Mondi plans to spend up to R11.15bn a year on upgrades |

PACKAGING and paper group Mondi is expecting to spend e700 million (R11.15 billion) to e800m on capital expenditure a year for 2019 and 2020 as the group continues to upgrade and revamp its operations to stay ahead of its competitors.

The group said that in the past three years, these investments had returned handsome rewards, as its major capital projects had contributed e95m of incremental operating profit, including e20m in 2018.

In 2019, the group expected to generate an operating profit of e50m from the capital projects.

Chief executive Peter Oswald said the group continued to make good progress in delivering value-accretive growth and enhancing the cost-competitiveness of its operations through its capital expenditure programme.

“During the fourth quarter of 2018, we successfully started up the e335m modernisation of our kraft paper facility in Steti and we received the final permits to proceed with our investment in a 300 000 ton kraft top white machine at our Ruzomberok mill in Slovakia, while work to upgrade the pulp mill at the same site is progressing well,” Oswald said.

The investments in these projects had delivered good returns in the year to end-December, with underlying earnings before interest, tax, depreciation and amortisation (Ebitda) increasing by 19 percent to e1.76bn, while underlying operating profit surged by 28 percent to e1.32bn, driven by strong demand for its products and higher average selling prices.

Revenue increased by 5 percent to e7.48bn and basic underlying earnings a share increased by 27 percent to 189.1 euro cents a share.

The board recommended a final dividend of 54.55 euro cents a share, taking the total dividend for the year to 76 euro cents, representing a 23 percent increase compared with last year’s 62 euro cents.

Oswald said the group had benefited from good demand across its fibre packaging businesses, higher average selling prices and the contribution from their recent acquisitions.

“I am particularly pleased to report on a robust operating performance, delivering productivity gains and strong cost containment, mitigating the inflationary pressures on our cost base,” he said.

Mondi closed 5.14 percent lower at R331.21 on the JSE yesterday.