Russian Investigation Of Mondi Plc Could Spell Trouble For Imperial Tobacco Plc & Polymetal International Plc

My take on Russia’s investigation of Mondi Plc (LON: MNDI) and what this could mean for Imperial Brands Plc (LON: IMB) & Polymetal International Plc (LON: POLY)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Share in Mondi (LSE: MNDI) fell sharply this morning after management responded to reports that Russia’s Federal Antimonopoly Service (FAS) has opened an investigation into some of its pricing practices which, investigators believe, violate federal competition laws.

The Russian authorities announced the investigation late last week via a press release, although, according to this morning’s response by Mondi, investigators are yet to provide formal notification to management. Investors will no doubt now be wondering whether this is a genuine and well-founded competition investigation or an act of political hostility.

Details & Implications for Mondi

The FAS alleges that Mondi has attempted to fix a “monopolistically high price” for  the offset printing paper it sells in Russia, after the London based business raised its selling prices by “roughly 50%” during the last year. According to the initial release there is a considerable discrepancy between price increases for the inputs required to make offset paper and the rate at which prices have been increased by Mondi.

Perhaps the fact that one individual company has enough of a grip on the paper market for it to be able to raise prices so sharply is suggestive of an undesirable situation from a competition standpoint. However, the prospect of Russian authorities involving themselves in the pricing of any private company’s products will do little to allay the concerns of western investors in Russia.

Regardless, it seems that for the time being the authorities have found their mark and are now busy lining up Mondi in their sights. The FAS has stated that it will consider all “case circumstances and arguments by the respondent” but exactly how the group gets out of this without it costing a small fortune, or worse, still remains to be seen.  

Imperial Tobacco & Polymetal

It isn’t unreasonable for nation states to act on concerns over competition and only time will tell whether this is a serious complaint or if it is just all politics being played out underneath the table.

However, Russian state authorities do not have a fantastic record when it comes to the fair treatment of foreign companies and, if Mondi is a sign of the times to come, investors would do well to consider the implications for their stakes in Imperial Tobacco/Brands (LSE:IMB) and Polymetal (LSE: POLY).  

Imperial’s largest market is Russia. It has a 9.2% market share and sells more cigarettes in this country than in any other, including China. Should concerns spread about the overreaching hand of the Russian authorities, then investors could soon start to discount the shares.

Equally, Polymetal is one of the region’s largest gold and silver miners, although it is listed in London. It holds the largest silver deposit in the world and has assets right the way across both Russia as well as Kazakhstan. Should the political winds cool even further shareholders may also need to consider the potential for the market to begin discounting these shares as well.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Skinner has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »