Johannesburg - Mondi was poised to position itself better to gain more exposure in emerging markets, in part by making its operations more energy efficient, the packaging and paper group said on Thursday last week.
Mondi reported a 60 percent jump in underlying earnings a share in the six months to June, boosted by the integration of acquisitions and thriving sales in Europe and emerging markets. Underlying operating profit came in at e336 million (R4.3 billion), up 35 percent.
“Mondi’s strategic focus on leading positions in emerging markets offers cost benefits, attractive growth rates and operational synergies with other businesses,” chief executive David Hathorn said.
He said that at the end of last year, 57 percent of the group’s revenue was generated from operations in geographical areas such as eastern Europe, Russia and South Africa. Industrial packaging in emerging markets undoubtedly surpassed European sales.
The company said that during the reporting period, industrial bags suffered from low sales in Europe.
“We are not fixated with emerging markets,” Hathorn said, while adding that it made sense for the business to be located in such markets because of the growth rates they were experiencing.
Mondi is completing renovations at its operations in Austria, Bulgaria, Russia and South Africa.
Hathorn said Mondi planned to include steam turbines to replace an old boiler at its Richards Bay operation to decrease its dependence on the local electricity grid.
This would make the local operations 91 percent energy self-sufficient, up from 58 percent at present.
Hathorn said this was prompted by the unpredictability of the electricity supply in the country.
Mondi’s Austrian and Russian operations would also be made energy self-sufficient, a process expected to be completed by the end of next year.
“Focus has been on integration and now we are starting to look at new opportunities in the future,” Hathorn said.
The company might not expand “right now” but these results showed that it was capable of doing so, he added.
Jacques Theron, a portfolio manager at Absa Investments, said the company had delivered a good set of results, and that it had a good management team.
It had transformed itself from a paper player to a more diversified company, including packaging in its offering.
Theron said European growth had been largely pedestrian and that it was worthwhile for the group to focus on its emerging market growth.
Hathorn said: “Delivery is in line with expectations. We think that the business is in great shape.”
Mondi shares reached record highs after the results, closing 2.65 percent up at R155 on the JSE on Thursday. - Business Report