Mondi on an in­vest­ment drive

In­vests R12.5bn in Poland and Czech

The Star Early Edition - - COMPANIES - Sandile Mchunu

IN­TER­NA­TIONAL pack­ag­ing and pa­per group Mondi said yes­ter­day that it would con­tinue to drive growth through a cap­i­tal in­vest­ment pro­gramme.

Mondi chief ex­ec­u­tive Peter Oswald said the group had in­vested around €800 mil­lion (R12.54 bil­lion) in two projects in Poland and the Czech Re­pub­lic.

“Dur­ing the pe­riod, we com­mis­sioned the sec­ond phase of our ma­jor in­vest­ment in the on­go­ing de­vel­op­ment of our world class fa­cil­ity in Swiecie, Poland, while good progress is be­ing made on the mod­erni­sa­tion of our kraft pa­per fa­cil­ity in Steti, Czech Re­pub­lic,” Oswald said. He said the in­te­gra­tion of ac­qui­si­tions com­pleted dur­ing 2016 and early 2017 was on track. “Th­ese ac­qui­si­tions en­hance our ge­o­graphic reach and prod­uct port­fo­lio in cor­ru­gated pack­ag­ing and con­sumer pack­ag­ing,” he said.

The suc­cess­ful in­te­gra­tion of ac­qui­si­tions, in­cludes Ex­cel­sior Tech­nolo­gies.

In Fe­bru­ary Mondi ac­quired 100 per­cent of the out­stand­ing share cap­i­tal of Ex­cel­sior from funds man­aged by End­less and cer­tain other mi­nor­ity share­hold­ers, for a to­tal con­sid­er­a­tion of £33m (R577.85m), on a debt and cash free ba­sis.

The group said the ac­qui­si­tion of Ex­cel­sior would sup­port the de­vel­op­ment of its con­sumer pack­ag­ing busi­ness in high-growth prod­uct ap­pli­ca­tions.

The con­sumer pack­ag­ing busi­ness is the area the com­pany is ex­pect­ing to show tremen­dous growth go­ing for­ward as the out­look re­mained pos­i­tive.

Mondi said it saw a strong de­mand across pack­ag­ing pa­per and cor­ru­gated pack­ag­ing in the first half of the year and it suc­cess­fully im­ple­mented price in­creases across cer­tain pa­per grades, of which the full ef­fect is an­tic­i­pated in the sec­ond half.

“The sec­ond half of the year will be im­pacted by planned main­te­nance shuts at a num­ber of our mills and the usual sea­sonal down­turn in un­coated fine pa­per. While we con­tinue to see some in­fla­tion­ary cost pres­sures, we re­main con­fi­dent of making progress in the year and de­liver in­dus­try lead­ing re­turns,” Oswald said.

In the re­sults for the six months to end June, Mondi re­ported a 6.43 per­cent de­cline in un­der­ly­ing op­er­at­ing profit to €497m, down from €529m as com­pared with last year. The group said sales vol­ume growth and higher prices were more than off­set by higher costs, a sig­nif­i­cantly lower forestry fair value gain (down €28m year-onyear), the im­pact of main­te­nance shuts (up €20m year-onyear) and a higher de­pre­ci­a­tion and amor­ti­sa­tion charge.

“Mondi de­liv­ered a ro­bust per­for­mance in the first half of 2017, with rev­enue up 8 per­cent, un­der­ly­ing op­er­at­ing profit of €497m and a re­turn on cap­i­tal em­ployed of 18.7 per­cent, re­flect­ing man­age­ment’s on­go­ing value fo­cus and the strength of our busi­ness model,” Oswald said.

The group’s un­coated fine pa­per busi­ness con­tin­ued to per­form very strongly, with un­der­ly­ing op­er­at­ing profit of €135m, de­liv­er­ing a 36.7 per­cent re­turn of cap­i­tal em­ployed.

In South Africa, the group’s un­der­ly­ing op­er­at­ing profit of €55m was down 44 per­cent in the first half of 2016, with a sig­nif­i­cantly lower fair value gain on its forestry as­sets, the neg­a­tive im­pact of a stronger rand, higher in­put costs and in­fla­tion­ary cost pres­sures.

The board de­clared an in­terim div­i­dend of 19.10 euro cents per share for the pe­riod.

Mondi’s share price was down 2.64 per­cent to close at R339.71 on the JSE yes­ter­day.


Mondi plant in Richards Bay, KZN. Mondi said it will con­tinue to drive growth through cap­i­tal in­vest­ment.

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