Mondi has reported lower earnings for the first half of the year due to lower selling prices and higher operating costs.
The UK- and JSE-listed paper group, a global leader in the production of sustainable packaging and paper, reported that underlying earnings before interest, tax, depreciation and amortisation (ebitda) for the six months ended June of €565m, was in line with expectations.
The decline in underlying ebitda was primarily due to lower average selling prices, and inflationary personnel and operating cost pressures, despite an improvement in sales volumes and a reduction in input costs.
Group revenue from continuing operations was 4% lower at €3.74bn and basic underlying earnings per share declined to 50.5 euro cents from 67c a year ago. An interim dividend per share of 23.33c was declared.
On February 13, the group returned the net proceeds from the sale of its Russian assets to shareholders by way of a special dividend of €1.60 per ordinary share.
Second quarter underlying ebitda benefited from rescheduled maintenance shuts and a higher-than-expected forestry fair value gain, together totalling about €40m, it said.
“Our underlying ebitda of €565m in the first six months, though lower than the comparable period last year, reflected an encouraging performance, supported by improving market conditions resulting in stronger order books and higher sales volumes,” CEO Andrew King said.
While improving market demand and customer restocking led to an increase in volumes in the first half of the year, prices were, on average, lower than the first half of 2023 as a result of the substantial price declines seen throughout 2023.
This enabled Mondi to implement a number of price increases across its paper grades.
“The benefit of the price increases will continue into the second half of the year. The second half is expected to be impacted by higher planned maintenance shuts and a likely forestry fair value loss,” he said.
The effect of maintenance shuts during the period was lower than previously expected due to the rescheduling of the maintenance shut at its Richards Bay mil from the second quarter of the year to the third quarter.
“We therefore expect the underlying Ebitda impact from shuts in the second half of the year to be around €80m when compared to around €20m impact in the first half of the year,” King said.
“We continue to invest through-cycle to grow our business, enhancing our unique packaging and paper platform and broad product offering,” he said.
“Of our €1.2bn organic growth investments, we will have invested around 80% by the end of this year, with operations currently ramping up following the modernisation of our Kuopio mill, the debottlenecking of our Swiecie mill and the two expanded box plants in Poland. Overall, our organic growth investments are expected to deliver a meaningful Ebitda contribution from 2025.”
King said the group was making good progress on its organic growth investments, with its €1.2bn of organic growth investments remaining on track and on budget.
“These projects are diversified across our value chain, products and geographic reach and comprise €0.6bn of investments in corrugated packaging and €0.6bn of investments in flexible packaging.
“Our projects are expected to take two to three years to achieve full production following their start-up, and deliver mid-teen returns through-cycle when fully operational,” he said.
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