Mondi profits grow by 15% in the first quarter

MONDI said its underlying operating profit for the first quarter of the year increased by 15%.

Underlying operating profit for the quarter increased to €295 million (R4.37 billion) as compared to €256m reported last year.

The group attributed this growth to higher average selling prices and profit improvement initiatives across the group, which more than offset higher operating costs, the impact of maintenance shutdown and negative currency effects.

Yesterday Mondi said costs were generally higher than the comparable prior year period and the previous quarter.

“Among key input costs, wood, energy and chemical costs were higher than the previous quarter. The notable exception was paper for recycling costs, where average benchmark European prices were down by 15% compared to the first quarter of last year, and 16% lower sequentially, as the Chinese imports ban continued to impact global trade. Cash fixed costs were higher, largely as a result of the impact of maintenance shut downs,” Mondi said.

Like-for-like sales volumes were stable on the comparable prior year period, with growth in packaging paper offset by lower volumes in uncoated fine paper due to the extended maintenance shut downs at Richards Bay.

Selling prices for the group’s key paper grades were, on average, above both the comparable prior year period and the previous quarter as the upward pricing momentum witnessed last year continued.

A prolonged maintenance shut down at its Richards Bay mill took place during the quarter.

The estimated impact on operating profit of maintenance shuts completed during the period was around €35m, up from €10m. The group said currency movements had a net negative impact on operating profit versus the comparable prior year period, driven mainly by a weaker dollar and Russian rouble relative to the euro, and a net negative impact when compared to the fourth quarter of last year mainly as a result of a stronger rand.

Going forward Mondi said the outlook for the business remained positive.

“We continue to experience a strong pricing environment in a number of our key product segments, supported by good demand growth,” Mondi said.