JSE- and London-listed paper and packaging group Mondi’s energy and debottlenecking projects were under way and progressing well, CEO David Hathorn reported on Tuesday.

Mondi, which is aiming to achieve 97.5% energy self-sufficiency across its operations as electricity prices increase, has set aside €170-million in capital expenditure for energy and debottlenecking projects.

The papermaker is investing in energy projects at Richards Bay, in South Africa, Syktyvkar, in Russia, Stambolijski, in Bulgaria, and Frantschach, in Germany.

Hathorn said in a conference call that €140-million of the earmarked capital expenditure was currently under way. “€30-million relates to the pulp dryer at Syktyvkar, which has been put on hold until we finalise a few technical issues, but we will continue with this project in the second half of the year,” he told Engineering News Online.

Meanwhile, Mondi reported a 24% year-on-year drop in its underlying operating profit for the six months ended June to €269-million. Its diluted headline earnings a share for the six months fell 21% to 30.8-euro cents from 38.9-euro cents a year earlier.

Hathorn said the results followed the anticipated pick-up in trading, after a challenging start to the year. “Cash generation is robust and our return on capital employed of 14.1% remains above our through-the-cycle target, reflecting the strength of our low-cost operating model.”

But he warned that the macroeconomic environment remained a concern, with continued soft demand evident in certain Western European markets. “Encouragingly, demand in a number of the emerging markets to which the group is exposed remains firm, and positive supply side fundamentals in various of our core grades offer price support. As such, we remain confident of delivering against our expectations for the full year."

SOUTH AFRICAN DIVISION

The South Africa division reported an underlying operating profit of €29-million for the six months, which was marginally higher than the comparable prior-year period.

The business benefited from both the weaker South African rand and an increase in sales volumes and lower operating costs, primarily owing to the shift in the planned yearly maintenance shutdown at the key Richards Bay operations from the first half in the prior year to the third quarter in the current year.

This was partially offset by lower average selling prices, particularly for hardwood pulp and white top containerboard. A continued focus on the domestic market and improved operating performance at Richards Bay has benefited the business through improved margins.

In June, a further eight forestry land settlement agreements were reached. To date Mondi has signed a total of 19 land settlements involving about 35 000 ha of its forestry land. The settlements were reached using a sale and lease-back framework developed by Mondi and the South African government, which ensures that title to the land is transferred to the various claimant communities, that Mondi is paid a fair price for the land and which secures a continued fibre supply for its mills.

The group declared an interim dividend of 8.9-euro cents per share, up 8% from last year.