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

Paper and packaging group Mondi has upped its dividend to end-December by almost double digits, saying even though lower prices for key paper and pulp grade weighed on profit during the period, it was optimistic about its future as capital investment starts to pay off.

Pre-tax profit was little changed at €1.1bn (R18.4bn), with the group upping it total ordinary dividend 9% to 83 euro cents.

The group said it raised its dividend as it was confident about its balance sheet and prospects, expecting its capital investment pipeline to deliver further growth.

Mondi is replacing older equipment and has embarked on a repair and maintenance strategy to reduce breakdowns.

The group spent €757m in its 2019 year on capital expenditure, and expects to spend between €700m and €800m in 2020.

Investments include modernising the group's Richards Bay mill, including upgrading the energy and chemical plants to improve reliability and avoid unplanned shutdowns.

The group said that over the past three years, major capital projects had cumulatively contributed an estimated €75m of annual incremental operating profit, with €30m of this coming in 2019.

The contribution from these projects was expected to rise to €40m in 2020, the group said.

“A solid operational performance, strong cost control and a good contribution from acquisitions and capital investment projects, partially offset the effects of market pressures in a number of key pulp and paper grades,” Mondi's CEO designate Andrew King said.

“Input cost relief, our ongoing profit improvement programmes and customer-centric innovation initiatives, and the benefits from our capital expenditure pipeline will continue to support our performance,” said King.

In morning trade on Thursday, Mondi's share price had edged up 0.15% to R314.48, having fallen 9.24% over the past 12 months.

gernetzkyk@businesslive.co.za