Packaging giant Mondi on Friday reported a 4% year-on-year increase in underlying operating profit to €1.01-billion for the year ended December 31, benefitting from good demand and higher average selling prices across most of its businesses.

"Our continuous drive for operational performance improvements mitigated the inflationary pressures on our cost base caused by the general economic recovery," said CEO Peter Oswald.

Supported by ongoing good demand, the dual-listed company saw strong upward momentum in pricing across its key product segments in packaging paper and fibre packaging over the course of 2017 and into early 2018.

"We expect continued, but manageable pressure on the cost base across the group, a consequence of the turn in the commodity price cycle and the general economic recovery we are seeing in many of the regions in which we operate," Oswald added.

However, the year was not without challenges, with the impact of maintenance shuts on underlying operating profit in 2017 being around €95-million, slightly above Mondi's previous expectation of €90-million.

Based on prevailing market prices, Mondi estimates the impact of maintenance shuts on underlying operating profit for this year to be around €110-million, of which the first half effect is estimated at around €55-million.

This includes the effects of a prolonged shut at Mondi's Richards Bay facility, in South Africa, following a technical incident in mid-February, which halted production for three weeks, longer than was planned for the yearly maintenance shut.

Currency movements also had a net negative impact on underlying operating profit. The net positive impact of a stronger rouble on translation of Mondi's domestically focused uncoated fine paper business was more than offset by the impact of the stronger rand and various central European currencies on margins from export-oriented businesses in these regions. The weaker dollar had a net negative impact on the group's second half results.

The currencies would continue to cause headwinds, the company noted.

Meanwhile, Mondi's outlook for the business remained positive, with it declaring a special dividend of €1 a share, in addition to the full year ordinary dividend of €0.62 a share. "This reflects the strength of our financial position and our continued confidence in the group's cash generating capacity," said Oswald.

Mondi would further focus on its largest projects currently in progress, including the €335-million modernisation of its kraft paper facility, in Steti, in the Czech Republic, which remained on track.

Work to upgrade the pulp mill at its Ruzomberok mill, in Slovakia, has also started, while Mondi awaits final permits to proceed with its investment in a 300 000 t kraft top white machine at the same site.

"In addition, we are making good progress on smaller expansionary capital expenditure projects at a number of our packaging operations. These projects are expected to contribute to earnings from 2019," said Oswald.