of our business but it’s not the only part. We have a number of other businesses and fruit is just one of them, and we have a very long association with that sector. And we have invested extensively to supply their needs and to develop our products accordingly.
HANNA BARRY: Is that sector a growing sector in South Africa?
BRUCE STRONG: It must be remembered that the fruit sector certainly is everything that is local, so it’s the one thing that is very much home-grown, if I can use that term. And that is positive for the South African economy because everything home-grown obviously has to be packaged here and sent off. The benefits of that are clear.
They do face a number of challenges, the sector generally, but the one thing that really impresses about the fruit growers in South Africa is their resilience. Many of these businesses have been around for several generations, they’ve seen a lot of ups and downs and they are at the forefront of the industry. So we are very proud to be associated with them and also able to benefit from their growth. There are a number of the exporters in South Africa who have grown extensively over the past years and will continue to grow, but there’s no doubt that they face some of the challenges that you’re seeing across the industry in South Africa and they’re having to deal with that. But they have shown the resilience at the same time to overcome.
HANNA BARRY: Mpact itself is quite exposed to the fast-moving consumer goods sector, being a packing company. The consumer is under pressure, as we know. Are you seeing the impact of a cash-strapped consumer reflected in your business?
BRUCE STRONG: Yes, I think it would be fair to say that when it comes to the fast-moving consumer goods sector of our business, things are more subdued than they are in other sectors. Just the manufacturing data that came out yesterday I think did show a contraction in manufacturing, but there was a 2.8% growth in food and beverage and that reflects the numbers we are seeing in our business. But there’s no doubt that consumers in South Africa are under pressure. On the one hand that’s a big challenge but on the other hand it presents an opportunity for innovative companies because, as they’re under pressure, one has to bring to the market more cost-effective packaging that not only delivers the same strength and display characteristics but comes in at a price which is affordable.
And especially if one considers how more and more pack sizes are becoming smaller in certain cases, there you’ve got to make sure the packaging costs don’t become such an impediment to actually distributing the goods that they’re not able to be consumed at the right price.
So, as an innovative company, as a company that’s investing in the sector, we see that as somewhat of an opportunity to differentiate ourselves and that’s reflective in the investments that we are currently undertaking. So for example in our PET business, in the plastics side, we’re investing in the recycling stream there. And on the corrugated side and the other paper sides we’re investing in lighter-weight products that deliver the same strength performance – higher graphics for example, to display the products more prominently and to differentiate them.
Those are the things that I think are necessary in these times to make sure that one’s business is more resilient than others.
HANNA BARRY: Is there a lot of pressure coming through from product providers to whom you are providing this packaging to do exactly what you’ve just described?
BRUCE STRONG: Absolutely. You’re finding right through the chain you’ve got a number of these brand owners who are demanding lighter-weight packaging. Packaging is obviously something that is absolutely necessary to ensure the safe passage of goods, and that it’s fit for consumption when it arrives at the consumer’s house or the point of consumption.
So nobody I think doubts the necessity of packaging but at the same time everybody wants to look at, one, the amount of cost involved in packaging but, two, also the recycling stream, making sure that the packaging that is used can be recycled. We are very pleased to be an integral part of the recycling industry in South Africa, which incidentally employs over 100 000 people. We have a big network and footprint of recycling across the country. We are a big buyer of recycled product and recently we’ve just commissioned a R350m recycle PET plant, which will see us putting recycled product into bottles and jars that are going to be used for food packaging as well.
HANNA BARRY: Bruce Strong is the CEO of paper and plastics packaging group, Mpact. Mpact recycles something like 450 000 tons of waste every year and it is also investing R765m in its Felixton Paper Mill in northern KwaZulu-Natal to increase the rates of recovery of paper.
I asked Bruce to chat to me a little bit about the beneficiation of recyclable products in this country – what that can do for the economy of the country, as well as the labour situation from his point of view, Mpact employing more than 4300 people.
For the full interview click here.