Packaging and paper company Mondi said on Wednesday its underlying operating profit for the first quarter of 2018 was over four billion rand, 15 percent above the comparable prior year period and up six percent on the fourth quarter of 2017.
In a trading update, Mondi said higher average selling prices and profit improvement initiatives across the group more than offset higher operating costs, the impact of maintenance shuts and negative currency effects.
Mondi is due to publish reviewed results for the half-year ending June 30, 2018, on August 3.
The company said like-for-like sales volumes were stable on the comparable prior year period, with growth in packaging paper offset by lower volumes in the uncoated fine paper due to the extended maintenance shut at its Richards Bay operation in South Africa.
“Selling prices for the group’s key paper grades were, on average, above both the comparable prior year period and the previous quarter as the upward pricing momentum witnessed during 2017 continued,” it said.
The estimated impact on operating profit of maintenance shuts completed during the period was around €35 million compared to €10 million in 2017.
“Based on prevailing market prices, we estimate that the impact of maintenance shuts on operating profit for 2018 will be around €115 million (2017: €95 million), slightly above our previous estimate, of which around half will be incurred in the first half of the year,” said Mondi.
The company said the outlook for the business remained positive, and it continued to experience a strong pricing environment in a number of key product segments, supported by good demand growth. Inflationary cost pressures across the group and currencies were however currently a headwind.
“With our robust business model, clear customer focus and culture of driving performance, we remain confident of sustaining our track record of delivering value accretive growth,” Mondi added.