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Mondi PLC announced on Thursday it has decided to pull the plug on its Russian businesses through a divestment process that is ‘operationally and structurally complex’.
The Weybridge, England-based paper and packaging firm said it has decided to divest its Russian assets after assessing all options for its interests there.
Mondi joins a long list of companies globally that have closed their businesses in Russia, which launched an unprovoked war on Ukraine late in February.
Mondi said the divestment of these ‘significant’ assets is ‘operationally and structurally complex’ and is being undertaken in an evolving political and regulatory environment.
‘Accordingly, there can be no certainty when a transaction will be completed or as to the structure of any possible transaction,’ the group said.
As at December 31, the net asset value of the Russian operations was €687 million.
Mondi's operations in Russia represent 12% of its revenue by location and generated 20% of its underlying earnings before interest, taxes, depreciation and amortisation over the last three years. It has operated in Russia for over 22 years.
The company has suspended all ‘significant’ capital expenditure projects in Russia.
The company said the Russian businesses have managed supply chain constraints. However, the situation remains fluid, with interruptions to pulp and paper production possible going forward.
Also on Thursday, Mondi said it had delivered a strong quarterly performance underpinned by good demand across the business.
Higher average selling prices more than offset continued cost pressures.
Underlying earnings before interest, tax, depreciation and amortisation rose 63% to €574 million, from €353 million in the same period a year prior.
The group said pipeline currently includes around €1 billion of expansionary projects already approved or under advanced evaluation, which we anticipate will generate mid-teen returns when in full operation.
Also the paper and packaging firm said the sale of its Personal Care Components business remains on track for completion in the second half of the year.
Mondi expects to deliver a year of good progress, with the annual performance benefitting from shorter planned maintenance shuts and the contribution from the capital investment programme.
‘While we expect to realise the full benefit of the price increases implemented in 2021 and 2022 as we go through the second quarter, we also anticipate continued inflationary pressures on our cost base,’ it said said.
Mondi shares closed 0.5% lower at R 297.33 in Johannesburg on Wednesday, and ended almost flat at 1,501.54 pence in London.
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