In a statement accompanying the results, the company said: “The newsprint business reflected a significant decline in underlying operating profit to €1 million mainly due to a disappointing performance at Aylesford Newsprint. Aylesford Newsprint experienced reduced sales volumes and prices and an operating loss resulted.
“Sales price increases of around £20 per tonne are being implemented during the second half of the year, although this is not likely to lead to a significant improvement in profitability due to ongoing input cost pressures.”
The statement added that the company's South African business Mondi Shanduka Newsprint's underlying operating profit was marginally lower than the comparable prior year period mainly resulting from increasing raw material costs.
It continued: “The European merchant business, Europapier, performed well, benefiting from increased selling prices and volumes. The sale of Europapier is expected to be concluded in the second half of the year, pending competition clearance.”
Publishers
Aylesford in the UK has faced strong pressure to keep selling prices down as UK newspaper publishers look to keep their costs down. And, the company has faced soaring prices for used newspapers and magazines as competition firms for material, with some parts of the UK reporting lower arisings from the household waste stream.
The UK market, said one paper sector member, has also become more competitive, as Palm Paper looks to secure tonnage for its “massive plant” at King's Lynn as well as UPM Shotton for its plant in north Wales.
Market conditions
Commenting on the six months period, Mondi group chief executive David Hathorn said: “Mondi achieved a pleasing result in the period against a backdrop of improving market conditions, supported by a particularly strong performance from the European Uncoated Fine Paper business.
The outcome bears testament to our robust business model, which encompasses leading market positions in higher growth emerging markets, low-cost operations and a relentless focus on performance.
“Despite cost pressures, the positive pricing momentum witnessed in Europe since the beginning of the fourth quarter of 2009 in most of the Group's key grades should see the business continue to deliver a strong performance in the second half.”
Mr Hathorn added: “The South Africa Division should benefit from the further management actions taken to improve profitability, although much depends on the outlook for the rand and export pulp prices.
“While the sustainability of the economic recovery remains uncertain, we believe the Group is well positioned to continue benefiting from the current positive trading environment.”
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