Mondi looks to packaging solutions for e-commerce for growth
Paper-and-packaging group reports 112% surge in profit before tax in the year ended December
23 February 2023 - 19:28
byMichelle Gumede
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Mondi, the multinational paper-and-packaging group, reported a 112% surge in profit before tax in the 12 months ended December after it pushed through higher average selling prices.
The company said on Thursday that profit before tax rose to €1.5bn, from €712m in 2021. The group, which is worth R158bn on the JSE, also reported underlying operating profit of €1.4bn, up 85%.
The group said that after special items, relating to the gain on disposal of the Personal Care Components business, the operating profit was €1.6bn, up 114%.
Mondi reduced its net debt to €1bn from €1.6bn it reported in the prior period. Its earnings before interest, taxes, depreciation, and amortisation was up 60% to €1.8bn.
The board recommended a full-year dividend of 70 euro cents per share, up 8% from 65 euro cents per share.
CEO Andrew King said the company’s integrated business model and strong operational performance enabled it to manage inflationary pressures in the period and expand margins through price increases.
“Our innovative product offering means we can use paper where possible and plastic when useful to provide customers with a uniquely broad choice of flexible packaging solutions to meet their needs,” said King.
“We are extremely confident in the trend about sustainable packaging being deeply entrenched even though there might be some cost implications for the customer in the short term.”
The firm which has its primary listing in London said it had now set its sights at penetrating the e-commerce market and speciality bespoke offerings in retail.
King said developing new applications, particularly in the consumer and e-commerce area, which simply did not exist before the Covid-19 era, was an exciting growth prospect for Mondi.
“Typically where we have seen the strong growth in those consumer applications, those are different customers and end users and they are not often familiar with these long-term contracts. Its more your industrial cement bags and industrial applications where you have longer-dated contracts,” he said.
The company is upgrading the capabilities in its Mexican plants and expanding capacity in paper-based flexible packaging solutions for e-commerce across Europe and the US.
The group operates more than 100 production sites in over 30 countries, under its three business units; corrugated packaging, flexible packaging and uncoated paper.
The corrugated packaging business increased its underlying earnings before interest, taxes, depreciation, and amortisation 22% to €662m, while flexible packaging grew its underlying earnings before interest, taxes, depreciation, and amortisation by 41% to €797m] and the underlying earnings before interest, taxes, depreciation, and amortisation of uncoated fine paper significantly improved from €55m in 2021 to €427m.
King said while there is a concerted drive towards sustainable packaging among its customers, Mondi noted that the current trend was for producers to opt for shorter-term contracts amid global dynamics and volatility.
He added that this was a swing from the traditional paper-based value chain of kraft paper and paper bags, where historically there was more annual and semi-annual business.
“We probably only have about 10% of our volume nowadays contracted on an annual basis, partly because of shifts in the way the industry operates and in the way our portfolio has evolved,” said the CEO.
But the outlook remains upbeat as wood prices, which soared in the second half of 2022, are expected to soften coupled with mostly normalising supply chains.
Meanwhile, the containerboard manufacturer is investing €190m across its flexible packaging converting network while ramping up production at its paper bag plants in Colombia and Morocco.
The group said it is also investing €65m to consolidate its leading position in the European pet food packaging market and plans to invest €50m to enhance its coating capabilities and meet customers’ growing demand for innovative, sustainable paper-based packaging with the necessary barrier properties.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Mondi looks to packaging solutions for e-commerce for growth
Paper-and-packaging group reports 112% surge in profit before tax in the year ended December
Mondi, the multinational paper-and-packaging group, reported a 112% surge in profit before tax in the 12 months ended December after it pushed through higher average selling prices.
The company said on Thursday that profit before tax rose to €1.5bn, from €712m in 2021. The group, which is worth R158bn on the JSE, also reported underlying operating profit of €1.4bn, up 85%.
The group said that after special items, relating to the gain on disposal of the Personal Care Components business, the operating profit was €1.6bn, up 114%.
Mondi reduced its net debt to €1bn from €1.6bn it reported in the prior period. Its earnings before interest, taxes, depreciation, and amortisation was up 60% to €1.8bn.
The board recommended a full-year dividend of 70 euro cents per share, up 8% from 65 euro cents per share.
CEO Andrew King said the company’s integrated business model and strong operational performance enabled it to manage inflationary pressures in the period and expand margins through price increases.
“Our innovative product offering means we can use paper where possible and plastic when useful to provide customers with a uniquely broad choice of flexible packaging solutions to meet their needs,” said King.
“We are extremely confident in the trend about sustainable packaging being deeply entrenched even though there might be some cost implications for the customer in the short term.”
The firm which has its primary listing in London said it had now set its sights at penetrating the e-commerce market and speciality bespoke offerings in retail.
King said developing new applications, particularly in the consumer and e-commerce area, which simply did not exist before the Covid-19 era, was an exciting growth prospect for Mondi.
“Typically where we have seen the strong growth in those consumer applications, those are different customers and end users and they are not often familiar with these long-term contracts. Its more your industrial cement bags and industrial applications where you have longer-dated contracts,” he said.
The company is upgrading the capabilities in its Mexican plants and expanding capacity in paper-based flexible packaging solutions for e-commerce across Europe and the US.
The group operates more than 100 production sites in over 30 countries, under its three business units; corrugated packaging, flexible packaging and uncoated paper.
The corrugated packaging business increased its underlying earnings before interest, taxes, depreciation, and amortisation 22% to €662m, while flexible packaging grew its underlying earnings before interest, taxes, depreciation, and amortisation by 41% to €797m] and the underlying earnings before interest, taxes, depreciation, and amortisation of uncoated fine paper significantly improved from €55m in 2021 to €427m.
King said while there is a concerted drive towards sustainable packaging among its customers, Mondi noted that the current trend was for producers to opt for shorter-term contracts amid global dynamics and volatility.
He added that this was a swing from the traditional paper-based value chain of kraft paper and paper bags, where historically there was more annual and semi-annual business.
“We probably only have about 10% of our volume nowadays contracted on an annual basis, partly because of shifts in the way the industry operates and in the way our portfolio has evolved,” said the CEO.
But the outlook remains upbeat as wood prices, which soared in the second half of 2022, are expected to soften coupled with mostly normalising supply chains.
Meanwhile, the containerboard manufacturer is investing €190m across its flexible packaging converting network while ramping up production at its paper bag plants in Colombia and Morocco.
The group said it is also investing €65m to consolidate its leading position in the European pet food packaging market and plans to invest €50m to enhance its coating capabilities and meet customers’ growing demand for innovative, sustainable paper-based packaging with the necessary barrier properties.
gumedemi@businesslive.co.za
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