Paper and packaging giant Mondi takes a major step towards full Russia exit
While the sale of Mondi’s three Russian packaging operations to the Gotek Group is a significant step towards the company exiting Russia, it retains a footprint in the country in the form of Mondi Syktyvkar, following a failed sale to Augment Investments.
Following its decision to exit all Russian operations in May last year, paper and packaging giant Mondi has confirmed the sale of its three Russian packaging operations to the Gotek group for RUB1.6-billion and net proceeds of €30.4-million.
The three packaging converting operations include a corrugated solutions plant and two plants for consumer flexibles, producing a range of packaging solutions for the domestic Russian market. Mondi will absorb a loss of about €70-80-million on the deal.
The buyer, Gotek Group, is a leading Russian packaging producer that is headquartered in Moscow and employs about 2,200 employees. While the sale is a significant step towards the company exiting Russia, it retains a Russian footprint in the form of Mondi Syktyvkar, following a failed sale to Augment Investments.
Augment was unable to achieve the necessary approvals, which led to the termination of the deal by Mondi earlier this year. However, management has indicated that it remains committed to the process and “continues to assess all alternative divestment options”.
Syktyvkar is a wholly owned integrated pulp, packaging and uncoated fine paper mill in Syktyvkar. The mill has about 4,500 employees and provides uncoated fine paper and containerboard to the domestic Russian market.
For the six months to the end of June 2022, Syktyvkar reported Ebitda of €225-million. In the group’s annual report for 2022, chief executive Andrew King says the divestment of the Russian assets is expected to have “minimal effect on future growth prospects outside of Russia”.
Mondi has already ramped up production with a new 300,000 tonne per annum containerboard machine in Slovakia, which produces a similar (to Syktyvkar) product, enabling it to continue to serve customers outside Russia.
“Importantly, our (€1-billion) expansionary capital investment programme, which was first formulated before the war in Ukraine, is unaffected by the decision to divest from Russia,” King says.
Some of the expansion projects in the past six months have included:
- The upgrade of the Dynäs pulp and paper mill in Sweden to improve energy and production efficiency. The improvements will include the installation and upgrade of a new cooking plant and bark boiler, which is expected to improve the mill’s energy efficiency. Upgrades will reduce air and water emissions while resulting in better wood utilisation at the mill. Construction is expected to be completed by the end of 2026.
- The €40-million acquisition of the Duino mill near Trieste in Italy.
- A €400-million investment in a new paper machine at the flagship Štětĺ mill in the Czech Republic.
Mondi says the net proceeds from the sale of all the Russian assets will be distributed to shareholders as soon as reasonably practicable following receipt, once the company’s exit from Russia has been completed. DM