3rd Aug 2023 10:54
(Alliance News) - Mondi PLC's first-half earnings beat is unlikely to send full-year consensus higher, analysts at Davy commented, as the packaging firm continues to suffer from weaker demand and its remaining Russia operation hanging over it.
Mondi's first-half bottom-line got a boost from a non-cash item. Without that, its first-half profit would have fallen short of consensus.
The Weybridge, England-based firm said pretax profit from continuing operations, excluding Russian operations, slumped by 55% to EUR418 million for the six months that ended June 30, from EUR933 million a year earlier.
Revenue for the first half dropped by 14% to EUR3.88 billion, from EUR4.51 billion, dragging down earnings before interest, taxes, depreciation and amortisation. Underlying Ebitda was 28% lower at EUR680 million from EUR942 million.
Davy noted the Ebitda result represented a 3% beat on the EUR661 million Bloomberg-cited consensus. The Irish broker, however, said this outcome was "flattered" by a EUR86 million fair value gain on its forestry assets, which Mondi said was up from EUR30 million a year earlier.
Davy said that without the gain, Mondi would have missed the Ebitda consensus by 5%.
Mondi Chief Executive Andrew King said demand and prices so far in 2023 had declined sequentially with the exception of containerboard prices, which stabilised in the later part of the half year.
"We saw some benefit from lower input costs which continue to ease as we progress into the third quarter of the year," Mondi said.
Mondi still expects total capital expenditure for this year to be around EUR800 million and EUR850 million, compared to EUR508 million in 2022.
The firm sold its three Russian packaging converting operations for EUR30.4 million. This disposal is not connected with JSC Mondi Syktyvkar, a pulp and paper mill.
The company said it remains committed to divesting Syktyvkar and continues to assess all alternative divestment options.
Davy said there was "little apparent progress on the Russia exit".
"While Mondi is a quality packaging group, with well invested assets and a strong balance sheet, the negative impact of subdued packaging and graphic paper demand with lower prices and continued uncertainty regarding its Russia disposal keeps us at 'neutral' with a GBP14.00 price target," Davy summarised.
Davy expects to see "limited" changes to the current full-year Ebitda consensus of EUR1.30 billion, which would represent a 30% decline from 2022's EUR1.85 billion.
Mondi shares dropped 4.6% to 1,274.50 pence each in London on Thursday morning, among the worst FTSE 100 performers.
By Eric Cunha, Alliance News news editor and Artwell Dlamini, Alliance News reporter
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