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Mondi Predicts Higher Orders on Rising Demand for Packaging

Feb. 28 (Bloomberg) -- Mondi Ltd., South Africa’s biggest packaging and paper company, expects higher orders in 2014 as trading improves across its markets.

“There is a more favorable environment,” Mondi Chief Executive Officer David Hathorn said in a phone interview today. “We are now seeing demand recovering. An upward momentum in pricing started to build, which is encouraging.”

Better trading conditions are prompting the company to negotiate prices with clients, boosting prospects of higher earnings, Hathorn said. Operating profit excluding exceptional items rose to a record of 699 million euros ($959 million) for the 12 months ending December, according to a statement.

“In the packaging paper business, we’ve again seen demand improvements,” Hathorn said. “This has lead us to have price-increase discussions” with customers of both kraftliner and kraft types of paper.

Mondi has expanded operations into China and Iraq as it focuses on emerging markets to boost earnings. The company is increasing its focus on consumer packaging in order to meet demand from clients such as household goods and foodmaker Procter & Gamble Co.

The Johannesburg-based company acquired 93.4 percent of Nordenia International AG from Oaktree Capital Management for 240 million euros in 2012, boosting capacity of consumer-packaging production. Consumer-goods wrapping accounted for half Mondi’s revenue in 2013. Total sales rose 12 percent to 6.48 billion euros in the period.

Difficult Environment

“It is particularly pleasing to see how well the integration of the businesses acquired in late 2012 has gone, with synergies delivered in line with target,” Hathorn said in the earnings statement. “Despite a difficult trading environment, the new business segment of consumer packaging has demonstrated its resilience.”

Mondi shares traded 5.1 percent higher at 193.30 rand by the market close in Johannesburg, the highest since the company’s listing in July 2007. The shares have gained 7.6 percent this year compared with a 2.3 percent rise in the 165-member FTSE/JSE Africa All Shares Index.

To contact the reporter on this story: Kamlesh Bhuckory in Johannesburg at kbhuckory@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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