Mondi confirms Russian exit

Mondi: uncoated fine paper markets in Europe “remain tight”
Mondi: uncoated fine paper markets in Europe “remain tight”

Mondi has confirmed that it plans to divest its Russian operations because of the country's invasion of Ukraine.

The group has a substantial presence in Russia with a net asset value on its books of nearly €700m (£600m), and the operations contributed some €114m in EBITDA in Q1. 

Mondi has been reviewing options for the Russian wing since early March.

It employs 5,300 people there, and the businesses accounted for around 12% of the €6.66bn turnover group’s sales by location of production.

The facilities include an integrated pulp, uncoated fine paper and packaging paper mill at Syktyvkar in Komi Republic, to the north-east of Moscow.

It also operates flexible packaging production sites at Pereslavl and Aramil, and makes corrugated products at Mondi Lebedyan.

The plants primarily serve the domestic market. 

In a trading update, Mondi said it had decided to sell, but it would be difficult and complex matter to resolve. 

“Since the announcement on 10 March, having assessed all options for the group’s interests in Russia and recognising its corporate values and stakeholder responsibilities, the board has decided to divest the group’s Russian assets,” Mondi stated. 

“The divestment process for these significant assets is operationally and structurally complex and is being undertaken in an evolving political and regulatory environment. Accordingly, there can be no certainty when a transaction will be completed or as to the structure of any possible transaction.”

Mondi also reiterated its stance on the conflict, and said: “Mondi remains profoundly concerned about the war in Ukraine and is shocked by the humanitarian impact. We express our deepest sympathy to all those affected by the ongoing hostilities, reiterating our call for an urgent cessation and a peaceful resolution.”

Mondi has halted substantial capex projects in Russia, and said that its businesses there had, up until now, managed the supply chain constraints caused by wide-ranging sanctions. 

It said the situation “remains fluid” and flagged possible disruption to pulp and paper production in Russia in future. 

Mondi also has a plant in Ukraine that makes paper bags, located in Lviv to the west of the country, around 70km from the Polish border. Production there has been suspended. 

In the three months to 31 March underlying EBITDA was up 63% to €574m, while the same figure excluding its Russian operations was €460m. 

Mondi said the uncoated fine paper markets in Europe “remain tight”, and average prices were higher following the price increases implement in 2021 and earlier this year. 

Operations at its Merebank UFP mill in South Africa are currently suspended due to last month’s severe floods around the city of Durban. Mondi said the impact was not expected to be material.   

It is also implementing price increases across its containerboard range and said growth in demand for corrugated packaging had “normalised”. 

Booming demand for sustainable packaging has boosted its flexible packaging wing, and Mondi is also talking to customers about further price increases for those products. 

Regarding the outlook, Mondi said that despite “significant geopolitical and macroeconomic uncertainties” it expected to deliver a year of good progress and would also benefit from shorter planned maintenance shutdown compared with last year.

Mondi’s share price rose by nearly 8.5% on the news, to 1,624p (52-week high: 2,088p, low: 1,233.5p).