Mondi pins its hopes on ecommerceSheng
One of the world’s biggest paper and packaging companies expects booming demand for cardboard boxes and packing for ecommerce to offset a permanent decline in the use of office paper as more people work from home.
Andrew King, chief executive of Mondi, said that online shopping had been on an upward trend even before Covid-19 but had “accelerated . . . through the last year and I certainly don’t see that going away”.
“When bricks-and-mortar retailers are allowed to reopen we will see some adjustment, but it is very clear that people have learnt to buy online and that is not going to reverse,” he said.
Shares in the FTSE 100 company have risen by 9 per cent in the past year, driven by demand for cardboard packaging, as well as paper and plastic bags.
Other parts of the business have fared less well. The market for office paper and schoolbooks, which account for 24 per cent of Mondi’s revenues according to its half-year results published in June, “was not expected to recover to pre-crisis levels,” he said.
“The slow structural decline in demand for paper was already under way before the pandemic but we are well positioned and our growth focus is clearly now on our packaging business.”
Mondi this week agreed to buy a 90 per cent stake in Turkish packaging company Olmuksan for €66m, and Mr King did not rule out further acquisitions in the coming year. “We continue to invest to grow our business organically but if we can supplement that with inorganic growth we will continue to do that.”
He dismissed concerns that an oversupply of packaging risked flooding the market and pushing down prices that have been in decline since 2018.
“The supply side has reacted to some extent but I think over the medium term that is digestible in a growing market,” he said.
The implementation of China’s “National Sword” environmental policy will also help. A ban on the import of waste paper, one of the raw materials of cardboard packaging, means that excess supply of the finished product from elsewhere will probably be absorbed by the world’s second-largest economy. Analysts at Jefferies estimate that Chinese imports of cardboard packaging from western Europe increased by 230 per cent last year.
Mr King admitted that the packaging industry remained “exposed” to the economic cycle but said that a number of “strong growth drivers” meant the group could cope with the uncertainty created by the pandemic.
Mondi is likely to benefit from the move away from plastic packaging and is already Europe’s largest producer of paper alternatives. “Ecommerce is very topical at the moment, but a longer term and frankly more powerful initiative is the sustainability issue, which presents us with a fantastic opportunity,” he said.