Stifel has downgraded Mondi PLC (LSE:MNDI) to 'hold' from 'buy' after the packaging group’s third-quarter update revealed a sharp earnings shortfall and little sign of near-term recovery.
The group’s pre-released figures showed underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of €223 million, around 23% below market expectations.
Weak sales volumes, lower prices and extended maintenance shutdowns weighed on performance, and guidance for the final quarter suggests more of the same.
Stifel’s Lars Kjellberg said the company’s recent heavy capital spending programme, aimed at expanding fibre-based packaging capacity, is proving mistimed.
New projects are ramping up just as demand softens and the market grapples with oversupply. The broker expects the contribution from these projects to reach only €30 million this year, well below earlier hopes of €100 million.
The result is a painful squeeze on profitability. Stifel has cut its 2025 earnings forecasts by 42% and EBITDA by 18%, with further downgrades of up to 45% pencilled in for 2026 and 2027.
Returns on invested capital, once north of 15%, are now closer to 5%, the broker estimates, reflecting both weak operating leverage and a tougher trading environment.
Kjellberg noted that Mondi’s earlier wave of investment, which focused on modernising its mills and closing inefficient plants, generated impressive returns through the last decade. But more recent projects, directed at growth rather than efficiency, have coincided with weaker demand and falling margins.
The shares, down alongside earnings, now trade on about six times forward EBITDA, close to the long-run average but, in Stifel’s view, misleadingly so as analysts cut forecasts.
The broker has lowered its price target to 945p from 1,760p, arguing that the valuation already reflects structurally lower returns and greater cyclicality.
For now, Mondi’s balance sheet is under modest strain and its growth plans are on hold. Stifel’s verdict is blunt: the path back to higher returns has become “increasingly less clear.”