UK Plastic Packaging Tax: who wins?
7th April 2022 |
The UK generates more than two million metric tonnes of plastic packaging waste per year.
That equates to roughly 36 kilograms of waste per person.
What’s more, for every kilogram of plastic packaging produced, 3.5 kilograms of carbon dioxide is released into the atmosphere.
Doing the maths shows that the UK emits 7 million tonnes of carbon dioxide into the atmosphere every year, from plastic packaging waste alone.
Bear this in mind, one tonne of carbon emissions is the equivalent to driving 23,000 miles in the average car.
Thankfully, the UK government has taken action to reduce the damaging environmental impact of plastic packaging.
On 1 April 2022, the UK-wide Plastic Packaging Tax came into force.
Under the terms, the tax will apply to any plastic packaging that is manufactured or imported into the UK, which is comprised of less than 30% recycled plastic.
The tax will apply at a rate of £200 per tonne.
The tax will not apply to businesses who manufacture or import less than ten tonnes of plastic packaging.
The tax comes as part of the UK government’s push to reduce carbon emissions in the wake of the COP26 climate summit talks.
The bad news is the tax could put a further squeeze on existing inflationary pressures, as businesses may pass on higher costs to consumers.
The good news is that the tax will likely incentivise businesses to become more sustainable with their packaging, reducing the environmental impact.
This boosts a strong investment case for MPAC Group (LSE: MPAC).
Frontier Tech Investor portfolio holding MPAC is a provider of versatile packaging solutions.
MPAC’s systems streamline the manufacturing processes of its customers, starting with product assembly, right through to palletisation.
MPAC’s automated technology is based on modular design. This means it can be adapted to a wide range of packaging solutions, such as cartoning and boxing.
This flexibility reduces waste packaging because it can easily meet packaging requirements, in comparison to conventional, fixed-process machinery, say.
What’s more, MPAC is seeking to create sustainable packaging for its customers.
Specifically, it is:
Partnering with customers to support their reduction in packaging materials usage and the effective adoption of biodegradable and recyclable materials.
An example of this is MPAC’s manufacturing of bagasse packaging.
Bagasse is sugarcane pulp which can be optimised for food packaging. It is a sustainable alternative to plastic packaging.
You can see how MPAC is involved in the Bagasse packaging process here.
In January, MPAC amalgamated its three business subsidiaries to form one entity, called One MPAC.
Its three business subsidiaries were MPAC Lambert, a provider of automated technology; MPAC Langen, a provider of automated packaging machinery; and MPAC Switchback, a designer of packaging equipment.
According to chief executive Tony Steels, the amalgamation will help to deliver more “scalable” and “innovative” solutions for customers.
Finally, MPAC has reported some solid financial figures for the full-year 2021.
MPAC reported revenues of £94.3 million for 2021, which is a 12.6% increase on the previous year.
In addition, its order intake increased 40.5% from 2020 to 2021, rising from £83.9 million to £117.9 million.
Whilst those numbers don’t excite, it’s important to bear in mind that MPAC is still in the early stages of commercialisation.
In fact, its state-of-the-art facility in the United States only opened in August last year.
We believe this could help MPAC realise its growth potential, as it will help boost scalability of its automated packaging solutions.
With policy-makers now targeting packaging as a way to tackle climate change, MPAC’s solutions suddenly seem even more attractive and valuable.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Buy list update
Equals Group (LSE: EQLS)
Equals is a financial ecosystem that provides international and domestic payments services, travel cash and crypto liquidity.
The company makes bureaucratic and often expensive cross border transactions easier and cheaper than ever before.
Its full-year figures for 2021 are once again, promising.
For 2021, Equals recorded revenues of £44.1 million. This is a 52% increase on the £29 million figure recorded for the full-year 2020.
Gross profits rose from £18.3 million in 2020, to £24 million in 2021. This is an increase of 31%.
In addition, losses for 2021 have sunk to £2.3 million, down from £6.9 million in the previous year.
The narrowing losses are a positive sign that Equals is delivering value to customers and reducing its costs.
The reason behind Equal’s solid figures is its pivot away from its roots as a travel cash company, towards a business to business (B2B) payments platform.
In terms of its B2B commercial deals, Equals doesn’t give too much away.
However, the fact the B2B section of the business accounted for 81% of total revenues in 2021 tells the full story.
Equals continues to deliver strong value to shareholders.
On 6 April 2021, Equals’ share price closed at 39GBp. Almost a year later, its share price is 76.28GBp- a near 100% gain.
We believe Equals will continue to play a key role in bringing seamless and efficient payment services for its customers.
We reiterate our HOLD recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes, it’s hard to decide which stocks to invest in from our Buy list.
Below is our Frontier Tech Investor “Top Three” section, showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: it’s just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games that contains some of the most popular products of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the nineties gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of non-fungible tokens (NFTs), a megatrend which could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the easing of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
Aura Energy (LSE: AURA) – Aura Energy is an early-stage mining company focused on the exploration and production of uranium, a key ingredient in the generation of nuclear energy. The company is showing signs that is moving from uranium explorer to producer, after uncovering water deposits at its Tiris mining project in Mauritania. Water deposits are essential for a smooth mining process. Aura estimates that its Tiris project will produce 12.4 million lbs of uranium over the next 15 years. Aura should be a key player in the nuclear future. You can find the original recommendation here.
Yellow Cake (LSE: YCA) – Yellow Cake is a hoarder of uranium oxide, which is used to generate nuclear power. In this, it offers direct exposure to the spot price of uranium to investors, removing geopolitical and processing risks associated with mining. In fact, it currently has a bumper contract with the world’s largest uranium producer, Kazatomprom, which supplies it with $100 million worth of uranium every year (up until 2027). In total, Yellow Cake stores 8,527 tonnes of uranium oxide in storage facilities, meaning that the uranium is currently worth more than $1 billion. This is a lot more than the current market capitalisation. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
