Profits of dual listed paper and packaging group Mondi were flat year-on-year in the traditionally quiet summer months, in line with management expectations.
Underlying operating profit for the quarter ended September 30th was €135m, barely changed from €136m in the third quarter of last year, but below the €150m achieved in the prior quarter.
The group said the profit performance reflects a stable trading environment considering the impact of the traditionally weaker European summer months, annual maintenance shut-downs at a number of the group's larger operating sites during the quarter and ongoing strong cost containment.
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Sales volumes were, on average, similar to those achieved in the previous quarter but above those of the comparable prior year period, although demand in the downstream converting operations was below that of the prior year.
Third quarter average benchmark selling prices across all grades were below those of the comparable prior year period. Selling price increases were realised in kraft paper during the quarter, while price increases for container-board are due to kick in early in the fourth quarter of 2012.
On average, input costs in the third quarter were similar to the previous quarter and below that of the comparable prior year period. Benchmark recovered fibre costs decreased by 23% in the quarter and were down 30% year-on-year. As a result of the anticipated start-up of new recycled container-board capacity in Poland in early 2013, regional market pressure on recovered fibre costs is expected in the near term.
The weaker South African rand and stronger US dollar versus the euro benefited mainly the South Africa division and, to a lesser extent, the Packaging Paper business.
Net debt at the end of the reporting period was €1,188m, an €85m improvement from the end-June position. However, the acquisitions of Nordenia and the Duropack corrugated assets as well as the disposal of Aylesford will increase net debt in the fourth quarter.
The group continues to be strongly cash generative and working capital levels
remain within the group's targeted range. Capital expenditure increased during the period due to the preponderance of maintenance shut-downs during the period as well as increased spending on the energy improvement projects. Total capital expenditure for the year is expected to be around 90% of the group's annual depreciation charge.
"Price increases in the main packaging paper grades offer support for the remainder of the year. Looking further forward, continued soft demand on the back of the prevailing macroeconomic uncertainties and some additional capacity expansions in certain of our core markets remain a concern, although it is
encouraging to note that the strong supply side fundamentals remain generally intact," the group's statement concluded.
JH
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