Mondi shares tumbled more than 7% on Friday after the paper and packaging group reported a sharp decline in first-quarter earnings and warned that the US-Israeli war on Iran and Lebanon had introduced fresh volatility into its operating environment. The FTSE 100 company, which has seen its share price fall more than 60% over the past five years, said it was raising prices and cutting 450 jobs this year as part of a broader cost-reduction programme that also includes plant closures. At 11:45 GMT, the stock traded at 780.40 pence, down 61.40 pence or 7.29% on the day.
Underlying core earnings for the first quarter came in at €212 million, a sharp decline from €290 million recorded in the same period a year earlier.
The company attributed the drop to persistently challenging market conditions, which have been exacerbated by the Middle East conflict. Mondi stated that the war had further increased volatility in an already complex operating environment, driving up costs for energy, raw materials, and logistics. The group expects the full impact of its price increases to take effect in the third quarter of this year.
Analysts noted that Mondi’s heavy exposure to rising input costs has placed significant pressure on profitability. Russ Mould, investment director at AJ Bell, observed that there was no disguising the weaknesses in the company’s latest update. He acknowledged, however, that management deserved some credit for achieving an increase in volumes, suggesting that the business is making progress on factors within its control. Mould added that the immediate outlook indicated Mondi would need to run hard merely to maintain its current position.
The broader market context offers little relief. The FTSE 100 stood at 10,396.18 by late morning, while the FTSE 350 and FTSE All-Share indices were largely flat. The General Industrials sector, which includes Mondi, fell 1.46% to 6,838.63, reflecting broader weakness in industrial stocks sensitive to energy and commodity price fluctuations. Mondi’s struggles mirror those of other European packaging firms facing compressed margins as elevated energy costs in the wake of the conflict persist and demand for consumer goods remains subdued.
The company’s job cuts, affecting 450 roles over the course of the year, come alongside planned plant closures. Mondi has not specified which facilities will be shuttered, but the moves signal a significant restructuring aimed at protecting margins amid persistent inflationary pressures. The group’s reliance on natural gas for paper production makes it particularly vulnerable to energy price spikes, a vulnerability that the Iran conflict has acutely magnified as global energy markets remain tense. Logistics costs have also risen as shipping routes are rerouted away from conflict zones in the Middle East, adding further strain to an already pressured supply chain.