Mayr-Melnhof's half-year results down by a quarter despite booming demand


Mayr-Melnhof's results in the first half-year were impacted by high input costs. Price increases were implemented, but furhter hikes are to follow in the third quarter.

Austrian board and packaging manufacturer Mayr-Melnhof (MM) was able to slightly increase its sales in the first half of the year compared to the same period 2020. The group said it continued to record high capacity utilisation in both divisions with good demand for cartonboard and cartonboard packaging.

However, this was offset by a significant weight on results owing to the high costs for raw materials, energy and logistics. The time lag between the rapid cost increase and the implemented price increases had led to a major squeeze in operating profit in the cartonboard business, said the company. MM therefore wants to introduce a further price hike for cartonboard as of October to compensate the cost increases the best possible.

By contrast, business development in the packaging division was reportedly more robust. Necessary restructuring measures at a packaging site in Germany, however, resulted in one-off expenses of around €26m.

The groups's sales in the first half of 2021 increased by 1.8 per cent year-on-year to €1.29bn. Operating profit, however, fell by a quarter compared to last year to reach €92.1m while net profit declined by 27 per cent to €62.2m.

MM feels that it has structurally strengthened its competitiveness through the acquisitions of the Kwidzyn mill in Poland, and Kotkamills in Finland. The group also acquired two new businesses "Kraft Papers" and "Uncoated Fine Papers". In line with the expanded product portfolio, the division MM Karton has been renamed MM Board & Paper. Part of the transformation was the disposal of the smaller cartonboard mills Eerbeek, Netherlands, and Baiersbronn, Germany.

Outlook: Cost increases continue as demand remains strong

Along with ongoing good demand, the strong cost inflation on the procurement markets has been persisting also in the third quarter so that margins remain under pressure despite improved selling prices., MM says in its financial report.

Although recovered paper prices were stable at a high level at the beginning of the summer, it is unclear whether this will result in price reductions. Prices reportedly continue to rise for many other input factors, though, which is why MM intends to further hike cartonboard prices.

On the other hand, higher cartonboard prices mean new cost weight for MM Packaging, which can only be passed on with a time lag.

For the acquisitions of Kwidzyn and Kotkamills, the positive contribution from the current result will be offset by one-off expenses this year due to the capitalisation of high order backlogs and inventory valuation in the course of initial consolidation. As a result, the new mills' earnings will only be fully reflected from 2022 onwards.

Booming demand on cartonboard markets

Demand on the European cartonboard markets remained characterized by strong order activity during the first half of 2021, says MM. As a result, the division's average order backlog of 194,000 tons was significantly higher than in the first six months of 2020 (115,000 tons). At 99 per cent, the division's capacities were almost fully utilised. Price increases for cartonboard were implemented effective from the second quarter or mid-year.

Nevertheless, both the volume produced and sold were below the previous year's level at 831,000 t and 854,000 t, respectively. This as in particular attributable to the closure of the cartonboard machine at the Hirschwang site during the fourth quarter of last year, said the company.

The divisions's sales in the first half were higher year-on-year due to increased selling prices and stood at €556.6m. In contrast, the operating profit declined by 44.3 per cent to €33m.

MM Packaging struggles with supply bottlenecks

Demand on the European folding carton markets showed an equally positive picture in the first half of 2021 as for cartonboard, according to MM. At the same time, however, all business areas have been affected by a significant increase in input costs such as cartonboard and paper, inks, coatings, and packaging materials. In addition, suppliers are increasingly experiencing supply bottlenecks, says the group. 

At €791.4m, the division's sales were close to the prior-year figure of €793.6m. The current operating profit was reduced to €59.1m, mainly due to restructuring expenses. Tonnage processed increased slightly from 420,000 t to 424,000 t.

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