Mondi's performance is considerably muddied by the programme to cut capacity that started two years ago, as exceptional costs of €387m (£340m) in 2008 pushed the paper and packaging group into the red.
Exceptional charges fell back to €133m last year, so the apparent recovery in reported profits hides the impact the recession has had on demand and pricing. In fact, underlying operating profit actually fell a third to €182m in 2009. However, Mondi's restructuring looks well timed, having taken out 15 per cent of high cost paper production capacity in Europe and 9 per cent in South Africa and focused the business on building up manufacturing in Poland and Russia. These operations will be very low cost and should boost earnings in a couple of years.
These moves have already produced cost savings of €251m, well in excess of target, which means that the group is in a good position to benefit from the revival in demand that became apparent in the second half last year. Even though profits in the corrugated, bags and specialities operations were sharply down, in contrast to a strong performance from uncoated fine paper, the improvement seen in the second half should carry on into 2010 - although rand strength remains a problem and fibre, energy and chemical costs could all rise this year.
Brokers have yet to firm up their 2010 profits forecasts.
MONDI (MNDI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 388p | MARKET VALUE: | £1.97bn | |
| TOUCH: | 387-388p | 12-MONTH HIGH: | 388p | LOW: 121p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | na | |
| NET ASSET VALUE: | 414p | NET DEBT: | 54% | |
| Year to 31 Dec | Turnover (€bn) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2005 | 5.36 | 98 | 4.4 | nil |
| 2006 | 5.75 | 223 | 15.2 | nil |
| 2007 | 6.27 | 382 | 45.4 | 23.0 |
| 2008 | 6.35 | -103 | -41.6 | 12.7 |
| 2009 | 5.27 | 49 | -6.5 | 9.5 |
| % change | -17 | - | - | -25 |
Ex-div:21 Apr Payment:19 May £=€1.14 | ||||
