Demand slump sinks Mondi

5th Aug 2009 07:58

Paper and packaging group Mondi fell into losses in the first half of the year as the global economic downturn hit demand for its products.In the six months to June, the company saw reported pre-tax losses of €1m, compared with €171m over the same period the previous year as revenue fell to €2.6bn from €3.3bn.The European businesses, which accounts for most of Mondi's revenue, saw a sharp fall in profitability in the fourth quarter of 2008 after the onset of the financial crisis, while South African operations began experiencing softer volumes and reduced export prices in the following period.Mondi has been exiting higher-cost operations that it believes will continue to struggle in the downturn but has continued investing in its two major projects in Poland and Russia. 'We believe the decisive actions taken to reduce capacity, lower the overall cost base and optimise cash flows, coupled with our high-quality, low-cost asset base leave us well positioned to benefit when market conditions improve," chief executive David Hathorn said.Mondi slashed its interim dividend to 2.5p from 7.7p the previous year.The firm's difficulties echo those of fellow packaging group Rexam, which also fell into losses at the interim stage amid falling global demand.