Mondi benefits from rising prices


Mondi benefits from rising prices


Published Date: 2018-05-17 | Source: Stephen Gunnion | Author: Stephen Gunnion

Mondi benefits from rising prices

The paper and packaging group says higher selling prices have offset rising operating costs and the impact of maintenance shutdowns

Mondi says it's had a strong start to its 2018 financial year as higher selling prices and initiatives it's taken to improve its profitability more than offset higher operating costs, the impact of maintenance shutdowns and volatile currencies.

In a trading update, the paper and packaging group said like-for-like sales growth was stable in the first quarter of the year, with growth in packaging paper offset by lower volumes in uncoated fine paper due to the extended maintenance shutdown at its plant in Richards Bay. Selling prices for its key paper grades were, on average, higher than the previous quarter and the comparable period last year. Costs were also higher, however, including wood, energy and chemicals. Cash fixed costs were affected by the impact of the shutdowns.

Mondi said underlying operating profit for the first quarter amounted to €295 million. That's 15% above the comparable prior year period and 6% up on the fourth quarter of last year. It said currency movements had a net negative impact on operating profit from a year earlier, driven mainly by a weaker US dollar and Russian ruble relative to the euro, and a net negative impact when compared to the fourth quarter of last year as a result of the stronger rand.

The estimated impact on operating profit of maintenance shuts completed during the period was around €35 million. Based on prevailing market prices, it estimates that the impact of maintenance shuts on operating profit for this year will be around €115 million, slightly above its previous estimate. Half of that will be incurred in the first half of the year.

Going into the second quarter, the group said it continues to experience a strong pricing environment in a number of its key product segments, supported by good growth in demand. However, it said inflationary cost pressures and volatile currencies remained headwinds.

Mondi Ltd shares gained 1.8% to R345.50 yesterday, while Mondi Plc stock rose 1.7% to R346.


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