May 07, 2008
Operating profit up, but costs worry MondiBack
© Reuse this International paper and packaging group Mondi, reported on Wednesday that its underlying operating profit improved for the four months ended April and that its expansion and upgrade projects were on track.
Kraft paper and converted bag prices had risen by about 5% since the year-end, the company said.
CEO David Hathorn commented during a conference call, that the power disruptions experienced in South Africa throughout the first months of 2008 had not materially affected the overall operations of the group, despite the electricity constraints having a direct impact on some of its South African operations.
He explained that its Richard's Bay mill was completely self-sufficient concerning electricity and was not plugged into the national electricity grid, and thus remained unaffected by the power disruptions.
Also, at its Merebank mill, Mondi had voluntarily reduced its power consumption by switching off its mechanical pulp line that could be switched off for a few hours at a time, depending on capacity, in order to assist State-owned power utility Eskom in stabilising the power situation.
Its South African division, however, was negatively impacted on by the timing of planned maintenance shutdowns and lower export sales volumes, mainly in wood chips, as the division had taken a decision to pursue margin and not volume in certain markets.
The company, which diversified miner Anglo American spun off last year, said it remained confident that the measures it had taken to improve profitability were working. Mondi added that a 5% price increase had been implemented on May 1.
The group remained concerned about input cost pressures and said the rising oil price continued to feed through into rising energy and transport bills.
External fibre cost pressures had continued to ease, but had increased in the comparable period given a steep increase in external fibre costs, which went up by about 25% in the first half of last year.
However, the group stated that its results continued to benefit from its ongoing focus on cost reductions, restructuring and productivity improvements, which all assisted in mitigating the impact of cost inflation.
The group reported that good progress on the execution of major projects had been made.
Mondi's new 470 000-t/y recycled containerboard machine and related box plant at Swiecie, in Poland, at a cost of €350-million, and the upgrade of its Russian mill, at a cost of €525-million were making good progress.
"All the equipment for Swiecie has been ordered, and the major contracts have been committed to for the containerboard machine, which is on schedule for completion during the third quarter of next year," Hathorn said.
The group said it expected the containerboard machine to have the lowest operating cost of its type.
Similarly, the upgrade of Mondi's Russian mill, which is being done to lower its cost base in Russia, improve efficiency, increase energy production and revenue, as well as providing extra pulp and paper capacity for the growing Russian market, was making good progress with all equipment contracts agreed to. Construction has started and the project is scheduled for completion in the middle of 2010.
In South Africa, the rebuild of Mondi Packaging South Africa's corrugated packaging paper machine at its Felixton operation had been commissioned on time and within budget and would increase containerboard production by 45 000 t/y to 155 000 t/y.
The group reported that the closure of the 140 000-t uncoated fine paper mill in Hungary has been completed, with production having ceased in March.
The group had also completed the restructuring and simplification of its European uncoated fine paper divisional structure and said it had begun to see the benefits of these actions.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Agriculture News
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
Forest products group Sappi has confirmed the selection of its 25 MW biomass-to-power project, to be erected at its Ngodwana mill, in Mpumalanga, as a preferred bidder under the South African government’s Renewable Energy Independent Power Producer Procurement...
Information and communications technology (ICT) distributor DCC is making Windows- and Android-operating systems tablets available through retailers and education equipment suppliers to provide school children with affordable, high-performance education tools. The...
Another cement manufacturer is set to enter the Ugandan market, raising hopes that prices will come down and spur growth in the construction industry. National Cement, a Kenyan manufacturer, has unveiled plans to invest $195-million in a new manufacturing plant in...
With growth rates exceeding that in the developed world – at an average of between 4% and 5% between 2002 and 2014 – African countries provide investors with ample reason to tap into booming consumer demand says Manufacturing Circle executive director Coenraad...
The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) decreased by 3.7 index points month-on-month to 89.1 in March.