Mondi PLC Update on trading and Russian businesses
May 04 2022 - 12:49PM
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
This announcement contains inside information.
4 May 2022
Update on trading and Russian businesses
Mondi today provides an update on trading for the three months to 31 March 2022
and its Russian businesses.
Strong delivery in Q1 2022
Mondi delivered strongly in the first quarter of 2022. Demand was good across
the business, supported by our broad range of innovative, sustainable packaging
and paper solutions, product quality and customer service. Higher average
selling prices more than offset continued cost pressures.
Underlying EBITDA for the first quarter was ?574 million, up 63% compared to
the prior year period (Q1 2021: ?353 million) and up 41% on a sequential basis
(Q4 2021: ?406 million). In the current context, the Group believes it is
appropriate to report that excluding the Russian operations, underlying EBITDA
for the first quarter was approximately ?460 million, up around 70% compared to
the prior year period.
This performance is testament to the continued dedication of our people, our
strong customer relationships and the strength of our integrated business
model.
We made progress on our expansionary capital investment programme to capture
growth across our packaging businesses in structurally growing markets
underpinned by demand for eCommerce and sustainable packaging solutions. As
previously outlined, our pipeline currently includes around ?1 billion of
expansionary projects already approved or under advanced evaluation, which we
anticipate will generate mid-teen returns when in full operation. We continue
to actively consider further capital investment opportunities.
The sale of the Personal Care Components business, which will simplify our
portfolio and deliver greater focus, remains on track for completion in the
second half of the year.
At the end of March 2022, Group net debt to underlying EBITDA was approximately
1.0x.
Update on Russian businesses
Mondi remains profoundly concerned about the war in Ukraine and is shocked by
the humanitarian impact. We express our deepest sympathy to all those affected
by the ongoing hostilities, reiterating our call for an urgent cessation and a
peaceful resolution.
Since the announcement on 10 March, having assessed all options for the Group's
interests in Russia and recognising its corporate values and stakeholder
responsibilities, the Board has decided to divest the Group's Russian assets.
The divestment process for these significant assets is operationally and
structurally complex and is being undertaken in an evolving political and
regulatory environment. Accordingly, there can be no certainty when a
transaction will be completed or as to the structure of any possible
transaction. As of 31 December 2021, the net asset value of the Russian
operations was ?687 million.
The Russian businesses have, to date, managed supply chain constraints.
However, the situation remains fluid, with interruptions to pulp and paper
production possible going forward. All significant capital expenditure projects
in Russia have been suspended.
Business unit trading overview
Growth in demand for Corrugated Packaging normalised during the quarter from
the high levels seen last year. We are implementing further price increases
across our portfolio of containerboard grades. Corrugated Solutions continues
to pass on higher input paper costs.
Flexible Packaging performed well in the period, driven by strong demand for
sustainable packaging solutions and the positive effect of higher kraft paper
and paper bag prices. On the back of continued tight markets, we are in
discussion with customers about further price increases across the business.
Engineered Materials' performance in the quarter was stable, with a good
contribution from Functional Paper and Films.
Uncoated Fine Paper markets remain tight in Europe due to good demand and
limited supply. Average uncoated fine paper prices were higher as a result of
price increases implemented during 2021 and 2022. The Richards Bay mill (South
Africa) is performing well following the recent upgrade of the energy and
chemical plants. Merebank's (South Africa) uncoated fine paper operations are
currently suspended due to severe floods around the city of Durban in
mid-April. The impact on the Group's performance is not expected to be
material.
Input costs, currency movements and maintenance shuts
Input costs were significantly higher in the quarter, both year-on-year and
sequentially, with higher energy, resins, transport, wood and chemical costs.
Currency movements had a net adverse impact on underlying EBITDA against the
comparable prior year period driven by a weaker Russian rouble and Turkish
lira.
The impact of scheduled maintenance shuts on underlying EBITDA during the
period was around ?20 million, with a similar amount expected in the second
quarter. Our full year estimate is unchanged at around ?110 million.
Summary and outlook
Mondi delivered strongly in the first quarter of 2022. While we expect to
realise the full benefit of the price increases implemented in 2021 and 2022 as
we go through the second quarter, we also anticipate continued inflationary
pressures on our cost base. The full year will benefit from shorter planned
maintenance shuts compared to 2021 and the contribution from our capital
investment programme.
While it is early in the year and significant geopolitical and macroeconomic
uncertainties remain, the Group expects to deliver a year of good progress.
Mondi remains well placed to deliver sustainably into the future.
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 tomorrow 5 May at 08:00 (BST) / 09:00 (SAST).
The conference call dial-in numbers are:
UK +44 1 212818004
South Africa +27 110197047 (to join the call press *0)
Other +39 02 802 09 11
Note: No passcode is required to join the conference call. Should you have any
issues accessing the facility please call +39 02 802 09 11.
A replay of the call will be available until 19 May 2022.
Dial-in: +39 02 802 09 87
Passcode: 700715#
Pin: 715#
Notes
This trading update provides an overview of our financial performance and
financial position for the three months to 31 March 2022. 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 integrated across the value chain - from managing
forests and producing pulp, paper and 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 2021, Mondi had
revenues of ?7.7 billion and underlying EBITDA of ?1.5 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: Merrill Lynch South Africa Proprietary Limited t/a
BofA Securities.
END
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