FY19 Results on 27 Feb: Mondi 2019 EBITDA cons is €1,648m (Jeff: €1,643m), which implies €371m 4Q EBITDA (3Q: €383m) driven by lower avg QoQ prices. We are c1% below 2019 cons EBIT/EPS of €1,213m /€1.70, respectively. However, we see limited investor focus on 2019 numbers and more on the 2020 expectations, where the benefits of lower mill maintenance (c€40m), capex projects (c€40m) & profit improvement initiatives will be offset by impact of lower avg YoY pricing in key pulp/paper grades and lower FV forest gains.
Into 2020 sell side EBITDA cons at €1,531m (Jeff: €1,520m), but buy side expectations are already 3-4% (or €50m) lower at approx €1,480m due to greater impact from lower niche sack/kraft & industrial bag prices, Finland strike & softer macro driven by Corvid-19 uncertainty. Positively though we expect modest 2020 cost inflation and see potential containerboard price hikes (note: here & here) supporting expectations.
We expect Mondi to provide a measured qualitative 2020 outlook given the wider macro uncertainty. However, with incremental contributions from major capex projects, its structurally advantaged low cost asset base (c85% of capacity in lowest two cost quartiles), strong balance sheet (1.4x net debt to EBITDA) and robust business model we expect Mondi to reiterate that it is uniquely positioned to leverage key industry trends of sustainability (plastic to paper), ecommerce and that it continues to look to the future with confidence.
Long Live the King:
Andrew King is a well respected CFO (Mondi CFO since 2008) and we believe that his appointment as CEO with effect 1 Apr-20 is good for the company as it removes uncertainty around the stock in terms of strategic continuity & operational delivery (note: here).
Our overall investor feedback has been one of positive reassurance, as Mr King knows the business better than any external candidate, he is a reliable safe pair of hands and many investors who know the company well think that the market should not underestimate the supportive buy-in from Mondi internally, for Mr King to lead the business into the next decade. We look forward to hearing the vision for Mondi under his leadership.