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Mondi posts 30% rise in earnings as it continues to tackle impact of war on plastic

Published: 08:01 11 Oct 2018 BST

Mondi
Mondi's quarterly results were supported by higher average selling prices of paper

Packaging and paper company Mondi Plc (LON:MNDI) reported a 30% increase in third-quarter earnings but warned that it continues to see pressure on its cost base and challenges stemming from the war on plastic waste.

Underlying earnings (EBITDA) rose to €466mln in the three months to September 30, compared to €359mln the same period a year ago.

The FTSE 100 firm said like-for-like sales volumes were higher than last year, supported by growth in its fibre packaging business.

However, fixed costs rose due to the shutdown of mills for maintenance work and higher input inflation.

Planned mill maintenance shuts had a €30mln impact on underlying EBITDA for the quarter and Mondi continues to expect to take a €115mln charge for the full year.

Growth in fibre packaging, which includes paper-based operations, was bolstered by higher average selling prices and demand for kraft paper as more businesses replaced plastic carrier bags with paper-based alternatives.

Mondi tackles war on plastic 

The government has clamped down on plastic use by making companies charge customers for plastic bags, while environmental campaigns have been calling on firms and consumers to cut back on plastic waste.

In response to the changes Mondi has been restructuring its consumer packaging business, which sells plastic-based consumer goods, by improving its product mix.

However, Mondi said the overall performance of the division continues to be held back by declining volumes in personal care goods.

READ: Mondi posts 25% jump in first-half underlying profit, thanks to higher selling prices, good demand across businesses

“We continue to work actively with our customers, suppliers and other stakeholders to find innovative solutions that improve the sustainability of plastic packaging, based on circular economy principles,” it said.

“We are seeking opportunities to leverage our product know-how and customer relationships across our packaging businesses, as a leading producer of both plastic and paper-based solutions.”

Mondi expects cost pressures to continue

The group added that its uncoated fine paper unit “continues to perform strongly” on the back of higher average selling prices but a rise in pulp prices continues to put pressure on production in Europe.

For the fourth quarter, Mondi said it will take a hit from large project-related shut and ramp-up at its Steti mill, restructuring initiatives in industrial bags and continued pressure on the cost base, offset by cost reduction initiatives.  

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