Mondi warns over profits as costs weigh on pa­per maker

The Daily Telegraph - Business - - Business - By Jon Yeo­mans and Rhiannon Bury

MONDI warned its full-year profits would be hit by ris­ing costs and neg­a­tive for­eign cur­rency move­ments, send­ing shares across the pa­per and pack­ag­ing sec­tor lower yes­ter­day.

The FTSE 100 busi­ness said that although the prices of its prod­ucts have climbed this year, this would not off­set the ris­ing cost of wood, en­ergy and chem­i­cals, as well as the fall­ing value of the US dol­lar and the “sharply weaker” Turk­ish lira.

“Con­tin­u­ing cost pres­sures and neg­a­tive cur­rency im­pacts are ex­pected to re­sult in an un­der­ly­ing per­for­mance for the year mod­estly be­low mar­ket ex­pec­ta­tions,” it warned.

It said planned shut­downs of some of its pa­per mills would also hit profits in the fourth quar­ter. Mondi’s shares plum­meted 7.8pc to £19.26, their low­est price since March, while DS Smith, which has a large pack­ag­ing arm, was down 2.1pc at 490p.

Fel­low pack­ag­ing group Smur­fit Kappa lost 2.9pc to end at £22.10, mak­ing it the se­cond largest faller on the blue-chip in­dex, be­hind Mondi.

Mondi, which has its head­quar­ters and a sec­ondary list­ing in Jo­han­nes­burg, pro­duces pack­ag­ing ma­te­ri­als, boxes and pa­per for a va­ri­ety of uses. It was spun out of min­ing gi­ant An­glo Amer­i­can in 2007.

De­spite ris­ing costs, it re­ported that its un­der­ly­ing op­er­at­ing profit for the third quar­ter of the year was €245m (£219m), up 8pc com­pared to the same pe­riod a year ago.

Mark Field­ing, an­a­lyst at UBS, said: “We would ex­pect the share to be slightly weaker on this an­nounce­ment given a gen­er­ally favourable back­drop on the pric­ing side be­ing off­set by the cost in­creases.” He main­tained his “buy” rat­ing on the stock, say­ing the out­look for Mondi was “at­trac­tive” in the medium term.

The news comes just five months af­ter Mondi ap­pointed Pe­ter Oswald as chief ex­ec­u­tive, af­ter the de­par­ture of long-stand­ing boss David Hathorn, who had been in his role for 17 years.

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