Mondi profits fall on lower prices as dividend raised

Annual profits at paper and packaging maker Mondi fell by a third on the back of “significantly lower” average selling prices for pulp and paper grades and the Covid-19 pandemic.

The company on Thursday said pre-tax profits for the year to December 31 fell 30% to €77m. Underlying core earnings declined 18% to €1.35bn, while revenue was down to €6.6bn from €7.2bn.

Mondi declared a total dividend of 60 euro cents a share, up 5% year on year. Cash generation for the company totalled €1.48bn.

Chief executive Andrew King said the results were “testament to the strength of our business model in the face of significantly lower average selling prices across our key pulp and paper grades, and the challenges brought by Covid-19”.

“We finished the year positively, with strong demand in the packaging businesses supported by the long-term growth drivers of sustainability and e-commerce.”

Mondi said it was “confident in the structural growth drivers in the packaging sectors in which we operate and the strength of our paper position” despite an uncertain near-term macroeconomic outlook.

“We are seeing strong order books supporting price increases in most packaging and pulp grades, and are encouraged by the improving uncoated fine paper demand,” the company said.

It added that it planned longer project-related maintenance shutdowns and was seeing input cost pressures and currency headwinds, although the benefits from its capital expenditure programme would continue to support performance.

AJ bell investment director Russ Mould said the growth of online shopping had been a "slow-burning driver for the packaging industry for several years, after all nearly everything you order over the web arrives at your door in a box".

“This trend has accelerated massively in the last 12 months as we have been stuck at home thanks to coronavirus restrictions.

“However, while this has led to reports of cardboard shortages and driven strong demand, particularly in the fourth quarter and over Christmas, Mondi’s results today show this was not enough to outweigh the loss of business in other areas due to the pandemic.

“This has been exacerbated by the plethora of used cardboard stuck in people’s homes; with pick up and recycling services unable to keep up, this has driven up the price of recycled containerboard which the likes of Mondi and DS Smith use to manufacture boxes."