Johannesburg - International packaging and paper group Mondi had seen some price weakness in some of its packaging paper grades, it said, but insisted that demand had remained strong.
The company said its first-quarter underlying profit rose 14 percent on strong performance from consumer packaging, uncoated fine paper and better sales in South Africa.
Read: Mondi gains in first quarter
Group chief executive David Hathorn said contributions from the South Africa division had offset the impact of lower selling prices in certain packaging paper segments and margin pressure in fibre packaging.
In the first quarter to March, the group raised its underlying operating profit by 14 percent to e269 million (R5 billion) from e236m in the matching previous quarter. The underlying operating profit was only up 9 percent compared with e246m in the fourth quarter of 2015.
It said sales volumes came in line with the comparable prior-year period, with lower volumes in the industrial bags segment offset by good growth in consumer packaging.
Mondi, which has operations in central Europe, Russia and North America, said its consumer packaging division continued to make good progress in volume growth and incremental improvements in fixed costs.
On uncoated fine paper, average benchmark selling prices in Europe were up 2.8 percent on the comparable prior-year period.
“We continue to benefit from higher uncoated fine paper prices, lower energy and related input costs, and the incremental contributions from our recently completed capital investment projects, together with the stability afforded by our downstream converting businesses,” Hathorn said.
He said the wood and chemical input costs were at similar levels to the comparable prior-year period, while paper for recycling costs were up 15 percent but broadly unchanged from last year’s fourth quarter.
Shutdowns
The group said it did not perform any planned significant maintenance shutdowns in the quarter.
However, in the comparable period last year, the impact of maintenance shutdowns on operating profit was estimated at about e17m.
“Based on prevailing market prices, we continue to estimate that the impact of planned maintenance shutdowns on operating profit for 2016 will be around e70m, of which around e25m will be incurred in the first half of the year,” Hathorn said.
The shutdowns impacted the operating profit by eR35m in the first half of last year, Hathorn said, adding that maintenance shutdowns were scheduled for the final quarter in the Richards Bay plant.
“Our South Africa division generates a large proportion of its revenue from exports with a predominantly rand cost-base and thus the weakening of the rand is beneficial to the underlying profitability of the division,” he said.
Hathorn said capital expenditure for the year was expected to remain in line with previous guidance of between e400m and eR450m. The group also said there were no acquisitions in the period.
The group gained 1.15 percent yesterday to R293.70.
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