UK packaging company shares plummet due to US tariffs prompting revenue concern
In a significant blow to Mpac Group, the UK-based packaging solutions provider, the impact of US tariffs has left a lasting mark on its business performance and future restructuring plans, particularly in its Americas operations.
The imposition of trade tariffs, combined with falling consumer confidence and growing economic uncertainty, has caused customers to defer capital investment decisions, leading to a substantial decline in orders during the first half of 2025. This tariff-related uncertainty has led Mpac to warn that its full-year revenue and profit will fall significantly short of previous expectations, with the closing order book down to about £90 million as of June 30, compared to £118.5 million at the end of 2024.
The share price dropped sharply by 33.7% following the profit warning, reflecting market concerns over tariff impacts and economic conditions. Analysts, including Jefferies, have downgraded their profit forecasts for Mpac by 25% for 2025 and 32% for 2026 due to these challenges.
In response to the tariff-related slowdown, Mpac is accelerating the consolidation of its US operations to optimize costs and prepare for recovery. This consolidation involves merging its Cleveland facility with the Boston site and reducing capacity at its Canadian facility in Mississauga. The restructuring aims to reduce costs, manage increased debt levels, and improve operational efficiency amid weaker customer confidence. Mpac is also focused on renegotiating customer-supplier terms as part of cost-cutting efforts.
Despite the current difficulties, Mpac remains well-placed to drive future growth, according to Equity Development analysts, who have noted the company's transformational change in recent times. Mpac's broadened and innovative product offering, specialist engineering expertise, and firm focus on operational excellence and increasing market share are key strengths that will help the company navigate through these challenging times.
It is worth noting that Mpac has agreed to a 'buy-in' transaction for its UK-defined benefit pension scheme with Aviva, worth £249 million. However, the company expects a non-cash impairment charge of approximately £11.5 million due to restructuring.
In conclusion, the imposition and uncertainty of US tariffs have materially disrupted Mpac Group's North American business, leading to deferred orders, lowered profit expectations, and an expedited consolidation plan in the US to mitigate these impacts and stabilize the business for the future.
In the midst of the uncertainties caused by the tariffs, investors might be forced to reconsider their financial decisions towards Mpac Group, particularly in the sector of packaging solutions. To cope with the slowdown, Mpac is not only consolidating its US operations for cost optimization but also seeking alternatives such as renegotiating customer-supplier terms and obtaining insurance, like the 'buy-in' transaction with Aviva, to manage risks and secure a stable financial future.
