Paper producer Mondi forecast a 10% to15% drop in annual underlying operating profit on Monday as a gloomier economic outlook hits business, knocking its shares as much as 7%.
Mondi said that although underlying operating profit rose 2% in the nine months to the end of September, it dropped 10% versus the year-ago figure in the third quarter, as business slowed in its European and international units.
Paper companies, particularly in Europe, have been struggling with slower demand and rising wood costs.
Mondi, the biggest producer of office paper in Europe, was spun off from mining group Anglo American in July last year.
”Within Europe & international division we have not seen the usual post summer seasonal pick up in demand and trading in September was weak,” the company said in a statement.
”Estimates for October indicate a continuation of this trend, and as a consequence we are taking significant market related downtime in a number of our European operations.”
Its Johannesburg and London-listed shares fell as much as 7%. The Johannesburg stock dropped 4% by 7.54am GMT, lagging a firmer Johannesburg Top-40 blue-chip index. The London stock dropped 4,8%.
Mondi, which has operations in 35 countries and 35 000 employees, said the worsening economic outlook prompted it to bring forward a third-quarter trading statement not due until October 24.
Its South African unit fared well thanks to a better operating performance and price increases.
But volumes at its key bags and specialities business in the Europe and international division were ”much softer than anticipated” as demand weakened, and input costs rose.
The company said planned closures of high-cost operations because of the worsening outlook would cost about €12-million and would be taken as a special operating item in its second-half accounts.
Mondi is reviewing its capital expenditure plans with a view to limiting future spending and said net debt at the end of September stood at €1,7-billion — an increase of €70-million on the end-June position.
It has just under €1,1-billion of undrawn committed debt facilities, €700-million of which is available under a €1,55-billion facility expiring in June 2012. The average maturity of the group’s committed debt facilities at the end of September was 3,6 years. – Reuters