Paper and packaging group Mondi believes it will remain resilient and deliver progress despite geopolitical and macroeconomic concerns as it awaits regulatory approval for the sale of most of its assets in Russia.
“We anticipate continued inflationary pressures on our cost base as we enter the fourth quarter,” the company, valued at R137.2bn on the JSE, said in a trading statement on Friday, commenting on its performance in the third quarter.
“The group 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 unique platform for growth, strong cash generation and financial position,” Mondi said.
The company announced in August it had reached a deal to sell most of its assets in Russia for €1.5bn (R26.7bn) to Augment Investments.
These assets include an integrated pulp, packaging paper and uncoated fine paper mill in the city of Syktyvkar, about 1,000km northeast of Moscow.
Mondi’s paper business in Russia accounts for about a fifth of the group’s core profit, but it said in May it was looking to leave the country amid an exodus of firms due to the war in Ukraine.
The Russian government still needs to approve the sale and its remittance through a dividend to Mondi.
Excluding Russia, Mondi’s underlying core earnings rose 55% year on year to €450m (R8bn) as higher average selling prices and overall volume growth more than offset significant cost pressures.
The corrugated packing side of the business benefited from higher average selling while box volumes were lower as demand decreased compared with strong volumes last year.
The company hiked the prices of its kraft papers and packing products while flexible packaging performed well.
Uncoated fine paper achieved higher average selling prices and grew pulp volumes while uncoated fine paper volumes were lower.
Input costs jumped as wood and energy costs increased because of higher demand and tight market conditions for wood affected availability.
Mondi largely avoided higher gas and electricity costs in Europe, because most of its pulp and paper mills generate most of its own energy “with around 80% of the fuels used in this process from biomass sources, and only around 10% of our fuel sourced from natural gas”.
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