Mondi PLC (MNODF) (Q4 2024) Earnings Call Highlights: Resilient Performance Amid Challenging Market Conditions

Mondi PLC (MNODF) navigates a tough pricing environment with strategic investments and cost reductions, maintaining stable profitability.

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Feb 21, 2025
Summary
  • EBITDA: €1,049 million for 2024, impacted by a reduction in forestry fair value gain and a one-off currency loss.
  • Net Debt: €1.7 billion at the end of 2024, with a leverage of 1.7 times.
  • Dividend: Full year dividend held at €70 cents per share.
  • Sales Volumes: Increased compared to the prior year, particularly in flexible packaging.
  • Sales Prices: Lower on average in 2024 compared to 2023.
  • Cost Reduction: Overall costs were €254 million lower in 2024 than in 2023.
  • Capital Expenditure: Over €900 million invested in 2024.
  • Return on Capital: Affected by significant reduction in forestry fair value gain.
  • Forestry Fair Value Gain: €7 million in 2024, down from €128 million in 2023.
  • Currency Loss: €32 million one-off loss from Egyptian pound devaluation.
  • Corrugated Packaging: Year-on-year improvement in profitability with steady improvement in container board prices.
  • Flexible Packaging: Good volume gains across all product categories, offset by lower selling prices.
  • Uncoated Fine Paper: Improved performance excluding forestry fair value gains, with volume gains and cost control.
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Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Mondi PLC (MNODF, Financial) has a strong market leadership position in flexible packaging, being the global number one in the craft paper and bags value chain.
  • The company has completed significant strategic acquisitions, such as the Hinton pulp mill in Canada and Schumacher's packaging assets in Western Europe, enhancing its geographic and operational footprint.
  • Mondi PLC (MNODF) has a well-invested and integrated asset base, consistently investing through cycles to ensure assets are appropriately positioned for market demands.
  • The company has a strong track record of delivering complex capital expenditure projects on time and within budget, which supports its growth strategy.
  • Despite difficult trading conditions, Mondi PLC (MNODF) delivered a resilient performance in 2024 with stable profitability, excluding one-off effects.

Negative Points

  • Mondi PLC (MNODF) faced weak demand and a generally weak pricing environment throughout 2024, impacting overall performance.
  • The company experienced a significant reduction in forestry fair value gain and a one-off loss due to the Egyptian currency devaluation, affecting EBITDA and earnings per share.
  • Sales prices in 2024 were on average lower than in 2023, particularly impacting the flexible packaging segment.
  • The recycled container board market is expected to be in oversupply in the short term, posing challenges for price recovery and industry margins.
  • Mondi PLC (MNODF) faces fixed cost increases, primarily due to the inclusion of Hinton's cost base and salary inflation, which could pressure profitability.

Q & A Highlights

Q: How is Mondi positioned to leverage potential demand recovery in the construction market, especially if there is a Russia-Ukraine peace deal? Also, what are the priorities for capital expenditure moving forward?
A: Andrew King, CEO, explained that Mondi is seeing a slow but steady recovery in demand for bags used in building materials and DIY markets. The company is also exploring new demand sources, such as e-commerce. Regarding capital expenditure, Mondi is cautious about expanding capacity in the oversupplied recycled container board market and is focusing on optimizing existing assets and cost-driven projects like the biomass boiler in Richards Bay.

Q: Can you provide guidance on the contributions from major projects for 2025?
A: Mike Powell, CFO, stated that while Mondi remains confident in achieving mid-cycle returns from growth projects, current market conditions are not at mid-cycle. For 2025, contributions from major projects are expected to be between €50 million and €100 million, depending on market pricing.

Q: Could you elaborate on the EBITDA bridge from 2024 to 2025, considering factors like costs and pricing?
A: Mike Powell noted that input costs are expected to remain stable, with some salary inflation. The fair value gain from forestry is projected to be around €60 million, and the Egyptian currency devaluation impact will not recur. Andrew King added that while there is some price recovery, it mainly restores previous price erosion, particularly in recycled grades.

Q: What is the strategy for the Duino paper mill, and how will trade barriers in Turkey affect it?
A: Andrew King mentioned that the acquisition of Schumacher changes Mondi's integration strategy, allowing more leverage in European markets. While trade tariffs in Turkey make it less attractive to send paper there, the acquisition strengthens Mondi's position in traditional European markets, ensuring a strong commercial ramp-up for Duino.

Q: How is Mondi managing the Hinton pulp mill, and what are the future plans?
A: Andrew King stated that Mondi is making operational improvements at Hinton, focusing on process enhancements and minor CapEx investments. The company is also conducting a feasibility study for a paper machine, which could further improve the mill's cost and output efficiency.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.