Mondi to sell three Russian operations at a loss

Making headway in its strategy to divest from Russia, Mondi Plc has entered into an agreement to sell three of its packaging converting operations to the Gotek Group, at a loss of between €70m and €80m (R1.2bn-R1.4bn).

Mondi’s paper business in Russia accounts for about a fifth of the group’s core profit, but it said in May it was looking to leave the country amid an exodus of firms due to the war in Ukraine.

The group’s Russian operations have since been classified as held for sale and presented as discontinued operations.

The UK packaging and paper firm on Thursday said it would sell the three Russian packaging converting operations — a corrugated solutions plant and two consumer flexibles plants which produce a range of packaging solutions for the domestic Russian market — to the Moscow-based Gotek Group for 1.6-billion roubles (R433m or €24m).

The loss on the disposal is expected to be in the range of €70m-€80m (R1.2bn-R1.4bn) at the current exchange rate, Mondi said.

The disposal, which is expected to be completed in the first half of 2023, follows Mondi’s announcement on May 4 that having assessed all options for the group’s interests in Russia it had decided to divest its Russian assets.

“However, as the disposal is being undertaken in an evolving political and regulatory environment, there can be no certainty as to when the disposal will be completed,” Mondi cautioned.

It highlighted that the disposal, which is subject to approval from Russian authorities, was not affiliated with the proposed €1.5bn disposal of Mondi Syktyvkar, its most significant facility in Russia, to Augment Investments.

Located in the capital of the Komi Republic, Syktyvkar, the Syktyvkar mill employs about 4,500 people and it is a leading provider of uncoated fine paper and containerboard to the domestic Russian market.

The Russian government still needs to approve the sale and its remittance through a dividend to Mondi.

As Mondi contracts in Russia, the company has moved to simultaneously broaden its geographic reach. In August it agreed to acquire the strategic Duino mill in Italy from the Burgo Group for a total consideration of €40m. 

The mill, located near Trieste in Italy, is a strategic asset because of its proximity to two important export harbours, with Mondi highlighting that Duino is ideally located to supply its Corrugated Solutions plants in Central Europe and Turkey, as well as to serve the growing Italian market.

The R152bn company, which counts the Public Investment Corporation (PIC) among its largest shareholders, has a primary listing on the London Stock Exchange and a secondary listing on the JSE.

Mondi’s share price was down 1.76% R307.68 by midday, having fallen more than 20% since the start of 2022.

gumedemi@businesslive.co.za