JSE-listed packaging and paper group Mondi has reported a 66% year-on-year increase in underlying earnings before interest, taxes, depreciation, and amortisation (Ebitda) from continuing operations to €942-million for the six months ended June 30.
Continuing operations' net debt at the end of the reporting period was €1.22-billion, down from €1.69-billion as at December 31, 2021, which reflects the group's strong cash generation capacity, the disposal of Personal Care Components and the ongoing investment in the business, including the increase in working capital.
Mondi performed strongly in the first half of this year and has a strong financial position, Mondi CEO Andrew King said on August 4.
Profit before tax was €933-million, up 164% year-on-year. Basic underlying earnings were €0.99 share, up 85% year-on-year.
After taking the effect of special items into account, basic earnings from continuing operations were €1.48 a share, up 173% compared with the prior comparable period.
“An interim dividend of €22 a share has been declared, up 8% year-on-year. The group has a strong financial position, with net debt to underlying Ebitda of 0.8 times at June 30, 2022, providing the strategic flexibility to pursue further organic growth projects, merger and acquisition opportunities and/or additional shareholder distributions, in line with our long-established capital allocation framework,” the company said in its results statement.
Further, the impact of planned maintenance shuts on underlying Ebitda during the period was around €40-million, up from €25-million during the same period in 2021. Based on prevailing market prices, Mondi estimates the full-year impact on underlying Ebitda of its planned maintenance shuts at about €100-million, down from €140-million in the first half of 2021.
“Our vertical integration, the agility of our organisation and strong collaboration with our customers ensured we delivered at a time when supply chains continued to be disrupted around the world. We achieved strong price realisation, while maintaining tight cost control, against a backdrop of strong inflationary pressures,” said King.
The company completed the disposal of the Personal Care Components business at the end of June for an enterprise value of €615-million, allowing for greater focus on its strategic priority to grow in sustainable packaging.
As a result of the sale, Mondi recognised a pre-tax gain on disposal of €246-million.
Additionally, the group's continuing operations have a strong liquidity position of about €1.6-billion, comprising €757-million of undrawn committed debt facilities and net cash of €870-million. The weighted average maturity of its committed debt facilities is 3.8 years, it said.
Input costs were significantly higher than in all of 2021 owing to materially higher energy, wood, resins, transport, chemical and paper for recycling costs. Energy costs were driven by sharp increases in the price of European gas and electricity.
“Our pulp and paper mills generate most of their energy needs internally, with biomass sources accounting for around 80% of the fuels used in this process, mitigating the impact of the significant surge in external fuel costs.
“Looking forward, pricing remains strong going into the second half, although we do anticipate continued inflationary pressures on our cost base and ongoing supply chain challenges. While significant geopolitical and macroeconomic uncertainties remain, we expect a year of good progress,” King noted.
Further, Mondi's packaging businesses continued to demonstrate the benefits of its integrated value chain, its portfolio of innovative and sustainable packaging solutions and its attention to quality and service. Uncoated Fine Paper performance recovered strongly, benefiting from the successful commissioning of the rebuilt recovery boiler in Richards Bay in early 2022 and good price momentum in all markets.
Demand for sustainable products continues to grow, with brands and consumers wanting to contribute to a low carbon, circular economy. Mondi's conversations with customers focus on how to design solutions that are efficient, fit-for-purpose and help to convey and deliver their sustainability commitments, the company said.
“Sustainable packaging continues to be a key priority for our customers and wider society. We are well placed to support our customers to achieve their environmental goals with circular driven solutions that are sustainable by design, a unique product portfolio, superior technical know-how, expertise in understanding the best material choices and leading innovation capabilities,” said King.
“Looking forward, we continue to see the opportunity to accelerate growth across our packaging businesses supporting our customers and strengthening our leading market positions in our growing markets. We have an ambitious expansionary capital investment programme to support this growth.”
“Mondi remains well-placed to deliver sustainably into the future, underpinned by our integrated cost advantaged asset base, culture of continuous improvement, portfolio of sustainable packaging solutions and the strategic flexibility offered by our strong cash generation and financial position," King said.
Additionally, Mondi's Russian assets and operations have been classified as held for sale and presented as discontinued operations. The divestment process is underway. The disposal of such significant assets is operationally and structurally complex and it is being undertaken in an evolving political and regulatory environment.