ii view: Mondi shares sunk by rising energy costs

Third-quarter trading update to 30 September

• Adjusted profit (EBITDA) excluding forestry operations down 12% from a year ago to €196 million

Chief executive Andrew King said:

“We continued to make progress on operational excellence, cost optimisation and improving the efficiency of our plant network to enhance competitiveness. 

“We remain confident in the structural growth drivers underpinning our sustainable packaging businesses. Supported by our cost-advantaged integrated asset base, broad portfolio of innovative and sustainable packaging and paper solutions and commitment to continuous improvement, we remain well positioned to deliver long-term value for our shareholders.”

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ii round-up:

Paper and packaging maker Mondi (LSE:MNDI)i today detailed profit that missed City forecasts, hindered by higher energy costs and planned maintenance shuts.

Adjusted profit (EBITDA) for the third quarter excluding forestry operations of €196 million was down from €223 million a year ago. Analysts had forecast profits of €212 million, with the miss heightening concerns about likely downgrades to the annual profit estimate.

Shares in the FTSE 100 company fell 9% in UK trading having come into this latest news down by a tenth so far in 2026. Dublin headquartered and US listed rival Smurfit WestRock (NYSE:SW) is up 5% over that time. The FTSE 100 index is up 8% year-to-date while the price of oil is up by more than a half. 

Mondi operates across the two divisions of Flexible Packaging and Corrugated Packaging, with its Uncoated Fine Paper business previously merged into the latter under a streamlining and efficiency drive.

The Weybridge, Surrey headquartered company flagged higher-than-expected input costs as energy costs continued to increase through the quarter.

Wood costs are also higher across Central and Eastern Europe. As such, and supported by good order books, Mondi pushed further product price increases, with the benefit expected towards the end of 2026 and into 2027.

Full-year results are scheduled for 25 February. 

ii view:

Mondi operates across the entire paper and packaging industry from managing sustainable working forests to making recyclable and compostable packaging. Group products range from e-commerce shipping boxes to photocopy paper. The FTSE 100 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, ongoing wars in the Middle East and Ukraine continue to inflate energy prices, pressuring profits.  A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap. Industry oversupply, as previously highlighted by management, warrants consideration, while currency moves can hinder performance.

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More favourably, a management focus on improving efficiency is ongoing. Both product and geographical diversity exist. Industry wide consolidation has included the previous takeover of former rival DS Smith, while Mondi’s own previous bolt-on acquisitions generated growth and cost saving opportunities.

For now, and despite ongoing exposure to environmental sustainability and ecommerce themes, persistently elevated energy costs give grounds for caution. 

Positives:

• Exposure to ecommerce and sustainability trends
• Ongoing performance improvement programme

Negatives:

• Uncertain economic outlook
• Exposure to currency movements

The average rating of stock market analysts:

Strong hold