LONDON (ShareCast) - (Sharecast News) - Shares in Mondi crumpled on Monday after the packaging and paper group warned weak demand and failing prices had hit earnings.
Updating on third quarter trading, the UK multinational - which employs around 24,000 people across 30 countries - said conditions had been "challenging".

In particular, it said volumes had been hit by "subdued" demand and further declines in paper selling prices.

As a result, underlying earnings before interest, tax, depreciation and amortisation came at €223m, down on the second quarter's €274m and the €290m seen in the first quarter.

It also struck downbeat note for the fourth quarter, warning: "Challenging conditions are expected to persist for the remainder of this year, as demand-side confidence remains fragile, key markets remain in oversupply and current selling prices are lower than third-quarter average selling prices."

As at 1430 BST, Mondi's shares had lost 16% at 879p.

Andrew King, chief executive, said: "We remain relentlessly focused on managing the controllables. We have sharpened our emphasis on margin management, rigorous cost optimisation and continuous improvement. These initiatives enable us to navigating current headwinds."

As well as reorganising into two business units from three, effective 1 October, Mondi will now delay a planned investment in a new paper machine at its Canadian pulp mill and has extended scheduled annual maintainence shutdowns.

"Looking further ahead, we remain confident in the long-term sustainable growth fundamentals of packaging businesses," King added.

Dan Coatsworth, head of markets at AJ Bell, called the update "a shocker".

He continued: "Packaging companies are economic bellwethers. A strong economy normally implies a steady flow of goods around the world; a weakening economy often leads to reduced demand for goods and the packaging that holds them.

"Mondi is well versed to operating in a cyclical market, and there are a few levers it can pull. However, investors are clearly worried about the bigger picture and whether we're in for a sustained period of weakness."

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