Not just a paper tiger

Not many would quibble about David Hathorn, the veteran CEO of paper giant Mondi, taking his rightful place among the best CEOs of the year.

The 53-year-old Hilton college graduate, who subsequently studied accounting at the University of Natal, has overseen a company that has broken away from its rivals to become a must-have stock in most investment portfolios. Mondi’s stock has shot up 61% on the JSE this year, reward for years of unremitting good returns, as much as it was a reflection of the allure of the company as a hedge against the falling rand.

It’s a thumping success story for Hathorn’s company, which until 2007 was part of the Anglo American industrial empire. Hathorn must be thanking his lucky stars because, since Mondi split from Anglo in 2007, its former parent company has lurched from crisis to crisis, while Mondi’s lustre has grown.

Listed both in London and Johannesburg, Mondi has turned its business model into something of an art. Its low-cost operations in 30 countries combined to produce a compelling 17% return on capital, which improved from 2013’s 15,3%.

Unlike paper companies in Western Europe, Mondi has produced an operating margin of 16,7% despite the fact that its input costs — largely wood, energy and chemical costs — fluctuate constantly, along with global currencies.

Compared to rival Sappi, which makes fine coated paper products, Mondi’s uncoated fine paper business is more stable, and a string of acquisitions have kept it ahead of the technology curve.

Today, the company makes three-quarters of its money in the packaging industry — and this is where Hathorn is keen to expand. Analysts and institutions love the company too, despite a relatively rich priceto-earnings ratio of 19,9.

Part of Mondi’s success this year has been thanks to the rand, which has helped bolster