ii view: Mondi profits and share price crumple

Third-quarter trading update to 30 September

• Adjusted profit (EBITDA) of €223 million (£194 million), down from €274 million in Q2

Chief executive Andrew King said: 

“Across the Group, we remain relentlessly focused on managing the controllables. We have sharpened our emphasis on margin management, rigorous cost optimisation and continuous improvement. 

“Looking further ahead, we remain confident in the long-term sustainable growth fundamentals of our packaging businesses. Our leading positions across attractive packaging markets, supported by a well-invested, cost advantaged and integrated asset base ensure Mondi is well placed to capture future growth and deliver value for our shareholders.”

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ii round-up:

One week ahead of schedule, paper and packaging maker Mondi (LSE:MNDI) today detailed profit that missed City forecasts, hindered by softer customer volumes and weaker pulp and paper prices. 

Third-quarter adjusted profit (EBITDA) to late September of €223 million (£194 million) was down from €274 million in the second quarter. Analysts had pencilled in nearer €300 million. Management expects challenging trading conditions to persist for the rest of this financial year, with key markets remaining in oversupply. 

Shares in the FTSE 100 company fell 15% in UK trading to a 12-year low, having come into this latest news down by around a tenth already during 2025. That’s in contrast to a near 15% gain for the FTSE 100 index. Dublin headquartered rival Smurfit WestRock (LSE:SWR) are down by close to third year-to-date. 

Mondi operates across the two divisions of Flexible Packaging and Corrugated Packaging, with its Uncoated Fine Paper business having recently been merged into the latter as part of a streamlining and efficiency drive. 

The group’s push to battle weaker economic trends includes raising its expected cost savings from the April acquisition of Schumacher's west European assets to €32 million from €22 million.

Mondi flagged an end to the group’s current investment cycle, although with adjusted profits from new 2025 projects now expected to come in at around €30 million, down from a previous €50-75 million. 

Full-year results are likely mid-to-late February. 

ii view:

Mondi operates across the entire paper and packaging arena from managing sustainable working forests to making recyclable and compostable packaging. Group products range from e-commerce shipping boxes to photocopy paper. The company employs around 24,000 people across 100 production sites in more than 30 countries, with key operations located across Europe, North America and Africa. 

For investors, the tough economic outlook for group customers, including trade tariff uncertainties and political instability such as that impacting France, should not be overlooked. The many factors outside of management’s control including energy costs and geopolitical tensions warrant consideration. An industry oversupply, as highlighted by management, is not to be forgotten, while currency moves can hinder performance. 

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On the upside, a management focus on improving efficiency is ongoing. There exists diversity of both products produced and countries sold to. Industry-wide consolidation has included the previous takeover of former rival DS Smith by International Paper Co (LSE:IPC), while Mondi’s own bolt-on acquisitions now generate growth and cost saving opportunity. 

In all, a forecast dividend yield of over 5% and ongoing exposure to environmental sustainability and ecommerce themes remain interesting. However, cautious outlook comments have made many investors nervous in the near term, making Mondi currently a stock for those with a high appetite for risk. 

Positives: 

• Exposure to ecommerce and sustainability trends
• Attractive dividend (not guaranteed)

Negatives:

• Uncertain economic outlook
• Exposure to currency movements

The average rating of stock market analysts:

Buy