JSE- and LSE-listed packaging and paper company Mondi says it is assessing all options for the group’s interests in Russia, including any form of legal separation.
It states, however, that this move does not mean, or imply, that it is planning, or initiating, any liquidation or bankruptcy proceedings in relation to any of its Russian subsidiaries or assets.
Mondi, which has operated in Russia for the past 22 years, generates about 12% of its revenue in the country, with about 20% of Mondi’s earnings before interest, taxes, depreciation and amortisation emanating from business in the country.
The group’s most significant facility in Russia is a wholly-owned integrated pulp, packaging, paper and uncoated fine paper mill in Syktyvkar, in Komi Republic.
Mondi, which employs about 5 300 people in Russia, also has three converting plants in the country, with all these facilities primarily serving the domestic market and continuing with operations through this time of heightened geopolitical tension.
The Syktyvkar mill is, however, starting to experience a number of operational constraints, potentially brought on by sanctions imposed on the country as a result of its invasion of Ukraine towards the end of February.
Mondi notes that, although the mill is still operating, it is struggling to obtain and import items for the plant such as process chemicals, spare parts and other critical supplies.
While it is difficult to assess the ramifications in what remains a rapidly evolving situation in Russia, Mondi reports that operational challenges may significantly impact the operation of the mill.
Further, the Syktyvkar mill, which does not receive any direct funding from Mondi, operates an integrated power plant providing a portion of the Komi Republic’s energy demand.
It is also the primary source of heat and warm water for the Ezhva district of Syktyvkar, which has a population of about 60 000, as well as providing other local community services such as wastewater treatment.
Mondi notes that the mill is legally required by Russian authorities to provide the energy supply.
Meanwhile, in Ukraine, Mondi’s single Lviv-based paper bag plant, which employs about 100 people, has suspended operations.
In an effort to assist Ukraine, Mondi has pledged €1-million to support the United Nations World Food Programme’s emergency operation to provide food assistance for people impacted by the conflict.
Mondi says it is “profoundly concerned” about the crisis unfolding in Ukraine and is “shocked” by the humanitarian impact of hostilities in the country.
“We express our deepest sympathy to all those impacted by the ongoing hostilities, adding our voice to those calling for an urgent cessation,” the company says in a statement.