August 3, 2018 / 7:03 AM / 4 months ago

Mondi bets on environmentally conscious consumers, e-commerce as profit jumps

JOHANNESBURG (Reuters) - Mondi, looked to e-commerce and environmentally conscious consumers to drive growth, after the packaging firm reported a 25 percent increase in half-year underlying profit on Friday.

The expansion of e-commerce is increasing the need for packaging, while consumers are increasingly demanding that producers use natural resources responsibly to minimise waste.

Chief Executive Peter Oswald said Mondi will benefit hugely from these trends given its position as the largest global producer of kraft paper, which is used to make a variety of industrial and consumer packaging.

“Since the beginning of this year we have seen an unprecedented surge in public interest in plastic waste and solutions for that,” he said at the results presentation.

“We are convinced that (sustainable packaging) will be a major growth profit driver for Mondi as Mondi is uniquely positioned as a leading producer of both plastics and paper based solutions.”

Mondi, which has operations in 30 countries worldwide, is replacing plastic carrier bags with paper-based alternatives.

The U.N. Environment Programme estimates that some 8 million tons of plastic are dumped into the ocean every year - the equivalent of a garbage truck of plastic every minute - killing birds and marine life and compromising the ocean ecosystem.

Mondi’s underlying operating profit rose to 630 million euros (£560.85 million) in the six-months to the end of June, up from 503 million euros in the same period last year, with the fibre-based packaging business the main contributor to the improved performance.

This was due to higher average selling prices and good demand across its packaging businesses.

Shares in both Johannesburg and London-listed Mondi surged more than 6 percent in early trade after the results. At 1313 GMT shares in Johannesburg were up 5.06 percent to 380.30 rand and remained up more than 6 percent in London.

“Over the last month, Mondi’s share price has slightly underperformed its peers so given this update we would expect a positive reaction from the market,” said analysts at Investec Securities in a note.

The company said it was making progress with plans to boost growth and ensure the ongoing cost competitiveness of its operations via a major capital expenditure programme of over 750 million euros ($869.33 million).

The investment aims to increase Mondi’s paper mill capacity and secure organic revenue from 2019 onwards.

Reporting by Nqobile Dludla. Editing by Jane Merriman and Kirsten Donovan

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