S&P Downgrades Mondi PLC to ‘BBB+’ on Weaker Credit Metrics and Profitability Pressure

S&P Global Ratings downgrades Mondi PLC to ‘BBB+’ citing lower EBITDA and higher debt. Stable outlook reflects expectations for 2026 recovery as market conditions improve.

Downgrade Reflects Declining Earnings and Rising Debt

S&P Global Ratings has lowered Mondi PLC’s long-term issuer credit rating to ‘BBB+’ from ‘A-’, citing deteriorating credit metrics. The outlook remains stable.

The agency pointed to a sharp fall in adjusted EBITDA to €1 billion for the twelve months to June 2025, compared with €1.9 billion in 2023. This decline has been compounded by increased debt issuance over the past two years.

Factors Behind the Downgrade

H3: Market and Pricing Pressures

• Excess containerboard capacity has pushed selling prices lower.
• Demand from both industrial and consumer end-users has weakened.
• Declining sales of uncoated fine paper have added further strain.

Volume and Cost Headwinds
Mondi saw material volumes fall in 2023, while cost increases further squeezed margins and profitability.

Debt Levels and Cash Flow Strain

With cash generation under pressure, Mondi financed part of its capital expenditure, dividend payments, and acquisitions through new debt.

H3: Rising Leverage

• Adjusted net debt rose by €1.5 billion between June 2023 and June 2025, reaching €2.8 billion.
• By year-end 2025, S&P forecasts debt to EBITDA slightly above 2.0x and FFO to debt at roughly 37.6%.

Liquidity Assessment Revised
S&P revised Mondi’s liquidity profile from “strong” to “adequate”, anticipating sources of liquidity will exceed uses by about 1.2x over the next 12 months.
This includes the mandatory repayment of €600 million notes due April 2026.

Outlook Remains Stable — Recovery Expected in 2026

Despite the downgrade, S&P expects Mondi’s credit metrics to improve starting 2026, supported by:

• Reduced expansionary investments
• No large debt-funded acquisitions
• EBITDA growth from higher selling prices and volumes
• Cost savings
• Full-year contribution from the Schumacher acquisition

Capital Expenditure Trends
Capex is forecast to decline:

• €975 million (2024) → €800 million (2025) → €650 million (2026)
  Down from €883 million in 2023.

Free Operating Cash Flow
S&P projects positive free operating cash flow from 2025 onward, though €700 million in new debt issuance this year will weigh on metrics.

Investor Takeaways

• Credit Quality: Mondi remains investment-grade at ‘BBB+’, but leverage is higher and profitability is weaker than in previous years.
• Recovery Drivers: 2026 EBITDA growth, market price stabilization, and reduced capex are key to ratings stability.
• Risk Factors: Prolonged demand weakness, higher costs, or additional debt-funded expansion could pressure the rating further.