Profits jump at Mondi

Mondi (MNDI) has had a tumultuous few months. In May, the packaging giant decided to sell its Russian assets following the invasion of Ukraine. This was no small undertaking: Russian operations represented around 12 per cent of the group's revenue in 2021 and generated around a fifth of underlying Ebitda over the last three years.

Business elsewhere is still booming, however. Yet revenue from continuing operations – which excludes Russia – surged by 37 per cent in these results, driven by particularly strong demand for corrugated products. Mondi also seems relatively unfazed by the rising cost of energy, wood, transport and chemicals, boosting its underlying Ebitda margin by over three percentage points to 20.9 per cent.

Mondi’s pulp and paper mills generate most of their energy needs internally, with biomass sources accounting for around 80 per cent of the fuels used in this process, “thereby mitigating the impact of the significant surge in external fuel costs”. It has also managed to pass on costs to customers. 

Things could get tighter in the second half of the year, with Mondi expecting “continued inflationary pressures on our cost base and ongoing supply chain challenges”.

There is also, of course, the large shadow cast by its Russian operations. Management said the divestment process is “operationally and structurally complex” and is being undertaken in an evolving political and regulatory environment. “There is uncertainty as to when a transaction will be completed and as to the structure of any possible transaction.”

While the group said a sale is highly probable within the next 12 months, it warned that “there can be no certainty that the price ultimately achieved on disposal of the Russian businesses will be sufficient to support the carrying value”. Assets held for sale currently amount to €1.7bn (£1.43bn).

Uncertainty abounds. Hold.