Mondi FY profits up despite fall in revenues

Paper and packaging manufacturer Mondi posted a 6% rise in pre tax profits to €843m (£715m) despite revenues falling by 2% to €6.6bn (£5.5bn).

Good volume growth in packaging paper and consumer packaging and higher domestic selling prices in South Africa and Russia were offset by lower average selling prices in packaging paper and fibre packaging, Mondi said.

Underlying operating profit of €981m was up 3% on the prior year. Packaging paper was negatively impacted by lower selling prices across most key grades and lower green energy prices, partially offset by like-for-like sales volume growth.

Fibre Packaging continued its positive development, with volume growth in Corrugated Packaging and a good performance from the core European industrial bags business, partly offset by negative currency translation effects and ongoing challenges in the US industrial bags business.

Mondi's South African division was negatively affected by sharply lower average export pulp selling prices and higher input costs which were only partially offset by positive currency effects and a higher fair value gain on forestry assets. After taking the impact of special items of €38m into consideration, operating profit of €943m was up 5%.

The dividend increased 10% to 57 cents.

Chief executive David Hathorn said the outlook for 2017 was positive, but the company warned that, despite improvements in certain segments of the global economy, uncertainties remained over slowing growth, political and economic structural weakness in the eurozone's single currency framework, and uncertainty over the outcomes of the UK's decision to leave the European Union.

“We have implemented or announced price increases in containerboard, sack kraft and uncoated fine paper grades, supported by good demand,” Hathorn said.

“We expect some inflationary cost pressures across the group and a lower forestry fair value gain. Furthermore, we anticipate a more challenging trading environment in certain uncoated fine paper markets following price erosion in Europe over the course of 2016, combined with emerging market currency volatility."