Packaging firm Mondi hikes prices to tackle Iran war costs, profit drop

By Neeshita Beura and Raechel Thankam Job

April 24 (Reuters) - Paper and packaging group Mondi MNDI.L said it would hike prices after a first-quarter profit decline and warned energy and raw material costs due to the Iran war would remain "higher for longer", sending its shares to a more than 13-year low.

Mondi's warning echoes that of Suzano SUZB3.SA, the world's largest pulp producer, which said that prices for toilet paper, tissues and diapers will rise if the war continues.

The industry was slowing even before the Iran war began at the end of February, triggering energy price rises and supply chain disruptions due to the closure of the Strait of Hormuz.

Mondi, which has operations in Europe, North America and Africa, said its price increases, which will take full effect from the third quarter, would help restore its profitability.

CEO Andrew King said Mondi was seeing cost increases in paper, its largest input, as well as in plastic resin, which is used to make pouches and laminated flexible packaging.

"We're seeing the worst of it right now," King told analysts, adding: "But as we see these price increases, we'll be confident we can restore and improve certainly the margins from where we are today."

He did not specify how much prices will rise by.

Mondi, which supplies paper bags, containerboard and printing papers to sectors including manufacturing and e-commerce, has been axing jobs over the last year as it reshapes its businesses and closes some plants to cut costs.

Shares in Mondi fell as much as 9%, the biggest drop in the FTSE 100 .FTSE. The stock has lost nearly a third of its value over the past year.

Underlying core profit fell by nearly 27% year-on-year to 212 million euros ($248 million) in the first quarter ended March 31, including gains from the revaluation of some of Mondi's forest assets.

($1 = 0.8563 euros)