Mondi increases operating profit despite headwinds

Mondi says underlying operating profit for the third quarter of 2016 of €227m is a modest 3% higher than in the same period in 2015.

But the international packaging group,
in a trading update since the half year ended June, showed an operating loss when comparing the third quarter with the second quarter of 2016.
"As anticipated, generally lower average selling prices and a significantly lower fair value gain on forestry assets resulted in a 12% reduction in underlying operating profit from the second quarter of 2016 of €259m," the group said on Thursday.
But on a like-for-like basis, it said sales volumes of its key paper grades were in line with the same period a year ago.

Meanwhile, key wood and chemical input costs remained stable during the third quarter. Energy costs were down on the comparable period in 2015 due to lower general energy prices and the benefits of various energy-efficiency investments.
Mondi group CEO David Hathorn on Thursday said overall demand for the company’s products remained "sensible".

"Markets have unfortunately not been shooting the lights out. Boring is the new exciting," he said, paraphrasing mining giant Rio Tinto’s chief financial officer, Chris Lynch.
Justin Jordan, an equity analyst for Jefferies International in London, said on Thursday that despite headwinds from foreign exchange fluctuations in the dozens of markets in which Mondi operated and generally lower selling prices, it had delivered 3% operating profit growth. Jefferies reaffirmed Mondi as a buy.
It said the outlook for the company was "confident", with Mondi being expected to deliver an "industry-leading performance" in 2016.
It also said the group’s proposed €60 a tonne, or 8%, sack kraft paper price increase was followed by key global peers. The paper is used in making industrial bags. Jefferies said this was likely to boost profit in 2017.

Mondi earlier this week announced the bolt-on acquisition of Russian corrugated packaging group Beepack for €41m. This followed earlier consumer packaging acquisitions: Kalenobel in Turkey and Uralplastic in Russia.
Hathorn said news of an attempted coup in Turkey earlier in 2016 had been a surprise but this was not expected to affect trading operations there.