A surge in profits despite flat revenues pushed shares in packaging and paper group Mondi (MNDI) to a record high. The pattern of higher margins on modest top-line gains was repeated across most of Mondi's businesses, the exception being the uncoated fine paper division, which was hit by its exposure to the Russian rouble.
Other currency fluctuations - particularly the weakening rand in South Africa - were positive, helping to lower fixed costs. Lower energy prices have also made Mondi's pulp and paper operations more efficient, as well as reducing transport and logistics costs. Even after extensive factory upgrades in recent years, energy and related costs account for about a third of the company's variable costs, so the fall in oil and gas prices is benefiting the company materially.
Unless energy prices drop further, however, capital investment is more likely to be a source of profit growth this year. The company completed three major projects last year - a bleached kraft paper machine in the Czech Republic, a recovery boiler in Slovakia and a softwood pulp dryer in Russia - and has approved a further €420m worth of capital spending for the years ahead. Management expects capital projects to add €50m to operating profit this year.
Analysts at UBS forecast EPS of 108¢ this year, rising to 115¢ in 2016, based on net earnings of €526m and €561m respectively.
| MONDI (MNDI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,304p | MARKET VALUE: | £6.3bn | |
| TOUCH: | 1304-1305p | 12-MONTH HIGH: | 1,308p | LOW: 919p |
| DIVIDEND YIELD: | 2% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 598¢* | NET DEBT: | 56% | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 5.61 | 333 | 37.8 | 20 |
| 2011 | 5.74 | 457 | 57.5 | 26 |
| 2012 | 5.79 | 368 | 50.1 | 28 |
| 2013 | 6.48 | 499 | 79.8 | 36 |
| 2014 | 6.40 | 619 | 97.4 | 42 |
| % change | -1 | +24 | +22 | +17 |
Ex-div: 23 Apr Payment: 21 May *Includes intangible assets of €658m, or 136¢ a share £1=€1.36 | ||||
