Sales are holding up at dual-listed South African paper and packaging group Mondi, but price cuts has led to a sharp deterioration in profitability in the first half of the year. Underlying pre-tax profits declined 27 per cent to €217m (£174m), although this was better than some analysts had expected and UBS upgraded their full-year EPS forecasts by 5 per cent to 64¢ (68¢ in 2011). Moreover, resilient cash flow generation allowed the group to complete a €296m buyout of the remaining shares in its Polish subsidiary, Mondi Swiecie.
Sales volumes were slightly up on the second half of last year, but management said significantly lower prices caused operating profits to sink by 38 per cent and 25 per cent, respectively, in the Corrugated and Bags and Coatings businesses, while the Paper operation saw profits down 15 per cent. Chief executive David Hathorn said he remains confident of delivering against full-year expectations, adding that there had been a pick-up in trading after a difficult start to the year.