Mondi PLC Trading Update
October 14 2022 - 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
14 October 2022
Trading update: Strong Q3 performance
Underlying EBITDA from continuing operations (Group excluding the Russian
operations) for the third quarter was ?450 million, up 55% compared to the
prior year period (Q3 2021: ?290 million). Higher average selling prices and
overall volume growth more than offset significant cost pressures.
Andrew King, Chief Executive Officer, said: "Mondi delivered strongly in the
third quarter. My sincere thanks go to all of my colleagues for their ongoing
agility and commitment in challenging times. We continue to partner with our
customers, helping to lead the way towards a circular economy with our unique
portfolio of innovative and sustainable packaging and paper solutions. We also
remain focused on operational efficiency and cost control.
Our ambitious expansionary capital investment programme is progressing well, as
we continue to invest in our cost advantaged asset base to capture
opportunities in our structurally growing packaging markets, enhance our
competitiveness and deliver sustainably into the future."
Business unit overview
Corrugated Packaging benefitted from higher average selling prices compared to
the prior year period, leveraging our innovative product portfolio and strong
customer proposition. Corrugated Solutions box volumes were lower in the
quarter driven by generally softer demand when compared with the strong volume
growth delivered in the prior year.
Flexible Packaging performed well, with resilient demand during the period.
Price increases across our range of kraft papers and packaging products were
implemented during the quarter, where not fixed by annual or semi-annual
contracts.
Uncoated Fine Paper achieved higher average selling prices and grew pulp
volumes in the quarter while uncoated fine paper volumes were lower. The
non-cash forestry fair value gain was higher.
Input costs
Input costs were significantly higher in the quarter, both year-on-year and
sequentially, largely due to higher wood and energy costs. Increased demand and
tight market conditions for wood continue to impact availability and pricing.
We were able to mitigate the impact of significantly higher European gas and
electricity costs as most of our pulp and paper mills generate the majority of
their energy needs internally, with around 80% of the fuels used in this
process from biomass sources, and only around 10% of our fuel sourced from
natural gas. We look to mitigate the effect of inflationary pressures on the
cost base through our cost control initiatives.
Investing for growth
Our ?1 billion expansionary capital investment programme is progressing well,
and we expect these projects to deliver mid-teen returns when in full
operation.
As part of this programme, we are pleased to have recently approved the
investment in a new 210,000 tonne per annum kraft paper machine at our flagship
Steti mill (Czech Republic) for ?400 million. This cost advantaged machine will
meet the growing demand for sustainable paper-based flexible packaging to
better serve our customers. Start-up is expected in 2025 with full production
ramp up by 2027.
Adding to our pipeline of growth projects, in August 2022 we agreed to acquire
the Duino mill near Trieste (Italy). We plan to convert the existing
lightweight coated mechanical paper machine into a high-quality,
cost-competitive recycled containerboard machine with an annual capacity of
around 420,000 tonnes. The total acquisition and capital investment cost is
estimated at around ?240 million. The mill is ideally located to source paper
for recycling, supply the Group's Corrugated Solutions plants in Central
Europe and Turkey as well as to serve the growing local Italian market. This
project provides an opportunity to grow our packaging business, build on our
integrated platform and broaden our geographic reach. The acquisition is
subject to competition clearance and other closing conditions with completion
expected in the fourth quarter of 2022. The converted machine is expected to
start-up in 2025 and deliver mid-teen returns when in full operation.
We continue to actively consider further investment opportunities to serve our
customers' growing demand for sustainable packaging solutions, improve our
environmental footprint and further improve our cost competitiveness.
Russian operations
Trading update
The Group's Russian operations have been classified as held for sale and
presented as discontinued operations. In the third quarter of 2022, the Russian
operations generated profit after tax of ?104 million (EBITDA of ?129 million).
Update on proposed disposal of Mondi Syktyvkar
On 12 August 2022 we announced that the Group had entered into an agreement to
sell its most significant facility in Russia, Joint Stock Company Mondi
Syktyvkar, together with two affiliated entities (together "Syktyvkar") to
Augment Investments Limited for a consideration of RUB 95 billion (around ?1.5
billion at current exchange rate), payable in cash on completion (the
"Disposal").
The Disposal is conditional on the approval of the Russian Federation's
Government Sub-Commission for the Control of Foreign Investments and customary
antitrust approvals. Furthermore, the planned remittance of the excluded cash
balance of RUB 16 billion by form of dividend to Mondi before completion
requires the approval of the Ministry of Finance of the Russian Federation.
These approvals remain outstanding.
Summary and outlook
While significant geopolitical and macroeconomic uncertainties remain and we
anticipate continued inflationary pressures on our cost base as we enter the
fourth quarter, we are confident that the Group will continue to demonstrate
its resilience and deliver a year of good progress.
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.
Contact details
Investors/analysts
Mike Powell +44 193 282 6322
Mondi Group Chief Financial Officer
Media
Chris Gurney +44 193 282 6358
Mondi Group Senior Communications Manager
Richard Mountain +44 790 968 4466
FTI Consulting
Conference call dial-in details
A conference call will be held today at 08:00 (BST) / 09:00 (CEST/SAST).
To access the facility please register your name and contact details: https://
register.vevent.com/register/BI356338855df84991843961483b13bc38
Replay details
Following the call a replay will be made available until 21 October 2022:
https://edge.media-server.com/mmc/p/r4iybh8a
Notes
This trading update provides an overview of our financial performance since the
half-year ended 30 June 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 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 sustainable consumer and
industrial packaging solutions using paper where possible, plastic when useful.
Sustainability is at the centre of our strategy, with our ambitious commitments
to 2030 focused on circular driven solutions, created by empowered people,
taking action on climate.
In 2021, Mondi had revenues of ?7.0 billion and underlying EBITDA of ?1.2
billion from continuing operations, and employed 21,000 people worldwide. Mondi
has a premium listing on the London Stock Exchange (MNDI), where the Group is a
FTSE100 constituent, and also has a secondary listing on the JSE Limited (MNP).
mondigroup.com
Sponsor in South Africa: Merrill Lynch South Africa Proprietary Limited t/a
BofA Securities.
END
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