Mondi raising prices to combat inflationary pressures
By Rob Griffin
11:09, 7 October 2021
Mondi, the global paper and packaging group, said demand remains strong, but the company is raising prices to combat ongoing inflationary pressures.
In a trading update, Mondi warned the fourth quarter would be impacted by recent input cost increases along with planned maintenance and project-related shutdowns.
However, the FTSE 100 company insisted it remained in a strong position and major capital investment projects were all progressing well.
Strong performance
The company said underlying EBITDA for the third quarter was €388m ($448m), up 27% from the same period last year.
CEO Andrew King branded it a “strong performance” with higher average prices across the business and strong volume growth against a backdrop of increased input costs.
“Throughout this period of high demand, we remained focused on ensuring security of supply and high-quality service for our customers,” he said.
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Capital investment projects
The generally optimistic tone of the update was enough to modestly lift Mondi’s shares up 0.6% at £17.98 per share by lunchtime in London.
According to King, the company continues to develop innovative and sustainable packaging solutions to help customers achieve their environmental goals.
He also said its major capital investment projects were progressing well.
“With these investments, we capture opportunities in our growing packaging markets, strengthen our cost competitiveness and deliver sustainability benefits,” he added.
Input costs
The update revealed that input costs were significantly higher in the quarter, both year on year and sequentially.
“When compared with the second quarter of 2021, we saw higher energy, resins, transport and chemical costs,” Mondi stated.
Paper for recycling costs were mostly stable, although increased towards the end of the quarter, while energy costs in Europe increased through the period.
They then rose sharply at the end of the quarter on the back of material increases in electricity and gas prices.
“We expect them to remain at these elevated levels in the fourth quarter,” the company said.
Scheduled maintenance costs
The company also said the impact of scheduled maintenance shuts on underlying EBITDA during the period was around €30m.
“The fourth quarter’s impact is estimated at around €70m, in line with previous estimates, and includes an extended project-related shut at Richards Bay (South Africa) as part of the ongoing modernisation programme at the mill,” it added.