Paper and packaging group Mondi on Thursday reported an underlying operating profit of €174-million for the three months ended September 30, which Mondi said was comparable to that of the prior corresponding period, but 10% below that of the second quarter.
Mondi group CEO David Hathorn told Engineering News Online that this performance was in line with expectations.
“The fact is quarter three is our big maintenance shut time, it is also European summer time where it is always a bit softer, so nothing untoward in quarter three. The seasonal trend between quarter two and quarter three is standard,” he pointed out.
Mondi said major yearly maintenance shuts scheduled for the group’s uncoated fine paper and containerboard facilities were completed according to plan, with the impact on third-quarter underlying profit from these shuts estimated at around €30-million.
It added that its major kraft paper maintenance shuts were scheduled for the fourth quarter, with the impact on underlying profit expected to be around €15-million to €20-million.
The company had also decided to close one of the two speciality kraft paper machines with a capacity of 30 000 t/y at its Lohja mill, in Finland, which had led to closure and restructuring costs of €6-million in the third quarter.
Mondi further noted that sales volumes for the quarter were also broadly in line with that of the prior comparable period.
The previously announced price increases had also been successfully implemented in a number of the group’s key packaging paper markets.
“The price increases range from about 5% to 10% for our major packaging grades, which are quite decent price increases. The fact that we got price increases through during the third quarter is also encouraging, relative to the fundamentals of those grades, which we have been positive about for some time,” Hathorn commented.
Unbleached kraft paper price increases of between €30/t and €40/t were implemented from July, while price increases for unbleached kraftliner and recycled containerboard of between €30/t and €40/t were achieved in steps during August and September.
Prices for white-top kraftliner and speciality kraft paper were stable, Mondi added.
Further, the company said wood costs during the third quarter were lower, on average, than the previous quarter, while paper recycling costs remained flat.
Meanwhile, Mondi’s fibre packaging division continued to perform well during the third quarter with good year-on-year margin development in corrugated packaging and industrial bags.
However, increasing paper input costs in the corrugated packaging segment and seasonally weaker demand in industrial bags were expected to put some pressure on margins in the fourth quarter.
Further, during the quarter under review, profitability in Mondi’s consumer packaging division improved on the previous quarter, although weak trading conditions in Europe had continued to impact on this business.
Mondi’s uncoated fine paper business was impacted by the seasonally weaker third quarter and the impact of planned maintenance shuts.
The company added that its South Africa division had benefited from the stronger US dollar on its export sales, while the weaker Russian rouble had a negative impact on the more domestically focused Russian businesses.
“The recent strengthening of the US dollar relative to the euro should support European pricing in packaging grades and provide a net benefit to the group’s export businesses,” Mondi said, adding that the company continued to monitor the developments in Russia and Ukraine; however, this had had minimal direct impact on the operations to date.
Mondi reported having made good progress on its major capital projects with the €128-million recovery boiler project at its Ruzomberok mill and the €30-million pulp dryer at the Syktyvkar mill now in the commissioning phase.
Hathorn noted that the company’s capital projects over recent years had delivered benefits for the company.
“This year’s numbers are supported on an annual basis by about a €13-million capital benefit from those projects, and we would expect to next year have a €14-million capital benefit from those projects,” he pointed out.
At the end of the third quarter, Mondi’s net debt was €1.8-billion, €60-million higher than in the June quarter.
The company attributed this to a number of factors, including the July 31 acquisition of the Printpack consumer packaging plant in Poland for $23-million, increased capital expenditure, payment of the interim dividend, interest on the 2020 €500-million Eurobond and currency effects.
OUTLOOK
Hathorn further said general market consensus was that Mondi’s fourth-quarter performance would be better than that of the third quarter, stating that the company was comfortable with that suggestion.
He added that market consensus was also that the group’s full-year profit would be up by about 5%.
Mondi would publish its results for the full year on or about February 24.