JSE- and LSE-listed packaging and paper company Mondi’s earnings before interest, taxes, depreciation and amortisation (Ebitda) increased by 11% year-on-year to €1.5-billion for the year ended December 31, 2021, mainly as a result of higher sales volumes and significantly higher selling prices in the face of inflationary cost pressures.

Group revenue was up 16% as a result of a combination of increased sales volumes and significantly higher selling prices.

Underlying operating profit of €1.06-billion was up 15% year-on-year. After taking the effect of special items into account, operating profit of €1.07-billion was up 23% year-on-year, while basic earnings of €15.59 a share were up 30% year-on-year.

At period-end, Mondi held net debt of €1.76-billion, compared with €1.79-billion as at December 31, 2020.

Capital expenditure for the period was €573-million, while the acquisition of Olmuksan added about €83-million to net debt.

Taking these figures into account, Mondi’s board recommended an increase in the final 2021 dividend to €0.45 a share, while the final dividend, together with the interim dividend, amounts to a total dividend for 2021 of €0.65 a share – an increase of 8% on the 2020 total dividend.

In 2021, Mondi increased production of corrugated packaging and flexible packaging, on the back of its integrated value chain, its portfolio of innovative and sustainable packaging solutions, and increased attention to quality and service.

Group CEO Andrew King says sustainable packaging continues to be a key priority for Mondi’s customers and wider society.

“With our unique product portfolio, technical know-how, expertise in understanding the best material choices and leading innovation capabilities, we are supporting our customers to achieve their environmental goals with circular driven solutions that are sustainable by design.”

Uncoated fine paper volumes also increased, as did Mondi’s selling prices across the entire business, most significantly in corrugated packaging.

As such, input costs increased materially year-on-year, in particular for energy, resins, paper-for-recycling and transport costs.

Energy costs gradually increased during the first half of 2021 from a low level in 2020, before rising sharply at the end of the third quarter as a result of significant increases in the price of European gas and electricity. Mondi expects energy costs to remain elevated for some time.

However, Mondi’s pulp and paper mills generate most of their energy needs internally, with biomass sources accounting for about 65% of the fuels used in this process, thereby mitigating the impact of the significant surge in external fuel costs.

Resin and paper-for-recycling costs increased sharply in the first half and have remained stable at high levels. We are currently seeing rising wood and chemical costs and generally expect cost pressures to continue.

Mondi reports that cash fixed costs were higher year-on-year, driven by higher maintenance costs, additional resources required to serve surging demand from its customers and general inflation; mitigated, however, by Mondi’s cost control measures.

The impact of planned maintenance- and project-related shuts on underlying Ebitda in 2021 was about €165-million, up from the €100-million of 2020.

Based on prevailing market conditions, Mondi estimates that the impact of planned maintenance shuts on underlying Ebitda this year will be about €110-million, of which the effect on the first half of the year is estimated at about €60-million, up from the €50-million of 2020.

Meanwhile, King says the company accelerated its climate plans by committing to transition to net zero by 2050, and made significant progress on all elements of its sustainability roadmap for the next ten years.

Also, regarding Russia’s invasion of Ukraine, Mondi reports that the unfolding humanitarian crisis poses a “great concern”.

Mondi has significant operations in Russia, representing about 12% of the group’s revenue by location of production in 2021, including its high-margin, cost-competitive, integrated pulp, packaging paper and uncoated fine paper mill located in the Russian city of Syktyvkar.

Over the past three years, Mondi’s Russia-based operations generated about 20% of the group’s underlying Ebitda, with its businesses primarily serving the domestic Russian market and continuing to operate through this time of heightened geopolitical tension.

“We are actively monitoring this rapidly evolving situation, the international response and the implications for the group,” Mondi says in a statement.