COVID-19 lock-downs, load shedding weigh on Mpact’s H1 earnings

Mpact, a paper and plastics packaging business and recycler, has recently released its interim results for the first half of the year ended on June 30, 2020. The company reported a 1.4% decrease in revenue, citing the impact of COVID-19 regulations and electricity outages. Mpact CEO, Bruce Strong, discussed the challenges faced by the company in a recent interview on CNBC Africa. He mentioned that despite most of their business being allowed to operate during the lockdown, they felt the effects of clients who were shut down, as well as the power supply issues in South Africa. The first half of the year was characterized by a series of challenges for Mpact. Prior to the COVID-19 outbreak, the company faced issues with electricity supply in South Africa, including load shedding and infrastructure failures. Strong highlighted incidents where Mpact experienced significant downtime and financial losses due to power-related problems. These challenges persisted into the first quarter of the year and were further compounded by the impact of the pandemic from the end of March. Despite these obstacles, Mpact managed to achieve a remarkable operating cash flow of 700 million rand during the period, a significant improvement compared to the previous year. Strong emphasized the importance of cash flow, particularly during challenging times, and commended the efforts of Mpact's employees, suppliers, and customers in responding effectively to the difficulties faced by the company. Looking ahead, Strong expressed concerns about the lingering effects of COVID-19 on the economy, as well as the ongoing issues surrounding income and power security in South Africa. He acknowledged that while COVID-19 will eventually pass, its economic repercussions will continue to impact businesses for some time. Additionally, he underscored the significance of reliable power supply and highlighted the detrimental effects of power outages on Mpact's operations. Strong called for prompt action and policy interventions to address the challenges related to power supply and pricing in the country. In conclusion, despite the challenges faced by Mpact in the first half of the year, Strong remains cautiously optimistic about the company's prospects. He noted that Mpact is well-positioned in sectors with promising growth potential, such as the fruit industry. However, he stressed the need for sustainable solutions to the economic and power supply issues plaguing South Africa. As businesses navigate through uncertain times, adaptability and resilience will be key to weathering the storm.