DURBAN - JSE-listed global leader in packaging and paper, Mondi, has revised down its capital expenditure to 600 million (R11.7 billion) for the year 2020 to protect profitability, liquidity and cash flow in response to the Covid-19 outbreak.
The group had initially anticipated to spend between 700m and 800m on capital expenditure in 2020.
Mondi has postponed non-essential capital expenditure and slowed down some of its major capital projects. It said this was likely to cause limited delays to the commissioning of certain capital investment projects.
“We have also postponed annual mill maintenance shuts to the second half of the year,” the group said.
In a trading update released on Thursday for the quarter to end March, Mondi said it had experienced a deterioration in its uncoated paper order book in Europe and South Africa as a result of the lockdown.
“We are taking downtime at our Neusiedler mill in Austria to manage our inventory levels while we have temporarily stopped production at the Merebank mill in South Africa, in line with government regulations. We will consider further such measures as required,” the group said.
The Merebank mill has production capacity of 270 000 tons a year.
Mondi reported an 18 percent decline in underlying earnings before interest, tax, depreciation and amortisation (Ebitda) to 385m, down from 471m compared to the same quarter last year, driven mainly by lower pricing across its key paper grades, however, this was mitigated by lower input cost and its ongoing cost reduction programmes.
Chief executive Andrew King said Mondi was a resilient business offering packaging and other products for daily consumer needs, and delivering essential services to the communities around its larger operations.
“We delivered a robust performance in the first quarter during these challenging times. The group is financially strong with a robust liquidity position and capital structure.
“However, in these unprecedented times we are taking appropriate actions to ensure we remain well-placed to withstand an extended period of uncertainty,” King said.
Mondi has a strong liquidity position of around 1.5bn, comprising 705m undrawn committed debt facilities and cash of approximately 800m.
Mondi’s board has decided not to propose a final dividend for the year to end December 2019 at the forthcoming annual general meeting to be held on May7.
“Despite the group’s strong balance sheet, the proactive measures it is taking to manage the current risks and the robust trading position to date, it is clear that the operating and trading environment is one of significantly heightened uncertainty. After due consideration, the board has decided it is prudent to no longer propose a final dividend for the year to end December,” the group said.
During the results presentation in February, the board recommended a full-year dividend of 83cents a share.