With paper and packaging prices rising and supply tightening following a wave of mergers in the sector, the major capital expenditure plans of Johannesburg and London-listed Mondi (MNDI) should prove to be highly profitable. What's more, analysts think strong cash generation could also fund a special dividend further down the line.
- Potential for a special dividend
- Solid track record
- Investment to boost market-leading ROCE
- Tightening supply and rising demand spur price rises
- Favourable commodity prices
- Vulnerable to commodity price swings
- Currency volatility
Despite a sluggish European economy, packaging giant Mondi posted higher sales from four of its five operations in the six months to the end of June and underlying operating profit surged 30 per cent to €490m (£345m). That impressive performance means Mondi has now delivered 20 per cent compound annual EPS growth since listing in 2007. Normally, you'd have to pay a premium for such success and encouraging prospects, yet the recent equity market sell-off has left Mondi's shares trading on an attractive forward price-earnings (PE) multiple of just 13 times.