Mondi earnings soar on paper profits and purchases

8th Aug 2013 08:37

Packaging and paper group Mondi enjoyed continuing strong momentum in Europe and South Africa as it posted record profits in the first half. Underlying operating profits of €366m were 21% above the previous six months and 35% above the comparable period last year, on revenues up 18.6% to €3.3bn for the six months to June.Group Chief Executive David Hathorn said the strong performance benefited from 2012's acquisitions and a number of major expansion projects. Excluding the impact of the acquisitions, underlying operating profit, which excluded costs of restructuring the newsprint operations, still increased by 12% on the previous period and 24% on the comparable period. Underlying earnings per share of 49.4 euro cents per share were up 60% on the comparable period."The group's major expansion projects are progressing according to plan and remain within budget," said Hathorn."Some of the synergies identified at the time of the acquisitions have already been achieved, and we remain on track to meet the previously announced synergy targets."The FTSE 250 group, which is a potential FTSE 100 entrant at the next index review on September 11th, attributed the record results to strong operating performance and reasonable trading environment, particularly in Packaging Paper and the South Africa DivisionCompared to the first half of 2012, Mondi's sales volumes increased across all major paper grades and while European demand was said to have remained "generally sluggish", Mondi compensated for this by making market share gains, and strong export market gains in kraft paper.Hathorn said the strong profitability and "relentless focus on performance" was reflected in a return on capital employed of 14.8%, well above the company's through-the-cycle hurdle rate of 13%. The period review benefited from the absence of any major mill maintenance shuts, which in the second half are estimated to hit underlying operating profit by €50-€60m compared to the first half of the year.Management warned that new industry capacity in the uncoated fine paper segment, coupled with prevailing demand softness in Europe, "may impact the supply/demand balance in the short term". However, Hathorn said he expected the momentum from the first half and the good packaging pricing environment to continue and was confident of delivering in line with previous expectations.Shares in Mondi were up 3.4% to 1,019p at 09:11 on Thursday. OH