12th May 2016 10:21
LONDON (Alliance News) - Shares in Anglo-South African paper and packaging company Mondi PLC were boosted on Thursday after the group reported good growth in underlying operating profit in the first quarter and affirmed expectations for the full year.
Mondi shares were up 1.5% late morning on Thursday to 1,369.00 pence, one of the best performers in the FTSE 100.
The group said underlying operating profit for the quarter to the end of March was EUR269.0 million, 14% higher than the EUR236.0 million it made a year earlier.
The group said it remains on track to meet its expectations for the full year. Mondi said it has seen some price weakness in certain packaging paper grades in the first quarter, but demand for the products remains robust, and Mondi said the fundamentals of its end markets still look strong.
Mondi added it has continued to benefit from higher uncoated fine paper prices, lower energy and related input costs and the incremental contributions driven by its capital investment programme.
Consumer Packaging, Uncoated Fine Paper and the group's South African arm all made strong contributions in the quarter, Mondi said, offsetting lower selling prices in some Packaging Paper segments and margin pressures on its Fibre Packaging business.
In addition, no significant planned maintenance shutdowns fell in the first quarter, after these had taken a EUR17.0 million bite out of operating profit a year earlier. Mondi said its capital investment programme remains on schedule and on budget for 2016, and the total spend remains in line with previous guidance of EUR400.0 million to EUR450.0 million.
Mondi said selling prices for containerboard grades in its Packaging Paper division grew marginally year-on-year in the quarter but were down on the fourth quarter of 2015. Demand remains solid, the company said, but increased supply from new capacity in Europe and competition from importers, benefiting from weak emerging market currencies, resulted in lower selling prices for unbleached kraftliner.
Mondi said average benchmark European kraftliner prices were down 3.4% in the first quarter against the fourth quarter of 2015, but broadly flat year-on-year. Benchmark selling prices for white-top kraftliner and recycled containerboard both fell against the fourth quarter, the company said.
It has, however, announced a price increase of EUR40.00 per tonne for all its kraftliner and kraft-top liner grades, effective from June 6.
Sack kraft paper sales volumes were broadly flat year-on-year in the quarter, though average selling prices were down 5% to 6% in Europe due to demand softness in a number of export markets and seasonal weakness in Europe. Since the end of the quarter, demand has improved in the south east Asia market and pricing in the Middle East remains stable, Mondi said.
Mondi said the Fibre Packaging business was boosted by cost cutting, restructuring and investment benefits in the quarter, which offset some negative currency effects and lower sales volumes in industrial bags, which has taken a hit from capacity rationalisation and challenging conditions in the US.
Consumer Packaging performed well in the quarter, Mondi said, with good volume growth and improvements to the division's fixed cost base making contributions.
Uncoated Fine Paper was helped by higher average selling prices and stable volumes year-on-year, which offset the impact of a weaker Russian ruble. European prices in the sector have stabilised following the rises seen in the second half of 2015, and average benchmark selling prices in Europe grew 2.8% year-on-year, though were flat against the fourth quarter of 2015.
Mondi's South African arm benefited from higher average selling prices for uncoated fine paper, pulp and white-top kraftliner, the company said, along with currency-related gains and high fair value gains made on its forestry assets compared to the year prior.
By Sam Unsted; [email protected]; @SamUAtAlliance
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