Mondi hands out dividend reams as prices and costs rise

Mondi, the South African packaging and paper group, will pay out a bumper special dividend on top of an already healthy payout for last year as it reported modest profits growth and "strong upward momentum" in pricing.

The FTSE 100 company €1.00 special dividend on top of a total ordinary dividend of €0.62 per share, which was up 9% on the total ordinary payment a year before.

Directors took the decision as cash generated from operations fell 5% to €1.3bn in 2017, with net debt down slightly to €1.3bn and €791m of a €2bn committed debt facilities still undrawn at the end of the year. The possibility of further small to mid-sized acquisitions over the coming years was also noted.

Revenues of €7.1bn were up 7% over the year, with underlying operating profit up 4% to €1.0bn. Profit before tax increased 5% to €887m and earnings per share rose 8% at the underlying level to 149.5 cents, which excludes some impairment of assets and a small level of restructuring costs.

Mondi benefited from solid demand and higher average selling prices across all divisions. Packaging saw the best growth, with corrugated cardboard packaging seeing like-for-like sales up 6%.

Profits gained from these higher selling prices and marginally higher volumes, more than offsetting higher operating costs, a lower fair value gain on forestry assets, the impact of maintenance shuts and negative currency effects.

Chief executive Peter Oswald said efforts to improve operational performance had mitigated the "inflationary pressures on our cost base caused by the general economic recovery".

In 2018 he expects "continued, but manageable pressure" on the cost base across the group to continue, "a consequence of the turn in the commodity price cycle and the general economic recovery we are seeing in many of the regions in which we operate".

But, supported by ongoing good demand, there had been "strong upward momentum in pricing" across key product segments in packaging paper and fibre packaging over the course of 2017 and into early 2018.

There are also current headwinds from recent US dollar weakness coupled with stronger emerging market currencies, most notably the South African rand.

"Our outlook for the business is positive and we remain confident that our consistent and focused strategy, robust business model centred around our cost advantaged assets, and firm focus on driving performance will sustain our track record of delivering value accretive growth."