Mondi warns on FY profit as shares drop
Paper producer Mondi Ltd forecast a 10-15 percent drop in annual underlying operating profit on Monday as a gloomier economic outlook hits business, knocking its shares as much as 7 percent.
Schroders 35% profit rise in 2007Mondi said that although underlying operating profit rose 2 percent in the nine months to the end of September, it dropped 10 percent 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 percent. The Johannesburg stock dropped 4 percent by 8:54 a.m. British time, lagging a firmer Johannesburg Top-40 blue-chip index . The London stock dropped 4.8 percent.
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 euros (9.3 million pounds) and would be taken as a special operating item in its second-half accounts.
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