Mondi to settle KZN land claims over the next two years, posts higher earnings

Paper and packaging group Mondi aims to settle all its land restitution claims in KwaZulu-Natal over the next two years, with 33 claims still outstanding, CEO David Hathorn said on Thursday.

“This will be done as funding becomes available from government,” he told Engineering News Online.

About 50% of Mondi’s South African forestry acreage is subject to land claims. The company said its settlement model, as the industry standard, provided some predictability for future land claim settlements.

Hathorn said the South African division would continue to pursue the settlement, with further progress expected during the second half of the year.

The Johannesburg- and London-listed group reported a strong first half performance, with basic earnings a share surging to 39 euro cents, from 19.3 euro cents for the same period in 2010.

With operations in 31 countries, the group posted revenue of €2.9-billion, up from €2.7-billion last year, while operating profit saw a 74% increase from the same period in 2010 to €354-million.

“The good results that were achieved in the positive market conditions confirm the validity of the group’s strategy. All operations are running well and our recent major investments have made a meaningful contribution to the group’s profits,” Hathorn said.

Its Europe and international division saw strong demand and order books remained good, having returned to normalised levels.

Maintenance shutdowns are planned for some of the European mills in the second half of the year and would impact on its performance in this period.

The company pointed out that procured wood prices in Central Europe would continue to increase, with average costs increasing by 12% compared with the second half of 2010. Pulp prices increased 2% for softwood and decreased 2% for hardwood, with the average benchmark price of recovered paper having increased by 23%. Energy and chemical prices also increased.

“Mondi benefits from its structural position in South Africa and Russia owing to integration into wood supply. The group’s integrated pulp and paper mills negate the impact of pulp price escalations,” it explained.

Further, the group said more recently, there has been evidence of some weakness in certain key input costs, particularly recovered paper, and it continues to feel the impacts of exchange rate volatility.

While the uncertainties in the broader macroeconomic environment continue to be a concern for demand, Hathorn believed supply-side fundamentals for the company’s core grades remained good.

COGENERATION

He said that Mondi would continue to look at cogeneration and biomass opportunities in South Africa, Russia and Europe.

While too “premature” to discuss such opportunities, in South Africa, the group remained focused on increasing its own generation capacity and reducing its dependence on power parastatal Eskom, amid longstanding concern that cost and availability of supply of electricity may significantly impact on local operations in future.

Mondi is exploring many opportunities with regard to energy efficiency at its European mills.

It said its Mondi Swiecie mill, in Poland, would only acquire a power- and heat-generating plant owned by Saturn management by year-end.