Our opinion on the current state of MONDIPLC(MNP)

Mondi (MNP) is a major international paper and packaging company that originated in South Africa. It operates in over 30 countries and employs 26,000 people across roughly 100 sites. Its operations span the entire packaging value chain, managing forests and producing wood pulp, paper, and plastic films for various packaging solutions. The company has been impacted by the Ukraine conflict, given that 12% of its revenue by production location was generated in Russia. Mondi owned an integrated pulp, packaging paper, and uncoated fine paper mill in Syktyvkar (Komi Republic).

To mitigate the impact of the conflict, Mondi decided to divest its Russian operations, valued at 687 million euros in net asset value as of December 2021. The company completed the sale of its personal care business for 615 million euros in July 2022 and announced the sale of its Russian subsidiary for around R25 billion in August 2022. This divestment positively affected the share price.

In its financial results for the year ending December 31, 2023, Mondi reported an 18% decrease in revenue and a 45% decline in headline earnings per share (HEPS). Underlying EBITDA of 1,201 million euros was lower than the previous year's strong performance, but cash generation remained higher at 1,312 million euros. In a trading update for the three months ending March 31, 2024, the company highlighted improved market conditions and higher sales volumes. The quarter's underlying EBITDA was 214 million euros, including a 32 million euro one-time loss from the devaluation of the Egyptian pound.

Mondi remains a highly regarded blue-chip company, currently trading at a P/E ratio of 12.44. Despite the potential for further downside, the company has shown signs of a new upward trend after stabilizing from the challenges of the Ukraine crisis. The global shift to online shopping is driving demand for packaging materials, which bodes well for Mondi's growth.

In March 2024, Mondi announced its intention to acquire a 54% stake in DS Smith Plc, an LSE-listed company, for GBP 5.14 billion, further strengthening its position in the packaging industry.