Mondi optimistic despite pressure

Mondi Group says the period since year-end December 2017 has provided a smooth business environment amid strengthening markets abroad.

Mondi Group says the period since year-end December 2017 provided a smooth business environment amid strengthening markets abroad.

“Our outlook for the business remains positive. We continue to experience a strong pricing environment in a number of our key product segments, supported by good demand growth,” the company said on Wednesday in a trading update.

But it also said it continued to see inflationary cost pressure across the group and currencies were “currently a headwind”. However, its “robust business model” and clear customer focus made it “confident of sustaining our track record of delivering value accretive growth”.

The packaging and paper group reported a 15% increase in operating profit for the first quarter of 2018 to €295m.

Higher than average selling prices and profit improvement initiatives across the group more than offset higher operating costs, the effect of maintenance shuts and negative currency effects, the group said.

Like-for-like sales volumes were stable on the comparable period previously, with growth in packaging paper offset by lower volumes in uncoated fine paper due to an extended maintenance shut at the group’s Richards Bay mill.

The estimated effect of maintenance shuts on operating profit during the period was €35m from €10m in 2017.

“Based on prevailing market prices, we estimate that the impact of maintenance shuts on operating profit for 2018 will be around €115m … slightly above our previous estimate,” Mondi said in the update.

Costs were generally higher than in the period a year ago and in the previous quarter, including key wood, energy and chemical costs.

Cole Hathorn, an equity analyst at Jefferies International in London, said on Wednesday that Mondi had started the year strongly, giving a positive outlook for 2018. The multinational financial services company has a target price of 2,300p.

“With key value-accretive capex investments on track supporting the medium-term growth outlook, we reaffirm our buy,” he said.

WE CONTINUE TO EXPERIENCE A STRONG PRICING ENVIRONMENT IN A NUMBER OF OUR KEY PRODUCT SEGMENTS