Half-yearly Report
30 July 2008
Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND ISIN: ZAE000097051
Mondi plc
(Incorporated in England and Wales)
(Registration number: 6209386)
JSE share code: MNP ISIN: GB00B1CRLC47
LSE share code: MNDI
As part of the dual listed company structure, Mondi Limited and Mondi plc
(together 'Mondi Group') notify both the JSE Limited and the London Stock
Exchange of matters required to be disclosed under the JSE listings
requirements and/or the Disclosure and Transparency and Listing Rules of the
United Kingdom Listing Authority.
HALF-YEARLY REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2008
Financial Summary 1
€ million, except for percentages and Six months Six months Half year
per share measures June 2008 June 2007 change %
Group revenue 3,263 3,052 +7
EBITDA 456 421 +8
Underlying operating profit 263 243 +8
Underlying profit before tax 210 203 +3
Reported profit before tax 171 250 -32
Basic earnings per share (€ cents per 17.1 31.9 -46
share) 2
Underlying earnings per share (€ cents 24.8 22.6 +10
per share) 2
Headline earnings per share (€ cents per 18.3 17.3 +6
share) 2
Interim dividend per share (€ cents per 7.7 7.3 +5
share)
Cash inflow from operations 310 356 -13
Net debt 1,655 1,335 +24
Group ROCE 11.1% 10.0% +11
1 See Glossary of Financial Terms
2 2007 is pro forma and based on the number of shares admitted following the
demerger from Anglo American plc on 2 July 2007.
Operational and Financial Highlights:
Underlying operating profit up 8% at €263 million driven by a strong
performance from the Europe & International Division
Improved profit trend in South Africa Division following a slow start to the
year
Results continue to benefit from our low cost operations and our low cost wood
resource in Russia and South Africa
Delivered cost savings of €58 million, representing 2.1% of cost base
Underlying earnings per share up 10% and ROCE up 11%
Major projects in Poland and Russia are on schedule and within budgeted capital
cost
Substantial cash inflow from operations of €310 million which was lower than
prior period due to working capital outflow on the back of higher trading
activity
Strong financial position with €1.1 billion of undrawn committed facilities as
at end of June
Reported profit before taxation is down 32% because of a change in special
items from a €47 million gain in 2007 (mainly disposals) to a €39 million
charge in 2008 (mainly closure costs)
Half year dividend up 5% at 7.7 euro cents per share
David Hathorn, Mondi Group Chief executive, said:
"This is a good result achieved in a softening European market. It reflects
Mondi's strategic positioning, in particular, our broad business base with
leading market positions, emerging market focus, including major positions in
South Africa and Russia (where demand is good), our continued push to drive
down costs and a willingness to respond quickly to changing market conditions.
In the second half, South Africa should see a further improvement as actions to
enhance profitability continue to take effect. This should help to offset a
softening trading environment in Europe. Overall Mondi expects to make progress
for the year as a whole."
Contact details:
Mondi Group
David Hathorn +27 (0)11 9945418
Paul Hollingworth +44 (0)1932 826326
Lisa Attenborough +44 (0)1932 826380 / +44 (0)7872 672669
Financial Dynamics
Sophie Kernon +44 (0)20 7269 7121/+44(0)7802 877 243
Louise Brugman +27 (0)11 214 2415 / +27 (0)83 504 1186
Conference call dial-in and audio cast details:
Please see below details of our dial-in conference call and audio cast that
will be held at 10:00 (UK) and 11:00 (SA).
The conference call dial-in numbers are:
South Africa 0800 991 276 (toll-free)
UK +44 20 7190 1232
0800 358 5260 (toll-free)
Europe & Other +44 20 7190 1232
An online audio cast facility will be available via: http://events.ctn.co.uk/
ec/mondi/547/
Password: HYResults08
The presentation will be available online via the above web site address before
the audio cast commences. Questions can be submitted either via the dial-in
conference call or by email via the audio cast.
Should you have any issues on the day with accessing the dial-in conference,
please call +44 20 8901 5400.
Should you have any issues on the day with accessing the audio cast, please
email mondievents@ctn.co.uk and you will be contacted immediately.
An audio recording of the presentation will be available on Mondi's website
during the afternoon on 30 July 2008.
Editors' notes:
Mondi is an international paper and packaging group and in 2007 had revenues of
€6.3 billion. Its key operations and interests are in western Europe, emerging
Europe, Russia and South Africa.
The Group is principally involved in the manufacture of packaging paper and
converted packaging products; uncoated fine paper; and speciality products and
processes, including coating, release liner and consumer flexibles.
Mondi is fully integrated across the paper and packaging process, from the
growing of wood and manufacture of pulp and paper (including recycled paper) to
the converting of packaging papers into corrugated packaging and industrial
bags.
Mondi has production operations across 35 countries and had an average of
35,000 employees in 2007.
Group performance overview
As previously announced, from 1 January 2008, the former Mondi Packaging and
Mondi Business Paper Business units now operate as two divisions: Europe &
International and South Africa. Accordingly, we have used this new reporting
structure for commenting on trading in this Half-yearly Report.
The Group's underlying operating profit was 8% ahead of the comparable period
for the prior year helped by a strong performance from the Europe &
International Division. Within Europe & International there were good
performances from the Bags & Specialities and Uncoated Fine Paper Business
units. This was partially offset by reduced profits from Corrugated as prices
came under pressure. Measures to improve the South Africa Division's
profitability started to bear fruit towards the end of the first half and
overall the Division recorded an increase in underlying operating profit.
Merchant and Newsprint saw a significant decline in profits as our joint
venture, Aylesford Newsprint, suffered from both a decline in selling prices
and an increase in input costs.
The Group continued to benefit from its low cost base and its own fibre supply
from the emerging markets of Russia and South Africa, with circa 50% of the
Group's fibre demand available from these sources. Overall the Group delivered
a further €58 million in cost savings, representing circa 2.1% of the prior
year cash cost base, further contributing to the positive performance versus
the prior year. Mondi remains committed to targeting annual savings of at least
2%.
Europe & International Division
Six months Six months Half year change %
€ million June 2008 June 2007
Segment revenue 2,742 2,544 +8
- of which inter-segment revenue 81 74 +9
EBITDA 364 321 +13
Underlying operating profit 215 182 +18
Bags & Specialities 109 80 +36
Uncoated Fine Paper 69 48 +44
Corrugated 37 54 -31
Capital expenditure 1 260 101 +157
Net segment assets 4,166 3,755 +11
Return on capital employed (%) 12.0% 9.8% +22
1Capital expenditure is cash payments and excludes business combinations
Whilst the European business environment is increasingly challenging, our focus
on driving down costs, leading market positions and exposure to the growth
markets of emerging Europe and Russia (where demand is good), all contributed
to underlying operating profit up 18% versus the prior period. The Division
delivered €50 million in cost savings, with the benefits from the
reorganisation of the Uncoated Fine Paper operations announced last year a
significant contributor.
In the Bags & Specialities business underlying operating profits were up €29
million. The business has benefitted from significantly higher kraft paper and
converted bag prices (up around 6% since the year end), however converting
volumes saw softness as demand from the building industry has started to slow.
The results also benefit marginally from the acquisition of Unterland in the
second half of 2007 which is now trading more in line with expectations.
In the Uncoated Fine Paper (UFP) business underlying operating profits were up
€21 million, with sales volumes only marginally down despite the closure of our
Hungarian mill during the period. Selling prices are up on average 3% against
the comparable period but are relatively unchanged since the year end. The
business also benefited from the internal restructuring announced last year end
as well as a better performance from all our mills including our Russian mill
where the local market continues to experience strong demand growth.
In the Corrugated business, which represents 17% of divisional operating
profit, underlying operating profits are down €17 million at €37 million as
selling prices fell back following substantial increases achieved in 2007.
Kraftliner prices are down 5% since the year end due to ongoing imports on the
back of the weak US dollar. As expected, following a rapid rise during 2007,
testliner prices have declined over 10% since the year end. The current price
declines are due to a substantial destocking combined with slowing demand. Box
prices, having increased since the year end, have now started to level off.
Results were also impacted by cost inflation, particularly recycled waste fibre
costs up 20%, market related downtime and the timing of maintenance shuts. We
will continue to monitor market conditions, in particular utilisation levels,
and take action if appropriate.
The recent acquisition of Tire Kutsan in Turkey continues to underperform.
This is mainly a result of softer demand coupled with new competitor capacity
coming on-stream and the resulting impact on prices in the local market. A
number of small acquisitions were completed in the period, primarily focused on
the strengthening of the product mix and geographic coverage of our Bags &
Specialities business. The enterprise value of all acquisitions in the period
totalled €36 million. The Division disposed of the remaining sheet feeder
plants in the United Kingdom for an enterprise value of €23 million and
completed the closure of the Szolnok mill in Hungary.
The construction of the new 470,000 tonne recycled containerboard machine at
Swiecie in Poland is progressing well (total cost of €305 million). Orders for
the main machine have been placed and we remain on track for completion in the
second half of 2009 within the budgeted cost. We anticipate this machine will
have the lowest operating cost of its type. The investment in the new box
plant and associated infrastructure (€45 million) has been delayed pending
agreement on the availability of subsidies.
The project to modernise our Russian mill (total cost of €525 million) is also
making good progress. All main equipment contracts have been agreed,
construction has commenced and we remain on track for completion within the
budgeted cost by mid to late 2010. The key value drivers of this project are
to improve efficiency and our cost base in Russia, increase energy production
and revenue by selling surplus energy to the grid and provide modest extra
capacity (both pulp and paper) for the strongly growing domestic market.
South AfricaDivision
Six months Six months Half year change %
€ million June 2008 June 2007
Segment revenue 274 295 -7
- of which inter-segment revenue 174 168 +4
EBITDA 67 65 +3
Underlying operating profit 45 44 +2
Uncoated Fine Paper 30 32 -6
Corrugated 15 12 +25
Capital expenditure 1 23 11 +109
Net segment assets 789 981 -20
Return on capital employed (%) 10.6% 9.9% +7
1Capital expenditure is cash payments and excludes business combinations
The South Africa Division recorded a small increase in underlying operating
profits of €1 million. An increase in profitability towards the end of the
period followed a slow start due partially to the loss of more than three weeks
of production at Richards Bay (largely as a result of an extensive maintenance
shut versus none in 2007). Throughout the period substantial progress was made
on the management of product mix to optimise margins as opposed to volumes.
Results towards the end of the period benefited from product mix changes as
well as selling price increases for both domestic (5% increase effective 1 May)
and export sales (following a 23% weakening of the rand). The Division has also
delivered €6 million in cost savings in the period.
In the domestic market (which represents about one third of the Division's UFP
volume), further price increases of up to 15% have been announced for
implementation during August. This will more than compensate for rising
domestic input costs. The domestic market for UFP continues to grow at around
6% per annum. Sales to Africa (which represent circa one third of the
division's UFP volume) also continue to grow, where price increases (quoted in
US dollars) of around 5% are in progress. The remaining UFP volume, which is
destined for the international markets, will benefit from the weaker rand.
The corrugated operations consist of the white top linerboard machine at
Richards Bay with approximately 80% of its production exported. The global
supply/demand balance remained favourable and there have been no announcements
of new capacity additions. Corrugated profits were up in the period with
export sales benefiting from the weaker rand.
These factors should support the ongoing improvement in the South Africa
Division's results on translation into euros for the full year.
Mondi Packaging South Africa (MPSA)
Six months Six months Half year change %
€ million June 2008 June 2007
Segment revenue 223 173 +29
- of which inter-segment revenue 14 17 -18
EBITDA 27 21 +29
Underlying operating profit 14 15 -7
Capital expenditure 1 25 14 +79
Net segment assets 308 207 +49
Return on capital employed (%) 11.1% 18.8% -41
1Capital expenditure is cash payments and excludes business combinations
Demand and pricing remained positive with corrugated packaging and corrugated
case material volumes up 7% and 3% respectively versus the comparator period.
This performance was helped by good demand from the agricultural sector, which
represents half of MPSA's corrugated box revenue. The agriculture sector is
highly export driven and is expected to continue to enjoy good volume
growth. Double digit price increases are targeted for the domestic
containerboard market with effect from 1 October. The Lenco acquisition (rigid
plastics manufacturer) completed in July 2007 contributed positively to
profits, in particular EBITDA, and is now performing better after a slow
start. The improved local performance is however impacted on translation into
euros at the much weaker rand rate and a €2 million charge for the amortisation
of Lenco intangibles (2007: nil).
Progress on the execution of major projects has been good with the Felixton
rebuild which was commissioned on time and within budget. This will increase
containerboard production by 45,000 tonnes per annum to 155,000 tonnes per
annum. This repositions Felixton to produce lightweight recycled
containerboard to serve the fast growing domestic market.
Merchant and Newsprint
Six months Six months Half year change %
€ million June 2008 June 2007
Segment revenue 293 286 +2
- of which inter-segment revenue - 1 n/a
EBITDA 18 27 -33
Underlying operating profit 10 16 -38
Capital expenditure 1 5 8 -38
Net segment assets 248 265 -6
Return on capital employed (%) 15.0% 14.1% +6
1 Capital expenditure is cash payments and excludes business combinations
At Europapier volumes and prices remained firm with good demand in emerging
Europe and Russia. At Mondi Shanduka Newsprint earnings were up in local
currency with volume and price increases largely eroded by a significantly
weaker rand exchange rate. Mondi's joint venture, Aylesford Newsprint (which
accounted for just under half the Divisions 2007 full year operating profit),
has seen a significant deterioration in profitability as a result of falling
selling prices, due to competition from imports, and rising energy and
recycled fibre input costs. The recent weakening of sterling should see
competition from imports lessen.
Corporate and other
Net corporate costs are €7 million higher than the comparable period in 2007
due to the establishment of Mondi's own corporate capacity following the
demerger from Anglo American plc as well as the disposal of non-core businesses
at the end of 2007 that contributed circa €2 million of profits in the
comparable period.
Input costs and currency
External wood cost pressures have continued to ease but waste-based fibre costs
were up by circa 20% on the comparable period although they started to fall
towards the end of the 2008 first half. Other input cost pressures remain a
concern and the rising oil price continues to feed through into rising energy
and transport bills. Importantly, our results continued to benefit from Mondi's
ongoing focus on cost reductions, restructuring and productivity improvements,
all of which help to mitigate the impact of cost inflation and delivered €58
million in cost savings during the period.
The relatively modest levels of net export dependency of UFP and containerboard
(circa 5% versus 20% for most coated and graphic paper grades) have helped to
limit the impact of the weak US dollar for Mondi. Whilst the profitability of
export sales from South Africa have benefited from the weakness of the Rand,
the strength of the emerging European currencies (up circa 5 to 10 % against
the Euro) has impacted on the Polish, Czech and Slovakian operations' margins
for Euro based exports.
Restructuring and operating special items
The previously announced closure of our 140,000 tonne uncoated fine paper mill
in Hungary was completed during the period (production ceased on 20 March
2008). We also completed the restructuring and simplification of our European
UFP divisional structure and are now beginning to see the benefits of these
actions coming through. The charge for impairment of the Hungarian site was
recognised in the 2007 results and closure and other costs of €26 million have
been disclosed as a special item in the first half. In addition, we incurred a
€5 million charge on the closure of the Nyborg Bags & Specialities plant in
Denmark with certain of the volumes transferred within Mondi.
Loss on sale
The €3 million loss on sale of the remaining United Kingdom Corrugated sheet
feeder plants for an enterprise value of €23 million has been reflected as a
special item.
Net finance costs
Overall finance charges were higher than the comparable period. For the first
half of 2007 Mondi was a subsidiary of Anglo American plc and operated under a
different capital structure which resulted in lower finance charges.
Taxation
The effective tax rate before special items, of 29% is down one percentage
point on the comparable period and is similar to the 2007 year end rate. This
is mainly a result of lower tax rates in our key geographies. The reported tax
rate after special items of 36% is 12 percentage points higher than the
comparator period in 2007, principally as disposals in the first half of 2007
were realised in a tax efficient manner.
Minority interests
Minority interests for the half year were €3 million lower than the comparator
period as earnings were down at the significant operations where there are
non-controlling interests particularly in our Corrugated operations within
Europe & International.
Cash flow and borrowings
As expected, Group borrowings have increased by €148 million since the year end
as the rate of capital expenditure increases due to the commencement of the two
key capital projects in Poland and Russia. In the period €140 million was
spent on these two projects versus nil in the comparator period (full year
2007: €40 million). Mondi's other major primary production sites are well
invested following major projects in recent years and, as such, capital
expenditure going forward will reduce to levels below depreciation.
Mondi enjoys a strong financial position and as at the end of June the Group
had just under €1.1 billion of undrawn committed debt facilities (€0.8 billion
of which is available under a €1.55 billion facility expiring on 22 June 2012).
Principal risks and uncertainties
It is in the nature of our business that Mondi is exposed to risks and
uncertainties which may have an impact on future performance and financial
results, as well as upon our ability to meet certain social and environmental
objectives. The Group believes that it has effective systems and controls in
place to manage the key risks identified below.
The markets for paper and packaging products are highly competitive, with many
participants and prices determined by market conditions including industry
operating capacities and exchange rates. Prices of Mondi's key paper grades
have experienced substantial fluctuations in the past; however, Mondi is
flexible and responsive to changing market and operating conditions and the
Group's significant exposure to low cost emerging markets provides some measure
of protection from market conditions.
Materials, energy and consumables used by Mondi include significant amounts of
wood, pulp, recovered paper, packaging papers and chemicals. Increases in the
costs of any of these raw materials, or any difficulties in procuring wood in
certain countries, could have an adverse effect on Mondi's business,
operational performance or financial condition. However, Mondi's relatively
high level of integration and access to its own fibre in Russia and South
Africa, acts to help mitigate this risk.
Mondi has announced two significant capital investments to expand and upgrade
existing facilities in Poland and Russia. These projects carry risks and Mondi
has put in place dedicated teams to ensure delivery of the projects on time and
within budget.
Board and Group Executive
As stated in the prospectus, a requirement of the South African Ministry of
Finance is that the Chief financial officer's role is based at the head office
in South Africa from the beginning of 2009. Paul Hollingworth, our Chief
financial officer, has decided not to relocate and as such, will step down from
the Board as Chief financial officer during the fourth quarter. He will stay
with Mondi until the end of December 2008. Mondi would like to thank Paul for
his significant contribution to the Group and also for helping to establish
Mondi as a separate listed Group following its demerger from Anglo American
plc. We are pleased that we have an excellent replacement, Andrew King, who
has worked for Mondi for 7 years, latterly as Group strategy and business
development director, who will take up the position of Chief financial officer
and will be based in South Africa. Andrew King will join the Board as Chief
financial officer during the fourth quarter.
Interim dividend
An interim dividend of 7.7 euro cents per share, an increase of 5.5%, will be
paid on 16 September 2008 to those shareholders on the register of Mondi plc on
29 August 2008.
An equivalent interim dividend will be paid in South African rand on 16
September 2008 to shareholders on the register of Mondi Limited on 29 August
2008. Holders of Mondi Limited Depositary Interests who hold their interests
through Equiniti Corporate Nominee Ltd will receive their dividend in UK
sterling on 23 September 2008.
Current year outlook
The 8% increase in first half underlying operating profits against a worsening
economic backdrop is a good result. It is testament to Mondi's strategic
positioning, in particular, its broad business base with leading market
positions, emerging market focus, including major positions in South Africa and
Russia (where demand is good), continued push to drive down costs and a
willingness to respond quickly to changing market conditions.
In the second half, South Africa should see a further improvement as actions to
enhance profitability continue to take effect. This should help to offset a
softening trading environment in Europe. Overall Mondi expects to make progress
for the year as a whole.
Directors' responsibility statement
The directors confirm that to the best of their knowledge:
* The condensed set of combined and consolidated financial statements has
been prepared in accordance with IAS 34, 'Interim Financial Reporting';
* The Half-yearly report includes a fair review of the important events
during the six months ended 30 June 2008 and a description of the principal
risks and uncertainties for the remaining six months of the year ending 31
December 2008;
* There have been no changes in the Group's related party relationships from
those reported in the Group's annual financial statements for the year
ended 31 December 2007; and
* The Half-yearly report includes a fair review of the Group's related party
transactions.
By order of the Boards,
David
Hathorn
Paul Hollingworth
Director
Director
29 July 2008
Independent review report to the members of Mondi Limited
Introduction
We have been instructed by the company to review the condensed financial
information of the Mondi Group for the six months ended 30 June 2008 which
comprises the condensed combined and consolidated income statement, the
condensed combined and consolidated balance sheet, the condensed combined and
consolidated cash flow statement, the condensed combined and consolidated
statement of total recognised income and expense and related notes 1 to 20. We
have read the other information contained in the Half-yearly report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The Half-yearly report, including the financial information contained therein,
is the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the Half-yearly report in accordance
with the basis of preparation set out in note 1, the JSE Listing Requirements
and the requirements of International Accounting Standard 34, "Interim
Financial Reporting", which require that the accounting policies and
presentation applied to the Half-yearly figures are consistent with those
applied in preparing the preceding audited financial information except where
any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in
International Standards on Review Engagements 2410 - "Review of Interim
Financial Information performed by Independent Auditor of the Entity" issued by
the International Accounting Standards Board. A review consists principally of
making enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed in
accordance with International Standards on Auditing and therefore provides a
lower level of assurance than an audit. Accordingly, we do not express an
audit opinion on the financial information.
Review conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-yearly
report for the six months ended 30 June 2008 is not prepared, in all material
respects, in accordance with International Accounting Standard 34.
Deloitte & Touche
Per C Sagar
Partner
29 July 2008
Note: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no
control procedures can provide absolute assurance in this area.
Independent review report to the members of Mondi plc
We have been engaged by the company to review the condensed set of financial
statements in the Half-yearly report for the six months ended 30 June 2008
which comprises the condensed combined and consolidated income statement, the
condensed combined and consolidated balance sheet, the condensed combined and
consolidated cash flow statement, the condensed combined and consolidated
statement of recognised income and expense and related notes 1 to 20. We have
read the other information contained in the Half-yearly report and considered
whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to them in an independent review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company, for our
review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The Half-yearly report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Half-yearly report
in accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial statements
included in this Half-yearly report has been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting" as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the Half-yearly report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-yearly
report for the six months ended 30 June 2008 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
29 July 2008
London, UK
Note: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no
control procedures can provide absolute assurance in this area.
Condensed combined and consolidated income statement
For the six months ended 30 June 2008
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
30 June 2008 30 June 2007 31 December 2007
Special Special Special
Before items Before items Before items
special (note special (note special (note
€ million Note items 5) items 5) items 5)
Group
revenue 4 3,263 - 3,263 3,052 - 3,052 6,269 - 6,269
Materials,
energy and
consumables
used (1,729) - (1,729) (1,577) - (1,577) (3,265) - (3,265)
Variable
selling
expenses (281) - (281) (280) - (280) (558) - (558)
Gross margin 1,253 - 1,253 1,195 - 1,195 2,446 - 2,446
Maintenance
and other
indirect
expenses (143) - (143) (130) - (130) (289) - (289)
Personnel
costs (470) (17) (487) (446) (5) (451) (906) (17) (923)
Other net
operating
expenses (184) (16) (200) (198) - (198) (381) - (381)
Depreciation
and
amortisation (193) (3) (196) (178) (3) (181) (368) (60) (428)
Operating
profit/
(loss) from
subsidiaries
and joint
ventures 4 263 (36) 227 243 (8) 235 502 (77) 425
Net (loss)/
profit on
disposals 5 - (3) (3) - 84 84 - 83 83
Net income
from
associates 2 - 2 2 - 2 2 - 2
Total profit
/(loss) from
operations
and
associates 265 (39) 226 245 76 321 504 6 510
Investment
income 19 - 19 21 - 21 44 - 44
Interest
expense (74) - (74) (63) (29) (92) (143) (29) (172)
Net finance
costs 6 (55) - (55) (42) (29) (71) (99) (29) (128)
Profit/
(loss)
before tax 210 (39) 171 203 47 250 405 (23) 382
Taxation
(charge)/
credit 7 (61) - (61) (61) 1 (60) (117) 15 (102)
Profit/
(loss) for
the
financial
period/year 149 (39) 110 142 48 190 288 (8) 280
Attributable
to:
Minority
interests 23 - 23 26 - 26 47 - 47
Equity
holders 126 (39) 87 116 48 164 241 (8) 233
Pro forma
earnings per
share
('EPS') for
profit
attributable
to equity
holders
Basic EPS (€
cents) 8 17.1 31.9 45.4
Diluted EPS
(€ cents) 8 16.9 31.9 45.1
Basic
underlying
EPS (€
cents) 8 24.8 22.6 46.9
Diluted
underlying
EPS (€
cents) 8 24.4 22.6 46.7
Basic
headline EPS
(€ cents) 8 18.3 17.3 39.5
Diluted
headline EPS
(€ cents) 8 18.0 17.3 39.3
There were no discontinued operations in any of the periods presented.
Condensed combined and consolidated balance sheet
As at 30 June 2008
(Audited)
(Reviewed) (Reviewed)
As at As at As at
30 June 30 June 31 December
€ million Note 2008 2007 2007
Intangible assets 524 381 520
Property, plant and equipment 3,750 3,594 3,731
Forestry assets 206 220 224
Investments in associates 7 7 6
Financial asset investments 25 25 25
Deferred tax assets 39 40 32
Retirement benefits surplus 15 8 11
Derivative financial instruments 5 - -
Total non-current assets 4,571 4,275 4,549
Inventories 759 710 760
Trade and other receivables 1,349 1,355 1,304
Current tax assets 24 33 52
Cash and cash equivalents 10 152 176 180
Derivative financial instruments 19 7 17
Total current assets 2,303 2,281 2,313
Assets held for sale - 2 -
Total assets 6,874 6,558 6,862
Short-term borrowings 10 (406) (311) (453)
Trade and other payables (1,095) (1,016) (1,150)
Current tax liabilities (87) (87) (81)
Provisions (14) (9) (14)
Derivative financial instruments (14) (2) (3)
Total current liabilities (1,616) (1,425) (1,701)
Medium and long-term borrowings 10 (1,401) (1,200) (1,234)
Retirement benefits obligation (190) (212) (200)
Deferred tax liabilities (313) (317) (322)
Provisions (46) (42) (50)
Other non-current liabilities (16) (15) (17)
Derivative financial instruments - - (2)
Total non-current liabilities (1,966) (1,786) (1,825)
Total liabilities (3,582) (3,211) (3,526)
Net assets 3,292 3,347 3,336
Equity
Anglo American plc investment in the Group 11 - 2,051 -
Ordinary share capital 11 114 - 114
Share premium 11 532 - 532
Retained earnings and other reserves 11 2,239 944 2,317
Total attributable to equity holders 2,885 2,995 2,963
Minority interests 407 352 373
3,292 3,347 3,336
Condensed combined and consolidated cash flow statement
For the six months ended 30 June 2008
(Reviewed) (Reviewed) (Audited)
Year
Six months Six months ended
ended ended
31
30 June 30 June December
€ million Note 2008 2007 2007
Cash inflows from operations 310 356 957
Dividends from associates - 1 1
Income tax paid (27) (40) (93)
Net cash inflows from operating activities 283 317 865
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and
cash equivalents (35) (7) (193)
Proceeds from disposal of subsidiaries, net of
cash and cash equivalents 2 103 112
Proceeds from disposal of associates - 54 54
Purchases of property, plant and equipment 12 (313) (139) (406)
Proceeds from disposal of property, plant and
equipment 12 7 4 17
Investment in forestry assets (22) (19) (41)
Purchase of available for sale investments - - (2)
Purchase of intangible assets (4) (2) (4)
Proceeds from disposal of available-for-sale
investments 2 - 2
Loan (advances to)/repayments from related
parties (2) 11 15
Interest received 9 9 18
Other investing activities 1 (1) (6)
Net cash (used in)/generated from investing
activities (355) 13 (434)
Cash flows from financing activities
Repayment of short-term borrowings 10 (143) (889) (945)
Proceeds from medium and long-term borrowings 10 285 548 564
Interest paid (69) (88) (139)
Dividends paid to minority interests (9) (21) (47)
Dividends paid to equity holders 9,11 (80) - (38)
Dividends paid to Anglo American plc group
companies 11 - (202) (202)
Increase in Anglo American plc invested
capital 11 - 120 120
Purchase of treasury shares 11 (15) - (33)
Other financing activities 13 (10) 3
Net cash used in financing activities (18) (542) (717)
Net decrease in cash and cash equivalents1 (90) (212) (286)
Cash and cash equivalents1 at start of period/
year 10 59 358 358
Cash movements in the period/year 10 (90) (212) (286)
Reclassifications 10 - (3) (3)
Effects of changes in foreign exchange rates 10 1 (7) (10)
Cash and cash equivalents1at end of period/
year (30) 136 59
Note:
1. Includes overdrafts and, for applicable periods, cash balances held in
disposal groups.
Condensed combined and consolidated statement of recognised income and expense
For the six months ended 30 June 2008
(Reviewed) (Reviewed) (Audited)
Year
Six months Six months ended
ended ended
31
30 June 30 June December
€ million 2008 2007 2007
Fair value gains/(losses) accreted on cash flow
hedges, net of amounts recycled to the combined and
consolidated income statement 6 (4) (3)
Actuarial gains/(losses) on post-retirement benefit
schemes 2 (19) 12
Fair value losses on available-for-sale investments - - (1)
Exchange gains on demerger - - 9
Exchange losses on translation of foreign operations (64) (35) (71)
Other movements - 2 (1)
Total expense recognised directly in equity1 (56) (56) (55)
Profit for the period/year 110 190 280
Total recognised income for the period/year 54 134 225
Attributable to:
Minority interests 46 32 56
Equity holders 8 102 169
Note:
1 Net of related tax
Notes to the condensed combined and consolidated financial information
1.Basis of preparation
The Group has two separate legal parent entities, Mondi Limited and Mondi plc,
which operate under a dual listed company (DLC) structure. The substance of the
DLC structure is such that Mondi Limited, and its subsidiaries, and Mondi plc,
and its subsidiaries, operate together as a single economic entity through a
sharing agreement, with neither parent entity assuming a dominant role.
Accordingly, Mondi Limited and Mondi plc are reported on a combined and
consolidated basis as a single reporting entity.
During the six months ended 30 June 2007, the Group did not form a separate
legal group. The equity reconciliation for this period shows the movement in
the Anglo American plc equity interest in the Group.
The condensed combined and consolidated Half-yearly financial information for
the six months ended 30 June 2008 has been prepared in accordance with IAS
34,'Interim Financial Reporting'. It should be read in conjunction with the
Group's annual financial statements for the year ended 31 December 2007, which
have been prepared in accordance with all applicable International Financial
Reporting Standards (IFRSs). There are no differences for the Group in applying
IFRSs as issued by the International Accounting Standards Board and as endorsed
by the European Union (EU). Consequently, the Group's annual financial
statements for the year ended 31 December 2007 are also compliant with IFRSs as
endorsed by the EU.
The information for the year ended 31 December 2007 does not constitute
statutory accounts as defined by section 240 of the Companies Act 1985 of the
United Kingdom. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditors' report was not qualified
and did not contain statements under Section 237(2) or (3) of the Companies Act
1985.
2.Accounting policies
The same accounting policies, methods of computation and presentation have been
followed in the preparation of the condensed combined and consolidated
financial statements as were applied in the preparation of the Group's annual
financial statements for the year ended 31 December 2007.
In line with the transitional provisions of IFRIC 14, 'IAS 19 - The Limit on a
Defined Benefit Asset, Minimum Funding Requirements and their Interaction' the
Group has retrospectively increased its surplus restriction as at 30 June 2007
and a consequential decrease in the Group's combined and consolidated net
assets of €12 million has been recognised. The Group's retirement benefits
surplus as at the same date has decreased from €25 million to €8 million. The
Group's reported earnings for the six months ended 30 June 2007 are unaffected
by this adjustment and there is therefore no impact on the Group's reported EPS
for same period.
3.Seasonality
The seasonality and cyclicality of the Group's operations do not impact
significantly on the condensed combined and consolidated financial statements.
4.Segmental information
As described in the Group's annual financial statements for the year ended 31
December 2007 and the Group's interim management statement for the period ended
30 April 2008, from 1 January 2008, in place of the former business units of
Mondi Packaging and Mondi Business Papers, the Group operates through two
divisions: Europe & International and South Africa. Segmental comparators have
been retrospectively restated to conform to the new reporting structure.
Primary reporting format - by business segment
The Group's revenues are disclosed by business segment as follows:
(Restated)
Six months ended Six months ended Year ended
30 June 2008 30 June 2007 31 December 2007
Segment Inter-segment Group Segment Inter-segment Group Segment Inter-segment Group
€ million revenue revenue revenue revenue revenue revenue revenue revenue revenue
Europe &
International
Bags &
Specialities 1,121 (10) 1,111 994 (11) 983 2,005 (19) 1,986
Uncoated Fine
Paper 846 (92) 754 837 (85) 752 1,666 (177) 1,489
Corrugated 830 (34) 796 756 (21) 735 1,616 (55) 1,561
Intra-segment
elimination (55) 55 - (43) 43 - (98) 98 -
2,742 (81) 2,661 2,544 (74) 2,470 5,189 (153) 5,036
South Africa
Uncoated
Fine Paper 221 (122) 99 248 (121) 127 491 (267) 224
Corrugated 63 (62) 1 60 (60) - 125 (125) -
Intra-segment
elimination (10) 10 - (13) 13 - (25) 25 -
274 (174) 100 295 (168) 127 591 (367) 224
Mondi
Packaging
South Africa 223 (14) 209 173 (17) 156 419 (28) 391
Merchant and
Newsprint 293 - 293 286 (1) 285 591 (1) 590
Corporate and
other
businesses - - - 14 - 14 28 - 28
Inter-segment
revenue (269) 269 - (260) 260 - (549) 549 -
Group total 3,263 - 3,263 3,052 - 3,052 6,269 - 6,269
4.Segmental information (continued)
The Group's operating result, both before and after operating special items, is
disclosed by business segment as follows:
Segment operating profit Segment operating profit
before special items1 after special items1
(Restated) (Restated)
Six Year Six Six Year
months Six months ended months months ended
ended ended ended ended
31 Dec 31 Dec
30 June 30 June 30 June 30 June
€ million 2008 2007 2007 2008 2007 2007
Europe &
International
Bags &
Specialities 109 80 154 103 80 153
Uncoated Fine
Paper 69 48 99 42 48 36
Corrugated 37 54 133 35 54 128
215 182 386 180 182 317
South Africa
Uncoated Fine
Paper 30 32 53 30 28 48
Corrugated 15 12 25 15 12 25
45 44 78 45 40 73
Mondi Packaging
South Africa 14 15 35 14 16 35
Merchant and
Newsprint 10 16 40 10 16 40
Corporate and
other businesses (21) (14) (37) (22) (19) (40)
Group total2 263 243 502 227 235 425
Notes:
1.Special items are set out in note 5.
2.Stated after green energy sales and disposal of emissions credits totalling €23
million (30 June 2007: €19 million; 31 December 2007: €42 million), which are
included within 'Other net operating expenses' in the Group's condensed
combined and consolidated income statement.
4.Segmental information (continued)
The Group's operating segment net assets are presented, and reconciled to 'Net
assets' in the Group's condensed combined and consolidated balance sheet, as
follows:
(Restated)
As at 30 June 2008 As at 30 June 2007 As at 31 December 2007
Net Net Net
Segment Segment segment Segment Segment segment Segment Segment segment
€ million assets liabilities assets1 assets liabilities assets1 assets liabilities assets1
Europe &
International
Bags &
Specialities 1,965 (313) 1,652 1,788 (271) 1,517 1,851 (305) 1,546
Uncoated Fine
Paper 1,605 (200) 1,405 1,556 (197) 1,359 1,491 (203) 1,288
Corrugated 1,356 (247) 1,109 1,117 (238) 879 1,389 (316)16 1,073
Intra-segment
elimination (30) 30 - (19) 19 - (45) 45 -
4,896 (730) 4,166 4,442 (687) 3,755 4,686 (779) 3,907
South Africa
Uncoated
Fine Paper 765 (99) 666 939 (114) 825 913 (100) 813
Containerboard 138 (15) 123 168 (12) 156 165 (12) 153
Intra-segment
elimination (2) 2 - (4) 4 - (4) 4 -
901 (112) 789 1,103 (122) 981 1,074 (108) 966
Mondi Packaging
South Africa 385 (77) 308 269 (62) 207 426 (92) 334
Merchant and
Newsprint 330 (82) 248 349 (84) 265 337 (90) 247
Corporate and
other businesses 5 (2) 3 25 (6) 19 12 (14) (2)
Inter-segment
elimination (110) 110 - (108) 108 - (157) 157 -
Segments total 6,407 (893) 5,514 6,080 (853) 5,227 6,378 (926) 5,452
Unallocated:
Investment in
associates 7 - 7 7 - 7 6 - 6
Deferred tax
assets/
(liabilities) 39 (313) (274) 40 (317) (277) 32 (322) (290)
Other
non-operating
assets/
(liabilities)2 244 (569) (325) 230 (530) (300) 241 (591) (350)
Group trading
capital employed 6,697 (1,775) 4,922 6,357 (1,700) 4,657 6,657 (1,839) 4,818
Financial
investments 25 - 25 25 - 25 25 - 25
Net debt 152 (1,807) (1,655) 176 (1,511) (1,335) 180 (1,687) (1,507)
Group net assets 6,874 (3,582) 3,292 6,558 (3,211) 3,347 6,862 (3,526) 3,336
Notes:
1 Net segment assets are operating assets less operating
liabilities. Operating assets are intangible assets, tangible assets, forestry
assets, retirement benefits surplus, inventories and operating receivables.
Operating liabilities are non-interest bearing current liabilities, restoration
and decommissioning provisions and provisions for post-retirement benefits.
2 Other non-operating assets consist of derivative assets, current
income tax receivables, other non-operating receivables and assets held for
sale. Other non-operating liabilities consist of derivative liabilities,
non-operating provisions, current income tax liabilities and liabilities
directly associated with assets held for sale.
4.Segmental information (continued)
Secondary reporting format - by geographical segment
The Group's revenues are presented by customer location as follows:
Year
Six months ended Six months ended ended
30 June 30 June 31 December
€ million 2008 2007 2007
South Africa 284 291 618
Rest of Africa 133 93 213
Western Europe 1,552 1,587 3,162
Eastern Europe 688 492 1,148
Russia 224 258 421
North America 97 98 194
South America 15 10 29
Asia and Australia 270 223 484
Group total 3,263 3,052 6,269
The Group's revenues are presented by geographical origin as follows:
Year
Six months ended Six months ended ended
30 June 30 June 31 December
€ million 2008 2007 2007
South Africa 470 469 995
Rest of Africa 6 5 12
Western Europe 1,475 1,376 2,840
Eastern Europe 895 797 1,615
Russia 282 270 546
North America 58 61 121
Asia and Australia 77 74 140
Group total 3,263 3,052 6,269
4.Segmental information (continued)
The Group's operating assets and liabilities are presented by geographical
location as follows:
As at 30 June 2008 As at 30 June 2007 As at 31 December 2007
Net Net Net
Segment Segment segment Segment Segment segment Segment Segment segment
€ million assets liabilities assets assets liabilities assets assets liabilities assets
South
Africa 1,266 (141) 1,125 1,411 (183) 1,228 1,444 (139) 1,305
Rest of
Africa 12 (4) 8 11 (6) 5 19 (5) 14
Western
Europe 2,204 (374) 1,830 2,310 (378) 1,932 2,376 (546) 1,830
Eastern
Europe 2,132 (282) 1,850 1,676 (196) 1,480 1,855 (144) 1,711
Russia 576 (40) 536 446 (35) 411 446 (27) 419
North
America 97 (12) 85 113 (16) 97 112 (20) 92
Asia and
Australia 120 (40) 80 113 (39) 74 126 (45) 81
Group
total 6,407 (893) 5,514 6,080 (853) 5,227 6,378 (926) 5,452
5.Special items
Year
Six months Six months ended
ended ended
31
30 June 30 June December
€ million 2008 2007 2007
Operating special items
Asset impairments and closure costs
Uncoated Fine Paper (Europe &
International) (26) - (57)
Bags & Specialities (Europe &
International) (5) - -
Uncoated Fine Paper (South Africa) - (4) (4)
(31) (4) (61)
Mondi Packaging South Africa negative goodwill - 1 1
Retention arrangements (5) (5) (9)
Accelerated charge on Anglo American plc
share-based award schemes - - (8)
Total operating special items (36) (8) (77)
Non-operating special items
Disposal of UK Corrugated sheet feeder business (3) - -
Disposal of partial interest in Mondi Packaging
Paper Swiecie - 57 57
Disposal of interest in Bischof + Klein GmbH - 19 19
Sale of assets and other items - 8 7
Net (loss)/profit on disposal (3) 84 83
Financing cost - (29) (29)
Total non-operating special items (3) 55 54
Total special items before tax (39) 47 (23)
Taxation - 1 15
Total special items after tax1 (39) 48 (8)
Note:
1 Attributable to equity holders of the Group.
5.Special items (continued)
Operating special items
The previously announced closure of the Group's 140,000 tonne uncoated fine
paper mill in Hungary was completed during the period (production ceased on 20
March 2008). The Group also completed the restructuring and simplification of
the European Uncoated Fine Paper divisional structure and is now beginning to
see the benefits of these actions coming through. The charge for impairment of
the Hungarian site was recognised in the 2007 results and closure and other
costs of €26 million have been disclosed as a special item in the first half.
In addition, the Group incurred a €5 million charge on the closure of the
Nyborg Bags & Specialities plant in Denmark with certain of the volumes
transferred within Mondi.
The equity-settled retention arrangements for the Group's senior management
resulted in a share-based payments incremental fair value charge of €5 million.
It is expected that a further €10 million will be incurred under these
retention arrangements over the period ending 2 July 2009.
Non-operating special items
The Group disposed of its equity interest in the Corrugated sheet feeder
business in the United Kingdom for €3 million and recorded an associated loss
of €3 million.
6.Net finance costs
Year
Six months Six months ended
ended ended
31
30 June 30 June December
€ million 2008 2007 2007
Investment income
Interest and other financial income 8 9 24
Expected return on defined benefit
arrangements 10 10 22
Foreign currency gains/(losses) 1 1 2 (2)
Total investment income 19 21 44
Interest expense
Interest on bank loans, overdrafts and
finance leases 2 (67) (52) (119)
Interest on defined benefit
arrangements (13) (13) (28)
(80) (65) (147)
Less: interest capitalised 6 2 4
Total interest expense before special items (74) (63) (143)
Special items financing cost - (29) (29)
Total interest expense after special items (74) (92) (172)
Net finance costs (55) (71) (128)
Notes:
1 Net of fair value movements attributable to forward foreign
exchange contracts.
2 Net of fair value movements attributable to interest rate
swap contracts
7. Income tax expense
Year
Six months ended Six months ended ended
30 June 30 June 31 December
€ million 2008 2007 2007
United Kingdom - - (1)
Overseas 55 58 88
55 58 87
Deferred taxation 6 2 15
61 60 102
The Group's estimated effective annual income tax rate applied to the Group's
underlying interim pre tax earnings is 29% (six months ended 30 June 2007:
30%). The Group's estimated effective annual income tax rate applied to the
Group's interim pre tax earnings is 36% (six months ended 30 June 2007: 24%).
The Group's share of associated undertakings' taxation for the six months ended
30 June 2008 is €0.5 million (six months ended 30 June 2007: €0.4 million, year
ended 31 December 2007: €1.0 million).
8.Pro forma EPS
The Group completed its demerger from the Anglo American plc group of companies
on 2 July 2007 ('the demerger date'). The ordinary shares of Mondi Limited and
Mondi plc were then admitted to the Johannesburg Securities Exchange ('JSE')
and the London Stock Exchange respectively on 3 July 2007 ('the listing date').
In order to provide a meaningful comparison, the number of ordinary shares
issued on the listing date has been retrospectively applied to the earnings
reported for the comparative Half-yearly period, which falls prior to the
demerger date.
Six Six Year
months months
ended ended ended
30 30 31
June June December
€ cents per
share 2008 2007 2007
Profit for the financial period/year attributable to equity holders
Basic EPS 17.1 31.9 45.4
Diluted EPS 16.9 31.9 45.1
Underlying earnings for the financial period/year1
Basic EPS 24.8 22.6 46.9
Diluted EPS 24.4 22.6 46.7
Headline earnings for the financial period/year2
Basic EPS 18.3 17.3 39.5
Diluted EPS 18.0 17.3 39.3
Notes:
1.The Boards believe that underlying EPS provides a useful additional non-GAAP
measure of the Group's underlying performance. Underlying EPS excludes the
impact of special items. Please see the reconciliation below.
2.The presentation of headline EPS is mandated under the JSE Listing
Requirements. Headline earnings has been calculated in accordance with Circular
8/2007, 'Headline Earnings', as issued by the South African Institute of
Chartered Accountants. Please see the reconciliation below.
8.Pro forma EPS (continued)
Year
Six Six
months months ended
ended ended
31
30 June 30 June December
€ million 2008 2007 2007
Profit for the financial period/year attributable
to equity holders 87 164 233
Special items: operating 36 8 77
Special items: financing costs - 29 29
Net loss/(profit) on disposals 3 (84) (83)
Related tax - (1) (15)
Underlying earnings for the financial period/year 126 116 241
Special items: restructuring and closure costs (28) - -
Special items: financing costs - (29) (29)
Special items: retention arrangements (5) (5) (9)
Special items: accelerated charges on exiting
Anglo American plc share and option schemes - - (8)
Loss on disposal of tangible fixed assets - 1 1
Related tax - 6 7
Headline earnings for the financial period/year 93 89 203
Year
Six months Six months ended
ended ended
31
30 June 30 June December
Million 2008 2007 2007
Basic number of ordinary shares1
outstanding2 508 514 513
Effect of dilutive potential ordinary
shares3 8 - 4
Diluted number of ordinary shares
outstanding 516 514 517
Note:
1.The total number of ordinary shares in issue as at 30 June 2008 is 514,137,127,
which is comprised of 146,896,322 Mondi Limited R0.20 ordinary shares listed on
the JSE Limited and 367,240,805 €0.20 ordinary shares listed on the London
Stock Exchange.
2.The basic number of ordinary shares outstanding represents the weighted average
number in issue for Mondi Limited and Mondi plc, pro-rated for the year ended
31 December 2007, as adjusted for the weighted average number of treasury
shares held.
3.Diluted EPS is calculated by adjusting the weighted average number of ordinary
shares in issue on the assumption of conversion of all potentially dilutive
ordinary shares.
9 Dividends
Year
Six months Six months ended
ended ended
31
30 June 30 June December
€ million 2008 2007 2007
Amounts recognised as distributions to
equity holders
Final and interim dividends paid 80 - 38
Amounts proposed as distributions to
equity holders1
Proposed interim and final dividends 40 38 80
Full year dividend paid and proposed 118
9 Dividends (continued)
Year
Six months Six months ended
ended ended
31
30 June 30 June December
€ cents 2008 2007 2007
Amounts recognised as distributions to
equity holders
Final and interim dividends paid 15.7 - 7.3
Amounts proposed as distributions to
equity holders1
Proposed interim and final dividends 7.7 7.3 15.7
Full year dividend paid and proposed 23.0
Note:
1.Proposed interim dividends are not accrued for until approved by the directors.
Proposed final dividends are not accrued for until approved by the ordinary
equity holders of Mondi Limited and Mondi plc, respectively.
The interim dividend for the year ending 31 December 2008 of 7.7 euro cents per
ordinary share will be paid on 16 September 2008 to Mondi Limited and Mondi plc
ordinary shareholders on the relevant registers on 29 August 2008. The dividend
will be paid from distributable reserves of Mondi Limited and of Mondi plc, as
presented in the respective company annual financial statements for the year
ended 31 December 2007.
The interim dividend for the year ending 31 December 2008 will be paid in
accordance with the following timetable:
Mondi
Limited Mondi plc
Last date to trade shares cum-dividend
22 August 22 August
JSE Limited 2008 2008
Not 26 August
London Stock Exchange applicable 2008
Shares commence trading ex-dividend
25 August 25 August
JSE Limited 2008 2008
Not 27 August
London Stock Exchange applicable 2008
Record date
29 August 29 August
JSE Limited 2008 2008
Not 29 August
London Stock Exchange applicable 2008
2 2
Last date for Dividend Reinvestment Plan (DRIP) September September
elections by Central Securities Depository Participants 2008 2008
Last date for DRIP elections to UK Registrar and South 3 3
African Transfer Secretaries by shareholders in Mondi September September
Limited and Mondi plc 2008 2008
Payment date
16
Not September
UK Register applicable 2008
16 16
September September
South African Register 2008 2008
19
September Not
Depositary Interest Holders (dematerialised DIs) 2008 applicable
23
September Not
Holders within the Equiniti Corporate Nominee 2008 applicable
Currency conversion dates
30 July 30 July
ZAR/euro 2008 2008
8
Not September
Euro/sterling applicable 2008
23 19
September September
DRIP purchase settlement dates 2008 20081
Note:
1 23 September 2008 for Mondi plc South African branch register.
Share certificates on the South African registers of Mondi Limited and Mondi
plc may not be dematerialised or rematerialised between 25 August 2008 and 31
August 2008, both dates inclusive, nor may transfers between the UK and South
African registers of Mondi plc take place between 20 August 2008 and 31 August
2008, both dates inclusive.
10 Net debt
The Group's net debt position, excluding disposal groups for relevant
periods, is as follows:
Debt due Debt due
Cash and cash within one after one Total
€ million equivalents1 year2 year net debt
Balance at 1 January 2007 358 (1,181) (656) (1,479)
Cash flow (212) 889 (548) 129
Business combinations and
disposal of businesses - 7 - 7
Reclassifications (3) 3 - -
Currency movements (7) 11 4 8
Closing balance at 30 June
2007 136 (271) (1,200) (1,335)
Cash flow (74) 56 (16) (34)
Business combinations and
disposal of businesses - (44) (122) (166)
Reclassifications - (85) 85 -
Currency movements (3) 12 19 28
Closing balance at 31
December 2007 59 (332) (1,234) (1,507)
Cash flow (90) 143 (285) (232)
Business combinations - (3) (5) (8)
Disposal of businesses - 4 16 20
Reclassifications - (42) 42 -
Currency movements 1 6 65 72
Closing balance at 30 June
2008 (30) (224) (1,401) (1,655)
Notes:
1.The Group operates in certain countries (principally South Africa) where the
existence of exchange controls may restrict the use of certain cash balances.
These restrictions are not expected to have any material effect on the Group's
ability to meet its ongoing obligations.
2.Excludes overdrafts, which are included as cash and cash equivalents. As at 30
June 2008, short-term borrowings on the balance sheet of €406 million (30 June
2007: €311 million, 31 December 2007: €453 million) include €182 million of
overdrafts (30 June 2007: €40 million, 31 December 2007: €121 million).
The following table shows the undrawn amounts on the Group's committed loan
facilities:
Year
Six months ended Six months ended ended
30 June 30 June 31 December
€ million 2008 20071 2007
Expiry date
In one year or less 154 - 185
In more than one year 934 - 1,025
Total credit available 1,088 - 1,210
Note:
1 Credit lines available prior to the demerger from Anglo American
plc are not considered to be representative of the Group's liquidity profile
post-demerger.
11 Condensed statement of changes in equity
Share capital
Combined
share Total
Anglo Mondi Mondi Mondi capital equity
investment Limited Limited plc and attributable
in Mondi share share share share Retained Other to equity
€ million Group capital premium capital premium earnings reserves1 holders
At 1 January
2007 1,899 – – – 1,899 1,100 (33) 2,966
Anglo
American plc
contribution 120 – – – 120 – – 120
Dividend in
specie 32 – – – 32 (32) – –
Dividends
paid to Anglo
American plc – – – – – (202) – (202)
Retained
profit
pre-demerger – – – – – 164 – 164
Currency
translation
adjustment – – – – – - (35) (35)
Other
movements – – – – – - (18) (18)
At 30 June
2007 2,051 - - - 2,051 1,030 (86) 2,995
Termination
of Anglo
American plc
equity
interest (2,051) 3 540 – (1,508) (832) 2,411 71
Dividend in
specie to
Anglo
American plc
shareholders – – – 2,938 2,938 – (2,938) –
Share issue
expenses – – – – – (74) – (74)
Share capital
reduction – – – (2,864) (2,864) 2,864 – –
Dividend in
specie to
Mondi plc
shareholders – – – – – (794) 794 –
Issue of
special
converting
shares – 8 (8) 29 29 (29) – –
Interim
dividend – – – – – (38) – (38)
Purchase of
treasury
shares – – – – – (33) – (33)
Post-demerger
retained
profit – – – – – 68 - 68
Share-based
payments
transfer – – – – – (8) - (8)
Currency
translation
adjustment – – – – – - (45) (45)
Other
movements – – – – – – 27 27
At 31
December 2007 – 11 532 103 646 2,154 163 2,963
Retained
profit – – – – – 87 - 87
Prior year
final
dividend – – – – – (80) - (80)
Purchase of
treasury
shares – – – – – (15) - (15)
Share-based
payments
transfer – – – – – 1 (1) -
Exit costs on
legacy Anglo
American plc
scheme – – – – – (3) - (3)
Currency
translation
adjustment – – – – – - (87) (87)
Other
movements – – – – – - 20 20
At 30 June
2008 - 11 532 103 646 2,144 95 2,885
Note:
1 Includes the share-based payment, cumulative translation adjustment,
available-for-sale, cash flow hedge, defined benefit obligation, merger and
other sundry
reserves.
12 Capital expenditure1
Year
Six months ended Six months ended ended
30 June 30 June 31 December
€ million 2008 2007 2007
By business segment
Europe & International
Bags & Specialities 47 29 102
Uncoated Fine Paper 130 41 98
Corrugated 83 31 111
260 101 311
South Africa
Uncoated Fine Paper 19 10 21
Corrugated 4 1 2
23 11 23
Mondi Packaging South Africa 25 14 47
Merchant and Newsprint 5 8 18
Corporate and other businesses - 5 7
313 139 406
Note:
1.Excludes the purchase of property, plant and equipment by way of business
combination and accrued capital expenditure. The additions to property, plant
and equipment during the six months ended 30 June 2008, including accrued
expenditure and purchases made by way of business combination, total €317
million (six months ended 30 June 2007: €146 million; year ended 31 December
2007: €589 million).
13 Earnings before interest, tax, depreciation and amortisation (EBITDA)
A reconciliation of cash inflows from operations to EBITDA is presented as
follows:
Year
Six months Six months ended
ended ended
31
30 June 30 June December
€ million 2008 2007 2007
Cash inflows from operations 310 356 957
Share option expense (6) (3) (6)
Fair value gains on forestry assets 24 13 32
Cost of felling (22) (26) (51)
Decrease in provisions and
post-employment benefits 11 10 14
Increase in inventories 11 52 69
Increase/(decrease) in operating
receivables 87 99 (25)
Decrease/(increase) in operating payables 28 (92) (141)
Other adjustments 13 12 21
EBITDA1 456 421 870
Note
1 EBITDA is operating profit before special items plus depreciation
and amortisation in subsidiaries and joint ventures.
13 Earnings before interest, tax, depreciation and amortisation (EBITDA)
(continued)
EBITDA by business segment is presented as follows:
Year
Six months ended Six months ended ended
30 June 30 June 31 December
€ million 2008 2007 2007
By business segment
Europe & International
Bags & Specialities 164 132 260
Uncoated Fine Paper 122 100 202
Corrugated 78 89 208
364 321 670
South Africa
Uncoated Fine Paper 48 48 87
Corrugated 19 17 35
67 65 122
Mondi Packaging South Africa 27 21 53
Merchant and Newsprint 18 27 60
Corporate and other businesses (20) (13) (35)
456 421 870
EBITDA is stated before special items and is reconciled to "Total profit from
operations and associates" in the Group's condensed combined and consolidated
income statement, as follows:
Year
Six months Six months ended
ended ended
31
30 June 30 June December
€ million 2008 2007 2007
Total profit from operations and associates 226 321 510
Operating special items (excluding
associates) 36 8 77
Net loss/(profit) on disposals (excluding
associates) 3 (84) (83)
Depreciation and amortisation: subsidiaries
and joint ventures 193 178 368
Share of associates' net income (2) (2) (2)
EBITDA 456 421 870
14 Business combinations
The Europe and International Bags & Specialities business acquired the
Hungarian and Ukraine bag converting operations of Dunapack for €29 million on
15 April 2008. €14 million provisional goodwill has been recognised on this
transaction. The flexibles business of BSK Handling Ltd was acquired on 2 April
2008 for €6 million. €5 million in provisional goodwill has been recognised on
this transaction. The purchase consideration and resultant goodwill on the
Group's other acquisitions in the six month period ended 30 June 2008 totalled
€2 million and, provisionally, €4 million respectively.
15 Write-down of inventories to net realisable value
The write-downs of inventories to net realisable value, recognised as an
expense for the six months ended 30 June 2008, total €9 million (30 June 2007:
€16 million; 31 December 2007: €10 million). The reversals of previous
write-downs, recognised as a reduction in the amount of inventories expensed
for the six months ended 30 June 2008, total €1 million (30 June 2007: €2
million; 31 December 2007: €8 million).
16 Retirement benefits
There were no significant curtailments, settlements, or other significant
one-time events relating to the Group's defined benefit schemes,
post-retirement medical plans or statutory retirement obligations during the
half-year ended 30 June 2008.
Material schemes
The Group's material defined benefit scheme and post-retirement medical plan
liabilities were actuarially assessed for the half-year ended 30 June 2008. The
net change in certain actuarial and financial assumptions from those applied as
at 31 December 2007 resulted in an immaterial impact on the present value of
the liabilities. The assets backing the defined benefit scheme liabilities were
updated to reflect their market values as at 30 June 2008. Any difference
between the expected return on assets and the actual return on assets has been
recognised as an actuarial experience movement within equity.
Remaining Group defined benefit schemes and unfunded statutory obligations
The remaining Group defined benefit schemes and unfunded statutory retirement
obligations are calculated on a year-to-date basis. The calculations performed
make use of the actuarial and financial assumptions published in the Group's
annual financial statements for the year ended 31 December 2007. Although
certain of these assumptions require adjustment to reflect significant market
fluctuations during the half-year ended 30 June 2008, the net effect of
applying these adjustments would have been immaterial. A full actuarial
assessment of all of the Group's defined benefit schemes and unfunded statutory
retirement obligations will be carried out for the year ending 31 December
2008.
17 Capital commitments
Year
Six months ended Six months ended ended
30 June 30 June 31 December
€ million 2008 2007 2007
Contracted for but not provided 421 79 74
Approved, not yet contracted for 436 107 824
18 Related party transactions
The Group has a related party relationship with its associates and joint
ventures, and up to the demerger date, with certain Anglo American plc group
companies. Transactions between Mondi Limited, Mondi plc and their respective
subsidiaries, which are deemed to be related parties, have been eliminated on
consolidation and are not disclosed in this note.
The Group and its subsidiaries, in the ordinary course of business, enter into
various sales, purchase and service transactions with associates and joint
ventures and others in which the Group has a material interest. These
transactions are under terms that are no less favourable than those arranged
with third parties. These transactions, in total, are not considered to be
significant.
Anglo American plc Joint
€ million group Ventures Associates
Half-year ended/as at 30 June
2008
Sales to related parties - 5 -
Purchases from related parties - - (18)
Net finance income/(costs) - - -
Dividends paid to related
parties - - -
Receivables due from related
parties - - -
Loans to related parties - 13 -
Receivables due from related
parties - 5 -
Half-year ended/as at 30 June
2007
Sales to related parties - - 1
Purchases from related parties (6) - (68)
Net finance income/(costs) 2 (2) -
Dividends paid to related
parties (202) - -
Dividends in specie (32) - -
Receivables due from related
parties - 1 -
Cash held by related parties - 2 -
Total borrowings from related
parties (4) (7) -
Year ended/as at 31 December
2007
Sales to related parties - 8 8
Purchases from related parties - (2) (1)
Net finance costs (22) - -
Dividends paid to related
parties (202) - -
Dividends in specie (32) - -
Loans to related parties - 13 -
Receivables due from related
parties - 5 -
18 Related party transactions (continued)
Mr Ramaphosa, joint chairman of Mondi, has a 39.96% stake in Shanduka Group
(Pty) Limited, an entity that has controlling interests in Shanduka Advisors
(Pty) Limited, Shanduka Resources (Pty) Limited, Shanduka Packaging (Pty)
Limited and Shanduka Newsprint (Pty) Limited and participating interests in
Mondi Shanduka Newsprint (Pty) Limited, Kangra Coal (Pty) Limited, Rennies
Distribution Services (Pty) Limited and Mondi Packaging South Africa (Pty)
Limited. Fees of €166,000 and €303,000 were paid to Shanduka Advisors (Pty)
Limited and Shanduka Resources (Pty) Limited respectively for management
services provided to the Group during the six months ended 30 June 2008 (30
June 2007: €193,000 and €345,000 respectively; 31 December 2007: €379,000 and €
681,000 respectively). Shanduka Packaging (Pty) Limited and Shanduka Newsprint
(Pty) Limited have also provided shareholder loans to the Group. The balances
outstanding as at 30 June 2008 are €14 million and €7 million respectively (30
June 2007: €7 million and €10 million respectively; 31 December 2007: €17
million and €9 million respectively). In the normal course of business, and on
an arm's length basis, during the six months ended 30 June 2008 the Group
purchased supplies from Kangra Coal (Pty) Limited totalling €6 million (30 June
2007: €8 million; 31 December 2007: €9 million) and made use of transport and
warehousing services provided by Rennies Distribution Services (Pty) Limited
totalling €4 million (30 June 2007: €6 million; 31 December 2007: €13 million).
€1 million remains outstanding on these purchases as at 30 June 2008 (30 June
2007: €1 million; 31 December 2007: €1 million).
Dividends received from associates for the six months ended 30 June 2008 total
€nil (six months ended 30 June 2007: €1 million, 31 December 2007: €1 million),
as disclosed in the condensed combined and consolidated cash flow statement.
19 Asset values per share
Asset values per share are disclosed in accordance with the JSE Listing
Requirements. Net asset value per share is defined as net assets divided by the
combined number of ordinary shares in issue as at the reporting balance sheet
date, less treasury shares held as at the same date. Tangible net asset value
per share is defined as net assets less intangible assets divided by the
combined number of ordinary shares in issue as at the reporting balance sheet
date, less treasury shares held as at the same date. For the purposes of the
comparative Half-yearly balance sheet date, the total number of shares issued
on the listing date has been used to calculate the asset values per share.
As at 30 As at 30 As at 31
June June December
2008 2007 2007
Net asset value per share (€) 6.51 6.51 6.56
Tangible net asset value per share
(€) 5.47 5.77 5.54
20 Events occurring after 30 June 2008
With the exception of the proposed interim dividend for 2008, as disclosed in
note 9, there have been no material reportable events since 30 June 2008.
Production statistics
Year
Six months Six months ended
ended ended
31
30 June 30 June December
2008 2007 2007
Europe & International
Containerboard tonnes 965,319 916,815 1,849,702
Kraft paper tonnes 461,754 444,625 891,385
Corrugated board and m m²
boxes 1,143 985 2,088
Bag converting m units 1,902 1,910 3,642
Coating and release m m²
liners 1,414 1,549 2,971
Uncoated fine paper tonnes 754,364 800,943 1,517,792
Newsprint tonnes 97,821 99,738 192,329
Total hardwood pulp tonnes 607,356 603,868 1,182,476
Total softwood pulp tonnes 970,356 875,019 1,748,294
External hardwood pulp tonnes 38,171 34,508 76,244
External softwood pulp tonnes 105,299 107,934 213,218
South Africa
Containerboard tonnes 117,449 119,117 251,661
Uncoated wood free paper tonnes 229,938 238,202 469,782
bone dry
Wood chips tonnes 364,247 362,089 690,447
Total hardwood pulp tonnes 264,003 326,019 630,210
Total softwood pulp tonnes 50,321 43,954 98,613
External hardwood pulp tonnes 13,214 34,719 86,802
Mondi Packaging South
Africa
Packaging papers tonnes 146,179 141,339 368,574
Corrugated board and m m²
boxes 183 171 367
Total hardwood pulp tonnes 40,147 32,631 65,829
Total softwood pulp tonnes 34,090 28,967 64,274
Newsprint joint ventures
Newsprint (attributable tonnes
share) 163,753 156,102 314,847
Aylesford (attributable tonnes
share) 99,639 94,354 185,990
Shanduka (attributable tonnes
share) 64,114 61,748 128,857
Total hardwood pulp tonnes
Shanduka 40,816 40,715 86,469
Exchange rates
Six
months
ended Year
30
Six months ended ended 31
30 June June December
2008 2007 2007
Closing rates against the euro
South African rand 12.34 9.53 10.03
Pounds sterling 0.79 0.67 0.73
Polish zloty 3.35 3.77 3.59
Russian rouble 36.95 34.83 35.99
Slovakian koruna 30.20 33.61 33.58
US dollar 1.58 1.35 1.47
Czech koruna 23.89 28.71 26.63
Average rates for the period
against the euro
South African rand 11.73 9.52 9.66
Pounds sterling 0.78 0.67 0.68
Polish zloty 3.49 3.84 3.78
Russian rouble 36.61 34.67 35.02
Slovakian koruna 32.24 34.05 33.77
US dollar 1.53 1.33 1.37
Czech koruna 25.21 28.16 27.76
Glossary of financial terms
EBITDA Operating profit of subsidiaries and joint ventures before
special items, depreciation and amortisation.
EBITDA EBITDA divided by net debt finance charges (before special
interest financing items).
cover
Gearing The ratio of net debt to total capital employed.
Group revenue Total turnover of subsidiaries and proportionate share of joint
venture turnover.
Headline JSE listing measure, calculated in accordance with Circular 8/
earnings 2007, 'Headline Earnings', as issued by the South African
Institute of Chartered Accountants.
Net debt A non-GAAP measure, comprising short and medium-term borrowings
and bank overdrafts less cash and cash equivalents and current
financial asset investments.
Net segment Net segment assets are segment assets, consisting of property,
assets plant and equipment, intangibles, forestry assets, retirement
benefit surplus, inventories and operating receivables less
segment liabilities consisting of non-interest-bearing current
liabilities, restoration and decommissioning provisions and
provisions for post-retirement benefits.
Operating Underlying operating profit divided by Group revenue.
margin
Return on This is trailing twelve month underlying operating profit,
capital including share of associates' net earnings, divided by average
employed trading capital employed and for segments has been extracted from
(ROCE) management reports. Capital employed is adjusted for the spend on
the two strategic projects in Poland and Russia which are not yet
in production.
Shareholders' Share capital, share premium, retained profits and other reserves
funds attributable to equity holders.
Special items Those non-recurring financial items which the Group believes
should be separately disclosed on the face of the combined and
consolidated income statement to assist in understanding the
underlying financial performance achieved by the Group and its
businesses.
Total equity Shareholders' funds and minority interests in equity.
Trading Net segment assets plus investment in associates, deferred tax,
capital and other non-operating assets and liabilities excluding
employed financial investments.
Underlying Net profit after tax before special items attributable to equity
earnings holders of the Group.
Underlying Operating profit of subsidiaries and joint ventures before
operating special items.
profit
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