Mondi is navigating inflation


Mondi is navigating inflation


Published Date: 2021-10-08 | Source: INCE|Community | Author: The Finance Ghost

Mondi is navigating inflation

I do love a quarterly update. Some people argue that it forces management teams into short-term thinking; I just think it gives them nowhere to hide, which isn't a bad thing. The long-term stuff can be addressed in the narrative around the numbers. If a business has had a poor (or exciting) quarter, I would want to know about it sooner rather than later.

In the third quarter, Mondi achieved underlying EBITDA of EUR388 million, up 27% vs. the third quarter last year and up 9% on a "sequential basis" i.e. vs. the second quarter. This is often referred to as cadence by US investors who are lucky enough to live in a world of quarterly reporting.

This result has been achieved despite higher input costs. Mondi achieved higher average prices across the business and strong volume growth, so increases are being passed on to customers successfully. In times of higher inflation, this is critical.

Demand was strong across the business, assisted by trends like eCommerce growth as a driver in flexible packaging. The company has also highlighted that the integration of the Olmuksan acquisition is progressing well.

The pressure in input costs came from higher energy, resins, transport and chemical costs. Mondi is exposed to the energy price issues in Europe, which include electricity and gas prices. Provided costs can continue to be passed on to customers, this can be managed.

Scheduled maintenance can have a significant impact on EBITDA. EUR30 million was lost to maintenance in this quarter, with a larger impact of EUR70 million expected in the fourth quarter. This is in line with previous estimates and includes an extended project in Richards Bay.

Success in the fourth quarter will likely be based on whether input costs can be passed through. The share price hasn't seen much action, only up 4.5% year-to-date.


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