Mondi annual pre-tax profits up 6%

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Paper and forestry products company Mondi reported a 6 per cent increase in pre tax profits for 2016, despite an 11 per cent fall in the second half as a result of lower selling prices for cardboard boxes and other packaging.

The FTSE 100 paper and packaging company spun out of mining conglomerate Anglo-American lifted pre tax profits from €796m to €843m for the year to December 31.

David Hathorn, who is stepping down as chief executive later this year to be replaced by Peter Oswald, said Mondi “saw good contributions from all our businesses despite pricing headwinds in a number of key paper grades”.

Operating profit rose 5 per cent to €943m.

But Mondi’s European and international packaging paper division saw an 8 per cent decline to €361m.

This was partly offset by an “exceptional performance” by its uncoated fine paper unit, where profits rose by a quarter to €264m.

Group sales were 2 per cent down on 2015 at €6.7bn, while net debt declined from €1.49bn to €1.38bn.

The company said recently completed investments had added €50m to operating profit in 2016 and a further €30m was expected in 2017. It also announced a €470m investment to replace equipment at a mill in the Czech Republic and install a new paper machine.

The sector is benefiting from the trend for online shopping. Deliveries by retailers such as Amazon rely on specially corrugated cardboard that Mondi and London-listed rivals DS Smith and Smurfit Kappa all manufacture.

Partly because of the growth in parcel demand, paper and packaging stocks have outperformed the overall London market with Mondi up 10 per cent since the start of 2017 and 42 per cent in the last year.

Mondi, in line with producers such as Smurfit Kappa, has announced price increases for its recycled containerboard product, which is used in box manufacturing.

A note by Deutsche Bank on Wednesday said it expected producers to achieve further “potential” price increases in the spring.

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