Mondi (LON:MNDI) shares rose on Thursday after the paper and packaging group said Underlying EBITDA rose 27% in the third quarter.
However, the group pointed to higher input prices impacting Q4 leading to price inflation.
Mondi said it ‘remains well-placed to deliver sustainably into the future’ and shares rose 1.9% in early trade on Thursday.
“Major challenge of the quarter has been passing on input costs mainly energy, resins, transport and chemical costs. 3Q21 EBITDA was up 27% compared to 3Q20, only 1% above 3Q19. The group expects to be impacted in Q4 by elevated input cost and planned maintenance and project related shutdowns,” said Ben Nutall, Senior Analyst at Third Bridge.
Ben Nutall also highlighted the ESG factors at play with Mondi given their focus industrial supply chains.
“Mondi primarily operates in secondary packaging markets across commercial and industrial supply chains, rather than in direct to customer packaging. Unfortunately industrial supply chain customers are less environmentally conscious than retail customers. Mondi is now seeing some rapid e-commerce growth as we use more cardboard packaging, but it’s from a smaller base.
“Mondi had the best paper assets in the industry which has led them to follow a long paper strategy, meaning they sell more paper than they use to make boxes. Mondi is significantly exposed to any volatility in the paper market. Mondi’s main competitors, DS Smith and Smurfit Kappa are short and balanced on paper.
“Our experts expect to see defensive consolidation in the European packaging market over the next few years as key players prepare for a potential transatlantic merger further down the line,” Nuttal said.
Andrew King, Mondi Chief Executive Officer, said:
“Mondi delivered a strong performance in the third quarter withhigher average prices across the business and strong volume growth year-on-year, against a backdrop of sharply higher input costs. Throughout this period of high demand, we remained focused on ensuring security of supply and high-quality service for our customers. Our growth is underpinned by our leading packaging portfolio and we continue to develop innovative and sustainable packaging solutions to help our customers achieve their environmental goals.”