Mondi Group battles weaker prices for board, paper to post profit
For year to December, Mondi said yesterday that it had posted a €1.1 billion (R18.22bn) profit, nearly unchanged from €1.11bn the previous year.
Despite this, newly appointed chief executive Andrew King said yesterday that it was a robust performance in 2019 against a backdrop of challenging trading conditions as Mondi recommended a 9.2 percent full-year dividend rise to 0.83 per share from 0.76 in 2018.
“A solid operational performance, strong cost control and a good contribution from acquisitions and capital investment projects partially offset the effects of market pressures in a number of key pulp and paper grades,” he said.
He also credited the performance to strong cost control across the group, good contribution from capital investments and acquisitions completed in 2018 as well as the completion of the process to simplify the corporate structure.
Mondi plc and Mondi Ltd merged last year to simplify its business mode.
King, who was last week appointed to the helm of Mondi following the surprise resignation of Peter Oswald in January, said the group had confidence in the structural growth drivers in the packaging sectors in which it operated.
Mondi delivered earnings before interest, tax, depreciation and amortisation (Ebitda) that was down 6 percent to €1.66bn.
Mondi said strong performances from its flexible packaging and engineered materials had helped to mitigate the margin pressures seen in corrugated packaging and uncoated fine paper in the face of market-driven price decreases.
Currency movements had a net positive impact on underlying Ebitda in the period under review.
Mondi said the negative effect of a weaker Turkish lira on its Turkish businesses was “more than offset” by the benefits to certain of our export orientated businesses of a stronger US dollar and weaker South African rand.
Its basic underlying earnings of 171.1 cents per share were down 10 percent compared to 2018, while it saw an operating profit of €1.22bn (below 2018’s €1.32bn) and cash generated from operations of €1.63bn, a decrease from €1.65bn a year prior.
Group revenue was down 3 percent at €7.27bn as a result of a combination of lower average selling prices and lower sales volumes, in turn primarily due to longer planned maintenance shuts and restructuring initiatives, the group said.
Wood said Mondi’s capital investment programme to deliver value accretive growth and enhance the ongoing cost competitiveness of its operations remained on track.
“Having commissioned the pulp mill rebuild at our Ruzomberok mill (Slovakia) in the second half of the year, we are making progress on the related investment in a new 300 000 ton kraft top white machine at the same site and previously announced major capital investment projects at our Syktyvkar (Russia) and Steti (Czech Republic) mills,” Wood said.
Looking at input costs, Mondi said they were generally higher year on year. It saw higher wood costs in Russia, South Africa and northern Europe, while costs in some countries in central and eastern Europe were lower due to favourable regional wood supply dynamics.
Driven by Chinese import policies, average benchmark paper for recycling costs were down 21 percent on the prior year, with the rate of decline accelerating in the second half of the year, it said. Chemical costs were higher on average versus the prior year, while energy costs were lower, it said.
Wealth management company Davy Group said although Mondi had significantly underperformed the European packaging sector over the past 12 months, earnings momentum could turn more positive as the year progressed.
Mondi shares closed 1.98 percent higher at R320.22 on the JSE on Thursday.