Shares in packaging and paper group Mondi fell sharply on Monday after the company issued a cautionary outlook, citing weak demand and falling prices across pulp and paper grades.
The warning rattled investor confidence in the paper and packaging sector, dragging Mondi shares to a 12-year low.
Mondi's third-quarter underlying core profit fell to €223 million, down from €274 million in the second quarter.
The company said volumes remained subdued and selling prices declined in most grades, particularly in fine paper and corrugated segments.
Citing fragile demand, Mondi described the trading environment as challenging and flagged continued weakness for the rest of the year. CEO Andrew King told analysts that demand for packaging "has not become worse, nor has it become better," and that weakness in the fine paper market persisted.
Industry peers hit by negative sentiment
Mondi's share price dropped more than 17% in a single session, reaching its lowest level in over a decade.
The rout also weighed on global peers: European firms such as Enso, UPM and SCA fell, while U.S. names including International Paper and Smurfit WestRock dropped by around 4% in premarket trading.
Analyst response and stock downgrades
In a note published ahead of trading, J.P. Morgan said it was "hard to see the corrugated market improving from these trough levels in the next couple of years," and downgraded Mondi from "overweight" to "neutral."
Jefferies, meanwhile, adjusted its forecast, projecting 2025 underlying core earnings between €1 billion and €1.05 billion--below the consensus of €1.16 billion compiled by LSEG.
Restructuring and investment delays under cost pressure
Facing a weak backdrop, Mondi announced a reorganization: it will operate under two business units rather than three, folding the uncoated fine paper segment into its corrugated operations.
The company also said it would delay investment in a new paper machine at its Canadian pulp mill as it shifts focus to cost cutting and cash generation.
Having completed much of its expansion cycle, Mondi now plans capital expenditure to concentrate on maintenance and efficiencies, rather than large-scale growth projects.
Outlook for paper and packaging sector remains uncertain
Mondi's warning underscores continued strain across the paper and packaging industry. Oversupply in key markets, weak industrial demand in Europe, and aggressive pricing competition are pressuring margins and volumes across the sector.
Unless consumer and manufacturing confidence recover, analysts see little room for near-term relief. J.P. Morgan's outlook suggests limited upside for corrugated demand in the short to medium term.
Market participants will be watching upcoming earnings updates and any signs of stabilization in demand and pricing.
