DAVY VIEW

The recent rally in the packaging sector has been driven, in our opinion, by increased confidence around the prospects for pricing. Mondi’s Q3 IMS and conference call confirmed that the demand environment in Europe continues to improve, driven by a number of structural factors. The CEO is “very confident” that the increase in containerboard prices is justified and will be implemented in full. The prospects for kraft paper price negotiations at year-end are also good. If prices increase, earnings forecasts will follow. We would be buying on any weakness in the sector this morning.