Mondi invests €1.2 billion in organic growth projects, Acquisitions continue to be a key part of investment strategy

Mondi invests €1.2 billion in organic growth projects, Acquisitions continue to be a key part of investment strategy

- Geopolitical uncertainties remain high and that it is going to be another challenging year ( 2024) for the world economy.
- Making good progress on our €1.2 billion of approved investments in organic growth projects, which remain on track and on budget
The Pulp and Paper Times

Mondi is market leaders organised across three business units: Corrugated Packaging, Flexible Packaging and Uncoated Fine Paper. Mondi’s 22,000 people work across 100 production sites in more than 30 countries, with key operations in Europe, North America and Africa. We are the leading virgin containerboard producer in Europe and the largest containerboard producer in emerging Europe. Our virgin containerboard is a high-quality product with excellent properties for specialised end-use applications, ideal to meet our customers' needs around the globe. As a global leader in the production of kraft paper and paper bags, our well-invested mills produce high-quality kraft paper that is converted into strong, lightweight paper-based packaging. Mondi Uncoated Fine Paper business produces a wide range of home, office, converting and professional printing papers at our mills in central Europe and South Africa.

“Mondi delivered a resilient performance against the backdrop of an uncertain global economic environment. We remain well positioned to capitalise on the expected future growth in the packaging markets we serve, supported by our leading market positions, compelling sustainable product portfolio and through-cycle investment in the business” stated by Mr Andrew King, Group CEO, Mondi in the annual report for FY 23.

Mondi delivered underlying EBITDA of €1,201 million in the year (2022: €1,848 million). Group revenue was down on lower selling prices and sales volumes as a result of softer market demand and the impact of customer destocking, which abated over the course of the year.

Corrugated Packaging delivered underlying EBITDA of €310 million in the year, down 53% on the prior year (2022: €662 million). Underlying EBITDA margin was lower at 13.6% as a result of selling prices declining more than input costs. Containerboard sales volumes were broadly stable despite the backdrop of softer market demand, while in Corrugated Solutions, good margin management supported a stable year on year financial performance.

Flexible Packaging's underlying EBITDA was €637 million, 20% lower than the previous year (2022: €797 million), mainly as a result of lower sales volumes. Underlying EBITDA margin was 16.5%. Although profitability was lower than the very strong performance in 2022, the business showed resilience due to its high level of integration across the kraft paper and paper bag value chain together with its exposure to consumer-focused markets. 

Uncoated Fine Paper delivered underlying EBITDA of €289 million in the year, down 32% (2022: €427 million) largely due to lower selling prices. Underlying EBITDA margin was 22.4%. Our geographic and product diversification supported our performance with higher uncoated fine paper and pulp sales volumes in South Africa mitigating lower European volumes.

On 2024 outlook, Mr. Philip Yea, Chair, Mondi Group stated the As we enter 2024, it is clear that geopolitical uncertainties remain high and that it is going to be another challenging year for the world economy. However, I am confident that Mondi has the resilience to navigate these challenges. We intend to push through the tough macroeconomic environment relying on our scale, quality asset base, integrated operations and excellent customer proposition.

“As part of our capacity expansion pipeline, we are making excellent progress on the project to install our new kraft paper machine at Štětí (Czech Republic) to increase our kraft paper capacity and are on track to commence operations in 2025. Our two containerboard debottlenecking projects in Kuopio (Finland) and Świecie (Poland) will be contributing additional capacity from 2024” Mr Philip Yea stated.

Mr Yea said, “Acquisitions continue to be a key part of our investment strategy. Opportunities are rigorously assessed in terms of both financial metrics and strategic fit, with a focus on those opportunities that complement our existing footprint and capabilities. An important new opportunity for us comes through the acquisition of the Hinton Pulp mill in Alberta (Canada) in early 2024 which is now part of our Flexible Packaging business unit. After the intended investment in a new kraft paper machine, Hinton will be capable of producing low-cost, high-quality kraft paper for industrial and eCommerce bags, and fully integrate our North American paper bag operations, strengthening our competitive advantage and providing our customers with security of supply”

On the capital Investment front, Mr Andrew informed that we are making good progress on our €1.2 billion of approved investments in organic growth projects, which remain on track and on budget. These projects are diversified across our value chain, products and geographic reach and comprise €0.6 billion of investments in Corrugated Packaging and €0.6 billion of investments in Flexible Packaging. By the end of 2024, we expect to have invested around 80% of the approved amount. We expect these projects to deliver a meaningful EBITDA contribution from 2025.

“In Corrugated Packaging, most of these projects are at, or close to, start up including investments at our Kuopio mill (Finland), Świecie mill (Poland) and Polish corrugated solutions plants. Our Duino mill (Italy) is expected to start up in 2025 as planned. In Flexible Packaging, we continue to make progress on our pipeline, with most projects, including the new paper machine at Štětí (Czech Republic), expected to ramp up from 2025. We expect our projects to take two to three years to achieve full production following their commissioning, delivering midteen returns through-cycle when fully operational,” he stated.

Mr Andrew added that over the past five years in our continuing operations, total capital expenditure and acquisitions have exceeded depreciation and disposals by €1.2 billion. Over this period, capital expenditure as a percentage of depreciation was 163%, with our organic growth capital expenditure and all acquisitions focused on the Group’s packaging businesses. Acquisitions continue to be a key part of our investment strategy. Opportunities are rigorously assessed in terms of both financial metrics and strategic fit, with a focus on those opportunities that complement our existing footprint and capabilities.
 

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