Most FTSE 100 companies feel very familiar to investors and ordinary Brits. Try and find someone who hasn’t shopped in Tesco [TSCO), taken a call from a Vodafone (VOD) mobile or hasn’t strolled past a branch of Lloyds (LLOY).
Yet it is the lesser-known Mondi (MNDI) that is leading the UK’s blue-chip index higher today, shares in the business rallying 6% in morning trade on Friday to £21.95.
That means the market now values the business at more than £8bn - a pretty hefty market capitalisation for an organisation many investors may barely have heard of.
Mondi is a global packaging supplier. It makes strong bags that carry heavy contents (cat litter, for example), various coatings, printing paper and straight-forward robust cardboard boxes and corrugated products.
It runs around 100 production sites across more than 30 countries, employing something in the order of 26,000 people. The company published half year results today, and they are impressive, according to analysts at broker Davy.
‘Overall, this is a strong performance from Mondi, with a positive outlook statement indicating that the trading environment remains strong going into the second half of the year,’ say Davy analysts.
FIRM FIGURES
Mondi reported headline operating profit 4.3% higher at €530m on a similar increase to its €3.73bn revenue. Under its preferred measure of profitability the company shows ‘underlying’ operating profit of €630m, ‘6% ahead of our forecast and 25% higher year-on-year,’ says Davy.
‘A 25% increase in underlying profit looks an excellent result given the impact of a weaker US dollar and Russian rouble and higher raw materials costs,’ says Russ Mould, investment director at investment platform AJ Bell.
Price rises pushed through to customers is a big part of why today’s figures are considered pleasingly strong. Better still, the company has announced price increases of €40 per tonne for selected grades of kraftliner from September. Kraftliner is the corrugated padding used typically for parcels.
ONLINE SHOPPING
Which explains a lot. The packaging industry is on the up thanks to booming online shopping and the millions of parcels that involves. It’s a far cry from how things looked back in October, when Mondi was forced to issue a profit warning.
You can read about Smurfitt Kappa’s (SKG) upbeat results from Wednesday here, which is also enjoying the internet commerce boom.
‘The seemingly mundane packaging sector has been enlivened in 2018 by the bid approach for Mondi’s rival Smurfit Kappa in March and this space is benefitting from demand created by the shift to online shopping,’ says AJ Bell’s Russ Mould.
‘Strong pricing across a number of its products should ensure that earnings momentum remains positive with further upgrades likely,’ conclude Davy analysts.
