Emerging-market operations provide buffer for Mondi

Mondi has produced a strong set of result despite difficult trading conditions in the paper and packaging business. Image: Mondi

The international pulp‚ paper and packaging group said that it had now integrated its most recent European packaging acquisitions and the creation of synergies were on track. It also said its strategic capital investments were on track‚ with a number of projects completed.

This came as the group reduced net debt by €251m to €1.62bn‚ as cash generated from operations exceeded €1bn for the first time.

"I am pleased to report a record financial performance‚ driven by our low-cost position‚ exposure to higher growth markets and ongoing focus on operational excellence‚" chief executive David Hathorn said.

He said that while growth in demand for the group's key products had remained generally subdued‚ supply-side constraint had been supportive of pricing.

The group operated mostly in emerging markets‚ including Russia and central Europe. This meant it had largely escaped the high costs of producing pulp-based products in long-floundering developed markets.

Difficult trading environment

"Despite a difficult trading environment‚ the new business segment of consumer packaging has demonstrated its resilience‚" Hathorn said.

"With order books strengthening in the new year and the structural growth dynamics still very much in place‚ we remain confident in the future development of this business," he added.

The group's packaging paper business was the standout performer‚ benefiting from higher average pricing in all key grades and good volume growth.

The downstream fibre packaging business was challenged by rising paper prices‚ but mostly made good progress in recovering margins‚ Mondi said.

It said the uncoated fine paper business continued to deliver strong results‚ despite the structural decline in demand seen in mature western European markets.

The South African division made "very good progress" during the year and was now delivering more than the group's 13% through-the-cycle rate.

Mondi also benefited from currency weakness in some of the emerging markets in which it operated‚ most significantly South Africa.

It said a focus on cost management and the benefits of restructuring activities in the year ensured that fixed cost increases were contained to well below inflationary levels.