8th June 2015
Graham Spooner, investment research analyst at The Share Centre explains why he is tipping blue-chip international packaging and paper group Mondi as a ‘buy’…
Global international packaging and paper group Mondi is involved at every stage of development, from growing the trees through to the final product. Demand for packaging continues to increase around the world, and with product prices holding up well and manufacturing costs remaining relatively low, we believe this company is an attractive one for medium risk investors.
In a recent trading update, the group reported a 29% rise in first quarter operating profit to €236m, a result of lower costs, volume growth, acquisitions and price increases. Investors should acknowledge that due to these impressive figures, the CEO is confident of making further progress in the year ahead.
The company has recently seen energy as well as chemical costs fall. Additionally, it has been investing in new and existing plants, leading to improved efficiency and lower costs. As a result, profit margins have improved to 12% and net debt has fallen.
Furthermore, Mondi have a wide geographic spread and product diversification, which along with its ongoing efficiency programme, is good news for investors.
In 2013 the group moved into the FTSE 100, which may have come as a surprise to some FTSE followers, as this is not a well-known company. However, we believe Mondi deserves to have a higher profile and the shares, which are up 15% from our February recommendation, remain a ‘buy’ for investors seeking both income and growth.