Given the constraints on profitability, a 6 per cent fall in underlying operating profits to €497m (£449m) actually represents a reasonable outcome for Mondi (MNDI) at the half-year mark. Sales improved on the back of increased global demand, and the paper and packaging group maintained the gross margin at 43.6 per cent despite higher raw material costs. But it also had to contend with increased maintenance shutdowns at its mills, which shaved €40m off profits, along with a significantly lower forestry fair value gain, down to €20m from €48m a year earlier.
Unfortunately, the means of production wears out over time, so the maintenance issues are inescapable. More saliently, investments in property, plant and equipment were up 19 per cent to €254m, including the second development phase of the facility in Swiecie, Poland, along with the modernisation of its kraft paper facility in Steti, Czech Republic. Despite these demands, €592m in operating cash flow was generated, although there was a net outflow of €343m on the back of some hefty eurobond repayments. Delays on the Ruzomberok mill project mean that capital expenditure is expected to come in at the lower end of the indicated range of €600m-€650m for this year, but the group’s capacity drive is gathering momentum.
Jefferies gives adjusted profit of €1.05bn for the December year-end, with EPS of 153¢, compared with €981m and 138¢ in 2016.
| MONDI (MNDI) | ||||
| ORD PRICE: | 1,959p | MARKET VALUE: | £9.51bn† | |
| TOUCH: | 1,957-1,959p | 12-MONTH HIGH: | 2,121p | LOW: 1,495p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 725¢*† | NET DEBT: | 38% | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Jun | (€bn) | profit (€m) | share (¢) | per share (¢) |
| 2016 | 3.31 | 482 | 75.0 | 18.81 |
| 2017 | 3.58 | 462 | 72.3 | 19.10 |
| % change | +8 | -4 | -4 | +2 |
| Ex-div: | 24 Aug | |||
| Payment: | 19 Sep | |||
*Includes intangible assets of €820m, or 169¢ a share £1=1.118 †Includes Johannesburg-listed shares | ||||
