14th May 2014 07:40
LONDON (Alliance News) - Packaging and paper company Mondi PLC Wednesday said its underlying operating profit rose in the first quarter, as restructuring benefits and price increases for some products more than offset higher input costs and lower selling prices for paper in Europe.
It was also positive about its outlook, citing its investment programme and discussions it is having about some more product price increases.
The company said its underlying operating profit, which excludes items including restructuring costs and asset impairments, was EUR183 million in the three months to end-March, up from EUR162 million a year earlier and up from EUR161 million in the fourth quarter of 2013.
It said sales volumes were broadly in line with the first quarter of 2013, but up from fourth quarter which was impacted by scheduled maintenance shut downs at its plants.
Mondi, which is listed in London and Johannesburg, said average selling prices for all key paper grades were down in Europe, with the exception of recycled containerboard. However, its corrugated packaging business benefited from price increases it has made, while pricing in its South Africa unit was up on the year in equivalent currency terms.
"There was some increase in key input costs over the quarter, with increases in wood costs and paper for recycling affecting the European operations. Offsetting these increases is the benefit from the various energy optimisation projects and restructuring initiatives completed during the prior year," the company said in its statement.
It noted that the first quarter of 2013 was also hit by a EUR11 million writedown on the value of green energy credits in Poland.
The company said there were no significant maintenance shut downs during the first quarter. It is planning the majority of this year's maintenance shut downs towards the end of the second
quarter and into the second half of the year. The impact of maintenance shut downs on annual operating profit is estimated to be between EUR50 million and EUR60 million, it said.
Mondi, with operations in countries across Europe, as well as countries including Russia and South Africa is exposed to currency fluctuations. However, it said movements were slightly favourable in the first quarter.
"Although there has been significant volatility in the key currencies to which the group is exposed, the overall weakening trend in the group's key operating currencies against the euro yielded a marginal net benefit," it said. "The businesses in Poland and South Africa were net beneficiaries, given their significant export exposure, but this was partially offset by the impact of the weaker Russian rouble on the group's more domestically focused Russian businesses."
It said it hadn't so far felt any impact from the crisis in Ukraine on its operations.
Mondi's net debt was EUR1.58 billion at the end of the first quarter, down from EUR1.62 billion at the end of December.
"The trading environment remains mixed. As anticipated selling prices for a number of the group's key paper grades are currently below those of the prior year. However, fundamentals in our core markets remain generally solid and price increases in certain grades are under discussion," the company said in a summary statement.
"Furthermore, the ongoing capital investment programme is already making an important
contribution to the profitability of the group, with further projects on track for completion over the course of this year," it added.
Mondi shares were up 2.2% at 1,054 pence in London Wednesday morning, the second-biggest gain on the FTSE 100.
By Steve McGrath; [email protected]; @SteveMcGrath1
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