Mondi plc
(Incorporated in England and
Wales)
(Registered number: 6209386)
LEI: 213800LOZA69QFDC9N34
LSE share code: MNDI
ISIN: GB00B1CRLC47
JSE share code:
MNP
14 October 2022
Trading update: Strong Q3
performance
Underlying EBITDA from continuing operations (Group excluding
the Russian operations) for the third quarter was €450 million, up
55% compared to the prior year period (Q3 2021: €290 million).
Higher average selling prices and overall volume growth more than
offset significant cost pressures.
Andrew King, Chief Executive
Officer, said: “Mondi delivered strongly in the third quarter.
My sincere thanks go to all of my colleagues for their ongoing
agility and commitment in challenging times. We continue to partner
with our customers, helping to lead the way towards a circular
economy with our unique portfolio of innovative and sustainable
packaging and paper solutions. We also remain focused on
operational efficiency and cost control.
Our ambitious expansionary capital
investment programme is progressing well, as we continue to invest
in our cost advantaged asset base to capture opportunities in our
structurally growing packaging markets, enhance our competitiveness
and deliver sustainably into the future.”
Business unit overview
Corrugated Packaging benefitted from higher average selling
prices compared to the prior year period, leveraging our innovative
product portfolio and strong customer proposition. Corrugated
Solutions box volumes were lower in the quarter driven by generally
softer demand when compared with the strong volume growth delivered
in the prior year.
Flexible Packaging performed well, with resilient demand during
the period. Price increases across our range of kraft papers and
packaging products were implemented during the quarter, where not
fixed by annual or semi-annual contracts.
Uncoated Fine Paper achieved higher average selling prices and
grew pulp volumes in the quarter while uncoated fine paper volumes
were lower. The non-cash forestry fair value gain was
higher.
Input costs
Input costs were significantly higher in the quarter, both
year-on-year and sequentially, largely due to higher wood and
energy costs. Increased demand and tight market conditions for wood
continue to impact availability and pricing. We were able to
mitigate the impact of significantly higher European gas and
electricity costs as most of our pulp and paper mills generate the
majority of their energy needs internally, with around 80% of the
fuels used in this process from biomass sources, and only around
10% of our fuel sourced from natural gas. We look to mitigate the
effect of inflationary pressures on the cost base through our cost
control initiatives.
Investing for growth
Our €1 billion expansionary capital investment programme is
progressing well, and we expect these projects to deliver mid-teen
returns when in full operation.
As part of this programme, we are pleased to have recently
approved the investment in a new 210,000 tonne per annum kraft
paper machine at our flagship Steti mill (Czech Republic) for €400 million. This cost
advantaged machine will meet the growing demand for sustainable
paper-based flexible packaging to better serve our customers.
Start-up is expected in 2025 with full production ramp up by
2027.
Adding to our pipeline of growth projects, in August 2022 we agreed to acquire the Duino mill
near Trieste (Italy). We plan to
convert the existing lightweight coated mechanical paper machine
into a high-quality, cost-competitive recycled containerboard
machine with an annual capacity of around 420,000 tonnes. The total
acquisition and capital investment cost is estimated at around €240
million. The mill is ideally located to source paper for recycling,
supply the Group’s Corrugated Solutions plants in Central
Europe and Turkey as well as to serve the growing
local Italian market. This project provides an opportunity to grow
our packaging business, build on our integrated platform and
broaden our geographic reach. The acquisition is subject to
competition clearance and other closing conditions with completion
expected in the fourth quarter of 2022. The converted machine is
expected to start-up in 2025 and deliver mid-teen returns when in
full operation.
We continue to actively consider further investment
opportunities to serve our customers’ growing demand for
sustainable packaging solutions, improve our environmental
footprint and further improve our cost competitiveness.
Russian operations
Trading update
The Group’s Russian operations have been classified as held for
sale and presented as discontinued operations. In the third quarter
of 2022, the Russian operations generated profit after tax of €104
million (EBITDA of €129 million).
Update on proposed disposal of Mondi
Syktyvkar
On 12 August 2022 we announced
that the Group had entered into an agreement to sell its most
significant facility in Russia,
Joint Stock Company Mondi Syktyvkar, together with two affiliated
entities (together “Syktyvkar”) to Augment Investments Limited for
a consideration of RUB 95 billion
(around €1.5 billion at current exchange rate), payable in cash on
completion (the “Disposal”).
The Disposal is conditional on the approval of the Russian
Federation’s Government Sub-Commission for the Control of Foreign
Investments and customary antitrust approvals. Furthermore, the
planned remittance of the excluded cash balance of RUB 16 billion by form of dividend to Mondi
before completion requires the approval of the Ministry of Finance
of the Russian Federation.
These approvals remain outstanding.
Summary and outlook
While significant geopolitical and macroeconomic uncertainties
remain and we anticipate continued inflationary pressures on our
cost base as we enter the fourth quarter, we are confident that the
Group will continue to demonstrate its resilience and deliver a
year of good progress.
The Group remains well-placed to deliver sustainably into the
future, underpinned by our integrated cost advantaged asset base,
culture of continuous improvement, portfolio of sustainable
packaging solutions and the strategic flexibility offered by our
unique platform for growth, strong cash generation and financial
position.
Contact details
Investors/analysts
Mike Powell
Mondi Group Chief Financial Officer |
+44 193 282 6322 |
Media
Chris Gurney
Mondi Group Senior Communications Manager |
+44 193 282 6358 |
Richard
Mountain
FTI Consulting |
+44 790 968 4466 |
Conference call dial-in details
A conference call will be held today at 08:00 (BST) / 09:00
(CEST/SAST).
To access the facility please register your name and contact
details:
https://register.vevent.com/register/BI356338855df84991843961483b13bc38
Replay details
Following the call a replay will be made available until
21 October 2022:
https://edge.media-server.com/mmc/p/r4iybh8a
Notes
This trading update provides an overview of our financial
performance since the half-year ended 30
June 2022. Financial metrics have not been audited or
reviewed by Mondi’s external auditors.
Underlying EBITDA is an Alternative Performance Measure that is
not defined or specified according to International Financial
Reporting Standards. This measure is defined as operating profit
before special items, depreciation, amortisation and impairments
not recorded as special items.
About Mondi
Mondi is a global leader in packaging and paper, contributing to
a better world by making innovative solutions that are sustainable
by design. Our business is integrated across the value chain – from
managing forests and producing pulp, paper and films, to developing
and manufacturing sustainable consumer and industrial packaging
solutions using paper where possible, plastic when useful.
Sustainability is at the centre of our strategy, with our ambitious
commitments to 2030 focused on circular driven solutions, created
by empowered people, taking action on climate.
In 2021, Mondi had revenues of €7.0 billion and underlying
EBITDA of €1.2 billion from continuing operations, and employed
21,000 people worldwide. Mondi has a premium listing on the London
Stock Exchange (MNDI), where the Group is a FTSE100 constituent,
and also has a secondary listing on the JSE Limited (MNP).
mondigroup.com
Sponsor in South Africa: Merrill Lynch South Africa
Proprietary Limited t/a BofA Securities.