Thu Oct 20 23:39:40 SAST 2016

Europe sales drag down Mondi - CEO

By unknown | Oct 21, 2008 | COMMENTS [ 0 ]

Tamlyn Stewart

Tamlyn Stewart

Packaging is a leading indicator of consumer demand and that's why Mondi's warning that its profits are likely to dive by up to 15 percent for the year ended December is another signal of a gloomy Christmas for retailers.

The paper and packaging multinational said its South African operations were performing better, but its overall profit would be dragged down by Europe's economic downturn.

Mondi CEO David Hawthorne said: "In Europe we have not seen the usual post-summer pick-up in demand. We did not see a pick-up in October.

"We consider it would be imprudent to forecast a pick-up between now and the end of the year."

As consumer demand for products declines, producers' orders for packaging also declines.

"Demand for products slowed in October and we've assumed that things will remain on October's track for November and December.

"Mondi will broadly speaking be tracking the wider economy," said Mondi's Chief Financial Officer Paul Hollingworth.

"Paper and packaging companies are exposed to the broadest range of sectors. Everything needs packaging from food, retailers, white goods and construction," he said.

The group planned to close its Holcombe recycling container board mill in the UK and the Zaragoza bag converting plant in Spain.

While the company warned that it would continue to review capacity, Hollingworth said Mondi did not anticipate a reduction in capacity in its South African operations, which contribute roughly 25 percent to the group's sales.

"In South Africa we have been successful in getting price increases through. In the first half of the year there were wage increases and increases in electricity costs which meant quite severe cost inflation, so we managed to recover those costs."

Hollingworth said a slowdown could be expected in its South African market but he did not expect it to be badly affected.

"The most adversely affected market is Western Europe, while Russia remains unaffected and South Africa is up at this stage," Hawthorne said.


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