Mondi points to local energy dependency from Russia mill amid business activity criticism
14 Mar 2022 --- Mondi is making clarifications about its continued business dealings in Russia after coming under criticism for refusing to join an industry-wide divestment from the country after its invasion of Ukraine.
Recently, paper and pulp manufacturers, along with forest standards agencies, began retracting their investments and approvals for Russia’s multi-billion-dollar wood industry as part of a non-governmental assault on the nation’s economy.
Mondi, however, remains involved – sourcing material from a wholly-owned integrated pulp, packaging paper and uncoated fine paper mill located in Syktyvkar, in the Komi Republic.
The group has shut down its operations in Ukraine as bombardments threaten the safety of civilians throughout the country. Calls to boycott the company were spread online, with other packaging players saying only major companies like Mondi can truly make a difference while using Russia as a source of profit is no longer ethical.
Mondi’s operations in Russia represented 12% of the group’s revenue by location of production in 2021 (roughly US$1,015 million) and generated around 20% of the company’s underlying US$1.65 billion EBITDA over the last three years. The company has operated in Russia for over 22 years.
Domestic and foreign markets
In a previous statement, Mondi quickly asserted the Syktyvkar mill primarily serves the Russian domestic market, and its facilities “have continued to operate through this time of heightened geopolitical tension.”
Calls to boycott Mondi have been issued online since its decision to maintain operations in Russia since the start of the Ukraine conflict.The mill, which does not receive any direct funding from Mondi, operates an integrated power plant providing a portion of the Komi Republic’s energy demand. The facility is the primary source of heat and warm water for the Ezhva district of Syktyvkar, which has a population of approximately 60,000 people, says a new Mondi statement.
“It [the mill] also provides other local community services such as wastewater treatment. The mill is legally required by the Russian authorities to provide the energy supply.”
However, while the Syktyvkar mill is currently operating, it is starting to see a number of operational constraints, including importing process chemicals, spare parts and other critical supplies. “While difficult to assess the ramifications in what remains a fast-moving situation, this may significantly impact the operation of the mill,” reads the statement.
Assessing all options
Mondi says it is “profoundly concerned” about the invasion of Ukraine and is “shocked by the humanitarian impact.”
“We express our deepest sympathy to all those impacted by the ongoing hostilities, adding our voice to those calling for an urgent cessation.”
The company is now announcing it will give €1 million (US$1,0940) to support the United Nations World Food Programme’s emergency operation to provide food assistance for people impacted by the conflict.
Mondi’s board of directors is also now assessing all options for the group’s interests in Russia, it says, including any form of legal separation.
“This does not mean, or imply, that Mondi is planning, or initiating, any liquidation or bankruptcy proceedings in relation to any of its Russian subsidiaries or assets,” it says.
By Louis Gore-Langton
