Packaging firm Mondi has posted an underlying EBITDA increase of 17% to €852 million in the first half of the year, with EBITDA margin of 22.9% for the period.
The group posted revenue of €3.73 billion for the period, which was up from the €3.58 billion it posted in the same period last year. Profit before tax was €490 million, up 6%.
Strong Performance
“Mondi delivered a strong performance in the first half of 2018, with underlying EBITDA of €852 million, up 17% in the period," said Peter Oswald, the group's chief executive.
"We benefited from good demand across our packaging businesses as well as higher average selling prices, while remaining focused on initiatives to drive performance and mitigate inflationary pressures on our cost base."
Oswald noted that the group saw a "strong operational performance" across its pulp and paper business, with the exception of an extended closure period at its Richards Bay mill in South Africa.
The company's Packaging Paper business, which posted sales of €1.3 billion, was described as 'excellent', while Mondi also said that it made 'good progress' on major capital investment projects, such as its kraft paper facility in Štětí in the Czech Republic, which is due to open in late 2018, and an upgrade to its Ružomberok pulp mill in Slovakia.
Cost Competitiveness
"We continue to make good progress in securing future growth and ensuring the ongoing cost competitiveness of our operations through the delivery of our major capital expenditure programme of over €750 million, which is expected to contribute to earnings from 2019," said Oswald.
"We continue to make good progress on smaller capital expenditure projects at a number of our packaging operations, while integration of the recently completed acquisitions is progressing according to plan. The trading environment remains positive going into the second half of the year, with pricing in key fibre based product
segments remaining supportive."
Divisional Performance
The group's Fibre Packaging division posted underlying revenue of €1.07 billion for the period, and an EBITDA gain of 4%, Consumer Packaging saw revenue of €822 million and a marginal decrease in EBTDA, and its Uncoated Fine Paper business saw revenue of €941 million.
Looking ahead to the rest of the year, Oswald said that he anticipates the period to be "impacted by the usual seasonal downturn in Uncoated Fine Paper. We also expect continued pressure on the cost base across the Group, mitigated by our ongoing proactive and comprehensive cost reduction programmes.
"Mondi is uniquely positioned to develop sustainable fibre and plastic based packaging solutions. With our robust business model, focus on leveraging key industry trends of sustainability, e-commerce and convenience, and culture of driving performance, we remain confident of sustaining our track record of delivering value accretive growth."
Analyst View
Commenting on the company's performance, AJ Bell investment director Russ Mould said, “A 25% increase in underlying profit looks an excellent result given the impact of a weaker US dollar and Russian rouble and higher raw materials costs.
“These factors contributed to a profit warning in October 2017 and based on today’s outlook statement from the company there is unlikely to be any let up in the remainder of the year. This, plus the impact of a seasonal downturn in its uncoated fine paper business, creates a challenge for the company to continue to manage its cost base carefully.
“The seemingly mundane packaging sector has been enlivened in 2018 by the bid approach for Mondi’s rival Smurfit Kappa in March and this space is benefitting from demand created by the shift to online shopping.”
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine
