Mondi's business outlook positive

Photo: Nicholas Rama

Photo: Nicholas Rama

Published Feb 24, 2017

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Durban - South African paper and packaging firm Mondi reported a 3 percent increase in underlying operating profit to e981 million (R13.53 billion) for the year to end-December with a return on capital employed at 20.3 percent.

The group said the outlook for the business remains positive.

Chief executive David Hathorn said: “We anticipate a more challenging trading environment in certain uncoated fine paper markets following price erosion in Europe over the course of 2016, combined with emerging market currency volatility.”

Hathorn added that the group saw good contributions from all its businesses, despite pricing headwinds in a number of key paper grades.

Group revenue came down 2 percent to e6.6 billion owing to the impact of currency movements. The group said its cash generation remained strong with cash generated from operations of e1.4 billion up 10 percent on the prior year. It reduced its net debt by e115 million to e1.38 billion.

Profits in the packaging paper section came down 8 percent on the prior year, impacted by lower average selling prices across most key grades, lower green energy prices and the loss of contribution from the Raubling mill sold during 2015, partially offset by the benefits of completed capital investment projects.

Read also:  Oswald to replace Hathorn as Mondi CEO

The group’s underlying operating profit in fibre packaging increased 3 percent to e123 million, with volume growth in corrugated packaging and a good performance from the core European industrial bags business partly offset by negative currency translation effects and ongoing challenges in the US and CIS industrial bags businesses.

Consumer Packaging made good progress with strong volume growth and improving margins.

Mondi completed four acquisitions totalling e185 million in 2016.

“Our South African division was negatively affected by sharply lower average pulp export selling prices and higher input costs, which were only partially offset by positive currency effects, a higher fair value gain on forestry assets and domestic price increases,” Hathorn said.

The board declared a final dividend of 38.19 eurocents a share, up from 37.62 eurocents a year earlier, making a total payout for the year of 57 eurocents, compared with 52 eurocents in 2015.

Mondi shares gained 2.67 percent to close at R308 on the JSE.

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