Mondi CEO Peter Oswald quits after just three years
Group battles higher costs and lower volumes in some areas
Paper packaging group Mondi’s CEO is stepping down in March after less than three years in the role.
Peter Oswald, who took over the reins in May 2017, leaves while the company is executing big projects in Slovakia and Russia as part of its capital expenditure project pipeline.
It is grappling with lower volumes in certain segments and higher costs that are weighing on profits.
The company, which did not provide details about Oswald’s departure, has bemoaned lower average selling prices, which it said offset efforts to improve profit.
Mondi manufactures and sells packaging and paper products. It had 102 production sites in more than 30 countries at the end of the 2018 financial year.
The company’s earnings for 2019's third quarter slumped 18% to €383m (R6.1bn), compared with the third quarter of 2018. On a quarter-to-quarter basis, the third quarter earnings fell 9%.
When Oswald, who has been with the group since 1992, took over as CEO Mondi had a strategy to increase its presence in packaging amid falling demand for paper.
Sappi, the other JSE-listed paper and packaging company, has previously alluded to weak demand for graphic paper.
“[Oswald] has made an immense contribution to the growth and development of Mondi since joining in 1992, most notably during his tenure as CEO of the former Europe and international division and subsequently as CEO,” said Mondi chair David Williams.
Mondi said CFO Andrew King would become interim CEO until a successor is appointed.
On Oswald’s watch, Mondi completed the €335m upgrade of the kraft paper facility in Štĕtí, Czech Republic.
The company has also finalised the simplification of its corporate make-up from a dual-listed structure into a single holding company entity under Mondi Plc Oswald has previously said that the move was meant to “remove the complexity associated with the previous structure and enhance strategic flexibility”.
Oswald, a former head of Mondi’s European and international unit, replaced another Mondi veteran, David Hathorn, who spearheaded the company’s international expansion after it split from Anglo American in 2007.
Ratings agency Moody’s Investor Service has assigned Mondi a Baa1 credit rating which it said in 2019 reflected the diversified nature of the business and its market leading positions in most paper and packaging grades.
The rating also confirmed Mondi’s track record of significant free cash flow generation “despite continued investments well above the depreciation levels and growing dividends as well as its track record of managing growth conservatively”.
The ratings agency said it had also considered Mondi’s exposure to the cyclical paper and packaging product industries, “which are competitive and offer relatively limited scope for product differentiation as well as the secular decline in the use of graphic paper in mature markets as a result of the continued migration towards electronic forms of communication”.
The agency said Mondi was exposed to volatile input costs, which it could not pass on to customers, as well as the risk of debt-funded growth.
In the six months ended June 2019, Mondi’s capital expenditure amounted to €339m, while its net debt was €2.35bn.
Mondi shares were down 3.01% to R307.80 on Friday. The stock has lost 11.29% since May 2017. In the same period, the JSE forestry and paper index slumped 19.83%, compared with the JSE all share index, which gained 6.81%.