Mondi PLC Trading Update

 
TIDMMNDI 
 
Mondi plc 
 
(Incorporated in England and Wales) 
 
(Registered number: 6209386) 
 
LEI: 213800LOZA69QFDC9N34 
 
LSE share code: MNDI                       ISIN: GB00B1CRLC47 
 
JSE share code: MNP 
 
15 October 2020 
 
Trading update: Mondi delivers resilient Q3 performance 
 
Underlying EBITDA for the third quarter of 2020 was EUR306 million, down 20% on 
the comparable prior year period (Q3 2019: EUR383 million), as lower average 
selling prices and negative currency effects more than offset lower costs. 
Compared to the second quarter of 2020 ('sequentially'), underlying EBITDA was 
down 13% (Q2 2020: EUR353 million). Good volume growth in uncoated fine paper and 
fibre-based packaging products and ongoing strong cost control were more than 
offset by the impact of planned maintenance shuts, negative currency effects 
and lower average selling prices. 
 
Andrew King, Group CEO, commented "The decisive action we took in the early 
stages of the COVID-19 pandemic helped to protect our people, maintain supply 
of essential products and services, and deliver a resilient performance. Our 
people have demonstrated their enterprise and commitment, taking care of 
colleagues, communities and customers in these unprecedented times. 
 
I am pleased that sustainable packaging continues to be a focus for our 
customers. We continue to make good progress leveraging our award-winning 
innovation capabilities and customer-centric approach to optimise packaging 
design using 'paper where possible, plastic when useful'." 
 
In Corrugated Packaging, demand from e-commerce and consumer applications 
remained strong. We also saw some recovery in industrial end-uses from the lows 
of the second quarter. We achieved good volume growth in Corrugated Solutions 
measured both year-on-year and sequentially. Given the strong order position 
and normalised inventory levels, we are currently in discussions with customers 
around price increases for various containerboard grades. 
 
Flexible Packaging demand remained resilient during the period and volumes in 
our paper bags business grew year-on-year. Following a strong performance in 
the first half, we saw some supply chain de-stocking effects impacting volumes 
in our consumer flexibles business during the quarter. 
 
We continue to leverage Engineered Materials' coating technologies to develop 
sustainable packaging solutions. As expected, we saw lower personal care 
component volumes as a key product matures. Demand in industrial and 
specialised end-uses continued to be impacted by lockdown restrictions, in 
particular in release liner. We are implementing a range of measures to reduce 
the cost base, including the closure of a release liner plant in Pleasant 
Prairie (Wisconsin, US) and engaging with employee representatives on the 
restructuring of our personal care components focused operations in Gronau 
(Germany). 
 
Encouragingly, Uncoated Fine Paper demand improved as lockdown restrictions in 
Europe, Russia and Southern Africa eased with a gradual pick-up in activity in 
schools, offices and commercial printing. Sales volumes were significantly up 
sequentially, although they are still down on the comparable prior year period. 
Average uncoated fine paper prices were lower than in the first half of the 
year. Our South African operations are currently affected by an industry-wide 
strike. We are engaging with trade unions and employee representatives to reach 
an agreement while we continue to deliver products to our customers. The 
Uncoated Fine Paper business remains well-positioned in the context of the 
current market challenges given our cost competitiveness, product 
diversification and geographic positioning. 
 
Average input costs were stable sequentially and cost control was strong across 
the business. Currency movements had a net negative impact on underlying EBITDA 
compared to the second quarter, driven by a weaker US dollar, impacting a 
number of the Group's globally traded products, coupled with a weaker Russian 
rouble and Turkish lira. Given prevailing exchange rates, we anticipate a 
further net negative currency impact in the fourth quarter. 
 
To protect our employees and suppliers and minimise execution risk, we decided 
to postpone most planned maintenance shuts to the second half of the year. 
During the quarter, planned maintenance shuts with an estimated impact on 
underlying EBITDA of around EUR35 million (2019: EUR40 million) were carried out 
successfully. Based on prevailing market prices, we continue to estimate that 
the impact of planned mill maintenance shuts on underlying EBITDA for 2020 will 
be around EUR100 million (2019: EUR150 million), with the fourth quarter impact 
expected to be around EUR55 million (2019: EUR30 million). 
 
Our major capital investment projects are progressing according to plan. The EUR 
67 million capital investment project to convert a containerboard machine at 
Steti (Czech Republic) to become fully dedicated to the production of 
speciality kraft paper for shopping bag applications is scheduled to be 
commissioned during the fourth quarter. This additional capacity (75,000 
tonnes) further supports our retail customers in their efforts to replace 
unnecessary plastic as they transition to more sustainable packaging solutions 
that contribute to the circular economy. 
 
During the period, we paid an interim dividend to shareholders amounting to EUR 
237 million. We also redeemed our 3.375% EUR500 million Eurobond from available 
cash. There are no other material short-term debt maturities. The Group's 
financial position remains strong, with liquidity of around EUR970 million. 
 
Outlook 
 
The macro-economic outlook continues to be uncertain, however we are confident 
that the Group will continue to demonstrate its resilience, while remaining 
well-positioned for when the recovery takes place. Our confidence is 
underpinned by Mondi's integrated high-quality, cost-advantaged asset base, 
culture of continuous improvement, portfolio of sustainable packaging solutions 
and the strategic flexibility offered by our strong cash generation and 
financial position. 
 
Contact details 
 
Investors/analysts 
Clara Valera                                     [phone] 
Mondi Group Head of Strategy and Investor 
Relations 
 
Media 
Kerry Cooper                                     [phone] 
Mondi Group Head of External Communication 
 
Richard Mountain                                 [phone] 
FTI Consulting 
 
Conference call dial-in details 
 
A conference call will be held today at 08:00 (UK) / 09:00 (South Africa). 
 
The conference call dial-in numbers are: 
 
UK                         0800 279 6619 
 
South Africa           0800 014 552 
 
Other                      [phone] 
 
Conference ID       6763227 
 
Should you have any issues with accessing the dial-in conference call, please 
call [phone]. 
 
A replay facility will be available until 22 October 2020 (Pin number: 
6763227). The dial in details are: 
 
United Kingdom     0844 571 8951 
 
Other                      [phone] 
 
Notes 
 
This trading update provides an overview of our financial performance and 
financial position since the half year ended 30 June 2020. Financial metrics 
have not been audited or reviewed by Mondi's external auditors. 
 
Underlying EBITDA is an Alternative Performance Measure that is not defined or 
specified according to International Financial Reporting Standards. This 
measure is defined as operating profit before special items, depreciation, 
amortisation and impairments not recorded as special items. 
 
About Mondi 
 
Mondi is a global leader in packaging and paper, contributing to a better world 
by making innovative packaging and paper solutions that are sustainable by 
design. Our business is fully integrated across the value chain - from managing 
forests and producing pulp, paper and plastic films, to developing and 
manufacturing effective industrial and consumer packaging solutions. 
Sustainability is at the centre of our strategy and intrinsic in the way we do 
business. We lead the industry with our customer-centric approach, 
EcoSolutions, where we ask the right questions to find the most sustainable 
solution. In 2019, Mondi had revenues of EUR7.27 billion and underlying EBITDA of 
EUR1.66 billion. 
 
Mondi has a premium listing on the London Stock Exchange (MNDI), and a 
secondary listing on the JSE Limited (MNP). Mondi is a FTSE 100 constituent, 
and has been included in the FTSE4Good Index Series since 2008 and the FTSE/JSE 
Responsible Investment Index Series since 2007. 
 
Sponsor in South Africa: UBS South Africa Proprietary Limited. 
 
 
 
END 
 

(END) Dow Jones Newswires

October 15, 2020 02:00 ET (06:00 GMT)