BANK OF AMERICA MERILL LYNCH PAN EUROPEAN PAPER & PACKAGING FORUM. 17 September 2013

Transcription

1 BANK OF AMERICA MERILL LYNCH PAN EUROPEAN PAPER & PACKAGING FORUM 17 September 2013

2 Agenda Mondi overview Operational overview Capital allocation Summary Appendices 2

3 Our journey since Mondi s demerger and listing Share price development (index) and annual underlying EPS (cent/share) Highlights Index (2 July 2007 =100) 250% 200% 150% 100% 50% 0% Cent/share Compound annual EPS growth of 20% Cash dividends paid of 0.6 billion In specie dividend distribution of 0.2 billion billion capital expenditure Disposed of non-core assets for a value of approximately 0.3 billion Approximately 1.6 billion spent on acquisitions Investment grade credit ratings (BBB-, Baa3) since October 2011 Mondi Plc FTSE100 Underlying EPS (RHS) (1) Distributed upon demerger of Mpact. 3

4 Repositioned business delivering strongly EBITDA ( million) and ROCE 1 (%) 13.6% 10.6% 9.2% 9.5% 7.6% 12.3% 15.0% 13.6% 14.8% 18.0% 16.0% Hurdle rate 13% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% H EBITDA ROCE % 2.0% 0.0% Key milestones: Mondi demerger & listing Corrugated packaging restructured & repositioned Swiecie RCB machine commissioned Europapier sold Hadera (25.1%) sold Syktyvkar modernisation completed Mpact demerged Swiecie minorities acquired Nordenia acquired Duropack plants acquired Aylesford sold (1) Average 3 year ROCE is arithmetic average. 4

5 Mondi today a focused packaging and paper Group Europe & International South Africa Packaging Paper Fibre Packaging Consumer Packaging UFP 2012 Revenue 1 1,896m 27% 30% 1,860m 1,167m 1,466m 702m 10% 9% 9% 21% 23% 29% 26% 8% 17% LTM ROCE% % 12.0% 10.1% % 12.8% Products (1) Pro-forma segment revenues, before elimination of inter-segment revenues, including Nordenia s full year 2012 revenues. (2) LTM as at 30 June (3) ROCE% has been adjusted for the Nordenia one-off costs and includes Nordenia from date of acquisition. 5

6 Our strategic pillars Achieve leading market positions Maintain and/or develop leading market positions in our core packaging and uncoated fine paper markets, with specific focus on higher-growth emerging markets Maintain a high-quality, low-cost asset base Maintain our low-cost, high-quality asset base by selectively investing in production capacity enjoying sustainable cost advantages Grow through customer focused development Develop markets and products aligned to our customer needs by developing products according to their requirements, increasing our exposure to more value added, innovative, technologically advanced products and by following our customers into high growth emerging consumer markets Continuous focus on performance Focus on performance through continuous productivity improvement and cost reduction, delivered through business excellence programmes and rigorous asset management We aim to exceed our hurdle rate of return on capital employed through the cycle of 13% 6

7 Our free cash flow priorities Maintain investment grade credit metrics Free cash flow priorities Selective capital investment opportunities (optimisation of asset base) Support dividends As appropriate M&A and/or increased shareholder distributions Future growth focused on faster growing packaging segments Continue to assess opportunities that are value enhancing to the Group 7

8 Growth priorities Group 2012 pro forma revenues (%) 1 Other 12% UFP 21% 48% Consumer exposed packaging Industrial packaging 19% Packaging Group 2012 sales by destination (%) Growth will be in packaging Within packaging, bias towards consumer exposed packaging A geographic preference for emerging markets Mature markets 50% 50% Emerging markets (1) Consumer exposed packaging includes containerboard, corrugated packaging, coatings and consumer packaging external revenues. Industrial packaging includes kraft paper and industrial bags external revenues. Others includes pulp, newsprint, energy, other external revenues. Includes Nordenia for the full year

9 Half year 2013 highlights Underlying operating profit and ROCE million 14.8% 13.4% 13.6% H H H ROCE % Earnings per share cents per share H H H Financial Record results: Underlying operating profit up 35% Underlying earnings per share up 60% Cash generated from operations of 431 million, up 21% ROCE of 14.8%, well in excess of through-the-cycle hurdle rate of 13% Operational Integration of acquisitions and related synergies on track Major capital projects on time and within budget 9

10 Performance drivers Focused on markets enjoying growth: Geographic exposure 50% of sales into higher growing emerging markets Product mix two-thirds of sales in packaging, typically enjoying structural growth Well invested asset base in regions enjoying low operating cost structures: 83% of upstream pulp and paper asset base in low-cost emerging markets A clear and consistent strategy, delivering a ROCE of 14.8% (last 12 months) Decentralised operating model with relentless focus on performance 10

11 The Mondi Way To create solutions for our customers success, delivering exceptional value for stakeholders in a sustainable way Leading market positions High-quality, low-cost asset base Customer focused development Focus on performance Purpose Strategy Operational Excellence People Development Sustainable Development and Safety Cutting Edge Products Customer Focus Mondi Diamond Dynamic Respectful Responsible Entrepreneurial Empowered Transparent Culture Passion for performance Caring Acting with integrity Values 11

12 Agenda Mondi overview Operational overview Capital allocation Summary Appendices Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 12

13 Packaging Paper million Underlying operating profit and ROCE 20.1% 18.5% 17.9% 14.2% 13.1% 10.8% Strong performance with ROCE of 20.1% Price increases in all containerboard grades Good production, particularly in Syktyvkar Benefited from lower input costs, particularly recovered fibre H H H ROCE % Underlying operating profit margin Logistics synergies realised from Corrugated plants acquisition No major maintenance shuts in the period all scheduled for H Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 13

14 Packaging Paper industry fundamentals Selling prices Price indexed vs 2007 opening levels Kraftliner White-top Kraftliner RCB/Recovered paper differential Virgin containerboard Supply side contraction and lower imports Average benchmark prices up 12% on H and 4% on H Recycled containerboard Improving pricing environment, but industry profitability still poor Average benchmark prices up 3% on H /t price increase announced to take effect from August 2013 Competitor activity Little impact from new Polish capacity as yet Closures announced in the UK Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 14

15 Packaging Paper industry fundamentals Selling prices Price indexed vs 2008 opening levels Kraft paper Pricing is stable Demand in Europe remains under pressure, offset by continued good export markets No significant supply side changes Sack kraft Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 15

16 Fibre Packaging million Underlying operating profit and ROCE 10.9% 12.5% 12.0% 5.0% 5.9% 4.8% Corrugated packaging Stable pricing and volumes Paper input price increases putting pressure on margins Benefited from 2012 acquisitions million H H H ROCE % Underlying operating profit margin Production volumes Industrial bags Growth in key overseas markets offsetting continued weakness in Europe Benefited from restructuring in southern Europe One-off gain of 3 million in H H H H H Industrial bags (000 units) - (LHS) Coatings (m²) - (LHS) Corrugated packaging (m2) - (RHS) Coatings Higher resin input costs Weaker volumes, mainly in automotive and building applications Volumes under pressure from new competitor capacity Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 16

17 Consumer Packaging million Underlying operating profit and ROCE % Integration progressing well Net synergy gains and additional cost reduction activities 10.8% 10.1% Partially offset by marginally lower sales volumes (pro-forma) 6.7% 6.5% 6.7% Closure of Lindlar plant on track H H H ROCE % Underlying operating profit margin 1 Underlying operating profit and ROCE% has been adjusted for the one-off costs of 14 million in H Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 17

18 Uncoated Fine Paper Underlying operating profit and ROCE million 16.7% 17.4% 15.7% 13.4% 13.8% 12.7% H H H ROCE % Underlying operating profit margin Strong operating performance with ROCE of 17.4% Volumes at similar levels to H Average selling prices slightly down on H driven by market mix and weak European demand Wood costs down Improved forestry management in Russia offsets inflationary cost pressures Higher pulp costs squeeze margins at Neusiedler - restructuring underway to improve competitive positioning All major maintenance shuts scheduled for H Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 18

19 Uncoated Fine Paper industry fundamentals Pulp and A4 B-copy prices Price indexed vs 2007 opening levels A4 b-copy /tonne Pulp (BHKP) /tonne (RHS) Demand Structural decline continuing in western Europe Demand growth still seen in emerging Europe and Russia Supply New capacity in Russia and France so far little market impact Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 19

20 South Africa Division Underlying operating profit, margin and ROCE 13.5% Improved result, with ROCE of 12.8% Domestic sales volumes increased Pricing 11.3% 12.8% Domestic price increases achieved 9.1% 9.6% Higher average export pulp and whitetop kraftliner prices 8.1% H H H ROCE % Underlying operating profit margin Gains from weaker rand Lower fair value gain on forestry assets Closure of 1 newsprint machine in Merebank and related restructuring Annual maintenance shut at Richards Bay mill planned for H Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division 20

21 Agenda Mondi overview Operational overview Capital allocation Summary Appendices 21

22 Major capital investments Description Progress Energy Projects Frantschach recovery boiler Richards Bay turbine Stambolijski turbine Syktyvkar bark boiler Finalisation of commissioning with start-up in H Start-up late H Start-up late H Completed Syktyvkar Pulp dryer tonne capacity Start-up H Štěti tonne capacity bleached kraft paper machine Start-up H Ružomberok Recovery boiler and improvements in chemical recovery and green energy Start-up H million of major capital investments on track 22

23 Agenda Mondi overview Operational overview Capital allocation Summary Appendices 23

24 Summary Strong financial performance Underlying operating profit up 35% ROCE of 14.8%, well in excess of Group s through-the-cycle target of 13% Integration of acquisitions and delivery of synergies on track Major capital projects on time and within budget Outlook Demand in Europe generally remains soft Increased uncoated fine paper capacity a concern All major annual maintenance shuts in H2 estimated million impact on operating profit Expected continuation of good pricing environment in packaging grades We remain confident of delivering in line with our expectations 24

25 Agenda Mondi overview Operational overview Capital allocation Summary Appendices 25

26 Operating financial highlights million H H H % change vs H % change vs H Group revenue 2,819 2,971 3,342 19% 13% Underlying EBITDA¹ % 13% % Margin 15.5% 16.5% 16.6% Underlying operating profit² % 21% % Margin 9.6% 10.2% 11.0% Group ROCE³ 13.4% 13.6% 14.8% 1 Underlying EBITDA is operating profit before special items, depreciation and amortisation 2 Underlying operating profit is operating profit before special items 3 Group return on capital employed (ROCE) is an annualised measure based on a 12-month rolling underlying operating profit plus share of associates net earnings divided by average trading capital employed before impairments and adjusted for major capital projects not yet commissioned 26

27 Variance analysis million Underlying operating profit development (24) (3) (11) H Sales volume Net positive improvements price variances Increase in variable costs Lower fixed costs Currency effects Acquisitions and disposals Lower fair value gains on forestry Writedown of green energy credits Net other impacts H

28 Divisional underlying operating profit¹ million Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division H H H Underlying operating profit is operating profit before special items 28

29 Financial review million H1 H2 H % change vs H % change vs H Underlying operating profit % 21% Net finance costs (55) (55) (57) -4% -4% Net income from associates (1) (4) 1 Underlying profit before tax % 28% Tax before special items (43) (47) (56) -30% -19% Total non-controlling interest (24) (11) (15) 38% -36% Underlying earnings % 29% Special items (after tax and minorities) 4 (96) (68) Reported profit after tax and minority interests % 92% Underlying earnings per share ( cents) % 29% 1 Underlying operating profit is operating profit before special items 2 Comparatives are restated to consolidate Mondi Shanduka Newsprint and account for Aylesford on the equity method, both previously proportionately consolidated 29

30 Finance costs million Closing net debt 1,257 1,872 1,844 Average net debt 976 1,515 1,851 Finance costs Net interest on defined benefit arrangements Net finance costs Effective interest rate (before capitalised interest) 9.4% 6.6% 5.5% H H H Finance costs up on higher average net debt Offset by lower effective interest rate Higher proportion of debt in Euro Unwind of fixed rate swaps in

31 Taxation and non-controlling interests Taxation million H H H % change vs H % change vs H Underlying tax charge % -19% Effective tax rate 20% 20% 18% Benefiting from Profit mix Investment incentives, notably Poland Non-controlling interests million Profit attributable to noncontrolling interests H H H % change vs H % change vs H % -36% % of underlying profit 9% 4% 4% Lower charge due to Acquisition of Świecie minorities in April and May 2012 Partly offset by higher profits at Ružomberok 31

32 Special items Operating special items - 81 million loss Consumer packaging ( 13 million loss) Closure of Lindlar operation, volumes redirected to other operations Uncoated fine paper ( 50 million loss) Restructuring activities and asset impairment in Neusiedler South Africa division ( 18 million loss) Closure of one Newsprint machine and related restructuring Cash effect of 26 million 32

33 Cashflow effects movement in net debt Movement in net debt , (41) (28) 1,844 (560) Net debt at Cash 31 Dec 2012 generated by operations* Movement in working capital Income tax paid Dividends paid to equity holders Dividends paid to noncontrolling interests Financing costs paid Capex and investment in forestry assets Currency movements Other Net debt at 30 Jun 2013 * Before working capital outflow 33

34 Working capital Working capital management Working capital cash flows million million % 11.9% 13.0% 12% 10% H H H Working capital as a % of revenue (105) (129) H H H Increase in working capital as a percentage of turnover is driven largely by Seasonal pick-up Change in business mix following acquisition of Nordenia (working capital as a % of revenue excluding Nordenia in H is 12.4%) 34

35 Capital expenditure million 68% Capital expenditure 102% 89% Major expansionary projects progressing according to plan Energy investments at Frantschach, Richards Bay and Stambolijski mills will be completed in H H H H Capital expenditure incl. intangible assets Capex as a % of depreciation & amortisation Štěti bleached kraft paper project on track for H start-up Ružomberok recovery boiler start-up in H Capex to depreciation expected to average ±125% in 2013/

36 Debt facilities million H H H % change vs H % change vs H Net debt 1,257 1,872 1,844 47% -1% Committed facilities 1,795 2,606 2,598 45% - Of which undrawn % -2% Gearing (Net debt / Trading capital employed) 31% 40% 40% Net debt / 12 month trailing EBITDA (times) Currency split of net debt 1,844 million 15% 9% 14% 16% 47% Public credit ratings reaffirmed Standard & Poor s at BBB- Moody s Investor Services at Baa3 Euro Russian rouble Polish zloty South African rand Other 36

37 Dividends cents per share 30 Dividends declared Interim dividend Final dividend Interim dividend of 9.55 cents per share declared, 7% up on prior year 37

38 Abridged income statement 1 million H1 H2 H % change vs H % change vs H Group Revenue % 13% Materials, energy and consumables used (1 478) (1 546) (1 758) Variable selling expenses (266) (261) (282) Gross margin % 12% Maintenance and other indirect expenses (123) (156) (122) Personnel costs (409) (425) (484) Other net operating expenses (106) (93) (142) Underlying EBITDA % 13% Depreciation and amortisation (165) (188) (188) Underlying operating profit % 21% Net income from associates (1) (4) 1 Net finance costs (55) (55) (57) Profit before tax % 28% Taxation charge (43) (47) (56) Profit for the period from continuing operations % 30% Non-Controlling Interest (24) (11) (15) Underlying earnings % 29% 1 Excluding special items 2 Comparatives are restated to consolidate Mondi Shanduka Newsprint and account for Aylesford on the equity method, both previously proportionately consolidated 38

39 Input costs million 600 Variable costs Pulp Paper Wood Recovered paper H H H Energy Chemicals Other Variable costs Nordenia H Nordenia H Lower average input costs per unit for the year Total costs increased due to Nordenia acquisition 39

40 Fixed costs million Fixed costs composition % 22.7% 22.4% H H H Personnel costs Depreciation and amortisation Maintenance and other indirect costs Other net operating expenses Fixed costs excl. depreciation as a % of turnover Strong cost management limits cost increases to below inflation 40

41 Cash flow million H H H % change vs H % change vs H Underlying EBITDA % 12% Working capital movements (105) 22 (129) Other operating cash flow items 23 (18) 6 Cash generated from operations % -13% Dividends from financial investments and associates Taxes paid (45) (64) (75) Net cash inflow from operating activities % -18% Capital expenditure, excl. intangible assets (110) (184) (164) Investment in forestry assets (30) (21) (20) Acquisitions¹ (384) (814) 0 Disposals² 1 (17) 3 Dividends paid (114) (43) (142) Other investing and financing activities (13) Net (decrease)/increase in cash (183) Includes net debt assumed and the impact of the acquisition of non-controlling interests 2 Includes net debt disposed of 41

42 Statement of financial position million H H H Intangible assets Property, plant & equipment Forestry assets Other non-current assets Total non-current assets Inventories Trade and other receivables Other current assets Total current assets Total assets Short-term borrowings (294) (281) (265) Trade and other payables (874) (1 029) (1 008) Other current liabilities (120) (137) (148) Total current liabilities (1 288) (1 447) (1 421) Medium and long-term borrowings (1 023) (1 648) (1 664) Retirement benefits obligation (217) (253) (225) Deferred tax liabilities (319) (344) (291) Other non-current liabilities (49) (58) (53) Total non-current liabilities (1 608) (2 303) (2 233) Total liabilities (2 896) (3 750) (3 654) Net assets Retained earnings and other reserves Total attributable to equity holders of the parent companies Non-controlling interests in equity Total equity

43 Emerging market asset base leads to low cost positions across the Group s main grades Cost quartile¹ Percentage of Mondi's capacity in overall cost curve in Q Q4 12% 18% 7% Q3 62% 20% Q2 25% 18% 38% Q1 100% 100% 100% 75% 20% 35% 100% White Top Kraftliner Unbleached 4 Kraftliner NSSC Fluting Recycled fluting Unbleached Sack Kraft Paper UFP² BHKP (Pulp)³ 1 Delivered to Frankfurt except where noted 2 Includes specialties 3 Delivered to Rotterdam, best estimate based on current exchange rates 4 Excludes kraftliner substitutes Source: RISI and Mondi estimates 43

44 Integrated value chain H Millions of tonnes Pulp Millions of tonnes Kraft Paper (0.2) Production Consumption Net long/(short) position E&I MSAD Production Consumption Net long position E&I Millions of tonnes Virgin Containerboard 1 Recycled Containerboard 1 Millions of tonnes Production Consumption Net long/(short) position E&I MSAD Production Consumption Net long position E&I 1 ±200 kt of kraftliner substitutes included in virgin containerboard, previously included in recycled containerboard 44

45 Production volumes Europe & International H H H % change vs H % change vs H Containerboard Tonnes % 4% Kraft Paper Tonnes % 5% Corrugated Board & Boxes m m % 12% Industrial Bags m units % 11% Consumer Packaging Tonnes >100% 74% Coatings & Release liners m m % 8% Uncoated Fine Paper Tonnes % 1% Newsprint Tonnes % 1% Total hardwood pulp Tonnes % 3% Total softwood pulp Tonnes % 3% South Africa Containerboard Tonnes % 1% Uncoated Fine Paper Tonnes % 3% Total hardwood pulp Tonnes % 0% Total softwood pulp Tonnes % -4% Newsprint Tonnes % -10% 45

46 Exchange rates Closing rates against the euro H H H % change vs H % change vs H South African rand % 17% Czech koruna % 3% Polish zloty % 7% Pounds sterling % 5% Russian rouble % 6% Turkish lira % 7% US dollar % -1% Average rates for the period against the euro South African rand % 15% Czech koruna % 2% Polish zloty % 0% Pounds sterling % 5% Russian rouble % 2% Turkish lira % 3% US dollar % 2% 46

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