Mondi Plc [JSE: MNP] Investment Case

April 16, 2024

Mondi Plc is one of the world's largest producers of packaging, paper, and pulp. Buy/hold/sell?


Mondi 101

Mondi Plc is one of the world's largest producers of packaging, paper, and pulp. It serves its customers in industries such as agriculture, automotive, building and construction, and consumer goods. The company is listed on both the JSE and London Stock Exchange, with its headquarters in London, UK. Mondi PLC was formed in 2007 through the merger of Mondi Limited and Mondi Group Plc. Mondi operates in over 30 countries and has around 27,000 employees.


Key financials

Market cap:                        R161b

Share price 1-year:          -14.5%

Share price 5-years:         +11.4%

Div yield:                              3.7%

P/E:                                        7.1

P/S:                                        1.0

Debt/Equity:                      32.5%


How does Mondi make money?

Business segments: 

The company operates in two main business segments: packaging and paper. The packaging segment provides a wide range of packaging products, including flexible and rigid packaging, as well as industrial bags. The paper segment provides a range of products, including uncoated fine paper, containerboard, and pulp. Visit their website at www.mondigroup.com/en/products-and-solutions/ to find more information on their wide range of products. 

Revenue contribution: 

In terms of profitability, the packaging segment contributes the largest share (66%), with the paper segment (and other minor segments) contributing a smaller share (22%).

Geographical representation: 

In terms of geographical sales, the company has a significant presence in Europe (74%), followed by Russia (12%) and South Africa (5%). The company also has operations in Asia, North America, and Australia. Mondi's strategy is to continue expanding its operations globally, both organically and through acquisitions, in order to enhance its competitiveness and strengthen its market position.



Mondi's CEO, Andrew King, has been with the company for over 19 years and has held several senior management positions. The majority shareholding in the company is held by institutional investors (76%), including BlackRock Inc. (8.55%) and Public Investment Corporation (8%). The remaining 24% is held by retail investors (23%) and insiders (1%).



Mondi plc reported earnings results for the half year ended June 30, 2022. 

  • Sales: EUR 4,505 million compared to EUR 3,283 million a year ago.
  • Net income: EUR 868 million compared to EUR 348 million a year ago. 
  • Basic earnings per share: EUR 1.484 compared to EUR 0.544 a year ago.
  • Around 1 billion of expansionary projects are underway, capturing growth in their packaging markets and building on their leading market positions.
  • Debt: Debt represents only 1/3 of financing. The company is under no pressure in this regard.
  • ROCE (return that management managed to deliver on equity and debt that that they have invested): +-20% growth average for last 12 years. In addition to a superb 20% ROCE, the company is trading at a mere 7 PE.   


Russia operations

Due to the Russia-Ukraine war, Mondi agreed to sell its largest plant in Russia in August 2022. Mondi's operations in Russia generated 20% of the Group's underlying EBITDA and represented 12% of the Group's revenue. Once the sale completes, the cash can be used to buy back shares, pay a large dividend, or fund new operations.  


Bullish cases

Sustainability: 78% of Mondis revenue is from products that are reusable, recyclable, or compostable. In 2020, Mondi was named one of the world's most sustainable companies by corporate sustainability assessor RobecoSAM. The company has a strong commitment to sustainability and operates with the goal of reducing its impact on the environment and promoting sustainable forestry practices.

Market leader: Mondi leads market positions by being number one in the following:  #1 uncoated fine paper supplier in Europe, Russia and South Africa which is used for printing. #1 virgin containerboard producer in Europe which is used in packaging, especially for e-commerce shipping. #1 paper bag producer in Europe and a global leader. 

Exchange rate hedge: Being listed in the UK and having most of its revenue generated in Europe, this offers a Rand hedge to the company.

Expansion: Around 1 billion of expansionary projects underway.

Russia plant: Even though Russia had a negative impact on shareholders in the short term, it may yield a positive outcome if the sale of the plant is successful. 

Valuation: ROCE of +-20% for the last 12 years. In addition to a superb 20% ROCE, the company is trading at a mere 7 PE.   


Bearish cases

Commodity prices: The prices of raw materials used by Mondi, such as pulp and wood, can be volatile and subject to supply and demand imbalances. This can make it difficult for the company to control its costs and maintain its margins.

Undifferentiated product: Competition will always be fierce, especially in an industry like packaging which is in high demand and highly integrated across the supply chain.


The final verdict

In conclusion, Mondi Plc is a well-established and diversified packaging and paper manufacturer, with a strong presence in Europe and a growing presence in other regions. The company's experienced management team and solid financial performance make it a compelling investment opportunity for investors looking to gain exposure to the packaging and paper industry.

The company is perfectly positioned in the move to greener corporate footprints as 78% of its products are reusable, recyclable, or compostable. The demand for its products is also very well integrated across the supply chain. According to analysis, our final consensus is a BUY for Mondi for the financial year 2023.


Disclaimer: Just a friendly reminder - This is not financial advice. Always do your own research before taking a position. Content is for informational and educational purposes only.

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