Mondi is advancing its expansion plans despite facing muted trading conditions characterised by economic uncertainties, in a bold move to solidify its market presence.
The packaging and paper giant recently announced its acquisition of the packaging assets from Schumacher Packaging in Western Europe for €634 million (R12.3 billion).
This strategic decision reflects Mondi’s commitment to bolstering its European footprint, funded by its existing financial resources.
CEO Andrew King confirmed yesterday that the company was also in the final stages of investing in new paper machines at its manufacturing facilities in Steti, Czech Republic, and Duino, Italy.
“Our expansionary projects remain on track. We are making good progress towards completing the paper machine investments at Steti and Duino, both expected to start-up as planned,” said King.
Investment into organic growth is expected to deliver a meaningful contribution to the company’s earnings before interest, tax, depreciation and amortisation (Ebitda) from next year.
“Together with the recently announced acquisition of the Western European assets of Schumacher Packaging, the additional capacity will ensure Mondi is well positioned to capitalise on the structural growth in sustainable packaging,” explained King.
Despite the intensifying its investments, King said “trading conditions remain muted against the backdrop of an uncertain economic” environment. However, the company had started to see “the benefits from the increase in prices earlier this year” across its key paper.
In the quarter to December, Mondi is anticipating fewer planned maintenance shutdowns while also expecting a pick-up in seasonal demand.
In the third quarter period to the end of September 2024, underlying Ebitda in Mondi was lower at €223m compared to €351m in the second quarter.
The company has attributed this to “to more planned maintenance shuts and a forestry fair value” loss. This has resulted in a difference between the third quarter and second quarter of some €90m.
This was in addition to softer seasonal demand and higher input costs experienced during the third quarter period under review.
Selling prices for the company’s corrugated packaging and flexible packaging were however higher compared to the previous quarter due to the implementation of paper price increases earlier in the year.
“After a recovery in pricing at the start of the year, pulp and paper selling prices in Uncoated Fine Paper declined in the quarter,” said the company.
Mondi declared a 23.33 euro cents (R4.57) dividend for the six months to June 2024, on top of the €1.60 per share special dividend arising from the proceeds from the sale of the group’s Russian assets.
The special dividend was accompanied by a share consolidation of 10 new shares for every 11 held. Including the consolidation, basic underlying earnings were 50.5 euro cents per share compared with 67 euro cents at the same time last year, prior to consolidation.
BUSINESS REPORT