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And the group's share price reacted accordingly: by 11am local time Mondi was quoted at R70.14 - up R1.34 or 2%, after touching a new record high of R70.20 earlier. To date this month, the company's share price is up more than 12%, outperforming the Forestry and Paper (J173) index, which is up 9% month to date.

Basic EPS rose to 71.8 euro cents for the year ended December 2012 from 45.6 euro cents a year ago. Basic EPS from continuing operations rose to 57.5 cents from 37.8 cents, while basic EPS from total operations increased to 66.1 cents from 44.1 cents.

Group revenue was up 2.3% at EUR 5.739 billion, while underlying EBITDA grew 20.8% to EUR964 million and underlying operating profit was 35.8% higher at EUR622 million.

The directors have recommended a final dividend of 17.75 euro cents per share, bringing the total dividend to 26.0 euro cents per share for the year, an increase of 30% on the prior year.

CEO David Hathorn noted that the results were achieved against the backdrop of a strong trading environment in the first half and a more challenging second half, which was characterised by a noticeable slowdown in demand and which led to some volume and pricing pressures when compared to the strong first half of the year.

The Europe & International Division, through its Uncoated Fine Paper, Corrugated and Bags & Coatings businesses, contributed €611 million to underlying operating profit and the South Africa Division €62 million. The Newsprint operating loss of €18 million was disappointing, while corporate costs were at similar levels to previous years, he noted.

Input costs, particularly wood, pulp and recycled fibre, rose by around 7% compared to the prior year, mainly due to market price increases, offset in part by currency gains and lower volumes, although some softening in key fibre input costs was seen in the second half of the year.

He noted that the company reduced net debt to €831 million at year end, from €1.364 billion at end December 2010, thanks to strong cash generation and the proceeds from the demerger of Mpact.

Mpact was demerged from Mondi and listed as a separate entity on the JSE in July last year.

Hathorn noted that Syktyvkar mill in Russia delivered a very strong result, benefiting from the first full year contribution from the mill modernisation investment completed in the second half of 2010. Together with a solid performance from the Ružomberok mill in Slovakia and Neusiedler mill in Austria, this more than offset the lost contribution from the sale at the end of 2010 of Mondi's controlling interest in Mondi Hadera.

The substantial improvement in the underlying profit of the corrugated business in 2010 continued in 2011, reflecting the benefit of the improved trading conditions, recent capital investments and restructuring and cost reduction initiatives undertaken over the last few years.

The Syktyvkar containerboard machine rebuild, completed as part of the Syktyvkar modernisation programme, made a strong contribution, while the Swiecie mill in Poland delivered a further significant improvement in performance.

He noted that operating performance in all kraft paper mills was excellent, although downtime in the second half of the year impacted productivity. The total commercial downtime, the majority of which was taken towards the end of the third quarter and during the fourth quarter of 2011, amounted to approximately 10% of annual production capacity.

The SA division saw underlying operating profit of EUR62 million - marginally down on the previous year, reflecting a weaker trading environment.

Benefits were seen from the mothballing of the 120,000 tonne per annum UFP machine in Merebank and the related restructuring programme which delivered both substantial cost savings and improved margins arising from an increased focus on the domestic market. The integrated pulp and paper operation at Richards Bay achieved record saleable production in excess of 750,000 tonnes in the calendar year.

The Mondi Shanduka Newsprint joint venture in SA was negatively impacted by currency translation effects and rising electricity costs. The business has however concluded renewed contracts with its major domestic customers at prices which will offset input cost increases over the coming year and restore a reasonable level of profitability.

Hathorn said the group had benefitted from its exposure to emerging markets, including, Russia, Eastern Europe and SA and it was well positioned to generate strong cash flow though the cycle.

"Our strong cash flow generation through the cycle enables us to ensure our asset base remains appropriately invested and exploit value adding growth opportunities, whilst maintaining our investment grade credit ratings and increasing returns to shareholders.

"In this regard, we have approved investments in certain high return energy and de-bottlenecking projects and launched a tender offer for the non-controlling interest in Mondi Swiecie," he added.

Looking ahead, Hathorn said, while macroeconomic risks remain, he was encouraged by the improvement in order books in recent weeks and prices had stabilised, with price increases announced in certain grades.

"This should allow some recovery of price declines experienced over the course of the second half of 2011, although recent strengthening of emerging market currencies is impacting margins. Supply side fundamentals in our core grades remain good following further announcements of capacity closures in the industry," he concluded.