JSE-listed paper and packaging group Mondi posted earnings before interest, taxes, depreciation and amortisation (Ebitda) of €680-million for the six months ended June 30, which was 28% lower than the Ebitda of €942-million reported for the prior year’s interim period.
Basic underlying earnings a share of €0.67 were down 32% year-on-year.
However, the company realised improved cash generated from operations of €554-million, up from €519-million in the 2022 interim period.
“This strong through cycle cash generation and financial position, with leverage of 0.8 times, provides the platform to continue investing in the business, ensuring we are well positioned to meet the expected growing demand for sustainable packaging and paper products,” the company said in its interim results statement on August 3.
Mondi declared an interim dividend of €0.23 a share, up from €0.22 a share in the 2022 interim reporting period.
“The group has a strong financial position and strong cash generation, providing the opportunity to pursue both organic and inorganic growth projects alongside the payment of an ordinary dividend,” it said.
Further, the company expects total capital expenditure (capex) to remain elevated for the next two years as it progresses and commissions its €1.2-billion pipeline of approved expansionary projects.
Total capex for the 2023 full-year is expected to be about €800-million to €850-million, of which it spent €310-million in the first six months of the year.
“Our pipeline of approved expansionary projects is being well executed, and is on track and on budget. These investments are diversified across our value chain, products and geographic reach. They comprise €600-million of investments in Corrugated Packaging and €600-million of investments in Flexible Packaging. Projects are expected to start up over the next two years and deliver through cycle mid-teen returns when fully operational,” Mondi said.
The capital investment is focused on meeting the growing demand for sustainable packaging and paper products; enhancing its product offering, quality and service to customers; strengthening cost competitiveness; and improving its environmental footprint.
“Given our confidence in the long-term growth of the packaging markets we operate in, and our leading positions within them, we seek to invest through the cycle to deliver value accretive growth,” Mondi said.
The group's Ebitda performance was impacted by softer demand, customer destocking and higher input costs, mitigated by rigorous cost management and focus on service and quality. Mondi also benefited from a forestry fair value gain of €86-million for the interim period, compared with a €30-million gain in the first half of last year, it said.
“Mondi's performance in the first half of 2023 reflects a strong delivery against a backdrop of challenging market conditions. While underlying Ebitda was lower, the business exhibited its strong cash-generative characteristics, improving cash generation. We maintained a robust balance sheet and are continuing to invest in our pipeline of expansionary projects,” said Mondi Group CEO Andrew King.
“So far in 2023, demand and prices have declined sequentially with the exception of containerboard prices which stabilised in the later part of the half year. We saw some benefit from lower input costs which continue to ease as we progress into the third quarter of the year.
“We remain focused on improving productivity and efficiency and delivering our Mondi Action Plan 2030 commitments, while expanding capacity in our growing packaging segments. We have a compelling portfolio of sustainable packaging and paper products, scale and a resilient business model, which position us well to deliver attractive returns and sustainable value accretive growth,” he said.
Further, as part of the Mondi Action Plan 2030, the company has a long-standing focus on climate action and continues to make good progress towards its science-based net-zero commitment by 2050.
“In the near-term, our targets commit us to reduce absolute Scope 1 and 2 greenhouse-gas (GHG) emissions by 46.2% and Scope 3 GHG emissions by 27.5% by 2030 from a 2019 base year.
“Additionally, in the first half of the year, we approved an investment in our Dynäs mill, in Sweden, which will reduce GHG emissions, and we hosted our first supplier engagement event to discuss the management of Scope 3 emissions,” the company noted.