Weaker prices hit Mondi profits

27th Oct 2009 07:15

Profits fell at paper and packaging firm Mondi during the third quarter, with a recovery in volumes offset by lower average selling prices.Third quarter underlying operating profit was "modestly" lower than the previous three-month period, but the firm said it is beginning to feel the benefits of its recently completed cost cutting programme."While volumes in most areas of the business continue to recover from the lows reached earlier this year, this has been offset by lower average selling prices for the majority of the group's products," said the company, which has recently announced price increases in most of its key European packaging grades.In the six months to June, the company had reported pre-tax losses of €1m, compared with a €171m profit over the same period the previous year as revenue fell to €2.6bn from €3.3bn. The Europe & International Division continues to perform well, with underlying operating profit for the third-quarter similar to the second-quarter thanks to a "good post summer seasonal pick up in demand".Bu the South Africa unit continues to face challenges from softer volumes, cost pressures and weak export prices, made worse by a strong Rand.Mondi says the impact of new uncoated fine paper capacity expected to come onto the market later this year is still unclear, while the extent of any recovery is largely dependent on the pace and extent of the global economic recovery, which remains uncertain."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 as market conditions improve," it said.Results for the year ending 31 December 2009 are expected to be announced on 23February 2010.