MONDI GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER February 2011

Transcription

1 MONDI GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 21 February 2011

2 Agenda Highlights Financial overview Operational review Summary Appendices Page 2

3 Key financial highlights Earnings significantly up versus 2009 EBITDA up 37% at 882 million Underlying operating profit up 73% at 509 million Underlying EPS up 151% at 47.0 euro cents Group ROCE of 12.3% Cash inflow from operations of 778 million Strong EBITDA growth 121 million investment in working capital in line with increased trading levels Capital expenditure of 394 million ( 160 million on major projects) Full year dividend of 20.0 euro cents per ordinary share, up 111% Successful launch of inaugural 500 million bond Strong recovery in profitability Page 3

4 Key operational highlights Sustained improvement in order inflows, volumes and prices across all main products Strong operating performance production records at 6 out of the 8 largest paper mills Restructuring activities Corrugated restructuring successfully completed Disposal of Europapier successfully completed Restructuring of South Africa Division successfully completed Major projects New Polish containerboard machine ramping-up ahead of expectation Russian mill modernisation successfully completed and running to plan Delivering on operational and strategic imperatives Page 4

5 Agenda Highlights Financial overview Operational review Summary Appendices Page 5

6 Operating financial highlights Millions 2009 % Change H H1 H2 Group Revenue % EBITDA % % Margin 12.3% 14.2% 12.8% 13.4% 14.9% 2 Underlying operating profit % % Margin 5.6% 8.2% 5.9% 7.3% 9.0% Underlying earnings per share ( cents) % Working capital cashflows 248 (121) (149%) 149 (141) 20 Cash generated from operations (10%) Net debt (1 517) (1 364) 10% (1 517) (1 632) (1 364) 3 Group ROCE 7.6% 12.3% 7.6% 9.5% 12.3% Strong performance supported by improving market conditions 1 EBITDA is operating profit of subsidiaries and joint ventures before special items, depreciation and amortisation. 2 Underlying operating profit is operating profit of subsidiaries and joint ventures before special items. 3 Group return on capital employed (ROCE) is an annualised measure based on 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. Page 6

7 millions Divisional underlying operating profits H H H1 H (20) Uncoated Fine Paper Bags & Coatings Corrugated South Africa division Mondi Packaging South Africa (5) Newsprint 1 Underlying operating profit is operating profit of subsidiaries and joint ventures before special items. Strong performance from all major businesses Page 7

8 / tonne million / tonne Input costs 4,500 4,000 Variable costs Average recovered paper ~ 3,500 3,000 2,500 2, ,500 1, Pulp Variable selling expenses Other variable costs Energy Wood Recovered paper Pulp Paper Merchandise Fibre input costs increased significantly Group balanced in pulp and long in paper Energy and chemical costs have also increased across the business Electricity prices in South Africa are of particular concern Rate of cost increases generally slowed in the second half Cyclical upturn in key input costs BEKP ~Simple average of PIX statistics for "OCC 1.04 dd " and "ONP/OMG 1.11 dd" Page 8

9 million Fixed costs 25.0% Fixed costs as % of Revenue Fixed costs 20.0% % 26.2% 25.1% 25.3% 26.1% 23.7% % % Fixed costs excl. depreciation Personnel costs Maintenance and other indirect costs Other net operating expenses Depreciation and amortisation Increased prices, volumes and tight cost control improved fixed cost recovery Impact of depreciation on major projects not yet fully realised Relentless focus on costs and efficiencies Page 9

10 Financial review Millions 2009 % Change H H1 H2 1 Underlying operating profit % Net Finance Costs (114) (117) (3%) (56) (48) (69) Associate net earnings Underlying profit before tax % Tax before special items (58) (93) (60%) (31) (46) (47) Total Non-Controlling Interest (29) (62) (114%) (17) (27) (35) Underlying earnings % Special items (after tax and minorities) (128) (15) 627% (50) 6 (21) Reported profit / (loss) after tax and minority interests (33) % Significant bottom line improvement 1 Underlying operating profit is operating profit of subsidiaries and joint ventures before special items. 2 Underlying profit before tax is reported profit before tax before special items. Page 10

11 Finance charges and net debt Millions 2009 % Change H H1 H2 Net debt (1 517) (1 364) 10% (1 517) (1 632) (1 364) Interest expense, net of investment income % Less: interest capitalised (45) (8) (82%) (14) (7) (1) Net debt finance charges and other financial (11%) income Foreign currency losses / (gains) 1 (8) >100% (1) (11) 3 Net finance costs (3%) Effective interest rate (before capitalised interest) 9.3% 8.0% 8.2% 7.8% 8.1% Lower interest rates in Russia, SA and certain countries Interest rate on Eurobond and lower levels of capitalised interest have increased finance costs Following issue of Eurobond, 73% of debt at fixed interest rates Lower effective interest rate Page 11

12 Taxation and non-controlling interests Taxation Non-controlling interests Millions 2009 % Change Millions 2009 % Change Underlying tax charge (60%) Tax on special items (6) (6) Taxation charge (67%) Minority share before special items (114%) Minority share of special items 1 (1) Profit attributable to minority interests (103%) Underlying effective tax rate 32% 24% Effective tax rate before special items of 24% (prior year 32%) Utilisation of tax losses due to improved profitability Change to regional mix of profits Benefit from tax incentives mainly relating to capital projects Benefit of tax planning initiatives Improved results across most operations with non-controlling interests (notably Świecie & Ružomberok) Significant and sustainable reduction in the tax rate Page 12

13 Special items Operating items ( 3 million gain): Uncoated fine paper ( 5 million gain) release of closure provisions no longer required Bags & Coatings ( 28 million net gain) reversal of impairment and closure provisions following re-start of Stambolijski impairment of underperforming Kraft Paper assets gain on acquisition recognised in respect of Industrial Bags plants offset by restructuring and closure costs South Africa Division ( 26 million loss) closure of the paper machine and related restructuring provisions Other ( 4 million loss) Non-operating items ( 25 million loss): Corrugated ( 17 million loss) loss on disposal of the UK corrugated packaging plants Merchant ( 28 million loss) Sale of Europapier completed South Africa Division ( 16 million gain) profit on sale of forestry assets Other ( 4 million gain) 22 million before tax (2009: 133 million) net special items charge Page 13

14 Cash flow Millions 2009 % Change H H1 H2 1 EBITDA % Working capital movements 248 (121) (149%) 149 (141) 20 Other operating cash flow items (26) % (11) 5 12 Cash generated from Operations (10%) Dividends from financial investments and associates % Taxes paid (32) (47) (47%) (14) (36) (11) Net cash inflow from operating activities (12%) Capital Expenditure, excl. major projects (217) (234) (8%) (101) (93) (141) Investment in forestry assets (40) (46) (15%) (20) (21) (25) Proceeds on sale of fixed assets and other items % (21%) Major expansionary project's expenditure (300) (160) 47% (121) (92) (68) Acquisitions (2) (2) - 7 (9) Disposals % Net cash flow after investing activities % EBITDA is operating profit of subsidiaries and joint ventures before special items, depreciation and amortisation. Continued strong cash generation Page 14

15 Working capital Working capital management Working capital cash flows % 248m % % 10.0% * 11.5% 12% 10% 97m m Working Capital Working Capital % of Turnover ( 82m) ( 121m) * Working capital as a % of turnover adjusted for disposals Increased volumes and price increases driving working capital growth Cash outflow in line with expectations As a percentage of revenue, working capital remains within target range Strong working capital management Page 15

16 millions Capital expenditure Capital expenditure % Cash spend, excluding major projects was 64% of depreciation (2009: 63%; 2008: 101%) % Approximately 50 million still to spend on major projects 0 H H H H H H H1 H2 0% Capital expenditure, incl. Intangible assets, excl. major projects Major projects Depreciation as % of CAPEX, excl. major projects Tight capex management yielded tangible cash flow benefits Page 16

17 Debt facilities Millions 2009 % Change Net debt (1 517) (1 364) 10% Committed facilities % Of which undrawn % Gearing (Net debt / Trading capital employed) 35.1% 29.7% Net debt / 12 month trailing EBITDA (times) Strong operational cash flows used to pay down debt Long term corporate credit ratings of Baa3 from Moody s investor service and BB+ from Standard & Poor s, both with stable outlook Following successful issue of inaugural 500 million 7-year bond, the average maturity of committed facilities is 2.6 years (2.2 years at 31 December 2009) Significant undrawn capacity on committed facilities Next major refinance event is 1.55 billion revolver facility maturing in June 2012 Currently 122 million drawn Strong liquidity position Page 17

18 Eur cents per share Dividends Final dividend of 16.5 euro cents per share proposed (20.0 euro cents for the year) Dividend cover of 2.35 times within stated cover range of 2 to 3 times Record date 15 April Dividends paid and proposed 20.0 Payment date 12 May Interim Dividend Final Dividend Significantly increased dividend Page 18

19 Agenda Highlights Financial overview Operational review Summary Appendices Page 19

20 Price indexed vs 2006 opening levels Uncoated Fine Paper Excellent full year result on the back of a strong operating performance and improved pricing Cost pressures Especially pulp at non-integrated mills Second half impacted by Extended Syktyvkar shut for final commissioning ( 15m) Lower speciality volumes 1.5 Fundamentals remain attractive A4 B-copy 1 Pulp (BEKP) Continued good demand growth in central Europe and Russia Western Europe structurally mature need for continued rationalisation Only new capacity in the pipeline is 150,000 tonnes in Russia in 2012 matched by expected demand growth Weaker euro supportive Low cost, integrated mills delivering value (1) Source: PIX FOEX Indexes Ltd Page 20

21 /tonne /tonne Uncoated Fine Paper Commodity cycle and returns 1,100 1,050 A4 B-copy 1 1, H2 H1 H2 H1 H2 H % % 20.0% % 15.2% 14.4% 15.0% % 5.8% 8.0% 8.4% 12.1% 10.5% 10.0% % H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 6 month ROCE% (annualised) (RHS) A4 B-copy 1 0.0% Price recovery, second half impacted by Syktyvkar shut (1) Source: PIX FOEX Indexes Ltd Page 21

22 Price indexed vs 2006 opening levels Corrugated Further improvement in product prices and volumes Partly offset by significant input cost pressures specifically recovered paper Recent strengthening of eastern-european currencies placed some pressure on export-focused operations Box prices tracking paper further increases required Benefiting from Świecie s new RCB machine Production 410,580 tonnes, well ahead of plan Restructuring successfully concluded Kraftliner - indexed White-top Kraftliner - indexed 0.6 RCB / Recovered paper differential - indexed Possible acquisition of power plant at Świecie Solid fundamentals Continued European demand growth No new VCB supply new RCB capacity in line with demand growth Weaker euro supportive to pricing (1) Source: PIX FOEX Indexes Ltd Strong recovery in demand and pricing Page 22

23 /tonne /tonne Corrugated Commodity cycle and returns Kraftliner RB Fluting-OCC differential H2 H1 H2 H1 H2 H % 17.1% 18.1% 18.0% 16.0% 16.0% 12.9% 11.9% 14.0% 12.0% 10.0% 8.3% 7.5% 8.0% 6.5% 6.0% 2.6% 4.0% 0.4% 2.0% 0.0% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 6 month ROCE% (annualised) (RHS) Kraftliner RB Fluting-OCC differential 1 1 (1) Source: PIX FOEX Indexes Ltd Restructured business delivering improving returns in upturn Page 23

24 /tonne Bags and Coatings Significant Kraft Paper selling price increases achieved Partially offset by sharp rise in input costs, mainly wood Recent pressure from strong eastern European currencies European volumes largely recovered, supported by exports Negligible market-related downtime (2009: ~87,000t) Re-start of Stambolijski in June (~80,000t capacity) Industrial Bag volume increases, offset by margin squeeze bag pricing lagged paper input cost increases Meaningful price increases achieved for 2011 Unbleached sack kraft average Fundamentals remain positive Substantial permanent supply contraction during recession No new capacity in the pipeline Weaker euro supportive to pricing Coatings & Consumer Packaging continue to enjoy Source : Mondi - Nominal prices demand growth, partly offset by rising polymer costs Wood costs and bags pricing limiting gains Page 24

25 Bags and Coatings Commodity cycle and returns Unbleached sack Kraft ( /tonne) % 14.0% 12.0% 10.0% 8.0% 10.0% 7.3% 11.9% 10.9% 15.3% 7.0% 6.7% 8.3% 10.2% 13.3% % 4.0% % % Source : Mondi - Nominal prices H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 6 month 2006 ROCE% (annualised) 2007 (RHS) 2008 Unbleached 2009 sack Kraft ( /tonne) Benefiting from sharp volume and price recovery Bags prices - indexed Page 25

26 South Africa Division Improved result, however still short of targeted levels Strong recovery in average pulp export selling prices Partially offset by rand strength Domestic cost inflation, most notably electricity Exited the European uncoated fine paper market Now focused on domestic and Africa Further ~120,000 tonnes UFP capacity reduction Restructuring initiated to re-align the cost base Second half pulp volumes benefit 0.0% 6 month ROCE% (annualised) 18.9% 100% Revenue - product mix 5.0% 0.0% 5.0% 0.0% -5.0% -0.7% 9.3% 10.2% 8.2% 12.7% 8.1% 1.3% 4.8% 11.9% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2007 H2 UFP UFP to Europe (none in 2011) Focusing on domestic markets & pulp exports VCB Wood Pulp Page 26

27 Mondi Packaging South Africa Very pleasing performance, especially on costs Pricing broadly unchanged until final quarter Demand largely back to pre-recession levels Growth in agricultural products for export supported the stronger second half result Industrial sector remains under pressure 6 month ROCE% (annualised) 25.0% 21.1% Improved margins due mainly to cost savings and 20.0% 15.0% 10.0% 13.7% 15.3% 12.6% 9.4% 7.8% 6.9% 15.7% 10.3% 18.4% volume gains Partially offset by above inflation labour and electricity increases 5.0% 0.0% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 Translation benefits resulting from the stronger rand Good performance on excellent cost containment Page 27

28 Newsprint Sale of Europapier completed November 6 million profit up to October Aylesford severely impacted by lower selling prices and input cost pressures, notably recycled paper Plus additional waste disposal costs Price increases in excess of 20% have been negotiated in 2011 more required to return to profitability Mondi Shanduka Newsprint ( MSN ) impacted by reduced demand and lower selling prices South African rand strength reduced returns from export sales and put pressure on domestic pricing Increasing electricity prices are severely hampering profitability resulting in a special item asset impairment being recognised Newsprint under pressure Page 28

29 Syktyvkar mill modernisation Project returns Wood / Pulp production ~30% woodyard capacity increase, ~10% efficiency gain ~170,000 tonnes pulp production Sales growth ~50,000 tonnes Uncoated Fine Paper (~5% of domestic market) ~63,000 tonnes Virgin Containerboard (~3% of domestic market) ~30,000 tonnes market pulp New recovery boiler ~100% increased heat supply ~571 Mwh additional energy sales Reduced environmental footprint Extended shut for integration in the second half, with around 15 million adverse trading impact Commissioned on schedule and within estimated capital cost (~ 545 million) Paper production to date has exceeded plan, with new UFP production records set Internal pulp delivering expected efficiency benefits, whilst pulp sales commenced in Q4 Energy turbine operational Further enhancing Mondi s low-cost position Page 29

30 /tonne Świecie s new machine performing well ECO7 410,580 tonnes production achieved >85% of full design capacity well ahead of business plan ~213,000 tonnes produced in second half, including impact of a maintenance shut Looking for a further >10% increase in output in 2011 Strong market demand for lightweight grades Good pricing levels achieved partially offset by waste paper input cost pressures Manufacturing costs /Q3 New Mondi PM7 RCB cost curve Cumulative capacity in kilo-tonnes per annum 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Highly competitive asset with integrated converting network 1 Source : RISI Page 30

31 Agenda Highlights Financial overview Operational review Summary Appendices Page 31

32 Summary Sustained improvement in order inflows, volumes and prices across all main products Strong operational performance Significant earnings recovery New Polish and Russian investments performing well Further refined portfolio with sale of non-core assets Significant increase in full year dividend Attractive sector fundamentals Risks Continued cost pressures Currency volatility Macro-economic environment Continuing to deliver Page 32

33 Outlook Demand growth over the past 18 months has been very encouraging, with volumes in most grades and geographic regions back at satisfactory levels. In 2011, further demand growth is expected, albeit at more modest rates. Recent industry capacity adjustments have also resulted in generally stronger fundamentals. Taken together, this has led to a positive pricing environment. The general economic recovery also brings cost pressures. We are confident that the Group s integrated low-cost position, focus on performance, and the contribution from the major investments made through the down cycle, position the business well for the future. Page 33

34 Agenda Highlights Financial overview Operational review Summary Appendices Page 34

35 Delivering on Group strategy Leading market positions High quality, low cost asset base Focus on performance European Corrugated restructuring completed Expanded Uncoated fine paper and containerboard capacity in Russia Consolidated Industrial Bags - leading market position in Europe South Africa division exited European Uncoated fine paper market increasing pulp exposure Syktyvkar mill modernisation completed, securing the mills cost leadership New recycled containerboard machine at Świecie performing well Further refinements to Bags & Coatings business underway Exited from high-cost / non-core business s: Frohnleiten and UK corrugated plants Europapier paper merchant Controlling interest in Hadera Relentless focus on costs entrenched Working capital within target range Strict adherence to capital expenditure approval limits, without compromising on performance Significant improvements in production / efficiencies across most businesses Page 35

36 Mondi at a glance UFP Corrugated Bags & Coatings South Africa MPSA Newsprint Sales (1) EBIT % 1.5B 1.2B 2.2B 0.6B 0.6B 0.5B 7% 10% 23% 9% 18% 33% 11.8% 9.6% 6.0% 11.1% 7.8% (0.9)% Products Positions in relevant markets () No. 1 in Office Paper and UFP in Europe (2) Europe South Africa Europe/SA No. 2 Virgin containerboard in Europe (2) No. 3 Corrugated Packaging in central and south east Europe (2) No. 1 in Kraft Paper in Europe (2) No. 1 in Industrial Bags in Europe (3) No. 1 in Commercial release liner in Europe No. 1 in Office Paper in SA (4) No. 1 in White Top Kraftliner in SA (4) No. 1 Corrugated Packaging in SA (3) No. 1 in Cartonboard in SA No. 3 in Rigid Plastics in SA No. 1 in Newsprint in South Africa (2) (1) Segment revenues, including inter-segment revenues. EBIT % is before special items. (2) Based on production capacity. (3) Based on sales. (4) Based on capacity. Sources: RISI, Pöyry Forest Industry Consulting, Freedonia, BMI Foodpack, PAMSA, Mondi Page 36

37 Focus on Packaging and UFP in emerging markets 1 Revenue by destination Revenue by origin Net operating assets 45% 55% 39% 61% 27% 73% Emerging markets Mature markets Virgin-based production Emerging markets Mature markets Revenue by product Emerging markets Mature markets Emerging markets Mature markets 22% 14% 26% Corrugated products Uncoated fine paper Kraft paper & industrial bags 78% 17% 22% Coatings & consumer packaging Other Competitive cost base and superior revenue growth (1) Mondi data Page 37

38 Integrated value chain Leading market positions + High quality, low cost asset base low cost asset base Millions of tonnes (0.5) Pulp (0.3) Production Consumption Net long/(short) E&I SAD Other position Millions of tonnes Virgin Containerboard Production Consumption Net long position SAD MPSA Upstream production cost advantages Millions of tonnes Kraft Paper Millions of tonnes Recycled Containerboard Production Consumption Net long position 0.0 Production Consumption Net long position E&I MPSA Source: Mondi. Exploiting benefits of upstream integration Page 38

39 Abridged income statement 1 Millions 2009 % Change H H1 H2 Group Revenue % Materials, energy and consumables used (2 768) (3 322) (20%) (1 381) (1 624) (1 698) Variable selling expenses (472) (548) (16%) (247) (277) (271) Gross margin % Maintenance and other indirect expenses (241) (298) (24%) (130) (132) (166) Personnel costs (838) (931) (11%) (408) (458) (473) Other net operating expenses (293) (247) 16% (140) (137) (110) EBITDA % Depreciation and amortisation (351) (373) (6%) (181) (183) (190) Underlying operating profit % Net income from associates Net finance charges (114) (117) (3%) (56) (48) (69) Profit before tax % Taxation charge (58) (93) (60%) (31) (46) (47) Profit after tax % Total Non-Controlling Interest (29) (62) (114%) (17) (27) (35) Underlying earnings % Before special items Page 39

40 Exchange rates 2009 % Change H H1 H2 Closing rates against the euro South African rand (17%) Pounds sterling (3%) Polish zloty (3%) Russian rouble (5%) US dollar (7%) Czech koruna (5%) Average rates for the period against the euro South African rand (17%) Pounds sterling (4%) Polish zloty (8%) Russian rouble (9%) US dollar (5%) Czech koruna (4%) Page 40

41 Production volumes Millions 2009 % Change H H1 H2 Europe & International Uncoated fine paper Tonnes % Containerboard Tonnes % Kraft paper Tonnes % Corrugated board and boxes m m² (23%) Industrial bags m units % Coating and release liners m m² % Newsprint Tonnes % South Africa Uncoated fine paper Tonnes (22%) Containerboard Tonnes % Wood chips (bone dry) Tonnes % External hardwood pulp Tonnes % Mondi Packaging South Africa Packaging papers Tonnes % Corrugated board and boxes m m² % Newsprint JVs (attributable share) Tonnes % Aylesford Tonnes (2%) Mondi Shanduka Newsprint Tonnes % Page 41

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