May 03, 2012
Mondi operating profit falls, says demand picking upBack
Africa|Environment|Flow|Mondi|Mondi Swiecie|Projects|Standard & Poor|Africa|Europe|South Africa|Electricity Price Hikes|Energy|Flow|Paper
© Reuse this
But the company said demand was improving, with its sales volumes in the three months to the end of March, on average, higher than in the previous quarter.
Underlying operating profit fell to €120-million in the first quarter, from €132-million in the final quarter of 2011 and €179-million in the prior year.
Although selling prices across all major paper grades were on average lower than those achieved in the previous quarter, Mondi said a trend of improving prices towards the end of the quarter was evident. The benefits of these improving prices, partly offset by rising fibre input costs, were expected to be realised from the second quarter onwards.
Average input costs were lower than the prior quarter, but increased during the period with closing benchmark prices being higher than those at December 31.
Benchmark hardwood pulp prices had increased by 15% at March 31 from December 31 levels and recovered paper increased by 30% over the same period.
Wood costs remained at similar levels to those of the previous quarter and spot prices have started to increase on the back of improving demand, with the expectation of further price recovery in noncontracted volumes as the year progresses.
Price increases of up to 10% have been announced effective from June.
Mondi’s South Africa division’s underlying operating profit was well down on the prior comparable year period and the final quarter of 2011.
Domestic sales of uncoated fine paper and pulp improved, while export sales of white-top containerboard saw lower average selling prices and weaker volumes owing to ongoing destocking in Europe.
Lower pulp selling prices severely impacted returns; however, prices have trended upwards from their lows in January, which should contribute to an improved performance in the second quarter, the group said.
The South African business, Mondi Shanduka Newsprint, also continued to be impacted by a rising cost base, largely owing to a series of significant electricity price hikes.
Mondi stated that selling price increases had been negotiated and were expected to take effect from the second quarter, restoring Mondi Shanduka Newsprint to a reasonable level of profitability.
The group’s cash flow for the quarter remained strong, while working capital levels were maintained in the targeted range of 10% to 12% of turnover.
Capital expenditure was at similar levels to that incurred in each of the previous two quarters of 2011 and was expected to increase during the remainder of the year as expenditure on the energy and debottlenecking investment projects start to ramp up.
The group said in a statement that its financial position at March 31 remained robust with net debt reducing further from €831-million on December 31 to €792-million.
The successful completion in April of the tender offer to acquire the 34% noncontrolling interest in its Polish unit, Mondi Swiecie, to increase the group’s holding to 93.2%, resulted in cash outflow of about €235-million in mid-April.
The company said a process had been implemented to acquire the remaining shares from those shareholders who did not respond to the initial offer, which was expected to result in a further outflow of about €60-million in the second quarter.
Further, Mondi has maintained its investment grade credit ratings from Moody’s (Baa3 outlook positive) and Standard & Poor’s (BBB- outlook positive). The average maturity of the group’s committed debt facilities was 4.2 years compared with 4.3 years as at December 31, with unused committed borrowing facilities in excess of €750-million after taking the Mondi Swiecie acquisition into consideration.
“Overall performance for the first quarter of 2012 was in line with our expectations. As anticipated, the generally weaker trading environment seen towards the end of the prior year continued into the early part of the first quarter,” the company assured.
The reviewed results for the half-year ending June 30 would be published on or around August 7.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Agriculture News
Updated 7 hours ago South Africa’s National Treasury on Friday reissued its amended request for proposal (RFP) for the five-year multibillion-rand project to replace the legacy systems currently in use with an enterprise resource planning (ERP) solution for an integrated financial...
Updated 7 hours ago The handover of specialised computer equipment to the Umfolozi Technical and Vocational Education and Training College would address one of the greatest challenges faced by Transnet Port Terminals (TPT) at the Port of Richards Bay – a lack of skills in a highly...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
As the City of Ekurhuleni continues its bid to develop the largely industrialised metropole into the continent’s first aerotropolis, executive mayor Mondli Gungubele has committed the city to creating a predictable, stable and enabling business environment in which...
While Ford Motor Company of Southern Africa (FMCSA) did not have “significant issues” with power supply in Gauteng, it was a different story in the Eastern Cape, said FMCSA and American Chamber of Commerce in South Africa president Jeff Nemeth earlier this month....
In 2000, exports into Africa from South Africa represented less than 5% of the turnover of Federal Mogul Motorparts Africa, with sales largely centred around Zimbabwe, Zambia, Malawi and Mozambique. Today, African exports represent 30% of sales, with trade expanded...
The Malawi government has launched a $50-million project to upgrade the Kamuzu barrage, on the Shire river, an outlet of Lake Malawi, which is used to control the flow of water from the lake to the lower Shire area. The project will run from this year to 2017 and...
Our new Technical and Vocational Education and Training (TVET) Colleges will replace the Further Education and Training (FET) Colleges which have served us for the past twenty years. The buildings will be the same and most of the staff will be the same but as the...