Mondi expects to sell Mondi Syktyvkar mill within 12 months

MOSCOW. Aug 4 (Interfax) - Austria's Mondi Group plc said it plans to take all necessary action to sell its largest and as of recently only Russian forestry asset, JSC Mondi Syktyvkar LPK (Mondi Syktyvkar).

Mondi Syktyvkar continued to satisfy the criteria to be classified as an asset held for sale, and there are currently several potential buyers for the mill, Mondi said in its report for the first half of 2023.

"The Board remains committed to divest Mondi Syktyvkar, with the sale process ongoing including the receipt of conditional offers from a number of potential buyers. While the available information suggests a range of fair values, the assets of the Syktyvkar mill were impaired by 97 million euros, net of related tax, in the six months ended June 30, 2023 to their estimated fair value less costs to sell," Mondi said.

The company has hired an independent appraiser, but the ultimate price of the sale, as well as the terms of payment, such as the currency and the so-called 'exit tax,' among others, must be approved by the Russian government commission on foreign investment.

The situation is "highly complex within an evolving political and regulatory environment and accordingly, the valuation of Syktyvkar, which is based on a range of potential outcomes, is a key source of estimation uncertainty," the company said.

Mondi earlier attempted to sell Mondy Syktyvkar to Augment Investments Limited, a company close to Viktor Kharitonin's Pharmstandard . Mondi announced in August 2022 that it had signed an agreement with Augment to sell the mill, which produces Snegurochka office paper, among other things, for 95 billion rubles, which was about 1.5 billion euros at the time.

But the agreement expired in May 2023 as the companies could not secure permission for the deal from the government commission for control over foreign investment. As a result, Mondi announced in early June that it had terminated the deal and intended to find new buyers.

Mondi completed the sale of its Russian packaging business to Gotek Group on June 30, 2023 and received 30.4 million euros in proceeds from the deal in its Austrian bank account. This business consisted of three mills: Mondi Pereslavl LLC, a producer of food and non-food packaging in Yaroslavl Region; Mondi Aramil LLC in Sverdlovsk Region, Russia's only plant with full-cycle production of flexible polymer food, non-food and industrial packaging; and Mondi Lebedyan LLC, a corrugated cardboard packaging producer in Lipetsk Region.

Mondi Syktyvkar is one of Russia's largest producers of pulp and paper products, with annual output of about 1.2 million tonnes. The mill produces office and offset paper, newsprint, packaging cardboard and dry commercial pulp. Mondi Syktyvkar closed 2022 with net profit up 18% to 22.5 billion rubles on revenue up 9% to 78 billion rubles.

In the first half of 2023, Mondi's Russian business generated 535 million euros in revenue for the group, up 3% from a year earlier. But it posted an after-tax loss of 4 million euros, compared to a profit of 148 million euros in the first half of 2022. The result includes the impairment charge of 97 million euros on Mondi Syktyvkar, a loss on disposal of business of 46 million euros and a foreign exchange loss of 28 million euros.