By Josh White for Sharecast
Mondi said its underlying EBITDA for the third quarter was 20% lower year-on-year at €306m (£276.55m), despite lower costs.
The FTSE 100 packaging producer said that, compared to the second quarter, underlying EBITDA was down 13%.
Good volume growth in uncoated fine paper and fibre-based packaging products and ongoing strong cost control was more-than-offset by the impact of planned maintenance shuts, negative currency effects and lower average selling prices.
In corrugated packaging, the company’s demand from e-commerce and consumer applications remained strong, while it also saw some recovery in industrial end-uses from the lows of the second quarter.
Mondi said it achieved “good” volume growth in Corrugated Solutions, measured both year-on-year and sequentially.
Given the strong order position and normalised inventory levels, it said it was currently in discussions with customers around price increases for a number of containerboard grades.
Flexible Packaging demand remained resilient during the period, with volumes in the company’s paper bags business growing year-on-year.
Following a “strong” performance in the first half, the firm said it saw some supply chain destocking effects impacting volumes in its consumer flexibles business during the quarter.
The board said the company was continuing to leverage Engineered Materials’ coating technologies to develop sustainable packaging solutions, and as expected, it saw lower personal care component volumes as a key product matured.
Demand in industrial and specialised end-uses for Engineered Materials continued to be impacted by lockdown restrictions, in particular in release liner.
The firm said it was implementing a range of measures to reduce the cost base, including the closure of a release liner plant in Pleasant Prairie, Wisconsin, and engaging with employee representatives on the restructuring of its personal care components-focussed operations in Gronau, Germany.
Mondi said that “encouragingly”, Uncoated Fine Paper demand improved as lockdown restrictions in Europe, Russia and southern Africa eased, with a gradual pick-up in activity in schools, offices and commercial printing.
Sales volumes were significantly up sequentially, although they were still down on the comparable prior year period, while average uncoated fine paper prices were lower than in the first half of the year.
The company’s South Africa operations were currently affected by an industry-wide strike, the directors said, adding that it was engaging with trade unions and employee representatives to reach an agreement while it continued to deliver products to customers.
It said the Uncoated Fine Paper business remained well-positioned in the context of the current market challenges, given its cost competitiveness, product diversification and geographic positioning.
Average input costs were stable quarter-on-quarter, and cost control was described as “strong” across the business.
Currency movements had a net negative impact on underlying EBITDA compared to the second quarter, driven by a weaker dollar, impacting a number of the group’s globally-traded products, coupled with a weaker Russian rouble and Turkish lira.
Given prevailing exchange rates, the board said it was expecting a further net negative currency impact in the fourth quarter.
To protect employees and suppliers and minimise execution risk, Mondi had decided to postpone most planned maintenance shuts to the second half of the year, and as such, planned maintenance shuts with an estimated impact on underlying EBITDA of around €35m were carried out during the quarter.
Based on prevailing market prices, Mondi said it was continuing to estimate that the impact of planned mill maintenance shuts on underlying EBITDA for 2020 would be around €100m, down from €150m year-on-year, with the fourth quarter impact expected to be around €55m, rising from €30m.
The firm said its major capital investment projects were progressing according to plan, with the €67m capital investment project to convert a containerboard machine at Steti in the Czech Republic to become fully dedicated to the production of speciality kraft paper for shopping bag applications scheduled to be commissioned during the fourth quarter.
During the period, Mondi paid an interim dividend to shareholders totalling €237m, and also redeemed its 3.375% €500m Eurobond from available cash.
There were no other material short-term debt maturities, and the board said the group’s financial position remained strong, with liquidity of around €970m.
Looking ahead, the company said the macroeconomic outlook continued to be uncertain, however it said it was confident that the group would continue to demonstrate its resilience, while remaining well-positioned for when the recovery took place.
“The decisive action we took in the early stages of the Covid-19 pandemic helped to protect our people, maintain supply of essential products and services, and deliver a resilient performance,” said group chief executive officer Andrew King.
“Our people have demonstrated their enterprise and commitment, taking care of colleagues, communities and customers in these unprecedented times.
“We continue to make good progress leveraging our award-winning innovation capabilities and customer-centric approach to optimise packaging design using ‘paper where possible, plastic when useful’.”
At 0822 BST, shares in Mondi were down 3.36% at 1,611.5p.