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Mpact to build R350m plant in major move into plastics recycling

29 000 tons of plastic bottles a year to be diverted from landfill

Johannesburg, 13 August 2014 – Mpact Limited, the JSE-listed manufacturer of paper and plastic packaging and a major paper recycler, today announced a major move into plastics recycling when it unveiled plans for a R350-million state-of-the-art polyethylene terephthalate (PET) recycling plant.

The new plant will process about 29 000 tons of PET plastic bottles a year, generating 21 000 tons of new raw material directly from what was previously considered waste material that would have been sent to landfill sites. This raw material is commonly referred to as rPET. Collecting and processing 29 000 tons of PET bottles amounts to a saving of about 180 000 cubic metres of landfill space each year, the equivalent of 75 Olympic-size swimming pools.

Mpact anticipates that about 1 000 jobs will be created directly and indirectly to operate the new plant and collect the 29 000 tons of PET bottles needed as input material.

Bruce Strong, chief executive officer of Mpact, says the entry into plastic recycling is an exciting opportunity. “Mpact is starting a new venture that will add an important dimension to our business. It is an excellent fit with our strategy and will enhance our position as a leading beneficiator of recyclables in South Africa.”

He says the new business will supply Mpact customers with a reliable and high-quality source of raw material while providing waste collectors with a committed buyer of used plastic bottles. Further, the benefits to the environment are substantial.

“The R350-million that Mpact is investing in plastic recycling, and the R765-million investment we announced in March this year for upgrading our Felixton paper mill, are tangible evidence of our commitment to exploiting sound growth opportunities,” says Strong.

The PET recycling plant will be part of Mpact Polymers, a newly formed operating entity within Mpact Limited. It will be built in Wadeville, Germiston, close to one of Mpact’s existing Plastics manufacturing facilities.

The Industrial Development Corporation (IDC) has provided loan funding of R210-million in debt and R30-million for its equity stake of 21% in Mpact Polymers. The Department of Trade and Industry (DTI) has approved a Section 12I tax incentive.

Hilton Lazarus, head of chemicals and allied industries at the IDC, states: “The plastics industry is a strategic focus area for the IDC. This project is a good fit with the IDC’s chemicals strategy in terms of downstream processing of chemicals, job creation and industrial development.”

Strong expects the new plant to be commissioned during the second half of 2015. He says that building the Mpact Polymers plant and making a carefully planned entry into plastics recycling is a good investment.

“Once the plant is fully operational it will be earnings enhancing,” he says.

Development of the plan for PET recycling was done in close collaboration with key customers to ensure that the processed recycled material meets international standards. Mpact worked with Coca-Cola, its bottling partner Amalgamated Beverage Industries (ABI), SABMiller as well as with industry body PETCO to bring the project to fruition.

Therese Gearhart, President Coca-Cola Southern Africa, adds: “Congratulations to Mpact on this significant investment. In South Africa we already have the highest recycling rates in the developing world at 48%. We are committed to working through partnerships with NGOs and government to increase recycling rates which creates jobs and leads to more economic activity.”

ABI will be the anchor customer for the rPET produced by the plant. Other customers include Mpact Plastics operations and other external customers who will convert rPET directly into preforms, bottles, jars and food trays.

Said ABI’s Managing Director, John Ustas: “When suppliers and customers work together we are able to achieve solutions that benefit all stakeholders. This is a solution that we as customers have been seeking and are excited that Mpact has responded with this R350-million investment. This will not only benefit business but will create jobs and most importantly address environmental concerns.”

Building the PET recycling plant will also enable Mpact to offer customers an alternative local supply of rPET, which allows them to reduce their own carbon footprints. Consumers will also benefit from the use of rPET in packaging as it reduces the cost of new packaging.

Strong says the sharing of expertise and mutual experience was vital to developing a PET recycling business that will be sustainable.

“Our people visited a number of plastics recycling operations around the world while developing Mpact’s plan to enter this business. The project team’s research included visits to Mexico, France, Germany, Bangladesh and Peru. Plants using different technology and facing particular challenges were examined. We drew important learnings about what is needed to establish a viable and sustainable plastics recycling business,” says Strong.

In developing the project, Mpact has also been supported by PETCO, the Ekurhuleni Metro, the Industrial Development Corporation (IDC) and the Department of Trade and Industry (DTI).

Says Strong: “The IDC and the DTI both have a significant interest in supporting industrial development and job creation and are willing to share in managing the risks of the project. The IDC is also an experienced funder of projects of this nature and we are pleased that the corporation has agreed to take up a stake of 21% in Mpact Polymers.

“While the economy is experiencing a variety of challenges, we believe it remains important to approach the future with the optimism and drive needed to lift the economy. Investment in this new plant is founded on both this optimism and a solid business case,” he says.

Strong notes that the new business leverages Mpact’s long involvement in recycling. “Mpact has been recycling paper for about 50 years and collects around 450 000 tons of recycled paper a year.”

Mpact has a substantial recycling footprint, including seven Mpact Recycling branches. The existing collection infrastructure will be enhanced through the addition of PET collection and Strong says this will add further weight to the Group’s contribution to job creation, economic value and environmental stewardship.

The plant will use sophisticated technology and equipment that will enable it to process PET bottles. PET is typically used for carbonated soft drinks, bottled water and other food packaging.

Mpact’s extensive research into the rPET market and technology lead it to select Krones as its supplier of plant equipment. Germany-based Krones is a leading global supplier of plant and equipment for the beverage industry, including for recycling.

Strong expects Mpact Polymers’ increased demand for PET bottles to bolster job creation in the recycling industry. “The South African market currently uses about 124 000 tons of PET bottles a year. Some 59 700 tons of PET was collected for recycling in 2013. So, our initial objective to collect and process 29 000 tons a year indicates a clear opportunity to expand PET recycling.”

The recycling industry in South Africa currently provides jobs for about 100 000 people. Mpact has helped more than 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.

Mpact also initiated projects to develop collections in deep rural and township areas. Recent recycling collection initiatives include a buy-back centre set up in Empangeni and collections at a landfill site in Hluhluwe, both in the Zululand area. Other initiatives include establishment of buy-back centres in Mabopane and Soshanguve around Pretoria, Diepkloof in Soweto as well as Daveyton and Tsakane in Ekurhuleni.

“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 material,” says Strong.

“Mpact is an ambitious company committed to exploring growth opportunities in South Africa and elsewhere in Africa. While Mpact is young in terms of its history on the JSE, it has a long history in South Africa. Our entry into PET recycling demonstrates how, through collaboration with various parties, we can create opportunities to grow our business,” says Strong.

About Mpact

Mpact Limited is one of the leading paper and plastics packaging businesses in southern Africa. It is listed on the JSE’s main board in the Industrial: Paper and Packaging sector. The Group has the leading market position in southern Africa in recovered paper collection, corrugated packaging, recycled-based cartonboard and containerboard, PET preforms, styrene trays, and plastic jumbo bins. These leading market positions allow Mpact to meet the increasing requirements of its customers, achieve economies of scale and cost effectiveness at the various operations.

Mpact has 32 operating sites, 22 of which are manufacturing operations, based in South Africa, Namibia, Mozambique and Zimbabwe and employs 4 000 people.

Please visit www.mpact.co.za for more information.

Issued by FTI Consulting, Strategic Communications on behalf of Mpact Limited
Trevor Jones +27 (0) 11 214 2414 / +27 (0)83 326 7698