Mondi completes western Europe exit strategy as profits plummet

By Rory Harrington

- Last updated on GMT

Related tags: Europe, Eastern europe, Central europe, Western europe

Mondi said it has completed the switch of its corrugated and recycled containerboard packaging operations away from western Europe in a bid to combat overcapacity in region and cut costs.

The South African-based company said it had successfully completed the revamp to its​core positions around Turkey and Central and Eastern Europe. The announcement is part of an ongoing trend that has seen packaging firms seek to establish bases in such emerging markets on lower overheads and the potential for stronger growth.

Mondi outlined its strategy as it said operating profits for 2009 dropped by a third to €294m. Its profit before tax, however, was €49m after taking into account restructuring costs of €133m. Profits from its corrugated business plummeted by €26m to €23m – a year-on-year drop of 53 per cent.

The group said this had occurred in a “very challenging trading environment”​ where demand was weak and prices had fallen sharply in the first half of the year. However, there was some recovery in both these in H2, it said.

Western Europe exit

In its report yesterday, the company provided details on a string of divestments as part of its scheme to significantly reduce its corrugated packaging and recycled containerboard presence in western Europe. It revealed it had reached an agreement earlier this month to sell its 170,000 ton per annum Frohnleiten recycled containerboard mill in Austria. The deal is subject to regulatory approval. It also confirmed that it was still in negotiation with Smurfit Kappa over the sale of its UK corrugated operations – but stressed it was not certain the sell-off would be completed.

The 18-month programme has seen the group exit four of its five western European recycled containerboard mills: Holcombe in the UK, Niedergosgen, in Switzerland, the Italian site at Monza as well as the Austrian facility. The move had resulted in an aggregate capacity reduction of 540,000 tonnes per annum (t/a).

“This comes in response to overcapacity concerns in western Europe, and a desire to improve our asset quality by both moving down the cost curve in recycled containerboard, and refining our geographical footprint around our core central and eastern European and Turkish positions,”​ said Mondi in a statement.

Its remaining recycled containerboard plants in Germany, Poland and the Czech Republic, with a combined capacity of 685,000 t/a, provided a strong and competitive base for central and eastern Europe, it added.

2010 Outlook

Mondi delivered a cautious outlook for the coming 12 months, saying its performance would depend “on the pace and extent of the global economic recovery”.​ The company also warned that more rationalisation may be in the pipeline to “ensure demand and supply are balanced”.

It concluded there had been some recovery in both orders and prices in European packaging grades in Q4.

Related topics: Processing & Packaging

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