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Mondi posts strong financials as it continues to invest in operations

By Josh White

Date: Thursday 28 Feb 2019

LONDON (ShareCast) - (Sharecast News) - Mondi reported lower revenue than expected for 2018 and said pricing is "mixed" going into 2019, but profits were stronger than forecast and the dividend was hiked 23%.
The FTSE 100 paper and packaging company reported revenue up 5% to €7.48bn, which was short of the 6.7% average revenue gain forecast by analysts in the City.

Underlying EBITDA was up 19% higher in the year ended 31 December at €1.764bn, while its underlying operating profit rose 28% to €1.318bn, both better than expected.

Basic underlying earnings per share were ahead 27% to 189.1 euro cents, and Mondi's profit before tax stood at €1.105bn for the year, up 25% on the prior 12 months.

The board recommended a full-year ordinary dividend of 76.0 euro cents per share - an uplift of 23% over the distribution paid at the end of 2017.

On the operational front, Mondi reported "robust" operational performance and "strong" cost control across the group, adding that its capital investment projects were on track and were delivering growth.

It said it had successfully started modernisation of Steti in the Czech Republic during the year, and explained that a project pipeline of "focussed" capital investment was in progress, in a bid to secure future growth.

Mondi claimed to have made "good progress" in integrating its acquisitions, spending a total of €424m during the period, and said it was "well-positioned" for the future with its sustainable packaging solutions portfolio.

"We benefited from good demand across our fibre packaging businesses, higher average selling prices and the contribution from our recent acquisitions," said chief executive officer Peter Oswald of the 2018 year.

"I am particularly pleased to report on a robust operating performance, delivering productivity gains and strong cost containment, mitigating the inflationary pressures on our cost base."

Oswald said the company had continued to make "good progress" in delivering value-accretive growth and enhancing the ongoing cost competitiveness of its operations through its capital expenditure programme.

"During the fourth quarter of 2018, we successfully started up the €335m modernisation of our kraft paper facility in Steti, and we received the final permits to proceed with our investment in a 300,000 tonne kraft top white machine at our Ruzomberok mill in Slovakia, while work to upgrade the pulp mill at the same site is progressing well.

"Expansionary capital expenditure projects at a number of our packaging operations and the integration of acquisitions completed in the year will further enhance our production capabilities and product offering to customers."

In November, Mondi announced a proposal to simplify its dual listed structure into a single holding company structure under Mondi plc, which Oswald said the board believed would streamline cash and dividend flows, enhance the firm's strategic flexibility, increase transparency and remove the complexity associated with the current structure.

"Looking ahead, while there are macro-economic uncertainties, we remain confident in the structural growth drivers in the packaging sectors in which we operate.

"Pricing is mixed going into 2019, with recent price reductions in containerboard grades and market pulp and stronger pricing in our kraft paper markets.

"During 2019, we are planning longer maintenance and project related shuts, while looking forward to the incremental contribution from recently completed major capital projects and acquisitions."

Oswald claimed Mondi was "uniquely positioned" to develop sustainable packaging solutions.

"With our robust business model, strong balance sheet, focus on leveraging key industry trends of sustainability, e-commerce and enhancing brand value, and culture of continuously driving performance, we continue to look to the future with confidence."

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