JSE-listed paper and plastics packaging company Mpact increased its revenue for the six months to June 30 by 1.1% year-on-year to R5.96-billion, and declared an interim dividend of 15c a share, despite the trading environment being challenging, CEO Bruce Strong has said.

The growth in revenue was supported by higher volumes in paper manufacturing, paper converting and plastic bins and crates, as well as an improved product mix in plastic fast-moving consumer goods (FMCG) at its Wadeville, Gauteng, operations.

Gross profit increased by 3.1% to R2.35-billion, with the gross margin improving to 39.4%.

However, earnings before interest, taxes, depreciation and amortisation from continuing operations decreased by 4.4% to R614-million and operating profit decreased by 15.7% to R284-million.

Earnings per share declined to 50c a share, down from 105c a share in the prior comparable interim period.

The six-month period under review was characterised by subdued economic activity, weak consumer demand and low business confidence.

Trading conditions deteriorated materially in the second quarter following the escalation of conflict in the Middle East, which increased fuel, freight and certain raw material costs and placed further strain on consumer spending and industrial activity, he explained.

However, cash generated from operations rose materially to R448-million, up from R173-million in the 2025 interim reporting period. Mpact also reduced its net debt to R2.6-billion from R3-billion.

The company is focusing on growth sectors and higher-margin sustainable products, and is optimising its portfolio to support longer-term growth and sustainability, he said during a presentation of the company's results on August 24.

“The group made good progress against its objectives. Stronger cash generation, disciplined capital allocation and operational efficiency initiatives contributed to a stronger balance sheet.

“Management remains focused on converting the enhanced asset base into improved earnings, cash generation and returns from recent strategic investments,” said Strong.

Further, the BM6 coated cartonboard machine at the Springs mill was closed in May, while the BM3 uncoated coreboard machine at the mill continues to operate.

“Globally, there is an overcapacity of coated carton of about five-million tonnes a year and the prospects of this reversing are low,” he said.

During the period, Mpact also started to rationalise its recycling collection footprint to improve operational efficiency and reduce costs. These actions formed part of Mpact’s portfolio optimisation programme, which was aimed at improving competitiveness, aligning capacity with market demand and enhancing returns, he said.

“We are reducing our exposure to assets where generating sustainable returns is unlikely. We have sold some properties and noncore and unused assets, and we continue to invest in competitive assets for growth sectors.”

The structural global oversupply in containerboard and cartonboard markets continued to put pressure on selling prices despite rising input costs, he added.

Further, Mpact’s paper converting and plastics businesses delivered volume and profitability growth and were supported by progress on strategic projects in selected growth sectors and continued investment in innovative, higher-margin and sustainable products.

“However, these improvements were impacted by margin pressure in paper manufacturing, where lower selling prices, higher input costs and increased depreciation, which were the result of the capitalisation of the Mkhondo mill upgrade, weighed on profitability.”

Management is focused on improving the quality of the company's portfolio, realising value from underused assets and deploying capital to support growth in sectors where it is competitive.

During the second half of the year, economic activity was expected to remain stagnant, while elevated fuel, freight, polymer and other input costs were likely to continue affecting margins, supply chains and customer demand, Strong said.

Municipal infrastructure constraints, double-digit water and electricity tariff increases, as well as an influx of imported products, continue to apply further pressure.

Further, pricing and margins in paper manufacturing are expected to remain under pressure in the third quarter, with any improvement in the fourth quarter dependent on the level of price increases.

Both containerboard mills were fully sold, with no planned commercial downtime, he added.

Demand from the agricultural sector remains a positive driver, supported by the medium-term outlook for citrus exports, although there may be short-term setbacks owing to the flooding in the Eastern and Western Cape earlier this year.

This should support demand for corrugated cartons and plastic crates.

“There are El Niño risks in the coming season, but we produce for a wide variety of fruit types in different regions. While we expect some regional volatility, our fruit and citrus producers have a long history of managing risks during these cycles,” Strong said.

Additionally, Mpact's plastics business is expected to deliver an improved full-year result compared with the prior year, with the improvement being dependent on the stability of the polymer price, which is impacted by developments in the Middle East.

Further, at its newly upgraded Mkhondo facility, the pulp mill is delivering on its throughput and quality objectives, and the sodium lignosulphonate (SLS) quality improved significantly following interventions in the first half, although market development and orders remain below initial projections.

Incremental revenue is not expected to fully offset the project’s additional depreciation and interest charges this year, he said.

“Key priorities for the remainder of 2026 include optimising returns from recent investments, accelerating the commercialisation of SLS, driving efficiency improvements and advancing targeted portfolio optimisation.”

The company expects the operating environment to remain challenging during the second half of the year, for domestic activity and industrial demand to remain subdued and for the global oversupply of containerboard and cartonboard to continue.

“Management will continue to prioritise cash generation, working capital discipline and margin improvement, while maintaining strict capital allocation principles,” he said.