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Boxes to become costlier as UK packaging firm Mondi raises prices

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Mondi
The FTSE 250 company said it was hiking its prices to tackle inflationary pressures. Photo: Igor Golovniov/SOPA/LightRocket via Getty Images

British multinational packaging firm Mondi (MNDI.L) has revealed that its fourth quarter will be impacted by recent increased costs.

The FTSE 250 company said it was hiking its prices to tackle inflationary pressures that would affect the business, but said demand for its products was strong.

In a short update, it said planned maintenance and a project-related shutdown of the Richards Bay plant in South Africa would also affect performance, with extra charges of €70m (£60m, $81m) expected.

During the last three months, the packaging maker, which has around 100 production sites across more than 30 countries, saw higher energy, resins, transport and chemical costs.

Although paper for recycling costs were steady, they increased towards the end of the quarter.

Read more: UK online shopping boom fuels cardboard shortage as households hoard boxes

Mondi also pointed to the current energy crisis across Europe, which has seen prices skyrocket to record highs. It expects prices to “remain at these elevated levels in the fourth quarter”.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the third quarter stood at €388m, up 27% compared to the prior year.

Demand for corrugated packaging was strong across all end-users, with volumes growing significantly year-on-year, while flexible packaging also performed well. The company added that sales at its engineered materials division were also stable.

Shares were 1.2% higher in London on Thursday.

Watch: Europe's energy crisis: EU divided over response to soaring, 'unbearable' prices

“Mondi delivered a strong performance in the third quarter with higher average prices across the business and strong volume growth year-on-year, against a backdrop of sharply higher input costs,” Andrew King, chief executive, said.

“Throughout this period of high demand, we remained focused on ensuring security of supply and high-quality service for our customers. Our growth is underpinned by our leading packaging portfolio and we continue to develop innovative and sustainable packaging solutions to help our customers achieve their environmental goals.”

Ben Nutall, senior analyst at Third Bridge, said: “Mondi primarily operates in secondary packaging markets across commercial and industrial supply chains, rather than in direct to customer packaging. Unfortunately industrial supply chain customers are less environmentally conscious than retail customers.  

"Mondi is now seeing some rapid e-commerce growth as we use more cardboard packaging, but it’s from a smaller base.

“Our experts expect to see defensive consolidation in the European packaging market over the next few years as key players prepare for a potential transatlantic merger further down the line."

Watch: What is inflation and why is it important?

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