Press Release

Mpact plans R765 million upgrade of its Felixton paper mill in KwaZulu-Natal, raise capacity by 60,000 tons by 2017, switch to recovered paper furnish

By Thu, Mar 06, 2014

JOHANNESBURG, March 5, 2014 (Press Release) -Mpact Limited (Mpact), the JSE listed manufacturer of paper and plastics packaging, today announced that it is investing R765 million to upgrade its Felixton Paper Mill near Empangeni in KwaZulu-Natal.

Mpact Chief Executive Officer Bruce Strong said the significant investment in the latest paper mill technology and machinery will enable the mill to enhance its total product offering and overall competitiveness, and increase capacity by 60,000 tons to 215,000 tons per annum.

"This project will also lead to substantial improvements in energy and operational efficiency. Moreover, the Felixton Mill's environmental footprint will significantly improve through this upgrade," says Strong.

The project benefits include the capability to further enhance our paper properties while simultaneously producing advanced lightweight packaging material. The drive for "lightweighting" is a notable feature of the packaging industry where reducing the weight of products transported over great distances is essential.

On completion of the project, the upgraded mill will use only recycled fibre in the manufacturing process, and will remain globally competitive. The project is expected to exceed Mpact's Return on Capital Employed (ROCE) target of 15%.

Implementation of the project will be over two phases and is set for completion in 2017. Phase One of the project will involve the installation of additional process equipment to increase the use of recycled fibre and enable the production of enhanced quality lightweight paper.

Phase Two will see a major rebuild of the paper machine to enable the mill to produce paper using 100% recycled fibre rather than using sugarcane bagasse as part of the process. The sugar industry is well advanced in the planning of projects that may see energy generated using bagasse as fuel, which will render bagasse less economical as a raw material for the paper manufacturing industry.

Phase One will be commissioned in the first half of 2015 and will see around 20,000 tons of additional capacity come on line. A further 40,000 tons of capacity will come online in the second half of 2017. Around 600 construction jobs will be created over the entire period.

Strong says that the cash requirement for the project will be funded from debt facilities and cash flow from operations. "Given the phasing of the capital spend, and that incremental capacity will be brought on line during the project period, we are comfortable with the funding arrangements," he says.

"The Department of Trade and Industry have approved a tax allowance for the project subject to meeting certain criteria which will be audited."

Strong expects the Felixton Mill's increased demand for recycled fibre to boost job creation in the recycling industry. "In South Africa we already collect 59% of paper and board that can be recycled, but there is no doubt this can be improved upon.

"To this end Mpact Recycling has initiated projects to develop collections in deep rural areas and in former township areas. These initiatives are based on assisting local entrepreneurs to set up businesses and providing support for them through the provision of equipment and purchases of collected paper," says Strong.

The recycling industry in South Africa currently provides jobs for about 100 000 people. Mpact has helped over 40 entrepreneurs start recycling businesses. The company provides further support through buy-back centres that purchase material and has set up sorting and baling facilities that provide further work opportunities.

Strong says Mpact currently serves domestic and other African customers. The company has experienced good growth in the local market and sees increased demand for higher quality recycled-based products in line with international trends. "Against this background we are pleased to be building the manufacturing capability to ensure that South Africa remains globally competitive in recycled paper production," says Strong.

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