6th Nov 2013 11:32
LONDON (Alliance News) - International packaging and paper company Mondi PLC Wednesday said it is confident in meeting full-year expectations, after reporting a big uptick in its underlying operating profit for the third quarter.
Despite being confident in its outlook for the remainder of the year, the group said that the current low-growth environment, coupled with increased competition in certain areas of its business, presents some challenges going into the new financial year.
Mondi reported third-quarter underlying operating profit of EUR172 million, up 25% on the EUR138 million for the same period a year earlier. It said that this was due to improved market conditions in packaging paper and in its South Africa division, as well as a boost from recent acquisitions.
The group said sales volumes in the third quarter was broadly flat year-on-year, as its trading performance was hit by scheduled annual maintenance shutdowns at a number of its larger operating sites and seasonally weaker demand for uncoated fine paper.
The negative impact of these shutdowns on its underlying operating profit in the second half of the year, when compared to the first half, is estimated at around EUR50 million to EUR60 million, Mondi said, which it said is as expected.
Mondi said that the net impact of currency movements on its underlying operating profit in the third quarter was limited, as gains from weaker emerging market production currencies were mostly offset by a stronger euro impacting the profitability of its US dollar denominated exports.
In its kraft paper division, European pricing and sales volumes remained relatively stable
throughout the quarter, Mondi said.
It also said that its fibre packaging business unit is being hurt by rising paper input costs affecting its corrugated packaging, while consumer packaging is benefiting from further planned synergies related to its recent Nordenia acquisition and other cost reduction initiatives.
The group said its South Africa division benefited from strong domestic demand, with both sales prices and volumes increasing during the quarter, as well as by the weaker South African rand.
Mondi said it is making good progress in its major capital investment projects.
Net debt was reduced to EUR1.79 billion, as strong operating cash inflows were partly offset by an expected ramp-up in capital expenditure and financing.
Mondi shares were down 3.7% Wednesday morning, trading at 1,075.00 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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