UK Edition
Prices for UK packaging set to rise as pound falls, Mondi says
Some of the UK’s best known household brands are set to pay more for their packaging as a result of the fall in the value of the pound, as packaging and paper company Mondi said it expected prices for its products to continue to rise.
Mondi’s chief executive David Hathorn said that many of its UK contracts, which include companies such as Unilever and Twinings, contained clauses that meant they could be recalculated in light of currency fluctuations.
“We export many of our products from Europe to the UK and most of these contracts have currency agreements in place, so they have been repriced to take in the currency movements,” he said. He added that many UK-based companies have seen price rises for their packaging as the pound has devalued.
The FTSE 100 company expects prices for its products to improve worldwide after tougher trading conditions in 2016.
"We're returning to a more stable market," said Mr Hathorn. "The supply-demand balance has come back into shape."
Mondi reported an improvement in profits after a rocky start to the year, as operating profits rose 3pc to €227m (£205m) in the third quarter, compared to the same period last year. The FTSE 100 company had experienced a 12pc drop in operating profits in the second quarter on the back of lower selling prices, but these have recovered in recent months.
Figures for the period since June 30 showed that the company’s sales volumes were in line with last year, and its costs for components such as wood and chemicals had remained stable during the period.
Mondi announced that an investment programme to upgrade its equipment would contribute slightly less to its operating profits than previously forecast - some €50, down from €60m - as installation would take longer than expected. The company is investing up to €450m this year to expand and modernise some of its production facilities.
Mondi employs around 25,000 people across more than 30 countries, and in 2015 had revenues of €6.8bn. Shares in the company, which is listed in London and Johannesburg, dipped more than 3pc this morning to around £16.05.