19th Oct 2023 11:11
(Alliance News) - Mondi PLC has far from an easy outlook, and analysts expect that to be factored into consensus soon enough, though a Russia exit potentially puts a special dividend on the table, giving investors something to look forward to.
The Weybridge, England-based packaging firm reported a 42% plunge in underlying earnings before interest, taxes, depreciation and amortisation to EUR261 million for the third quarter that ended September 30, from EUR450 million in the same quarter last year.
Compared to the second quarter to June 30, underlying Ebitda dropped 21% from EUR329 million.
In the third quarter, the challenging market conditions continued as expected in light of the ongoing weak macroeconomic environment, Mondi said, noting that lower average selling prices were largely mitigated by falling input costs and tight fixed cost control.
In Corrugated Packaging, containerboard prices were stable, with the order books improving, while converting network delivered a resilient performance. But flexible packaging saw further price and volume declines in kraft paper, which is traditionally later in the cycle.
Uncoated Fine Paper pricing continued to decline in Europe on ongoing weakness in demand, it said.
Analysts at UBS commented: "[The third-quarter] saw subdued demand with stable containerboard/declining kraft paper pricing. Mondi sees this trend continuing in 4Q. However, the CEO expects input costs to stabilise (after falling year-to-date) and a greater impact from maintenance/project-related shuts in 4Q. With little cost relief, weak flexibles volumes and lower kraft paper pricing (and ongoing declines in bags/boxes), the margin squeeze should continue.
"On top of this, the EUR60 million of guided maintenance costs in [the second half] will be skewed to 4Q. With a similar level of forest gains, we believe the EUR200 million implied by our existing 2023 Ebitda estimate of EUR1.14 billion is reasonable and implies a 5% cut to Visible Alpha consensus."
Irish broker Davy believes consensus for Mondi earnings may come under pressure. Davy's 2024 Ebitda expectation for Mondi sits 8% below consensus at EUR1.2 billion.
Something a little more cheerful, however, Mondi expects to distribute proceeds from its Russia unit sales to shareholders. Davy said this gives "expectations of a possible EUR1.60/share 2024 special dividend".
Davy rates Mondi at 'neutral' with a 1,500 pence price target. The stock traded 5.5% lower at 1,260.00p each in London on Thursday morning.
By Eric Cunha, Alliance News news editor
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