Mondi strengthens position in Europe with e60m deal
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PAPER and packaging producer Mondi has signed a e60 million (R785m) deal to acquire two coatings sites owned by Walki Group, an international maker of technical laminates and protective packaging headquartered in Finland.
The JSE-listed company has operations in Russia, South Africa and North America.
It would acquire a 100 percent stake in Walki’s extrusion coatings plants in Pietarsaari, Finland, and Wroclaw, Poland, it said on Friday.
“The acquisition will strengthen Mondi Group’s position in the European extrusion coatings market and increase the range of technical capabilities on offer to customers,” the company said.
The transaction is subject to competition clearance and is likely to be completed by the third quarter. The operations generated e113m revenue and unaudited adjusted earnings before interest, taxes, depreciation and amortisation of e9m in the year to April.
The Walki plant in Pietarsaari produces wrapping materials for the paper industry, barrier lining, covering material for biomass and selected technical products. The plant has a production capacity of 100 000 tons a year and employs 195 people.
The Walki plant in Wroclaw focuses on the production of wrapping material for the paper industry, barrier lining and flexible packaging material. It has a production capacity of 45 000 tons a year and employs 50 people.
Previously analysts have commended Mondi’s capital allocation as being a key success of the group. Over the past two years Mondi has invested e350m in projects with returns in excess of 40 percent.
Sanlam Investments equity analyst Lazar Naiker said the majority of the projects focused on cost optimisation. “Further spend of e420m over the following two years is expected to yield returns in excess of 20 percent,” Naiker added.
Mondi acquired a 93.4 percent shareholding in Nordenia, an international supplier of innovative consumer packaging solutions and hygiene components for e240m in 2012.
Naiker said the acquisition had been slower to deliver on expected returns given a weak global consumer. “This business does appear to be turning a corner and provides a good base for Mondi to deliver high-value, specialised consumer packaging products.”
Mondi posted a 29 percent rise in profits in the first quarter of the year on higher sales, lower input costs in its main European market and increased selling prices in Russia and South Africa.
It said contributions from capital projects and acquisitions had also improved its underlying operating profit to e236m for the three months to March compared with e183m in the corresponding period a year ago.
Mondi, which is also listed in London, said the returns were 9 percent above its 2014 fourth-quarter operating profit of e216m. The company’s shares on the JSE closed Friday up 0.81 percent at R280.