Earnings call transcript: Mondi Q1 2025 sees strong EBITDA amid market challenges

Mondi PLC, with a market capitalization of $6.75 billion, reported a robust Q1 2025 performance with underlying EBITDA reaching €290 million, driven by higher sales volumes and effective cost management, despite facing lower average selling prices compared to Q4 2024. According to InvestingPro data, the company maintains a strong financial health score of 2.56 (GOOD), underpinning its operational resilience. The company maintained its full-year guidance for project contributions and highlighted its strategic expansion efforts. Mondi’s stock price rose 3.29% to 1,146.5, reflecting investor confidence in its operational strategy and market position. InvestingPro analysis suggests the stock is currently undervalued, with analysts setting a consensus target price that implies 24% upside potential. The company offers an attractive dividend yield of 5.37% and has maintained dividend payments for 19 consecutive years.

Key Takeaways

• Mondi achieved €290 million in Q1 underlying EBITDA, aided by increased sales volumes.
• The company maintained its full-year guidance for project contributions.
• Stock price increased by 3.29%, signaling positive investor sentiment.
• The flexible packaging market shows structural growth potential.
• Mondi’s strategic acquisitions and expansions are on track.

Company Performance

Mondi’s Q1 2025 results demonstrate the company’s resilience in navigating market challenges. The firm reported strong underlying EBITDA of €290 million, bolstered by higher sales volumes and stringent cost control measures. However, the quarter was marked by lower average selling prices compared to the previous quarter. Despite these hurdles, Mondi has maintained its full-year guidance, reflecting confidence in its strategic initiatives. The company’s performance is set against a backdrop of industry challenges, including overcapacity in the corrugated packaging market and pressure on recycled containerboard markets.

Financial Highlights

• Underlying EBITDA: €290 million
• Sales volumes: Increased compared to previous periods
• Average selling prices: Lower than Q4 2024
• Full-year guidance for project contributions: €50-100 million

Market Reaction

Mondi’s stock rose by 3.29% following the earnings announcement, closing at 1,146.5. This increase positions the stock well within its 52-week range, with a high of 1,617.5 and a low of 975.2. The positive movement reflects investor confidence in the company’s strategic direction and its ability to effectively manage costs and integrate recent acquisitions.

Outlook & Guidance

Mondi expects its expansion projects to contribute €50-100 million in EBITDA, maintaining its guidance for the year. With a P/E ratio of 27.37 and revenue growth of 1.17% in the last twelve months, the company’s valuation metrics and growth prospects are thoroughly analyzed in the comprehensive Pro Research Report, available exclusively on InvestingPro, along with 8 additional key investment tips for this stock. The acquisition of Schumacher is anticipated to be EPS accretive in its first full year, with an estimated €30 million contribution for the nine months following the acquisition. Despite geopolitical uncertainties and trade tensions, Mondi remains cautiously optimistic about its future performance.

Executive Commentary

Andrew King, Group CEO, expressed enthusiasm about the company’s growth opportunities, stating, "We are very excited by the opportunities that it brings us." He also highlighted the challenges posed by geopolitical uncertainties, remarking, "Uncertainty is the enemy of good commerce." King emphasized confidence in optimizing synergies from recent acquisitions, saying, "We remain extremely confident in the synergy optimization opportunities."

Risks and Challenges

• Overcapacity in the corrugated packaging market could pressure pricing.
• Recycled containerboard markets face significant pressure.
• Geopolitical uncertainties and trade tensions could impact global operations.
• Integration of recent acquisitions poses operational challenges.
• Maintenance costs are expected to remain similar to the previous year, around €100 million.

Mondi’s Q1 2025 earnings call highlighted the company’s strategic focus on expansion and integration, with a cautious yet optimistic outlook amid market challenges. The company maintains a healthy current ratio of 1.87 and an Altman Z-Score of 7.84, indicating strong financial stability. For deeper insights into Mondi’s financial health and growth potential, including exclusive Fair Value calculations and expert analysis, visit InvestingPro.

Full transcript - Mondi PLC (MNDI) Q1 2025:

Call Moderator: Hello, everyone, and welcome to this Monday q one trading update. Just to let you know, we do have captions today on this call, and these can be switched on and off within your Zoom settings, but please be aware they are automated and can sometimes contain errors. We will be taking questions today, and this can be done by using the raised hand function on the Zoom app. I’m now going to hand you over to Andrew King. Andrew, please go ahead.

Andrew King, Group CEO, Mondi: Good morning, everyone, and thank you for joining us to discuss today’s trading update. I’m Andrew King, your group CEO, and with me is Mike Powell, our CFO. I’m sure you’ve all seen the announcements. I’m just going to pick up on a few points before we’ll welcome any questions. The first quarter of the year was characterized by higher sales volumes, good cost control and fewer planned maintenance shuts.

These offset lower average selling prices when compared to the fourth quarter of twenty twenty four. Underlying EBITDA for the quarter was reported at €290,000,000 Importantly, we continue to make good progress ramping up production at our capacity expansion projects. Our new kraft paper machine at Steti, which we started up in December, is showing excellent results in terms of both quality paper quality and production volumes. We’re also delighted that our newly converted paper machine, Edwina, in Italy successfully started up on time and on budget in April. We’re also pleased to welcome our 2,200 new colleagues from Schumacher to Mondele, and we look forward to working with them to drive sales and provide our customers with an enhanced range of solutions.

Before handing over to take questions, just a quick point on the tariffs. As we said in our statement, the direct impact on our operations is limited, with under 3% of our revenue involving export sales to The U. S. However, we remain mindful of the potential second order impacts that could affect trade flows, consumer confidence and supply chains. With that short introduction, I’m happy to hand over to questions.

So it’s back to the operator.

Call Moderator: Thank you very much. Right, we do have a variety of raised hands. So we’re going to start with Cole from Jefferies. Cole, if you’d like to unmute and ask your question, please.

Cole, Analyst, Jefferies: Good morning. Thanks for taking the question. If I could just start on any changes in cost inflation that you’re seeing be it wood costs. And then I just like your commentary on the waste paper costs have obviously moved higher into the second quarter. And I’m just wondering how Mondi is positioned with waste paper costs and majority of your costs being from the wood side?

Secondly, on the Schumacher acquisition, you’ve had the business now for thirty days, just like initial thoughts on how that acquisition is progressing. Thank you.

Mike Powell, CFO, Mondi: Morning, Cole. It’s Mike here. Let let me take input costs and costs, and then Andrew can talk about PFR into into q two, how it relates to the market, and probably touch on Schumacher. Input costs, I would still guide as I did at the full year results. I would say input costs are fairly flat overall.

I’d still give that guidance for the full year. Clearly, within quarters, you see some movements. So, actually, q one, q ’4, for example, we actually saw, on average, lower PFL costs. Clearly, they accelerated into the q two, but that was offset by higher energy. As we move into q two, those are probably flipping around.

But, again, in a scale of a business the size of ours, you know, input costs flat is is still very good guidance. And then on discretionary costs, clearly, we’re working those hard and, you know, in the current environment, being very careful and reducing discretionary costs where we can. So no change to guidance, bit of movement up and down within the quarters, But in the scale of a big business call, it’s it’s sort of a few ups and a few downs leave us flat. Andrew, do you wanna touch PFR, or do you want to?

Andrew King, Group CEO, Mondi: Yeah. Mike’s hand kindly given me the job of trying to predict the PFR prices. They’ve

Call Moderator: gone up.

Andrew King, Group CEO, Mondi: They’ve gone up. Yeah. So you’re right, Colin, that, obviously, our exposure on a relative basis to some of our, call it, corrugated peers isn’t quite as much because of the bias towards virgin based products. But I remind you, we still pre Adwina, we’re buying about a million tons a year of PFR. And clearly, with the ramp up of Adwina, we’ll be consuming an extra 400, four hundred 50 thousand tons of PFR.

So it’s not a insubstantial spend for us. As as everyone knows, the PFR prices have been going up quite rapidly over the course of q one and into q two. They started the year somewhere around a hundred euros a ton and up to, what, about a hundred and 60 odd now. Always a very difficult price to predict. It’s always volatile.

We know that. And, of course, it gets driven by not direct supply demand impacts because it’s almost a it’s almost a byproduct of other processes. So in the short term, clearly, what it’s doing is driving up the whole recycled containerboard cost curve. As we discussed at the full year results, I mean, the the recycled market is under huge pressure Already, there was a modest price increase in q one, but that’s basically all been eaten up by this PFR increase. So we from a margin perspective, the market is back to where it was at the beginning of the year, which was in a very, very strange situation.

And so we there are further price increase initiatives out at the moment supported by, clearly, by a a rising cost base driven by this PFR dynamic. So in short, the market remains under huge pressure, the top of the cost curve clearly under massive pressure compounded more recently by the PFR increases. Clearly, on the back of that, we’re also seeing some price increases in the virgin grades. That is more about margin expansion in our case because, clearly, as Mike just said, most other costs are are fairly benign at the moment. Maybe then on Schumacher first impressions, I think it’s really confirmed what we were hoping.

We certainly see a strong synergy opportunity. Clearly, as a buyer of paper right now, it’s a it’s a it’s a that buying power is very useful for us as for one thing. But more importantly, you know, everything we had hoped around making giving our customers a better geographic offering, also, obviously, adding that solid board exposure, which is a very interesting niche for us as well. We really think that that does open up bigger opportunities for us, so we’re very excited by that initial engagement with the combined customer base, I think, has been very positive, very positively received. And equally important, our our rapid engagement with our new new colleagues from Schumacher has been, I think, gone extremely well.

So we are currently working very hard on the, you know, the hard work around integration and making sure we really bring the best of both together and drive the synergy. So we are very remain extremely confident in the synergy optimization opportunities, and we certainly believe the combination will be able to drive that commercial offering, which is all important in this deal for us and remain very excited by the opportunities that it brings us.

Cole, Analyst, Jefferies: And then maybe just as a follow-up, could you give any commentary around your order books? I understand it might be too early to see any indirect impact from U. S. Trade tariffs, but we’re in a situation where we’re seeing differing commentary out of The U. S.

Versus Europe. In The U. S, you’ve got corrugated volumes down to in Europe, I imagine they were probably plus 3% to 4% in Q1. So I’m just wondering, after a good order book in Q1, what are you seeing into the second quarter? Yes.

Andrew King, Group CEO, Mondi: Thanks, Karl. I think, as you say, it’s I mean, in q one, it is obviously not really a tariff story because it only really started to become a topic into q two. In q one, orders I mean, volumes in Europe, we see we haven’t got the full industry stats as yet because they haven’t been published. But, I mean, it it it it was a fairly good quarter, I think, from a from a volume perspective across the industry. You know?

And, certainly, our Central European business enjoyed good volume growth in q one. Turkey is another issue. Turkey had a very difficult quarter. I mean, as you well know, the geopolitical issues there are are disturbing, and and that has created a lot of uncertainty in that particular market, but that’s a different story to the to the tariff issues. Clearly, you know, the tariffs discussions only really started to take place into q two.

As you say, it’s really too yeah. It’s very early days in that. I think it is fair to say that there’s a there’s a general unease around. I mean, it is the topic. Every time you talk to customers these days, it is a big topic for everyone more in terms of simply the uncertainty that it creates.

So everyone’s speculating as to what might or might not happen. And as a consequence, as we all know, you know, uncertainty is is the enemy of of of good good commerce, and it’s it’s it just creates a a more unstable environment, should I say. So it’s not particularly evident, frankly, to date in our, call it, European order books. There’s but at the same time, I think we shouldn’t be complacent around this at all because, undoubtedly, it is a big topic for our customers and their customers in turn, and everyone’s pondering what it might mean for them. And, you know, it’ll clearly, we none of us know what the rules of the game will be anyway around this.

And I guess that in that uncertain environment, everyone takes someone to a risk off approach. So I think, you know, we’ll no mean by no means complacent about this, but it’s not particularly evident so far in our order books. Where we do see pockets of genuine weakness, I suppose, is in exposure to China. So where we do sell product into China, which is fairly limited in our case, but we do sell some pulp, as you know, into China, both from South Africa and from Canada. And there, you can see a a a weakness in the order situation.

And I think that, again, China is really really in the crosshairs of the the whole tariff discussion, and and I think that is evident in a deep sense of uncertainty within China. Again, I’m not sure if it’s driven by actual underlying demand side declines or just the uncertainty that prevails, and so people are looking to hunker down and not and not carry stocks and and the like, which is a typical sort of risk of behavior.

Sean, Analyst, Cronut: Thank you.

Call Moderator: Thank you so much for your question, Cole. Our next question comes from, let me just check, comes from Lars, Lars of Stifel. Lars, if you’d like to unmute and ask your question, please.

Lars, Analyst, Stifel: Yeah. Good morning, and thank you for taking my questions. You, of course, have a lot of internal things that you’re doing right now with Steti, Adorino, and Schumacher coming on board. And just wanted to clarify if you have been taking any, sort of start up costs above the line or or these sort of costs are capitalized as ramping up? And if you can comment on what sort of contribution you would expect from these assets in the current environment.

Appreciate the high uncertainty, but nevertheless, it would be interesting to to hear your comment on that. And on Schumacher specifically, of course, it is a sort of a challenging market, but it seems as if Germany is strengthening a bit. Are you seeing that? And what sort of contribution in this moment again would you expect to get from Schumacher? You know, if I start there and can see if there’s any follow-up.

Andrew King, Group CEO, Mondi: Okay. Very good, Lars. So in terms of startup costs, yes, there’s always startup costs, but those take those are all taken as above the line costs. That’s that’s just a cost of doing business. So it’s partly reflected in know, when we talk about maintenance shuts, clearly, for example, when you’re commissioning a new new machine I mean, do we know it’s a slightly different topic?

But but but, for example, the machine, when you take down certain operations in order to commission the new machine, it’s part of that maintenance cost. So for example, at the moment, we’re doing some work in up in Adinas in in Sweden. Maybe you can go and visit it last, but they they are down at the moment on a big project. So that will be incorporated in our guidance around that annual maintenance charge, and that’s you know, it’s a it’s a downtime effectively while you while you while you’re commissioning. And, of course, when you start a new machine in particular, there are some startup losses because you you’re running with a fixed cost base and, of course, you haven’t got full saleable production, etcetera.

And it takes I mean, it takes two to three years for a machine to be fully optimized both from a production perspective and quality perspective and, as importantly, from a commercial perspective, I e, bringing it into the markets that you want to serve in the long term. So that but but that’s all in our numbers, if if that makes sense. We don’t we don’t separate that out, and we certainly don’t take any of that stuff below the line. The only thing we allow to take below the line is is, you know, the direct one, not even that. We we we take some direct transaction costs related to acquisitions.

So Schumacher, there will be some transaction costs, but those are the direct transaction costs when it comes to then, for example, the integration cost, the the cost to to to deliver synergies, etcetera, those are all incorporated in our in our trading profits. So, yes, there are some there is some initial drag when you start up these these machines. So, for example, do we know we’ll be initially loss making as we ramp it up for obvious reasons? Because until you have a certain level of production, you’ve got a big fixed cost base that you you you can’t cover yet. But that’s you know, we just incorporate that all in our in our in our full guidance.

It’s not it shouldn’t be seen as a separate separate cost category. But, you know, in short, though, we are you know, we’re very happy with where we are with those projects from a project execution perspective. You know, these are big projects, and we’re not unaware of all the execution risks that come with big projects. But I’m delighted as to and a huge credit to our technical teams and and the operating teams at each of these operations that have been able to bring these these big projects on on time, on budget, and are now ramping them up in line with our our business plan. In terms of the overall contribution from the projects, as we keep stressing, obviously, when you’re bringing on new capacity, the one big line item that you don’t know at any one time is is your selling price.

What we do know is we can manage the market risk very nicely. As you remind you, p n 10 in Shetty, yes, it’s 200,000 tons of sack kraft. But roughly speaking, by the time we optimize everything, net exposure will be an extra hundred thousand tons of sack kraft. And I remind you, we lost a hundred thousand tons of sack kraft in Stobulinsky last year back end of last year. So it’s essentially replacing that now, and then you’ve got a hundred thousand tons of the specialty kraft papers, which you all invited next week to our teaching on on flexibles, and, you know, we’ll tell you about all the exciting markets that we are selling into and the big increases in demand that we are seeing driven by the whole sustainable packaging dynamic.

So we’re very excited about it, and we certainly see the market risk as being manageable. Obviously, the ultimate the profit contribution in next quarter will be a function of the selling prices, and that’s also a reflection of the overall market dynamics. Do we know similarly, yes, we bring on 400,000 tons of recycled containerboard, and I appreciate everyone’s very nervous about the overhanging capacity in the recycled markets. But, again, I remind you, we are short of recycled containerboard in our operations, and, obviously, that’s been I don’t wanna say exacerbated because it’s a nice problem to have at the moment, but being increased by the Schumacher acquisition. So, you know, the it’s a great combination, frankly, bringing on Arduino and having Schumacher at the same time because it allows us to drive that integration strategy.

And so the market exposure in terms of finding markets for this volume is very limited in our case. Obviously, again, I stress that the the exact margin earnings contribution in year one is always always a function of the overall market price. Maybe I I’ll short circuit things. I think Mike, know, sent sent it to the at the full year guidance on contribution net contribution from all our expansionary projects in this year was 5,200,000,000. Yeah.

We stand by that No change. Yeah. That guidance.

Lars, Analyst, Stifel: So Just one follow-up, if I may. You call that this is part of your maintenance cost in a way. So what are you looking at for your maintenance cost as to help us out to understand that? I think last year, you had about hundred million. Is that number now gonna be materially higher?

Mike Powell, CFO, Mondi: No. No. But the full year results I guided this year would be about the same. We’ll clearly firm that up for the half year. Quarter ones had nothing because we don’t have maintenance shuts in quarter one similar to last year.

I’d expect probably call I’d expect that hundred to be split twenty, eighty. That, again, is in line with what I said probably eight eight, 10 weeks ago. So, therefore, they’ll probably be about 20 in q two, about 80 in the second half. If there’s any difference to that, I can update at the at the half year, Lars.

Lars, Analyst, Stifel: Very good. Thank you. And good luck.

Andrew King, Group CEO, Mondi: Just to remind you, in terms of timing, we did take some big shots last year as well.

Mike Powell, CFO, Mondi: Yeah.

Andrew King, Group CEO, Mondi: And for example, that PM 10 commissioning was was a last year event. So as it so happens, that was also impacted by by by, call it, project related shuts over and above the normal normal shots. And then, sorry, Lars, you asked also about Germany and and Schumacher. I mean, we you know, we we hopeful around Germany. I mean, I’m a firm believer in Germany in the long run.

I mean, that’s why, you know, we Schumacher was also very interesting for us, and it’s a very important corrugated market. And more importantly, we think we’re extremely well positioned within that market. But I think it is fair to say that it you know, the last few years has it’s been a very difficult market. When was it 2024, it remained difficult. ’25, yes, if you look at the industry volumes, they look a little bit better in in Germany than they have have been.

But it’s still, you know, it’s still not strong, I would say. But I agree with you, Lars. Obviously, if if one if one believes that, you know, the the commitment to the, you know, this additional spend from the federal government, if they can you know, the the political situation can be resolved and the like must be a strong stimulus for for growth from a economic perspective more broadly, and, undoubtedly, we will benefit from that. So I think it’s early days in that. It’s fair to say it’s still a challenging market environment, But I like you, I also have strong hopes that that, you know, we’ll see a stronger environment going forward from a trading perspective.

But most importantly for us as well, we think there’s a lot of self help we can do driving our synergy opportunity and driving that combined commercial offering where we have access to customers, simply put, that we didn’t have be able weren’t able to access previously because we didn’t have the necessary geographic coverage in in in our box business.

Lars, Analyst, Stifel: Very clear. Thank you.

Mike Powell, CFO, Mondi: Thanks, Lars.

Call Moderator: Thank you for your question, Lars. We’re now going to go to Charlie from BNP Paribas. Charlie, please unmute and ask your question.

Charlie, Analyst, BNP Paribas: Yes. Morning. Thanks for taking my questions. Just related to the start up costs specifically again, but I guess, obviously, Duino wasn’t contributing at all in q one. But were there any particular costs for that or other projects that you were incurring with q one that didn’t have any any kind of offsetting revenues or profit contribution?

And on the project contributions you’re expecting for the year, the 50,000,000 to $100,000,000 I just wanted to clarify, assume that excludes the contribution you’re expecting from Schumacher. I just wondered if, you know, where your expectation is for how much Schumacher might contribute in the year now. Thank you.

Andrew King, Group CEO, Mondi: Yeah, Charlie. So so I appreciate I mean, the good and the bad thing is there are lots of moving parts around all of these projects. That’s right. And and, you know, we see it as as kind of normal business to be bringing on projects as and when they come, and and all the costs associated with them are are in the numbers. So I can only reiterate that.

So, yes, there were some start up costs in q one linked to do we know because, clearly, we started having to you know, we can’t capitalize everything. So there are some operational costs that we were incurring, and we didn’t have any revenues. But it’s pretty small. Yeah.

Mike Powell, CFO, Mondi: Sounds good.

Andrew King, Group CEO, Mondi: And it’s not particularly material to the overall group number. And, you know, just as we were incurring costs there, obviously, we started to see more revenues, for example, come out of out of the PM 10 ramp up and and the like. So I can just reiterate. These are all in the numbers. There’s there’s always a bit of noise associated with projects as you bring them on, as you ramp them up, etcetera.

But to us, that’s normal business. And most importantly, we expect to see a year on year incremental contribution in the 50 to hundred million range depending on exact pricing over the course of of the year, and that’s an all in number including all associated startup costs, etcetera.

Mike Powell, CFO, Mondi: Yeah. And, Charlie, that 50 to a hundred is is the organic expansion. So that’s on the 1,200,000,000.0 growth program. That guidance hasn’t changed, and we still feel good about that guidance. And as Andrew said, those projects have been brought on time and on budget as well from a CapEx guidance perspective.

Therefore, no change. You asked about Schumacher contribution. That is outside of that 50 to 100, so it is on top of that. I think Cole said, you know, you’ve only had the business for four weeks. That’s quite correct.

So we’re still in German Gap, and we’re still we’re very pleased with the acquisition. The the fit is as good as we expected, and the opportunities, as Andrew has said, exciting ahead of us. The the best guidance I can probably give, and and, you know, we have only ended four weeks, is we’ve previously said a couple of things. One is in FY twenty three. Our best guess of IFRS was that it made 66,000,000.

We’ve said that publicly, and we’ve also said that it will be in the first full year of ownership EPS accretive. There’s no change to that EPS accretive guidance. I think probably if you wanted to plug a number in for nine months, net of transaction costs because we’ve gotta spend some things to deliver synergies, probably 30 for the nine months. I wouldn’t take that necessarily as a run rate because I think we’re quite excited about the opportunities. But I think if you wanted a number for this year for your model, which I guess is behind your question, you have best best guess today, four weeks in, net of transaction costs and sorry.

Net of synergy costs, 30 is probably not around 30 is probably not a bad guide. Thank you. Thanks, Charlie.

Call Moderator: Thank you, Charlie. We’re now gonna go to Patrick from Bank of America. Patrick, please unmute and ask your question.

Patrick, Analyst, Bank of America: Good day. Thanks very much for taking my question. Maybe just a little bit of a longer term question. You know, we’ve spoken about us being below mid cycle and, you know, the projects contributing below mid cycle, and all of your commentary seems to be suggesting, you know, the price increases are largely being pushed around by costs. I mean, thinking longer term, what do you think we need to see for sort of a return to a pricing environment or market environment where you can price for margin and and sort of recover to that mid cycle level that we’ve seen in the past?

You know, is it know, is it working through the excess capacity? Is it a return to demand? Is it the high end of the cost curve falling off? Yeah. Maybe if you could just give us your thoughts around that and and how that could play out.

Thank you.

Andrew King, Group CEO, Mondi: Yeah. Thanks, Patrick. I I think I think the first comment I’d make, that issue around, call it, pricing, know, driven by cost, is purely in one particular segment, which is the recycled containerboard sort of market, which, yes, it’s important, but it’s certainly not the only market we serve. I mean, for example, in our flexible packaging business, it isn’t there is no real sort of, call it, supply side concern. You know, sack kraft, which is the major product within that market.

The only new supply coming on is our own. And as I mentioned already, net net, it’s actually fairly limited incremental because because of the unfortunate situation we had with Stomolinsky back end of last year. So it’s the the I I would hesitate to say there’s no real supply side concern, should I say, on in in on our flexibles business. There, it’s driven a lot by, you know, the cycle and normal sort of supply demand dynamics in a cyclical downturn. Of course, more the industrial exposures get more more impacted, but the supply side is actually in very good shape, I would say.

And so I on that particular business, to me, on the industrial base, it’s just industrial exposures. It’s simply a question of the the cycle and the cycle turns. And, you know, we have seen an improving order situation in, for example, what we call our overseas business, which is very cement exposed and the like. The cement industry in emerging markets has looked a bit better. You know, I caveat that by saying, of course, with the, you know, the tariff stories, everyone’s a little bit uneasy right now.

But, you know, that that that will be resolved one way or the other going forward. So so that’s very much a call it. I I I firmly believe more of a sort of cyclical demand side issue. And similarly, in our consumer facing businesses, inflexibles, very robust, frankly, on the demand side even in a, you know, more difficult world. And the supply side, yes, there’s a bit of new specialty craft coming on from different players, but I’m very excited by the structural growth we see in those markets going forward.

And and I think that can contribute to onward strengthening both from a margin perspective and a volumes perspective in, as you say, the longer term. The one market, you know, coming back to that corrugated business, which is, as you say, the one where we are faced with this overcapacity story, and you can’t call it price for margin. As you were saying, it’s more about trying to push on the cost. You know, firstly, I am a believer that this is a long term structurally growing market. I think over time, the world needs more boxes driven by, you know, everything from the ecommerce dynamic through to the the fact that there is no obvious substitute.

It is the most environmentally friendly solution when it comes to moving goods around in in a in a protective packaging. So, you know, that that long term growth dynamic, I firmly believe, remains in place. In the short term, we’ve had the issue of, you know, a coinciding demand side softness driven by the cycle combined with, of course, this capacity expansions coming into a downturn, and that’s what’s caused the short term indigestion in the market. I think what can resolve that in the long term, you you need a incentive price for for new capacity. I’m outside audit the moment, but in due course, the world will be short of this stuff again if the price doesn’t get to a level that incentivizes new capacity.

What needs to happen to get to that point? Clearly, some demands genuine demand side and sustained demand side recovery can can can take a big chunk out of, you know, the excess capacity. And, you know, I think we all believe that there has to be further capacity closures. There have been some closures. I mean, there’s a lot of downtime being taken in the market that is extremely expensive, and I’m not sure how people can carry on doing that without being pushed to permanent closures.

But I would expect to see some permanent closures in this market. Clearly, we’re in a different situation because, you know, we have very low cost production in in this product, and we can still make money even in these very difficult times. But, undoubtedly, there must be some very a a lot of pain at the higher end of the cost curve. So one would assume that that would drive some some some closures, always takes longer than one expects, and, of course, it’s always somewhat frustrating. But but I suspect it’ll be a combination of those.

And maybe the last point, you know, we we’re living in a world right now where exports from Europe have, you know, severely reduced. Clearly, if export markets improve, that can also be something of a a a safety valve, but I wouldn’t rely on that in the long term because I think as we’re seeing in the in The US, there’s a realization that this is a product that doesn’t travel particularly well. It’s always better to try and sell it as close to home as possible. So

Brian, Analyst, RMB Stanley: I hope that

Patrick, Analyst, Bank of America: Yep. Thanks a lot.

Call Moderator: Thank you, Patrick. We’re now going to go to Brian of RMBM Stanley. Brian, please unmute and ask your question.

Brian, Analyst, RMB Stanley: Hi. Good morning, Andrew and Mike. Quick question on Dreno and and PM ten at Steti. First question on Dreno, if I may. How are you marketing the product?

Are you sending that material to Turkey as as originally as originally planned?

Andrew King, Group CEO, Mondi: Or was Yep. Brian, we lost you there, but we certainly heard the first part of that question. Can you still hear us? Are you are you able to

Mike Powell, CFO, Mondi: Brian’s dropped off.

Andrew King, Group CEO, Mondi: Looks like Brian’s dropped off. Can

Sean, Analyst, Cronut: you hear me now?

Mike Powell, CFO, Mondi: There you go. We got you.

Call Moderator: We can, Brian. Thank you. Sorry. I don’t know what happened there.

Patrick, Analyst, Bank of America: The second question

Brian, Analyst, RMB Stanley: was on was on the the ramp up profile for both, for PM PM 10 and for Arduino. Is it just a a question of of volume ramp up, or is there a question of of quality ramp up too?

Andrew King, Group CEO, Mondi: Yes. So so thanks for that. So so firstly, in terms of the the specific question around Reno, obviously, we’re not gonna give specifics on sort of commercially sensitive issues around where and when we’re selling our product. But it is fair to say that, as I said earlier, clearly, the dynamic has shifted a bit since the acquisition of our Schumacher business that gives us a natural outlet for paper from Duino either directly into those into our our broader converting network as we have now in Central Europe or through what we call swap deals, which is a fairly common thing in the industry where you swap with other producers to optimize logistics and the like into your respective plots. So so there is a lot of volume going in will be targeted because we’re still ramping it up as we’ll come on to, but a lot of the new volume is targeted into those through either directly or indirectly through swaps into our own our own converting operations.

Clearly, there is some volume targeted particularly into the, what we call, the open market in in Italy itself. To your question on Turkey, less attractive, frankly, right now than we had perceived at the time we made the original investment decision because, as you know, that in Turkey, they put tariffs on containerboard imports some time ago. So we readjusted some of our our thinking there. But having said that, there are still price points at which it makes sense to export to Turkey, and it’s certainly an option for us because, as you know, we we ourselves, again, are short of paper in Turkey as well. So we do still have the option to sell some of it into Turkey if the pricing is more favorable relative to buying it directly in Turkey itself.

So it’s a combination of those, but as I say, you know, we we we are still net short of of recycled containerboard in in the group, and so we’re in a very strong position to place that volume into both our own captive, call it, customer base and and the market. And in terms of the ramp up profile, as I said earlier, it takes two to three years for to get full optimization of these machines. Why is that? Partly, it’s because there’s a there’s a technical ramp up. So you get quite a lot of volume upfront.

You can get to 70% output for each for a bit, you know, in rough terms quite quickly. But then, you know, to get that last 30% of the production, which is obviously really, you know, the the usually sort of profitable business, the incremental volumes that you can squeeze out at the end, that does take a period of time to optimize both in terms of the actual production output and also, call it, the quality parameters. Now, you know, with PM 10, I think we alluded to it in the in the literature. You know, we’re delighted with the quality and so so our customers I mean, we’re already producing a very high quality product there. Now it’s about ramping that up to full capacity over a period of time in terms of optimizing the full mill.

I mean, frankly, in in that operation, it’s around optimizing the whole mill infrastructure, which is which is part of the project, which we are in the process of doing. And then you’ve got the commercial optimization where, again, you don’t necessarily sell the first volume straight into the market your long term market. You will sell it into a broader market and then develop over time the markets that you want to serve and optimize in the in the long run, and that does also take a period of time. But, again, you know, the these all of these nuances that I’ve just been referring to are built into our modeling, our planning, and the the kind of guidance we give you in terms of contribution. But it does take, yeah, up to three years before you’ve got full optimization, full contribution from these these these particularly these big paper machine investments.

Brian, Analyst, RMB Stanley: That’s perfect. Thank you, Andrew.

Call Moderator: Thank you, Brian. We’re next going to go to Sean from Cronut. Sean, please type star six to unmute and ask your question.

Sean, Analyst, Cronut: Morning, Andrew. Mike, can you hear me?

Mike Powell, CFO, Mondi: We can, yes. Thanks, Sean.

Sean, Analyst, Cronut: Excellent. Thanks. My first question is just around the credit wood for you. It’s obviously a bit less relevant in the profitability mix at this point. But it does seem like a fair amount of capacity has come out the market, which has been ahead of the sort of softness in demand.

Maybe if you can share any light on order books and perhaps if Monty’s had taken any downtime on the nonintegrated assets or machines, sorry?

Andrew King, Group CEO, Mondi: Yes. Thanks, Sean. Yes, I think it’s fair to say it’s been the uncoated fund paper market. If you compare year on year, it’s a bit more difficult. But reminding you that this time last year, it was actually very strong.

We but, clearly, there we always knew there was an element of restocking. The year this year, I think, started off in pretty decent shape, but it clearly you know, the the European market is challenging. We have seen, you know, pretty flat to even decline some declines in in pricing. And, of course, we are current You know? There’s big debates, obviously, what where next on the pulp price, but one sense is, you know, with China slowing down and the like, it’s one would has has to assume that pulp prices will start to come under pressure.

And, of course, that in turn reduces the cost support for for fine paper pricing in in Europe because there still is some unintegrated capacity around that. Obviously, in the short term, in our noisy operations, we somewhat benefit from that because because we buy in pulp there. Obviously, in Ruzomberok, which is the other the the main profit contributor there, we would we would suffer if the uncoated fine paper price comes under pressure as a consequence of that. So, yeah, it’s been a bit up and down, I would have to say, in the fine paper markets in in q one, and, certainly, we’re not seeing any real improvement on that at the moment going into q two. So I think it is, you know, it is quite challenging for the for for that business on that.

Having said that, you know, our guys in Jean Baroque are doing a great job on cost control. The wood cost situation has got much better over the last couple of years, and that means, you know, they they, you know, they’re driving good profitability in spite of a challenging market environment. We have also seen imports from from from the likes of from Asia. Those do come and go. It’s a very spot market for the Asians, but you do see on occasion import pressures, and then they alleviate, and it’s it’s very mixed you know, it’s very volatile in that in that sense.

But, yeah, all in all, pretty muted sort of demand side environment, very good cost control from our teams holding up profitability, I think, is the the main message out of European fine paper. South Africa, always a slightly different dynamic. Frankly, the biggest profit driver there is the export pulp, where, again, you know, a weaker dollar pulp price is clearly a headwind for that business. By the same token, obviously, the weakening rand is is is is somewhat supportive, but, you know, clearly a challenging export pulp market at the moment, especially if if the Asian markets continue to soften.

Sean, Analyst, Cronut: Perfect, Andrew. And then just a further one on Schumacher. I appreciate the EBITDA guidance for the full year. I think when the deal was first announced, I think you guys sort of hinted at low operating rates between, I don’t know, it was low 40s or 50s, I can’t recall. Are you able to shed any light on that evolution at all?

Andrew King, Group CEO, Mondi: Yes. I mean, they remain low as we expected. And again, I mean, just to remind you, these are converting operations. So it’s very different to a paper mill. You have different cost structures.

You have a little bit more flexibility on your cost structure. But, you know, we were excited at the time by the fact that there was, you know, very well invested asset base, heavily underutilized, and, certainly, we believe with the combined sales platform that we we now have, we have every opportunity to fully optimize and utilize that capacity. So that capacity, you know, it remains under underutilized. It also comes back to that earlier discussion we had around the, you know, the the trading environment in Germany in particular, which we also sell into Benelux and and The UK. But, you know, we are very excited by the conversations we’ve been having with our customers.

I think they see us as a as a real credible player across that Northern European market now. We do have, you know, all the weapons at our disposal now to be highly competitive across that region, and it’s now up to our teams to drive the integration and optimize, you know, the the hard the hard cost synergies and at the same time ensure that we drive the commercial strategy to fill this heavily underutilized capacity with the right volumes because that is also very important.

Sean, Analyst, Cronut: Great. Thanks, Andrew. Just last one. Just in terms of the reported underlying EBITDA for the quarter with the benefit of hindsight, are there any sort of pockets that were maybe better than expected that you guys saw? Sorry,

Mike Powell, CFO, Mondi: I missed the first part of the question, Sean.

Sean, Analyst, Cronut: Mike, in terms of the performance for underlying EBITDA for the quarter, with the benefit of hindsight now that we’ve obviously closed the quarter, was that pretty much in line with your expectations? Or were there any pockets that were much better than you guys No.

Mike Powell, CFO, Mondi: Pretty much in line. And I think also the delivery of the, you know, the projects for the forward business has also gone very well as well. So, I mean, it’s one thing to deliver numbers and look backwards. It’s really important, you know, that we’ve delivered these projects, which which allow us a great platform going forward too. So I think, yeah, it’s been not that we run the business by quarter, as I always say, Sean.

But, yeah, if I was to talk about the quarter only, in line both in terms of delivery of projects and numbers.

Sean, Analyst, Cronut: Cool. Thanks for the time. Cheers.

Mike Powell, CFO, Mondi: Thanks, Sean.

Call Moderator: Thank you, Sean. We’re next gonna go to James from Prescient Securities. James, please unmute and ask your question.

James, Analyst, Prescient Securities: Yes. Thank you very much for all the details today. Yes. Two questions from me, if I may. Firstly, the sat paper market, as you mentioned, it clearly is in a quite a different position to the corrugated business.

There has been a little bit of a price rise I think that we’ve seen in the last few months or so. Is there a price rise another price rise underway as you’re doing for containerboard? And then secondly on the Schumacher business, now you own it, is there any way you could give us some historic numbers maybe for last year what the sales were even or the EBITDA? And just quickly, if I may, just to do the third one. That 50,000,000 to 100,000,000 of benefits from the projects, I assume that’s an EBITDA number.

And do you have a depreciation number for that? I was assuming around 40. Thank you for for for that.

Mike Powell, CFO, Mondi: Yeah. James, let me start. So the Schumacher, no. I mean, you know, we don’t give individual details on any of our businesses. And, frankly, FY twenty four is all still in German gap anyway.

I mean, we’ve only owned it for four weeks. I’m certainly not gonna spend a lot of time resource retranslating FY twenty four right now. We we’ve we’ve got a business to to integrate. But listen. I’ve given you good guidance, I think, in terms of our best guess for the EBITDA for this year.

And I think you’ve heard that we’re pleased with the combination. And, frankly, we’re super excited about the opportunity, very much in line with what we’ve said in in the past. In terms of the 5,200 EBITDA, already guided to this year’s depreciation, so there’s no change to that. I think over time, our depreciation will nudge up. You know, if you think of ’26, ’20 ’7, it’ll probably nudge up to the 500 type number as we move forward, but no change to depreciation at this trading update either for this year.

Andrew, do you wanna take the other one?

Andrew King, Group CEO, Mondi: Yeah. In terms of the bags business, and I’ve gone for the life of me to remember what you’d asked them.

Mike Powell, CFO, Mondi: Is there a second price increase?

Andrew King, Group CEO, Mondi: Oh, sorry. Sorry. Yeah. I mean, yeah, I think it has to be I mean, they they’re very different markets, so they operate in different ways. So I appreciate the ones called kraft paper, now there’s kraft liner.

But they but they do operate in very different sort of dynamics. And as I mentioned, you know, very so supply side is in good shape. I think in terms of the demand side, you know, we saw a good volume in our underlying bags, you know, the bags business, which is where where most of the goes. Certainly, Europe showed a good volume growth in q one. Our export markets, as I mentioned, the cement industry seems to be picking up on a in the, call it, the emerging markets that we serve.

So it feels a bit stronger. I think the big caveat to that in the short term, though, is the, call it, the unease that is around simply driven by the the tariff uncertainty and the impact it may or may not have on growth in all of these different markets. And as a consequence, one senses, you know, the the the supply chain across the piece is kind of taking a somewhat of a wait and see attitude. So, you know, we have to be mindful of that in the short term. But, yeah, we we’re positive about the supply side, and we’ll have to watch how the demand side develops over the coming months as to, you know, our our pricing strategy going forward.

So, you know, I we come back to that comment we made in the trailing statement. You know, we have to be conscious of the the macroeconomic overlay and the geopolitical uncertainties that abound and seem to seem to, unfortunately, only heighten on a daily basis, albeit we also know, particularly with these trade trade discussions, that that things can change quite quickly as well. So maybe, you know, some positive outcomes around some of these bilateral discussions might well restore confidence through the supply chains. But I think right now, we just have to be cautious around around the expectations in the near term.

James, Analyst, Prescient Securities: Appreciate that. Thank you.

Mike Powell, CFO, Mondi: Thanks.

Call Moderator: Thank you, James. And our last question comes from Lewis of Goodbody. Lewis, please unmute and go ahead.

Andrew King, Group CEO, Mondi0: Good morning. Thanks for taking my questions. First one is just on some color behind the sequential improvement in the corrugated and flexible packaging segment. Just sort of how much of that is mix and is there sort of a market difference intersegment between sort of those end markets or products? And then the second one, just acknowledging the direct tariff impact is limited.

Just on that indirect piece, can we maybe get an insight on how much of that demand is sort of resilient in terms of FMCG or essential industrial goods or otherwise?

Andrew King, Group CEO, Mondi: So I’m not sure if I could follow the first question. In terms of demand resilience, I I think it’s dangerous to just sort of, you know, say industrial bad, FMCG good. It doesn’t necessarily work like that. I mean, again, we’ll be giving some insights into our exposures on the flexible packaging business. Corrugated corrugated more generally is 70% kind of food, beverage, and nondurable indirect exposure because, obviously, it’s largely a transport packaging.

And then there’s a sort of industrial component. You know, flexible business, if you take it at a very high level, is around half half consumer driven, half industrial being mainly cement building materials, agricultural, etcetera. You know, I think it’s wrong to assume that in a sort of more difficult macroeconomic environment, the one is sort of prejudiced particularly relative to the other because, obviously, they’re very different dynamics whether whether if you’re building bridges using cement bags in in Egypt, it doesn’t necessarily correlate with overall sort of economic GDP growth, etcetera, for the globe. So so you have to be a little bit careful. But that I mean, what I’ve just outlined is the broad sort of exposure differences between, call it, the industrial and FMCG, but I wouldn’t translate that into, you know, one’s gonna get hammered in a downturn and the other’s going to, you know, going to prosper.

Andrew King, Group CEO, Mondi0: That’s clear. Thanks. Yeah. My first question Can

Andrew King, Group CEO, Mondi: you just repeat the first part?

Andrew King, Group CEO, Mondi0: Yeah. Of course. Just just on that sequential improvement, just wondering how much of that is mixed.

Andrew King, Group CEO, Mondi: You mean on the pricing or quarter on quarters? Is that

Charlie, Analyst, BNP Paribas: Yes.

Cole, Analyst, Jefferies: Yeah. Quarter on quarter.

Andrew King, Group CEO, Mondi: No. I mean, it’s it’s it’s it’s I mean, pricing actually was down quarter on quarter. I think we hopefully made it clear on a sequential basis purely because we saw we saw you know, as I think we said at the full year results, we saw containerboard kraft paper and the like tail off into q four of last year. So we started the year at a kind of a low point, and then we’ve been getting some price increases through the first quarter. But if you take an average on average effect, you know, q one pricing was lower on average than q four.

I’m looking at my case, hopefully. I’m nodding.

Mike Powell, CFO, Mondi: I just can’t see it.

Andrew King, Group CEO, Mondi: Yep.

Sean, Analyst, Cronut: It’s great.

Andrew King, Group CEO, Mondi: Okay. I hope that’s clear. Yeah. But but thanks, everyone, for your interest. Mike and I need to go and talk to our shareholders at the AGM.

So with that, we should probably wrap up. As always, Fiona and team are readily available if there’s any follow-up questions. But thank you again for your interest. Just like to reiterate, I think, yes, q ’1 very much in line with our expectations. Most importantly, I think we made great strides on our big important projects and also working very hard on the Schumacher integration, which will set us up very strongly for the future, obviously, with an eye to the the overall macroeconomic environment.

And as a last advert for our flexible packaging teaching next week where, hopefully, we can give you a lot more insights into the value drivers behind that particular business. Looking forward to seeing you as many of you as possible at that event either physically or on the webcast. So thank you again for your attention, and no doubt we’ll keep in touch.

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