Packaging and paper producer Mondi delivered a robust performance in the first half of this year on the back of improving market conditions, although its underlying earnings before interest, taxes, depreciation, and amortisation (Ebitda) of €565-million with a margin of 15.1% were below the comparable half-year period in 2023 of €680-million, with a 17.5% margin.

The lower Ebitda for the half-year to June 30, was primarily owing to lower average selling prices and inflationary personnel and operating cost pressures, despite an improvement in sales volumes and a reduction in input costs, the company says.

The group's robust half-year performance was supported by its continued focus on quality, reliability and offering its customers a broad range of sustainable packaging and paper solutions, says Mondi CEO Andrew King.

“Our underlying Ebitda in the first six months, although lower than the comparable period last year, reflected an encouraging performance, supported by improving market conditions resulting in stronger order books and higher sales volumes.

“Alongside lower input costs, we delivered a sequential improvement in underlying Ebitda when compared to the second half of 2023,” he says.

The benefit of the price increases will continue into the second half of the year. The second half is expected to be impacted by higher planned maintenance shuts and a likely forestry fair value loss, he adds.

Personnel, maintenance and other net operating expenses were higher compared to the first half of 2023, driven by inflationary cost pressures, a lower forestry fair value gain, a one-off currency loss in the period from the devaluation of the Egyptian pound and income received in the prior year from an insurance claim.

Meanwhile, Mondi continues to invest through-cycle to grow its business, thereby enhancing its packaging and paper platform and broad product offering.

“Of our €1.2-billion organic growth investments, we will have invested around 80% by the end of this year, with operations currently ramping up following the modernisation of our Kuopio mill, the debottlenecking of our Świecie mill and the two expanded box plants in Poland.

“Our organic growth investments are expected to deliver a meaningful Ebitda contribution from 2025,” King highlights.

The group continues to invest in upstream and downstream assets to deliver organic growth, enhance cost competitiveness, improve environmental performance and drive synergistic benefits of its integrated business model.

This enables it to further strengthen its range of sustainable solutions, and partner with customers to contribute to a circular economy, Mondi notes in its results.

The group's €1.2-billion organic growth investment projects are diversified across its value chain, products and geographic reach. The projects comprise €600-million of investments in Corrugated Packaging and €600-million of investments in Flexible Packaging.

“Our projects are expected to take two to three years to achieve full production following their startup, and deliver mid-teen returns through-cycle when fully operational.

“We expect these projects to deliver a meaningful Ebitda contribution from 2025,” the company says.

Mondi continues to take action on climate and make good progress towards achieving its 2030 milestone in support of its net-zero commitment by 2050.

“Our investments to reduce our reliance on fossil fuels and make our operations more energy efficient are progressing well, including notably the modernisation investment at our Dynäs mill, in Sweden, and the installation of a power boiler at our Richards Bay mill, in South Africa.”

The group declared an interim dividend of €0.23 a share, which is the same as it declared during the first half of its 2023 financial year.

Further, net debt to underlying Ebitda at June 30 was 1.5-times owing to ongoing investment in the business and payment of a special dividend. The group had net debt of €1.6-billion, up from €419-million as at December 31, 2023.

The improving market demand and customer restocking led to an increase in volumes in the first half of the year, although prices were, on average, lower than the first half of 2023 as a result of the substantial price declines seen throughout 2023.

The improving market conditions, however, enabled a number of price increases to be implemented across all its paper grades over the course of the first half of the year. The full benefit of these increases is expected to come through in the second half of this year, the company notes.

Additionally, overall input costs were lower in the period compared to the first half of 2023, mostly owing to lower wood and energy prices.

“As we enter the second half of 2024, input costs are stable despite recent increases in paper for recycling prices,” says King.

Meanwhile, return on capital employed was lower at 10.8%, down from December 31, 2023, at 12.8%, but calculated on a rolling 12-months basis.

Further, the group continues to generate good cash flows and maintains a strong financial position, which provides the platform to continue investing in the business through-cycle alongside paying dividends to shareholders, Mondi says in its results.

Cash generated from operations of €372-million was lower than the prior comparable half-year period's €554-million mainly owing to an increase in working capital in line with the improving market environment.