Mondi Q1 profit hit by lower prices, higher costs

First quarter underlying operating profit at paper and packaging maker Mondi fell 6% to €252m (£211.7m) as strong sales volume growth was more than offset by a significantly lower forestry fair value gain, inflationary cost pressures and lower average selling prices.

Underlying operating profit was up 12% to €225m on the fourth quarter of 2016 as the group benefited from higher sales volumes and prices.

Mondi said selling prices for the its main paper grades were, on average, lower year on year as prices fell over the course of 2016.

“As previously highlighted, during the first quarter of 2017, we implemented price increases across a number of our paper grades, although these had only limited impact in the quarter,” Mondi said.

“Wood costs were higher than the comparable prior year period, while benchmark paper for recycling prices rose sharply, up 17% compared to the first quarter of 2016, and were at similar levels to the fourth quarter of 2016.”

Mondi added that benchmark polyethylene prices were also higher, on the back of higher crude oil prices, while energy costs increased due to the weather conditions in Europe and higher energy input costs.

Inflationary cost pressure resulted in higher fixed costs and the depreciation charge was up due to the impact of the group’s capital investment programme, the company said.