Mondi share prices dip as trading update reveals difficult quarter

By Tony Corbin for Packaging News

Mondi’s share price fell to its lowest level in almost three years as the paper and packaging giant reported softer paper demand and lower prices had hit its third-quarter revenue.

Mondi’s share price was down on 10 October by 3.59%, the lowest level since January 2017.

The company said like-for-like sales volumes to end-September were, on average, marginally lower than the comparable period in the prior year as a result of lower industrial bags and uncoated fine paper volumes. The fall was, however, partially offset by growth in corrugated packaging.

Its statement read: “As outlined in our half-year results, demand in the third quarter remained generally softer across the markets in which we operate and prices for key paper grades were below those of the first half. Consequently, underlying EBITDA for the third quarter of 2019 was €383 million, down 18% on the comparable prior year period (€466 million) and 9% below the second quarter of 2019 (€423 million).

“Lower average selling prices from the highs reached towards the end of 2018 and into early 2019, coupled with the anticipated lower forestry fair-value gain, more than offset the benefits of our ongoing profit improvement initiatives.”

David O’Brien, equity analyst at Goodbody, commented on Mondi’s Q3 trading update this morning, saying: “Mondi has had a difficult quarter, with EBITDA declines accelerating in the face of a slowing economic picture.

“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 this morning’s results and a 3-5% drop in share prices.

“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.

“Although the stock trades on an undemanding EV/EBITDA multiple of 6.5x relative to its leading returns profile, we note that risks remain as supply-side growth in European containerboard continues while demand across most product categories is under pressure.”

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