While macroeconomic uncertainties remain, trading is positive for paper and packaging manufacturer Mondi, which expects to see the full impact of the price increases implemented to date and the continued contribution from its capital investment projects during the second half of this year.
Mondi also expects to offset the impact of planned maintenance shuts and ongoing input cost pressures on its financial position, through a focus on cost control.
Underpinned by the group's integrated cost-advantaged asset base, culture of continuous improvement, portfolio of sustainable packaging solutions and the strategic flexibility offered by its strong cash generation and financial position, the group remains well-placed to deliver sustainably into the future.
Reflecting on the six months ended June 30, Mondi CEO Andrew King says volume growth and pricing momentum in packaging markets had been strong and that the company had also seen improving uncoated fine paper markets.
“We exhibited strong cost control, against a backdrop of rising commodity input costs, while keeping a sharp focus on delivering our high-quality product and service offering to our customers,” he comments.
During the period under review, Mondi remained focused on driving organic growth through its capital investment programme, through which it successfully started up a new 300 000 t containerboard line at Ružomberok, in Slovakia, and a repurposed machine in Štĕtí, in the Czech Republic, which is now dedicated to producing speciality kraft paper for e-commerce and retail shopping bags.
Expansionary projects are also under way at a number of Mondi’s converting packaging operations, enhancing its production capabilities and product offering to further support customers, particularly in e-commerce.
Mondi also approved an expansion and upgrade of its semi-chemical fluting mill at Kuopio, in Finland.
“We are excited by the possibilities offered by our cost advantaged asset base and we continue to evaluate further development opportunities in our structurally growing packaging markets,” King said.
Mondi also completed the acquisition of Olmuksan, expanding its corrugated offering in the fast-growing Turkish market.
GROUP PERFORMANCE REVIEW
Mondi delivered strongly in the first half of the year, with very strong volume growth in its packaging and paper businesses, which was underpinned by the company’s range of innovative, sustainable packaging solutions.
Higher sales volumes, higher average selling prices and strong cost control contributed to performance, against a backdrop of sharply rising input costs, as economies reopen, and negative currency effects.
Underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) for the six months of €709-million were down 4% compared with the first half of 2020, and up 15% compared with the second half of 2020.
Revenue was up 5% on the comparable prior year period, driven by higher sales volumes and pricing.
However, input costs were up, with significantly higher paper for recycling, resins, energy and transport costs.
Maintenance costs were higher, driven by planned maintenance shuts while inflationary cost pressures were mitigated by ongoing cost reduction initiatives.
The noncash forestry fair value gain of €8-million in the first half was down €11-million on the prior-year period. Based on current market conditions, Mondi expects the forestry fair value gain in the second half of the year to be lower than in the first half.
In the first half of the year, Mondi completed a planned maintenance shut at Syktyvkar, in Russia, and smaller shuts at some of its other mills.
Based on prevailing market prices, Mondi now estimates the full-year impact of the group's planned maintenance shuts on underlying Ebitda to be about €150-million, of which the first half effect was about €50-million.
This includes an extended project-related shut at Richards Bay, in South Africa, in the second half as part of the ongoing major modernisation programme at the mill.
Currency movements had a net negative effect on underlying Ebitda versus the comparable prior year period as a result of the negative impact, on certain of Mondi’s export-oriented businesses, of a weaker dollar coupled with translation losses from a weaker Russian rouble and Turkish lira relative to the euro.
Depreciation and amortisation charges were broadly flat year-on-year, and profit before tax was €461-million, down 1% on the comparable prior year period.
Basic underlying earnings were €0.71 a share, down 3% year-on-year.
After taking the effect of special items into account, basic earnings were €0.72, in line with the prior year period.
An interim dividend of €0.20 has been declared.