7th Aug 2014 10:12
LONDON (Alliance News) - Mondi PLC said Thursday that underlying operating profit rose as expected in its first-half, supported by strong performances in Packaging Paper, Fibre Packaging and its South Africa division, as it increased its dividend by 39% and benefited from a reduced special charge on restructuring activities during the period.
The FTSE 100-listed company said first-half underlying operating profit - which excludes items including restructuring costs and asset impairments - rose 3% to EUR377 million from EUR366 million in the comparable period last year.
Pretax profit also came in higher at EUR312 million compared to EUR229 million for the first-half in 2013 and EUR270 million in the second-half.
In its half-year results for the six months to June 30, 2014 Mondi said revenue was marginally lower at EUER3.15 billion, down from EUR3.34 billion in the first-half of last year but up from EUR3.13 billion in the second-half. The company said that on a like-for-like basis, excluding currency movements and disposal effects, revenue was in line with the comparable prior year period.
Mondi - which is dually-listed on the London Stock Exchange and the Johannesburg Stock Exchange - increased its interim dividend for the period by 39% to 13.23 euro cents per share, up on the 9.55 euro cents paid last year. Basic earnings per share also came in higher, as expected by the packaging company, at 48.6 euro cents per share compared to the 35.3 euro cents paid in the comparable period last year.
While meeting expectations, Mondi said that the 3% rise in underlying operating profit on last year - up 13% on the second-half - buoyed by its Packaging Paper, Fibre Packaging and its South Africa division, was offset in part by weaker results from Uncoated Fine Paper and Consumer Packaging.
In a trading statement released last week the international packaging and paper company said that it expected underlying operating profit for the period to come in higher than recorded in the comparative period last year as a net special item charge would be reduced in the half-year due to restructuring activities.
In accordance with listing requirements, companies are required to publish a trading statement as soon as they become reasonably certain that the financial results for the period to be reported on next will differ by at least 20% from those of the previous corresponding period.
The net special item for the first-half was EUR16 million before tax, attributable to restructuring in Mondi's Coating business and a EUR13 million net charge on early redemption of the EUR280 million Eurobond, partly offset by the release of a previously recognised provision for transaction costs, said the company.
In the six months to June 30, 2013, the group recognised a net special item charge after tax of EUR68 million. Last week the business said the net special item charge for the six months ended June 30, 2014 was set to be approximately EUR16 million.
Mondi said sales volumes across the group's key paper grades remained largely unchanged in the half-year, reflecting the continued slow economic recovery in Europe, it said. Apart from recycled containerboard, average benchmark selling prices across Mondi's key paper grades were lower than those of the previous year, as anticipated.
Average benchmark recycled containerboard prices were 10% above those of the first-half of 2013 and 2% above the levels of the second-half of 2013, said the FTSE 100-listed company. In its downstream packaging businesses, most notably in Corrugated Packaging and Consumer Packaging, the company saw an increase in average price levels on the back of higher input costs.
Wood costs were higher in most of Mondi's European operations, while in Russia the weaker rouble offset higher domestic wood costs, it said. Average paper for recycling costs were similar to the comparable prior year period although some reduction in benchmark prices was observed in the second quarter, with prices at the end of the quarter 5% lower than the average for the half-year.
Annual maintenance shutdowns took place at the Swiecie mill in Poland and Richards Bay mill in South Africa during June 2014 with the balance of the annual maintenance shuts scheduled for the second-half of the year. Consistent with the previous year, and based on prevailing market prices, the estimated impact on underlying operating profit of Mondi's maintenance shutdowns is estimated at around EUR50 million to EUR60 million, of which the first-half effect was around
EUR10 million, it said.
Mondi said that its South Africa Division benefited from the weakening of the rand against both the euro and the US dollar during the period. The Fibre Packaging and Uncoated Fine Paper business units were negatively impacted by the weakening of the US dollar, Turkish lira and Russian rouble against the euro.
The remaining currencies in which the group operates continued to trade in a relatively narrow band, it said. "The net effect of currency movements only had a marginal impact on the Group's underlying operating profit when compared to the first-half of the prior year," noted the company.
The company said that anticipated price increases in some of its packaging paper grades should provide positive momentum in the near term, though noted that its second-half, as in prior years, will be impacted by planned annual mill maintenance shuts.
"Strong cost management and contributions from successfully completed strategic capital investments, together with the benefits from downstream integration in key packaging segments, enabled the Group to offset the impact of lower prices in a number of paper grades," said Chief Executive David Hathorn.
Hathorn remains confident for Mondi's future, "Market fundamentals remain sound, which, coupled with a continued economic recovery, should prove positive for further growth in the packaging businesses. Overall, we remain confident that Mondi will continue to deliver an industry leading performance."
Mondi's key operations are located across central Europe, Russia, the Americas and South Africa. Thus far there has been no material impact on the company's operations in Russia, it said, though added that it continues to monitor the political developments in the country and
Ukraine.
Mondi shares were trading 1.57% lower Thursday morning at 1,002.00 pence per share, amongst the top ten fallers on the FTSE 100.
By Alice Attwood; [email protected]; @AliceAtAlliance
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