Bloomberg News

Mondi Operating Profit Declines After Slowdown in Demand

November 01, 2011

(Updates with CEO comment in third paragraph.)

Oct. 31 (Bloomberg) -- Mondi Group, Europe’s largest maker of office paper, said global economic uncertainties in the third quarter resulted in slowing demand and “moderately lower” sales prices.

Underlying operating profit fell to 136 million euros ($191 million) from 175 million euros in the second quarter, as planned maintenance shutdowns reduced the total by about 20 million euros, Johannesburg-based Mondi said in a statement today. Profit was higher than in the same period a year earlier, Mondi said, without giving the year-earlier figure.

“The destocking we’ve been doing is mainly in the paper- bag business, where we’ve had quite high paper levels and we’ve reduced production and are consuming the paper stocks we have,” Chief Executive Officer David Hathorn said on a conference call. “By the end of this year, our internal stock levels will be where we want them to be.”

An industrial bags facility in Aberdeen, Scotland, is being closed and its production will be transferred to other Mondi facilities, Hathorn said. Reorganization costs in the second half, including those linked to the Aberdeen closure, will total about 11 million euros, Hathorn said.

Mondi’s newsprint business continued to deliver weak earnings, with rising South African power prices pushing up costs, the company said. Management is assessing “various options to address the resultant unacceptable financial performance.”

Net debt was reduced to 1.05 billion euros as of Sept. 30, with the average maturity of Mondi’s committed debt facilities at 4.2 years, compared with 4.1 years at the end of the previous quarter.

Mondi fell as much as 4.7 percent to 58.46 rand and was down 1.4 percent as of 12:07 p.m. in Johannesburg trading, paring its gain this year to 18 percent. Shares of South African competitor Sappi Ltd., the world’s largest maker of glossy paper, have dropped 30 percent in 2011.

--Editors: Robert Valpuesta, David Risser.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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