Mondi earnings plummet, acquires Canadian pulp mill

Product packaging giant Mondi saw a significant decrease in earnings in the first half of 2023 and announced the acquisition of the Canada-based Hinton Pulp mill.

Mondi released its results for the six months ended 30 June 2023 today, which revealed a 28% drop in EBITDA.

The company’s EBITDA decreased from €942 million (R19.04 billion) in the first half of 2022 to €680 million (R13.74 billion) in H1 2023.

Mondi’s basic underlying earnings per share (EPS) was down 32% at 67 euro cents (H1 2022: 98.7 euro cents).

However, the company’s cash generation remained strong, growing from €519 million (R10.49 billion) to €554 million (R11.2 billion).

The company attributed its drop in earnings to softer demand, customer destocking, and higher input costs. However, it says the impact was mitigated by the company’s “rigorous cost management and focus on service and quality”. 

Mondi said the first half of 2023 benefited from a forestry fair value gain of €86 million (R1.74 billion), compared to €30 million (R606.54 million) in the first half of last year.

In addition to its interim results, the company has agreed to acquire the Hinton Pulp mill in Canada, with completion expected by the end of 2023. 

“Following the completion and subject to pre-engineering and permitting, the intention is to invest €400 million (R8.09 billion) in the expansion of the mill, primarily for a new 200,000 tonne per annum kraft paper machine, anticipated to be operational from the second half of 2027,” it said.

The majority of this capital expenditure is planned for 2026 and 2027.

The company has a pipeline of approved expansionary projects totalling €1.2 billion. They comprise €0.6 billion of investments in Corrugated Packaging and €0.6 billion in Flexible Packaging. 

Mondi said these projects are expected to start over the next two years and deliver through cycle mid-teen returns when fully operational. 

“We continue to expect total capital expenditure in 2023 to be around €800 to 850 million, of which we have spent €310 million in the first six months of the year,” it said.

“We expect total capital expenditure to remain elevated for the next two years as we progress and commission our €1.2 billion pipeline of approved expansionary projects.”

The company’s results follow news in July that it has completed the sale of three of its Russian assets.

Mondi received net proceeds of €30.4 million (R618 million) from the sale, which it will distribute to shareholders. 

The company also provided an update on the sale process of its Syktyvkar mill, saying it is “ongoing within an evolving political and regulatory environment”.

The company declared an interim dividend of 23.33 euro cents per share, a slight increase from the 21.67 euro cents per share it declared in H1 2022.