All about costs
can’t be directly compared. Both are in the same broad industry and produce pulp. However, Sappi is the big player in the fine paper market (typically glossy publications) while Mondi dominates the uncoated fine paper market – what we call office paper.
Both are currently struggling under slowing demand and overcapacity in some markets: but where Mondi seems to have a clear advantage – which it identified more than 10 years ago – was to focus its resources and growth prospects on lower cost emerging markets.
Mondi CEO David Hathorn says its low cost base is one of the group’s competitive advantages, with 65% of assets in emerging markets keeping production costs in the lowest quartile of the cost curve. Mondi also receives 46% of its revenue from emerging markets. Primary focus is on Eastern Europe, where Mondi spent part of its €875m capital expenditure bill last year on expanding and modernising plants in Russia and Poland.
Sappi claims its mills are among the most efficient in the world. That’s no doubt true. But with the mills based in Western Europe, they entail higher costs, particularly labour.
Like Sappi, Mondi is under pressure from overcapacity in its markets and earlier this year closed a mill in Hungary. But its lower cost base is an advantage that should really come through when demand again picks up.