Mondi operating profit increases on higher prices
First-quarter operating profit was up 8%, though higher selling prices were offset by rising costs and a forex knock
Mondi said in a trading update for the third quarter to the end of September 2017 that underlying operating profit of €245m had increased 8% on the same period in 2016.
The group said that it had benefited from higher average selling prices, partly offset by higher costs and negative currency effects.
The underlying operating profit for the quarter was in line with the 2017 second quarter, with positive pricing momentum across most product segments amid a seasonal downturn in uncoated fine paper.
Mondi CEO Peter Oswald said on Wednesday that the international paper and packaging group was benefiting from real GDP growth in Europe, its main market. “We are in a clear upward trend,” he said. Like-for-like sales volumes were above the same period a year ago, driven by good growth in containerboard and fibre packaging.
Selling prices for Mondi’s top paper grades were above those of both the comparable period in 2016 and the previous quarter, as the upward momentum in pricing over the first half continued. Wood, energy, chemical and recycling costs were higher than in the period in 2016.
Cash fixed costs were higher due to inflationary cost pressures and the effect of maintenance shuts, while depreciation and amortisation charges were up due to Mondi’s ongoing capital investment programme.
Oswald said Mondi had a good order book going forward and that container-board growth was driven by the growth of e-commerce in eastern and central Europe and the general good economic health of Poland and the Czech Republic. The group derives a third of its revenue from central and eastern Europe and Russia.
Justin Jordan, an equity analyst at Jefferies International in London, said that the key takeaway from the quarterly trading update was despite good growth in the period, there were headwinds. “While [we are] confident of sustained 2017-18 organic volume growth and successful price rises, due to industry-wide cost inflation [for] wood, energy, chemicals and modest [forex] headwinds, we downgrade 2017 ebit/EPS [earnings before interest and tax, and earnings per share] 4%,” he said.