Strong demand, supported by paper manufacturer Mondi’s range of innovative and sustainable packaging solutions alongside higher average containerboard selling prices, as well as strong cost control measures continued to support the company’s performance in the first quarter of this year.
This was against a backdrop of input cost inflation and negative currency effects.
Mondi’s underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) for the first three months of the year were in line with expectations, at €353-million, but 8% lower year-on-year. Ebitda for the quarter was, however, 14% higher quarter-on-quarter.
Good cash generation resulted in lower net debt at the end of the quarter and Mondi continues to invest in its business to “capture good growth opportunities”, while enhancing its product offering, quality and service to customers.
The company intends to further strengthen its cost competitiveness and improve its environmental footprint moving forward and said on May 6 that this ongoing investment enables it to grow its packaging markets by “leveraging structural growth drivers, including e-commerce and the transition to more sustainable packaging solutions”.
Mondi’s major capital investment projects are progressing well, with the new 300 000 t/y kraft top white machine at Ružomberok, in Slovakia, and the converted specialty kraft paper machine at Štětí, in Czech Republic, having been commissioned in January.
These machines and are now successfully ramping-up production, with high-quality products being well-received by customers.
Sustainability remains at the centre of Mondi’s strategy, and the company is “uniquely positioned to deliver a range of sustainable packaging solutions” to its customers, adhering to the company’s principle of ‘paper where possible, plastic when useful’, the company said in its statement.
Following the launch of its ten-year sustainability plan, MAP2030, earlier this year, Mondi is now developing bespoke roadmaps across the business to achieve its commitments on circular-driven solutions, empowered people and climate action.
“We believe working in partnership with others is key to having a meaningful positive impact,” the company said, referring to two new partnerships entered into during the quarter under review.
The first agreement is with the Alliance for Water Stewardship to tackle climate change impacts on water security and the second with the United Nations World Food Programme, recognising the important role fit-for-purpose packaging can play in addressing food waste in the fight to eliminate world hunger.
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Demand in corrugated packaging remains strong, driven by growth in e-commerce, fast-moving consumer goods and a recovery in a range of industrial applications.
On the back of tight global markets, a series of price increases across Mondi’s containerboard grades were implemented during the quarter and into the second quarter.
Overall, the corrugated solutions performed strongly, with volumes growing significantly. Mondi made good progress in passing on higher input paper costs.
Good volumes continue to be seen in the flexible packaging segment, with resilient construction end-uses and strong demand for at-home consumption, sustainable packaging and e-commerce solutions.
On the back of strong order books and tight market conditions, price increases across the company’s range of sack kraft papers and paper bags have been implemented where not fixed by yearly or semi-yearly contracts.
As expected, the performance for engineered materials was stable, with capital investment projects and restructuring initiatives progressing according to plan. In this segment, Mondi is seeing improved demand for functional papers and films.
Uncoated fine paper sales volumes were lower on a strong comparable prior year period but improved sequentially. Average uncoated fine paper prices were lower. However, Mondi noted that, towards the end of the quarter, price increases were implemented across its key markets.
“The business remains well-positioned given our broad product portfolio, excellent customer service, geographic positioning and cost competitiveness.”
In relation to input costs, currency effects and maintenance shuts, Mondi said input costs were up in the quarter, and that the company was seeing significantly higher paper for recycling and resins costs, as well as higher energy and transport costs.
Currency movements had a net negative impact on underlying Ebitda against the comparable prior year period owing to the weaker dollar impacting on a number of the group's globally traded products, coupled with the weaker Russian rouble and Turkish lira.
As planned, no significant maintenance shuts were carried out during the quarter, though the impact of scheduled maintenance shuts on underlying Ebitda in the second quarter is estimated at about €40-million and the full-year estimate is unchanged at about €140-million.
Mondi said that it was seeing strong demand across its packaging markets, supported by the structural growth drivers of e-commerce and sustainability and are implementing price increases across all key product segments.
“We continue to benefit from the contribution of our capital investment programme and our relentless focus on continuous improvement, mitigating the impact of significant input cost pressures and currency headwinds,” the company said, noting that, while macroeconomic uncertainties remain, it is confident the group remains well placed to make progress in line with expectations.