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Johannesburg - Mondi [JSE:MND] the South African manufacturer of packaging and paper goods from industrial bags to office stationery, expects stable or higher prices for its products even as global economic growth slows.
“Our order books remain good, demand trends remain positive and the pricing environment remains favourable,” said chief executive officer David Hathorn on Thursday.
“We haven’t seen any real change on the back of global uncertainty over the last month.”
Lower costs
The company, which is based in Johannesburg and has operations in more than 30 countries, is spending more than €500m a year to build, expand and improve facilities as it seeks to increase output and lower costs.
Hathorn said Mondi was also evaluating potential acquisitions for its packaging business.
Mondi’s underlying operating profit advanced 27% to €221m for the three months to September, compared with €174m a year earlier, the company said in a statement on Thursday. Like-for-like sales volumes increased, with the exception of kraft paper and the company also benefited from the weaker rand against both the dollar and the euro.
The shares declined 1% to R299.33 at 13:51 in Johannesburg, valuing the company at R145bn.The stock has risen 59% this year, making it the ninth-best performer on the FTSE/JSE Africa All Shares Index.
Some volatility
A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund to cut its outlook for global growth this year to 3.1% from a July forecast of 3.3%.
Next year the world economy will expand 3.6%, less than the 3.8% projected in July.
Even so, the price of uncoated fine paper is increasing after global production declined, Hathorn said.
While container board markets may show some volatility as new capacity comes online in the next 18 months, prices should remain broadly flat, the CEO said. Stability is also a “reasonable assumption” for sack-kraft paper, used in cement bags, he said.
