Mathabo Le Roux
9 July 2009
Johannesburg — MORE jobs are set to be lost in the manufacturing industry, in the face of plunging demand and falling prices as the global recession wreaks havoc on the sector.
Paper manufacturer Mondi is set to cut back its output, taking several hundred jobs with it, as dire market circumstances persist, putting a severe strain on product prices and margins.
The jobs under threat represent just more than 4% of Mondi's total workforce in SA.
The company said yesterday it was in talks with workers and unions at its Merebank facility about the mothballing of the plant, which will take 120000-ton annual capacity out of commission. As many as 240 workers may lose their jobs as a result of the closure.
The group said it would offer support to its employees, in addition to severance packages, subject to consultation with union representatives.
In its European market, Mondi has already taken 127000 tons of production (about 12% of capacity) out of the market in the last quarter to match depressed demand.
It is also in the process of mothballing its Stambolijski mill in Bulgaria and its Dynas PM5 paper machine.
The action that the company is taking will also include the reorganisation of the newsprint and paper production operations, it said, in response to the strong decline in sales margins and low market prices in the fine paper business and a reduction in international selling prices of newsprint.
Its remaining two fine paper machines had sufficient capacity to meet market demand in these conditions, Mondi said in an announcement yesterday.
Mondi has been holding up relatively better than its peers in these tough times, last month announcing it had maintained operating profit levels in the first quarter of this year, if only barely.
Other cost cutting measures were also under way, which include exiting high cost operations, reducing capital expenditure and focusing on capital management.
Shares in the company yesterday traded almost 1% higher at R33,11.
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