Mondi, the multinational packaging and paper group, said on Friday that, despite the significant geopolitical and macroeconomic uncertainties, it was confident it would continue to demonstrate resilience.
In its trading update for the third quarter, the group said it anticipated continued inflationary pressures on its cost base as it entered the fourth quarter.
"The group remained well placed to deliver sustainably into the future, underpinned by our integrated cost-advantaged asset base, culture of continuous improvement, portfolio of sustainable packaging solutions, the strategic flexibility offered by our unique platform for growth, and strong cash generation and financial position," it said.
Mondi flagged the fact that underlying earnings before interest, tax, depreciation and amortisation from continuing operations, excluding the Russian operations, for the third quarter was €450 million (R8 billion), up 55% compared with the prior year period, as higher average selling prices and overall volume growth more than offset significant cost pressures.
In August, the group announced it had reached a deal to sell most of its assets in Russia for €1.5 billion (R26.78 billion) to Augment Investments. The Russian government still needed to approve the sale and its remittance in form of a dividend to Mondi.
Mondi CEO Andrew King said: “Mondi delivered strongly in the third quarter.
"We continue to partner with our customers, helping to lead the way towards a circular economy with our unique portfolio of innovative and sustainable packaging and paper solutions.
“We also remain focused on operational efficiency and cost control. Our ambitious expansionary capital investment programme is progressing well, as we continue to invest in our cost-advantaged asset base to capture opportunities in our structurally growing packaging markets, enhance our competitiveness, and deliver sustainably into the future," he said.
Corrugated packaging benefited from higher average selling prices compared to the prior year, leveraging off its innovative product portfolio and strong customer proposition.
"Corrugated solutions box volumes were lower in the quarter driven by generally softer demand when compared with the strong volume growth delivered in the prior year," Mondi said.
“Flexible packaging performed well, with resilient demand, during the period. Price increases across our range of kraft papers and packaging products were implemented during the quarter and were not fixed by annual or semi-annual contracts.
"Uncoated fine paper achieved higher average selling prices and grew pulp volumes in the quarter, while uncoated fine paper volumes were lower. The non-cash forestry fair value gain was higher," it said.
Mondi said input costs were significantly higher in the quarter, year on year and sequentially, largely because of higher wood and energy costs. Increased demand and tight market conditions for wood continue to impact availability and pricing.
"We were able to mitigate the impact of significantly higher European gas and electricity costs, as most of our pulp and paper mills generate the majority of their energy needs internally, with around 80% of the fuels used in this process from biomass sources, and only around 10% of our fuel sourced from natural gas. We look to mitigate the effect of inflationary pressures on the cost base through our cost-control initiatives," it said.
Mondi said its €1 billion (R17.85 billion) expansionary capital investment programme was progressing well, and it expected these projects to deliver mid-teen returns when in full operation.
The share price closed up 1.27% at at R286.25 on Friday.
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