Mondi confident despite fall in first-half earnings

(Sharecast News) - Mondi reported a solid first-half performance on Thursday, despite facing market challenges, as underlying EBITDA fell to €565m from €680m year-on-year, resulting in an EBITDA margin of 15.1%. The FTSE 100 paper and packaging giant said the decline was primarily due to lower average selling prices and inflationary pressures on personnel and operating costs, partially offset by improved sales volumes and lower input costs.

Group revenue for the six months ended 30 June was €3.74bn, slightly down from €3.88bn in the first half of 2023.

Profit before tax fell to €296m from €418m, while basic underlying earnings per share dropped to 50.5 euro cents from 60.7 euro cents a year earlier.

Basic earnings per share also decreased, to 44.5 euro cents from 63.7 euro cents.

Mondi declared an interim dividend of 23.33 euro cents per share, consistent with the prior year, and noted the special dividend of 160 euro cents per share previously announced and paid in February.

The special dividend followed the disposal of the group's Russian assets in 2023, with the proceeds being returned to shareholders.

The company said it continued to advance its strategic initiatives, with €1.2bn in organic growth investments on track and on budget.

It said the investments, spread across its corrugated and flexible packaging divisions, were expected to significantly contribute to EBITDA from 2025 onward.

Mondi said its corrugated packaging division reported underlying EBITDA of €143m, down from €188m in the first half of 2023, reflecting lower selling prices despite stable sales volumes and cost reductions.

The flexible packaging division saw its underlying EBITDA decline to €276m from €343m, impacted by lower average selling prices and a one-off currency loss due to the devaluation of the Egyptian pound.

In uncoated fine paper, Mondi delivered an underlying EBITDA of €166m with a margin of 24.8%, slightly down from €168m in the prior year.

The division benefited from improved market conditions in Europe, although demand in South Africa was weaker.

Cash generated from operations totalled €372m, down from €554m in the first six months of 2023, due to an increase in working capital driven by the improving market environment.

The group's net debt rose to €1.6bn, up from €419m at the end of 2023, following continued investment in the business and dividend payments.

Mondi said it remained focused on its long-term strategy of sustainable growth, investing in innovation and capacity expansion while maintaining a strong financial position.

"Our underlying EBITDA of €565m in the first six months, although lower than the comparable period last year, reflected an encouraging performance, supported by improving market conditions resulting in stronger order books and higher sales volumes," said group chief executive officer Andrew King.

"This enabled us to implement a number of price increases across our paper grades.

"Alongside lower input costs, we delivered a sequential improvement in underlying EBITDA when compared to the second half of 2023."

King said the benefit of the price increases would continue into the second half, which was expected to be impacted by higher planned maintenance shuts and a likely forestry fair value loss.

"We continue to invest through-cycle to grow our business, enhancing our unique packaging and paper platform and broad product offering.

"Of our €1.2bn organic growth investments, we will have invested around 80% by the end of this year, with operations currently ramping up following the modernisation of our Kuopio mill, the debottlenecking of our Swiecie mill and the two expanded box plants in Poland.

"Overall, our organic growth investments are expected to deliver a meaningful EBITDA contribution from 2025."

At 1111 BST, shares in Mondi were up 2.27% at 1,555p.

Reporting by Josh White for Sharecast.com.