Mondi PLC Trading Update
October 15 2020 - 2:00AM
UK Regulatory
TIDMMNDI
Mondi plc
(Incorporated in England and Wales)
(Registered number: 6209386)
LEI: 213800LOZA69QFDC9N34
LSE share code: MNDI ISIN: GB00B1CRLC47
JSE share code: MNP
15 October 2020
Trading update: Mondi delivers resilient Q3 performance
Underlying EBITDA for the third quarter of 2020 was EUR306 million, down 20% on
the comparable prior year period (Q3 2019: EUR383 million), as lower average
selling prices and negative currency effects more than offset lower costs.
Compared to the second quarter of 2020 ('sequentially'), underlying EBITDA was
down 13% (Q2 2020: EUR353 million). Good volume growth in uncoated fine paper and
fibre-based packaging products and ongoing strong cost control were more than
offset by the impact of planned maintenance shuts, negative currency effects
and lower average selling prices.
Andrew King, Group CEO, commented "The decisive action we took in the early
stages of the COVID-19 pandemic helped to protect our people, maintain supply
of essential products and services, and deliver a resilient performance. Our
people have demonstrated their enterprise and commitment, taking care of
colleagues, communities and customers in these unprecedented times.
I am pleased that sustainable packaging continues to be a focus for our
customers. We continue to make good progress leveraging our award-winning
innovation capabilities and customer-centric approach to optimise packaging
design using 'paper where possible, plastic when useful'."
In Corrugated Packaging, demand from e-commerce and consumer applications
remained strong. We also saw some recovery in industrial end-uses from the lows
of the second quarter. We achieved good volume growth in Corrugated Solutions
measured both year-on-year and sequentially. Given the strong order position
and normalised inventory levels, we are currently in discussions with customers
around price increases for various containerboard grades.
Flexible Packaging demand remained resilient during the period and volumes in
our paper bags business grew year-on-year. Following a strong performance in
the first half, we saw some supply chain de-stocking effects impacting volumes
in our consumer flexibles business during the quarter.
We continue to leverage Engineered Materials' coating technologies to develop
sustainable packaging solutions. As expected, we saw lower personal care
component volumes as a key product matures. Demand in industrial and
specialised end-uses continued to be impacted by lockdown restrictions, in
particular in release liner. We are implementing a range of measures to reduce
the cost base, including the closure of a release liner plant in Pleasant
Prairie (Wisconsin, US) and engaging with employee representatives on the
restructuring of our personal care components focused operations in Gronau
(Germany).
Encouragingly, Uncoated Fine Paper demand improved as lockdown restrictions in
Europe, Russia and Southern Africa eased with a gradual pick-up in activity in
schools, offices and commercial printing. Sales volumes were significantly up
sequentially, although they are still down on the comparable prior year period.
Average uncoated fine paper prices were lower than in the first half of the
year. Our South African operations are currently affected by an industry-wide
strike. We are engaging with trade unions and employee representatives to reach
an agreement while we continue to deliver products to our customers. The
Uncoated Fine Paper business remains well-positioned in the context of the
current market challenges given our cost competitiveness, product
diversification and geographic positioning.
Average input costs were stable sequentially and cost control was strong across
the business. Currency movements had a net negative impact on underlying EBITDA
compared to the second quarter, driven by a weaker US dollar, impacting a
number of the Group's globally traded products, coupled with a weaker Russian
rouble and Turkish lira. Given prevailing exchange rates, we anticipate a
further net negative currency impact in the fourth quarter.
To protect our employees and suppliers and minimise execution risk, we decided
to postpone most planned maintenance shuts to the second half of the year.
During the quarter, planned maintenance shuts with an estimated impact on
underlying EBITDA of around EUR35 million (2019: EUR40 million) were carried out
successfully. Based on prevailing market prices, we continue to estimate that
the impact of planned mill maintenance shuts on underlying EBITDA for 2020 will
be around EUR100 million (2019: EUR150 million), with the fourth quarter impact
expected to be around EUR55 million (2019: EUR30 million).
Our major capital investment projects are progressing according to plan. The EUR
67 million capital investment project to convert a containerboard machine at
Steti (Czech Republic) to become fully dedicated to the production of
speciality kraft paper for shopping bag applications is scheduled to be
commissioned during the fourth quarter. This additional capacity (75,000
tonnes) further supports our retail customers in their efforts to replace
unnecessary plastic as they transition to more sustainable packaging solutions
that contribute to the circular economy.
During the period, we paid an interim dividend to shareholders amounting to EUR
237 million. We also redeemed our 3.375% EUR500 million Eurobond from available
cash. There are no other material short-term debt maturities. The Group's
financial position remains strong, with liquidity of around EUR970 million.
Outlook
The macro-economic outlook continues to be uncertain, however we are confident
that the Group will continue to demonstrate its resilience, while remaining
well-positioned for when the recovery takes place. Our confidence is
underpinned by Mondi's integrated high-quality, cost-advantaged asset base,
culture of continuous improvement, portfolio of sustainable packaging solutions
and the strategic flexibility offered by our strong cash generation and
financial position.
Contact details
Investors/analysts
Clara Valera +44 193 282 6357
Mondi Group Head of Strategy and Investor
Relations
Media
Kerry Cooper +44 193 282 6323
Mondi Group Head of External Communication
Richard Mountain +44 790 968 4466
FTI Consulting
Conference call dial-in details
A conference call will be held today at 08:00 (UK) / 09:00 (South Africa).
The conference call dial-in numbers are:
UK 0800 279 6619
South Africa 0800 014 552
Other +44 2071 928 338
Conference ID 6763227
Should you have any issues with accessing the dial-in conference call, please
call +44 2071 928338.
A replay facility will be available until 22 October 2020 (Pin number:
6763227). The dial in details are:
United Kingdom 0844 571 8951
Other +44 3333 009785
Notes
This trading update provides an overview of our financial performance and
financial position since the half year ended 30 June 2020. Financial metrics
have not been audited or reviewed by Mondi's external auditors.
Underlying EBITDA is an Alternative Performance Measure that is not defined or
specified according to International Financial Reporting Standards. This
measure is defined as operating profit before special items, depreciation,
amortisation and impairments not recorded as special items.
About Mondi
Mondi is a global leader in packaging and paper, contributing to a better world
by making innovative packaging and paper solutions that are sustainable by
design. Our business is fully integrated across the value chain - from managing
forests and producing pulp, paper and plastic films, to developing and
manufacturing effective industrial and consumer packaging solutions.
Sustainability is at the centre of our strategy and intrinsic in the way we do
business. We lead the industry with our customer-centric approach,
EcoSolutions, where we ask the right questions to find the most sustainable
solution. In 2019, Mondi had revenues of EUR7.27 billion and underlying EBITDA of
EUR1.66 billion.
Mondi has a premium listing on the London Stock Exchange (MNDI), and a
secondary listing on the JSE Limited (MNP). Mondi is a FTSE 100 constituent,
and has been included in the FTSE4Good Index Series since 2008 and the FTSE/JSE
Responsible Investment Index Series since 2007.
Sponsor in South Africa: UBS South Africa Proprietary Limited.
END
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