Finance News

Mondi PLC quarterly profits drop 18% as bags and paper prices soften


Like-for-like sales volumes were lower in industrial bags and uncoated fine paper, which was partly offset by growth in corrugated packaging

Paper and packaging maker () said that demand and prices were softer in the third quarter and that prices have softened further in the fourth.

The FTSE 100 and Johannesburg-listed group said underlying profit (EBITDA) for the third quarter was down 18% year on year to €383mln and 9% below the second quarter this year. 

“Lower average selling prices from the highs reached towards the end of 2018 and into early 2019, coupled with the anticipated lower forestry fair value gain, more than offset the benefits of our ongoing profit improvement initiatives.”

Prices entering the fourth quarter are “marginally” below the third, which the company expects to be “largely offset by an easing of pressure on the cost base, supported by our ongoing profit improvement initiatives”.

Volumes down, costs mixed

Like-for-like sales volumes were lower in industrial bags and uncoated fine paper, which was partly offset by growth in corrugated packaging. 

On average, costs were higher than this time last year, although lower than the preceding quarter.

There was not much price movement during the period, though due to movements earlier in the year, average European containerboard selling prices were lower than the previous quarter and significantly lower than a year ago.

Mondi said it made “steady progress” with consumer packaging but uncoated fine paper saw significantly lower pulp selling prices compared to the previous quarter, materially lower forestry fair value gains.

Shares in the company were down 3% to 1,500.5p in early trading on Thursday.

Analysts at broker Goodbody said EBITDA declines were accelerating in the face of a slowing economic picture: “The corrugated box business can be viewed as a proxy indicator for European economic growth.

“Global negative macroeconomic trends are reflected in subdued demand for packaging companies which has been illustrated in this morning’s results and a 3-5% drop in share prices.

“The US China trade war, European industry recession and ongoing concerns around Brexit have all culminated in poor demand for packaging sector and Mondi’s results are a clear indicator of this.”

— Adds price, broker comment



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