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

Packaging and paper group Mondi raised its interim dividend by more than a quarter after profits improved thanks partly to higher selling prices and investments in the business.

“Mondi delivered a strong performance in the first half of 2019 against a backdrop of increasingly challenging trading conditions," CEO Peter Oswald said on Thursday.

Underlying earnings before interest, tax, depreciation and amortisation (ebitda) rose 5% to €894m (R14.2bn).

“Higher average selling prices, the contribution from capital investments and acquisitions, and a higher forestry fair value gain more than offset the impact of planned maintenance shuts, lower volumes in certain segments and higher costs," Oswald said.

He said the €335m project to “modernise” Mondi’s kraft paper facility in the Czech Republic contributed to the rise in earnings.

And higher export prices and volume increases resulted in a fair-value gain on the forestry assets of €52m, though Mondi said another gain of that magnitude was not expected in the second half.

The group raised its interim dividend per share by 27% to 27.28 euro cents.

Oswald said the group was “making good progress” in its capital investment projects in the Czech Republic, Slovakia and Russia.

Meanwhile, at the end of July, Mondi simplified its corporate structure from a dual-listed entity into a single holding company structure under Mondi plc.

Oswald said this would “simplify cash and dividend flows, increase transparency, remove the complexity associated with the previous structure and enhance strategic flexibility”.

“Going into the second half of 2019, ongoing macroeconomic uncertainties continue to impact on the trading environment.

“Demand is generally softer across the markets in which we operate, while prices for key paper grades are currently below those of the first half,” Oswald said.

hedleyn@businesslive.co.za