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

Third-quarter earnings for listed packaging and paper group Mondi rose 30% because of higher prices, improved performance of its businesses and contributions from recent acquisitions.

The strong performance of the fibre packaging, consumer packaging and uncoated fine-paper businesses in the quarter ended September 30 boosted the company’s underlying earnings before interest, tax, depreciation and amortisation (ebitda) as higher selling prices more than offset higher costs.

This is a continuation of a trend in the first half of 2018, whereby stable sales volumes and higher prices offset rising costs and the impact of maintenance shutdowns.

The higher average selling prices look set to boost the firm’s full-year results, notwithstanding the expected negative impact of the shutdown and ramp-up of the Štětí mill in the Czech Republic and pressure on costs in the fourth quarter.

The group has previously said that the usual seasonal downturn in uncoated fine paper generally affects second-half performance. 

The firm on Wednesday released a trading update for the quarter in which it said it had seen “manageable” upward pressure on its cost base in the quarter. Mondi said mill maintenance shutdowns and inflation increased the company’s cash fixed costs.

The impact of planned mill shutdowns on ebitda for the quarter was unchanged at €30m, compared to the corresponding quarter in 2017.

“Based on prevailing market prices, we continue to estimate that the impact of maintenance shuts on underlying ebitda for 2018 will be around €115m [compared to €95m in 2017],” Mondi said.

It said currency movements had a modest impact on performance in the quarter, as the strength of the dollar and the weakness of the rand relative to the euro largely offset the negative impact from a weaker Russian rouble and Turkish lira.

A stronger dollar has a net positive effect on Mondi’s dollar-denominated sales of globally traded products. Mondi said its €335m modernisation project at Štětí  was on course and would be commissioned in the fourth quarter of the year. 

The project, which entails rebuilding fibre lines,
de-bottlenecking existing packaging-paper machines and installing a new recovery boiler, should improve the plant’s performance on the environmental front. This follows complaints about odour from the plant over the years. According to Mondi, it will result in significant reductions in specific air emissions, water emissions and waste. njobenis@businesslive.co.za

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