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Mondi cautious on outlook

The packaging specialist's exposure to niche markets hedged its portfolio against price volatility
August 1, 2019

Demand for paper and packaging looks soft going into the second half of the year, according to Mondi (MNDI). Prices for key paper grades are presently lower than those of the first half. Higher export prices and net volume rises during the period led to a forestry fair value gain of €52m (£47.4m), up €39m on the prior year. But tricky market conditions leave Mondi expecting this to be “significantly lower” in the second half.

IC TIP: Buy at 1,707p

“It’s not the time to increase prices,” chief executive Peter Oswald says. Prices for Mondi’s more niche product offering, such as white top kraftliner and semi-chemical fluting, came down between 4 and 5 per cent, compared with normal brown kraftliner and testliner prices, the latter of which fell over 20 per cent. Mondi’s prices are, and will remain, ahead of last year. Its portfolio’s Achilles heel has proven to be its standard containerboard crate kraftliner where prices have fallen significantly. “We haven’t yet succeeded in increasing them again,” Mr Oswald admitted.

House broker UBS forecasts full-year 2019 adjusted pre-tax profits and EPS of €1.12bn and 170.6¢, rising to €1.13bn and 172¢ in 2020.

MONDI (MNDI)    
ORD PRICE:1,707pMARKET VALUE:£ 6.3bn
TOUCH:1,706-1,708p12-MONTH HIGH:2,250pLOW: 1,558p
DIVIDEND YIELD:4.4%PE RATIO:10
NET ASSET VALUE:1,023¢*NET DEBT:57%
Half-year to 30 JunTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20183.7349072.521.45
20193.7763295.827.28
% change+1+29+32+27
Ex-div:15 Aug   
Payment:20 Sep   
£1=€1.1 *Includes intangible assets of €1.02bn, or 280¢ a share