Mondi pulls dividend due to Covid-19 uncertainty


Mondi pulls dividend due to Covid-19 uncertainty


Published Date: 2020-04-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Mondi pulls dividend due to Covid-19 uncertainty

The group says it will consider an additional interim dividend for 2019 when it has a clearer view of the impact of the coronavirus.

Mondi says after a solid first quarter, its performance for the rest of the year is difficult to predict due to the potential impact of Covid-19 on its operations. The paper and packaging group says all its facilities have continued operating, with the exception of the temporary closure of its Merebank paper milll in KwaZulu-Natal and temporary closures or other interruptions at a small number of its paper bags converting plants.

However, as a precaution, the group has cut its capex budget for the year and will withdraw its decision to pay a final dividend for 2019 at its annual general meeting next month.

In a trading update, the group reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of €385 million for the three months to end-March, in line with the fourth quarter of last year but 18% down from the same period a year earlier. It said the decline was mainly due to lower pricing across its key paper grades mitigated by lower input costs and its ongoing cost reduction programme.

Towards the end of the quarter and into early April it saw a deterioration in its uncoated fine paper order book in Europe and South Africa as the effects of the various lockdown measures took hold. To manage inventory levels, it is taking downtime at its Neusiedler mill in Australia, while the 270,000 tonnes a year Merebank mill has been closed in line with government regulations. In Flexible Packaging, while there was strength in a number of consumer related applications, particularly in food, beverage and personal and home care, trading with its customers in the building and construction industries was weaker, with a mixed picture in industrial and other end-uses.

Mondi said it had postponed non-essential capital expenditure and slowed down some of its major capital projects, reducing near term cash outflows and minimising contractors and other non-operating people on its key sites. As a result, it now expects capital expenditure of around €600 million this year, down from €700 million to €800 million previously. It said this was likely to cause limited delays to the commissioning of certain of its capital investment projects. It has also postponed annual mill maintenance shuts to the second half of the year.

The group said its board would consider the appropriateness, quantum and timing of an additional interim dividend payment for 2019 when it had a clearer view of the effects of Covid-19 on its business and outlook.

Mondi's shares closed less than 0.1% higher at R301.05 on Thursday.


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