• Today’s results follow on from poor interim results in July, leaving investors looking for stabilisation in the prices of key paper grades soon.
• Demand and prices were softer in Q3 and that prices have softened further in the fourth quarter.
• We continue to recommend the shares as a ‘Buy’ for investors willing to accept a medium level of risk.

The international paper and packaging group has reported softer trading in the third quarter with earnings down 18% at €383mn. Prices of key paper grades were lower than in the first half and sales volumes also dropped back. Corrugated packaging remained strong but the company now expects the cost of shutting down some of its mills for planned maintenance to reach €150m. As trading moved into the final quarter, prices fell further but Mondi expects the impact of that to be offset by a lower cost base and its profit improvement initiatives.

This was clearly disappointing news and the shares dropped back 3% in early trading. Given the poor interim figures in July the news was not entirely unexpected. There were some positives for investors but the market will want to see some stabilisation in the prices of key paper grades soon because profit improvement initiatives and the ongoing business reorganisation can only go so far in helping to offset that.

Our view on Mondi - Buy

We continue to recommend the shares as a ‘Buy’ for medium risk investors seeking a mixture of income and growth.

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