Mondi posts 2010 profit hike, expects growth to slow in 2011

By Rory Harrington

- Last updated on GMT

Related tags Eastern europe Paperboard Price Mondi group

Mondi said growth in demand coupled with higher prices for its products and strong performance from its restructured operations all contributed to a 73 per cent leap in its full year operating profits.

The South Africa-based packaging and paper firm announced its underlying 2010 operating profit climbed €509m compared to the previous year’s €294m.

“The 2010 financial year saw a much improved financial performance from the Mondi Group,”​ said group chief executive David Hathorn. “After the turmoil of 2008 and early 2009 created by the global financial crisis, the recovery noted in late 2009 continued into 2010.”

He said demand growth over the past 18 months had been “encouraging, with volumes in most grades and geographic regions back at satisfactory levels​”.

The CEO expected further demand growth this year, although at more modest levels, saying that a better pricing environments and recent industry capacity adjustments had given rise to generally stronger fundamentals.

The company paid €117m in debt, a year-on-year reduction of €46m, while the cost incurred for Special Items such as operational sell offs fell from €133m in 2009 to €22m in 2010.

Segment performance

“Strong operational performance and significantly improved trading environment with price and volume improvements across all main products”​ were all behind the improved results, declared the company.

The European and International division – made up of the Corrugated, Uncoated Fine Paper, and Bags & Coatings businesses contributed €431m, its South Africa Division, €64m; and Mondi Packaging South Africa, €51m

The corrugated business posted a 417 per cent increase in underlying profit- rising from €23m in 2009 to €119m last year.

Improved prices and volumes, along with benefits from the new recycled containerboard at its Polish plant in Swiecie ramping up output sooner than expected had all boosted performance.

The company also highlighted its restructuring programme and focus on central and Eastern Europe as key.

“During the year, the business concluded its restructuring programme with the sale of the Frohnleiten mill in Austria and UK corrugated plants,”​ said Mondi. “Going forward, the business will focus on its core central and eastern European markets, supported by production facilities in Poland, Turkey, Germany and Austria.”

Price rises for its products also fuelled strong performance. Benchmark kraftliner prices increased by 45 per cent, recycled containerboard prices by 30 per cent and white top

containerboard prices by 20 per at year end, from 31 December 2009 levels, it revealed

The trend has already spilled over into 2011 with the company announcing further recycled containerboard price increases of €40/tonne and white top containerboard price increases of €50/tonne to take effect during the first quarter of 2011.

Improvements in volume growth in both containerboard and corrugated packaging were described by the company as “pleasing”.

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