Mondi Kraft paper production. Picture: SUPPLIED
Mondi Kraft paper production. Picture: SUPPLIED

Mondi put in a "very robust" performance in the year to December 2017, pushing all major earnings indicators upwards as it set itself up to reap the benefits of a massive capital expenditure programme.

The best returns for the integrated international pulp, paper and packaging group came from its consumer packaging products. These included packaging for foods and animal nutrition, mainly sold in Europe but also the US, China and Thailand.

"[The result] for 2017 was an industry-leading performance," CEO Peter Oswald said on Friday. He said 2018 had started well for the group and 2019 promised more. Three years of expansionary capital spending from 2017 of €750m would see further bottom-line benefits between 2019 and 2021.

The group had targeted fast-growing emerging markets in Europe and further afield, including Turkey and Russia.

"The real highlight is the good growth pipeline from 2019 onwards," Oswald said. He said the group continued to address capacity restraints to facilitate the expansion of its business.

Mondi had made packaging acquisitions in the UK and Finland during the financial year. The €365m buyout of the Powerflute operation in Finland on a debt and cash-free basis provided Mondi with facilities that helped reduce food waste by protecting perishable products on long journeys to the market.

Group revenue for the year was €7.1bn, up 7% from previously. Underlying earnings before interest, tax, depreciation and amortisation rose 6% to €1.4bn as underlying operating profit was up 4% to €1bn.

Profit for the year of €714m was up 4.1%. Diluted headline earnings per share increased 5.2% from the previous year.

Justin Jordan, an equity analyst at Jefferies International in London, said on Friday the key takeaways of the results included the recommended full-year ordinary dividend of 62 euro cents per share, up 9%, and a recommended special dividend of 100 euro cents per share.

He said the outlook for 2018 was positive, with continued volume growth and "strong upward momentum in pricing" across containerboard and boxes in the second half of 2017 and in early 2018 had more than offset cost pressures in raw materials and currency headwinds.

Jefferies International affirmed Mondi as a buy.

Meanwhile, Mondi had benefited from good demand and higher average selling prices in most of the group’s businesses, Oswald said. He said a continuous drive for operational performance improvements had mitigated inflationary pressure caused by the general economic recovery globally.

Mondi is conducting a €335m modernisation of its kraft paper facility in Steti in the Czech Republic and was upgrading the Ruzomberok pulp mill in Slovakia.

allixm@bdfm.co.za

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