By DhanushVignesh Babu and Yadarisa Shabong
(Reuters) -Paper and packaging company Mondi warned on Monday of weak demand and falling prices across most pulp and paper grades, sending shares of the British company and its global competitors lower.
Despite consolidation over the past two years, the paper and packaging industry is still grappling with intense competition amid a longer-term decline in print paper consumption.
“Challenging trading conditions are expected to persist for the remainder of this year as demand-side confidence remains fragile, key markets remain in oversupply and current selling prices are lower than third quarter average selling prices,” Mondi said.
Shares in the company tumbled more than 17% to a 12-year low, headed for their biggest one-day percentage drop ever and the second-biggest faller on the STOXX 600 index.
European rivals including Enso, UPM and SCA were also lower while International Paper and Smurfit WestRock dropped between 4%-5% in U.S. premarket trading.
“Looking critically at the market dynamics right now, it is hard to see the corrugated market improving from these trough levels in the next couple of years,” J.P. Morgan said in a note on Sunday as it downgraded Mondi’s stock rating to “neutral” from “overweight”.
Mondi, which operates in more than 30 countries, said it is reorganising into two business units from three and will delay a planned investment in a new paper machine at its Canadian pulp mill as it focuses on cost cuts and cash generation.
Third-quarter underlying core profit fell to 223 million euros ($260.35 million) from 274 million euros in the second quarter.
Jefferies said that points to 2025 underlying core earnings of 1 billion to 1.05 billion euros, below the average analyst estimate of 1.16 billion euros compiled by LSEG.
($1 = 0.8565 euros)
(Reporting by DhanushVignesh Babu and Yadarisa Shabong in Bengaluru; Editing by Tasim Zahid, Kirsten Donovan)
