FTSE 100: 3 best shares to buy 

These FTSE 100 stocks have the makings of long-term performers, and even now their numbers look relatively good. 

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In its half-year results released today, Mondi (LSE: MNDI) saw a marginal decline in profits. The overall picture for the FTSE 100 paper and packaging provider is still quite healthy. But this number still stood out because it has flagged inflation as a source of concern in the recent past, since it can directly eat into profits for companies with limited or no pricing power.

Inflation’s effect on Mondi

The release consistently says that the impact of inflation has been met with cost reductions. At the same time, I could not help but notice some increase in expenses in its income statement compared to 2019, even though the revenues were slightly less. 

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These include “variable selling expenses” and “other net operating expenses”, which make up much of the difference in pre-tax numbers. At €461m, Mondi’s pre-tax profits may just be slightly lower than in 2020, but they are a whole 32% below those for 2019. I think a comparison with 2019 is important because 2020 was as atypical a year as they come. 

For this reason, I am interested in seeing how the inflation story plays out over the rest of the year. This is especially so because Mondi has said that its input costs rose. The company itself seems quite confident about handling it now, though, which is a positive. 

Positive long-term story

Also, I like the fact that Mondi’s long-term story is still intact. This is evident from the fact that both its corrugated packaging and flexible packaging segments are growing. Not only are they the biggest revenue generators for Mondi, they are closely linked to e-commerce demand. This indicates that digital sales are still going strong. In fact, the company has approved further investment in corrugated plants to meet this e-commerce demand. 

This is further corroborated by the half-year numbers from another FTSE 100 packaging solutions provider for online sales, Smurfit KappaThe company reported an 11% increase in revenue from the year before. The third of such FTSE 100 companies, DS Smith, also reported growth in corrugated box volumes in its annual results for the year ending 30 April 2021. 

For this reason, I think all these stocks could be great long-term buys for my portfolio. I believe in the potential of digital sales to increase far more, and we have already got a sense of this in the lockdown. 

What I’d do now about the FTSE 100 stocks

For now, though, I am cautious about two aspects. One, in a bid to manage higher costs, selling prices have been increased. This can potentially impact sales in the second half of the year, which in turn can impact share prices. Two, their share prices have already run up a fair bit in the past year. So, I do not think that the same pace of increase will continue in any case. 

Realistically, if I buy these three FTSE 100 stocks, returns on capital in the next year or so could be muted. But over the long-term I think they may well be among the best shares for me to buy.

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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended DS Smith. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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