Our opinion on the current state of MNP

Mondi, originating from South Africa, has evolved into a global powerhouse within the paper and packaging industry, with operations spanning 30 countries and employing around 26,000 individuals across approximately 100 sites. Its business encompasses the entire spectrum of packaging, managing forests, producing wood pulp, paper, and plastic films for a variety of packaging solutions. The professionalism with which Mondi is managed has positioned it as a leader in its field.

The company's operations have been significantly influenced by the ongoing Ukraine crisis. Particularly noteworthy was Mondi's presence in Russia, which accounted for about 12% of the group's revenue, with key assets including an integrated pulp, packaging paper, and uncoated fine paper mill in Syktyvkar, Komi Republic. The decision to divest from its Russian holdings, with a net asset value of €687 million as of 31st December 2021, was a critical strategic move. The sale of its personal care business for €615 million in July 2022 and its Russian subsidiary for approximately R25 billion in August 2022, underscore Mondi's responsive and decisive actions in navigating geopolitical challenges.

For the fiscal year ending 31st December 2023, Mondi reported a decrease in revenue by 18% and a significant 45% drop in headline earnings per share (HEPS), reflecting the challenging global business environment. Despite these declines, the company's strong cash generation of €1,312 million, surpassing the previous year's performance, highlights its resilience and operational efficiency.

Mondi's current valuation on a price:earnings multiple (P:E) of 11.14 suggests it may be undervalued, considering its blue-chip status. However, the potential for further downward movements in the share price cannot be overlooked. The company's share price trajectory has experienced fluctuations, particularly with the destabilizing impact of the Ukraine crisis in March 2022. Yet, signs of a new upward trend are emerging, buoyed by the increasing demand for packaging materials driven by the worldwide shift to online shopping and potential resolutions to the Ukraine crisis.

The recent announcement on 8th March 2024 of Mondi's acquisition of a 54% stake in LSE-listed DS Smith Plc for GBP 5.14 billion marks a significant expansion and consolidation within the packaging industry. This strategic acquisition is poised to enhance Mondi's market position and operational capabilities further.

In conclusion, despite facing geopolitical and market challenges, Mondi's strategic divestitures, robust cash generation, and recent strategic acquisition indicate a company poised for recovery and growth. The global shift towards more sustainable packaging solutions and the resolution of geopolitical tensions are likely to serve as catalysts for Mondi's continued success and upward trajectory in the market.