Paper and packaging company Mondi (MNDI) is feeling the pinch after reporting an 18% fall in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the third quarter of 2019.

The €383m posted was down from €466m reported in the same period last year and 9% below the €423m reported in the second quarter as demand stayed soft and prices for key paper grades were below those of the first half.

‘Mondi has had a difficult quarter, with EBITDA declines accelerating in the face of a slowing economic picture’, said David O’Brien, equity analyst at Goodbody.


The sharp fall in Mondi’s Q3 profits appears to be related to its kraft and uncoated fine paper grades, but ‘this should come as little surprise to investors’, said Barry Dixon of Davy Stockbrokers.

The corrugated box business can be viewed as a proxy indicator for European economic growth. Global negative macroeconomic trends are reflected in subdued demand for packaging companies, which has been illustrated in today’s results and a 3% to 5% drop in share prices across the sector.

Mondi saw its share price slide roughly 2.4% to £15.095, but sector peers DS Smith (SMDS) and Smurfit Kappa (SKG) have also fallen under fire from investor’s sell buttons. Both are down between 1.5% and 2.5% at 329.1p and £24.04 respectively.

Mondi's like-for-like sales volumes were, on average, marginally lower than a year ago, while costs were higher.


The £7.5bn company also had planned mill maintenance shutdowns to contend with, adding an extra €40m-odd impact on underlying EBITDA. Last year servicing mills cost it approximately €30m. Based on prevailing market prices, Mondi has estimated that the impact of planned mill maintenance shuts on underlying EBITDA for 2019 will be around €150m, compared to €110m in 2018.

Questions remain about the near-term too. ‘The US/China trade war, European industry recession and ongoing concerns around Brexit have all culminated in poor demand for packaging sector and Mondi’s results are a clear indicator of this,’ said Goodbody’s O’Brien.

Further year-on-year declines are now being predicted by analysts.

‘Stripping out the nine-month result implies fourth quarter EBITDA of €400m, 10% below the implied 2018 result’, said Davy’s Dixon.

‘This could prove to be too optimistic given the third quarter result.’

Davy’s Barry Dixon is now forecasting EBITDA of €1.67bn for the full year to 31 December 2019, roughly 5% down on 2018. The consensus remains pitched at €1.69bn, which is starting to look optimistic.

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Issue Date: 10 Oct 2019