MONDI, the multinational packaging and paper group, is divesting of its R11.4 billion operations in Russia, the group said in a quarterly update yesterday.
“The board has decided to divest the group’s Russian assets. The divestment process for these significant assets is operationally and structurally complex and is being undertaken in an evolving political and regulatory environment,” the group said.
There was no certainty when a transaction would be completed or as to the structure of any possible transaction, it said.
The net asset value of Mondi’s Russian operations was €687 million (R11.37 billion) as at December 31, 2021.
“The Russian businesses have, to date, managed supply chain constraints. However, the situation remains fluid, with interruptions to pulp and paper production possible going forward. All significant capital expenditure projects in Russia have been suspended,” the group said.
Mondi’s operations in Russia include an integrated pulp, packaging paper and uncoated fine paper mill located in Syktyvkar, which mainly serves the domestic market.
Meanwhile in South Africa, the group’s Merebank uncoated fine paper operations were suspended due to severe floods around Durban in mid-April. The impact on the group’s performance was not expected to be material.
Mondi said demand had been good across all its businesses globally in the three months to March 31, while higher average selling prices more than offset continued cost pressures.
Underlying earnings before interest tax depreciation and amortisation (Ebitda) came to €574m, up 63 percent compared to the prior year period and up 41 percent compared with the fourth quarter of 2021.
Excluding the Russia operations, underlying Ebitda for the first quarter was about €460m, up around 70 percent compared to the prior year period.
The group said it made progress in the first quarter in its investment programme to capture growth across its packaging businesses in growing markets, underpinned by demand for e-commerce and sustainable packaging solutions.
“Our pipeline includes around €1 billion of expansionary projects already approved or under advanced evaluation, which we anticipate will generate mid-teen returns when in full operation.”
During the quarter growth in demand for Corrugated Packaging normalised from the high levels seen last year.
Containerboard prices were being increased. Corrugated Solutions continued to pass on higher input paper costs.
Flexible Packaging performed well, driven by strong demand for sustainable packaging solutions and higher kraft paper and paper bag prices.
Engineered Materials’ performance in the quarter was stable, with a good contribution from Functional Paper and Films.
Uncoated Fine Paper markets remained tight in Europe due to good demand and limited supply. Average uncoated fine paper prices were higher due to price increases in 2021 and 2022.
BUSINESS REPORT ONLINE