Mondi shares tumble to 12-year low after flagging ‘challenging’ conditions

Shares in global paper producer Mondi have plunged to a 12-year low after reporting weak demand and lower prices weighing on trading over recent months.

The company, which is listed on London’s FTSE 100 index, said “challenging” conditions were set to persist for the rest of the year.

This reflected lower selling prices of paper and pulp dragging on its sales, as well as weaker demand and intense competition affecting the division.

Mondi said it had extended planned maintenance shuts at some of its sites in response to lower levels of demand.

It also told investors it was reorganising the business from three divisions to two in order to cut costs and speed up decision-making.

The tougher conditions were expected to persist for the rest of the year “as demand-side confidence remains fragile, key markets remain in oversupply and current selling prices are lower”, according to the company.

“Trading conditions in the third quarter were challenging, with softer volumes and declining prices across most pulp and paper grades,” Mondi’s chief executive, Andrew King, said.

But he said the company was “relentlessly focused” on managing what it can control in order to “navigate current headwinds”.

Shares in Mondi, which employs about 24,000 people globally, tumbled by around 15% on Monday to hit the lowest price since 2013.

Dan Coatsworth, head of markets for AJ Bell, said: “Packaging companies are economic bellwethers.

“A strong economy normally implies a steady flow of goods around the world; a weakening economy often leads to reduced demand for goods and therefore for the packaging that holds them.

“Mondi has issued a shocker of a trading update, causing its share price to slump and hit a 12-year low.

“Mondi is well versed to operating in a cyclical market and there are a few levers it can pull, such as extending maintenance shutdowns.

“However, investors are clearly worried about the bigger picture and whether we’re in for a sustained period of weakness.”