Shares in Mondi (LON:MNDI) plunged on Wednesday, after the firm warned its half-year profits would be slightly below analysts expectations.
The South-African based packaging company warned that cost pressures and negative currency impacts would likely impact underlying performance causing it to fall “modestly below market expectations”.
This was attributed to the weaker US dollar and alongside a significantly weaker Turkish lira. In addition, higher costs also had a negative impact on performances for the six months to 30 June 2017.
According to the statement, wood, energy and chemical costs were higher, with recycling prices up 15 percent compared to the third quarter of 2016, and 6 percent higher sequentially.
Underlying operating profit for the third quarter of 2017 of €245 million proved 8 percent ahead of the the previous year total of €227 million.
Ultimately, Mondi benefited from higher average selling prices which was partly offset by the aforementioned higher costs and negative currency impacts. The company said maintenance shut downs during the period had affected operating profit by €30 million, with the estimated full year impact totalling in at around €90 million.
Overall, like-for-like sales volumes proved above comparable prior year period, encouraged by “good growth” in containerboard and Fibre Packaging. Underlying operating profit remained in line with second quarter results, the group added.
Looking forward, the company stated:
“We remain confident of making progress for the year and expect a strong final quarter, supported by generally higher average selling prices and good growth.”
Nevertheless, it remained cautious about the impact of continuing cost pressures and negative currency on future performance.
The international packaging company with headquarters in Johannesburg, employs over 24,400 people with 102 operations across more than 30 countries.
It specializes in containerboard, kraft paper, corrugated packaging, industrial bags, extrusion coatings, release liner, consumer goods packaging, advanced films and hygiene products components, alongside office and digital printing.
Shares in Mondi are currently down 7.56 percent as of 13.35PM (GMT).