Interim Management Statement
Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND ISIN: ZAE000156550
Mondi plc
(Incorporated in England and Wales)
(Registered 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 Listings Requirements of
the JSE Limited and/or the Disclosure and Transparency and Listing Rules of the
United Kingdom Listing Authority.
Mondi Group: Interim Management Statement 16 October 2014
This interim management statement provides an update on the financial
performance and financial position of the Group since the half year ended 30
June 2014, based on management accounts up to 30 September 2014 and estimated
results for October 2014. These results have not been audited or reviewed by
Mondi's external auditors.
Audited results for the year ending 31 December 2014 will be published on or
around 24 February 2015.
Except as discussed in this interim management statement, there have been no
significant events or transactions impacting either the financial performance
or financial position of Mondi Group since 30 June 2014 up to the date of this
statement.
Group Performance Overview
Third quarter underlying operating profit of EUR174 million was in line with
management's expectations, comparable to the prior year period and 10% below
that of the previous quarter.
Like-for-like sales volumes were broadly in line with the comparable prior year
period.
Previously announced price increases were successfully implemented in a number
of the Group's key Packaging Paper markets, with increases implemented for
unbleached kraft paper from the beginning of the third quarter, recycled
containerboard from August and unbleached kraftliner from September.
Wood costs were lower on average than the previous quarter whilst paper for
recycling costs were at similar levels. The business continued to benefit from
its investments in energy related capital expenditure and lower European
natural gas prices.
During the quarter, the major annual maintenance shuts scheduled for the
Group's uncoated fine paper and containerboard facilities were completed
according to plan. The major kraft paper maintenance shuts are scheduled for
the fourth quarter. The impact on third quarter underlying operating profit
from these shuts is estimated at around EUR30 million. Based on prevailing
market prices, the fourth quarter impact will be around EUR15 million to EUR20
million.
The South Africa Division benefited from the stronger US dollar on its export
sales whilst the weaker Russian rouble had a negative impact on the more
domestically focused Russian businesses. The recent strengthening of the US
dollar relative to the euro should support European pricing in packaging grades
and provide a net benefit to the Group's export businesses.
The Group continues to monitor the developments in Russia and the Ukraine,
however these have had minimal direct impact on operations to date.
Reorganisation of business segments
During the quarter, the Group refined its organisational structure, which has
resulted in several changes within the Group's segmental reporting. The most
significant of these changes were the:
* transfer of the release liner business from Fibre Packaging to Consumer
Packaging to take advantage of identified synergies in customer relations,
innovation and the global footprint of these businesses; and
* transfer of the 40,000 tonne per annum kraft paper machine at the
Ruzomberok mill from Uncoated Fine Paper to Packaging Paper.
The restated segmental information is included as an appendix to this
statement. The reorganisation had no impact on the overall Group result.
Divisional Overview
The Packaging Paper business saw selling price increases across a number of key
grades. Unbleached kraft paper price increases of between EUR30/tonne and EUR40
/tonne were implemented from July. Price increases for unbleached kraftliner
and recycled containerboard of between EUR30/tonne and EUR40/tonne were
achieved in steps during August and September. Prices for white-top kraftliner
and speciality kraft paper were stable.
During the quarter, the Group announced the intention to close one of the two
speciality kraft paper machines at its Lohja mill in Finland with capacity of
30,000 tonnes per annum. Closure and restructuring costs amounting to EUR6
million were recognised as a special item.
Fibre Packaging continued to perform well, with good year-on-year margin
development in both Corrugated Packaging and Industrial Bags. Increasing paper
input costs in the Corrugated Packaging segment and seasonally weaker demand in
Industrial Bags are expected to put some pressure on margins in the fourth
quarter.
During the quarter the sub-scale Moderbrugg corrugated packaging plant in
Austria was sold.
The integration of the recently acquired Graphic Packaging industrial bags
business in the US is progressing according to plan. Various restructuring
activities have been announced, including the closure of a plant in
Philadelphia. The closure and restructuring costs, which will be reflected as a
special item, are estimated at EUR13 million.
Profitability in Consumer Packaging improved from the previous quarter,
although the weak trading conditions in Europe continued to impact this
business. A relocation of the head office activities of the business unit was
implemented and costs amounting to EUR12 million reflected as a special item.
The Uncoated Fine Paper business was impacted by the seasonally weaker third
quarter and the impact of planned maintenance shuts. Further weakening of the
Russian rouble impacted the profitability of the business, although price
increases achieved during the quarter in Russia partly offset this. The normal
seasonal pick-up in demand following the European summer has been marginally
weaker than anticipated with some price softness evident in key European market
segments.
Lower export pulp sales prices and fair value gains on forestry assets resulted
in lower profitability in the South Africa Division compared to the previous
quarter. The weakness of the rand against the US dollar provided some offset.
Capital investment projects
The Group continues to make good progress on its major capital projects. The
EUR128 million recovery boiler project at the Group's Ruzomberok mill and
EUR30 million pulp dryer at the Syktyvkar mill are currently in commissioning
phase.
Financial position
On 15 July 2014, as previously announced, the Group redeemed the 9.75%
EUR280 million Eurobond, assumed as part of the Nordenia acquisition. The notes
were redeemed utilising proceeds from existing borrowing facilities.
Net debt of EUR1,811 million at the end of the quarter was EUR60 million up on
the half-year, impacted by a number of factors including the 31 July
acquisition of the Printpack Inc. consumer packaging plant in Poland for
USD23 million announced at the half-year, increased capital expenditure,
payment of the interim dividend, interest on the 2020 EUR500 million Eurobond
and currency effects.
Outlook
Recent price increases in a number of the Packaging Paper grades and continued
strong operating performance across the Group should provide solid support for
the Group to continue to deliver in line with management expectations.
Looking further forward, much depends on macroeconomic developments in the
Group's core European markets. However, with the Group's low cost operating
model in upstream businesses, to be further enhanced by the various capital
projects nearing completion, and the benefits of strong vertical integration,
management remains confident of continuing to deliver industry leading
performance.
Operating segments(restated)
Six months ended 30 June 2014
Europe & International South
Africa Corporate Intersegment Segments
Division & other elimination total
€ million, unless Uncoated
otherwise stated Packaging Fibre Consumer Fine
Paper Packaging Packaging Paper
Segment revenue 1,022 868 685 646 284 - (357) 3,148
Internal revenue (282) (20) (3) (4) (48) - 357 -
External revenue 740 848 682 642 236 - - 3,148
EBITDA 216 78 69 127 78 (15) - 553
Depreciation, (49) (30) (30) (47) (20) - - (176)
amortisation and
impairments
Underlying 167 48 39 80 58 (15) - 377
operating profit/
(loss)
Special items - (7) 4 - - (13) - (16)
Operating segment 1,975 1,075 1,140 1,301 728 6 (177) 6,048
assets
Operating net 1,621 814 979 1,113 608 7 - 5,142
segment assets
Additions to 135 27 33 50 29 23 - 297
non-current
non-financial
assets
Capital expenditure 116 30 35 59 9 - - 249
cash payments
Operating margin 16.3 5.5 5.7 12.4 20.4 - - 12.0
(%)
Return on capital 22.5 12.3 8.3 15.6 20.5 - - 16.0
employed (%)
Six months ended 30 June 2013
Europe & International South
Africa Corporate Intersegment Segments
Division & other elimination total
€ million, unless Uncoated
otherwise stated Packaging Fibre Consumer Fine
Paper Packaging Packaging Paper
Segment revenue 1,078 856 721 711 325 - (349) 3,342
Internal revenue (265) (23) (2) (3) (56) - 349 -
External revenue 813 833 719 708 269 - - 3,342
EBITDA 202 75 74 150 67 (14) - 554
Depreciation, (48) (31) (32) (53) (23) (1) - (188)
amortisation and
impairments
Underlying 154 44 42 97 44 (15) - 366
operating profit/
(loss)
Special items - - (13) (50) (18) - - (81)
Operating segment 1,859 1,069 1,160 1,328 810 7 (129) 6,104
assets
Operating net 1,498 839 993 1,144 687 7 - 5,168
segment assets
Additions to 59 22 27 32 34 - - 174
non-current
non-financial
assets
Capital expenditure 56 31 27 36 14 - - 164
cash payments
Operating margin 14.3 5.1 6.0 13.6 13.5 - - 11.0
(%)
Return on capital 20.0 13.4 7.3 17.2 12.8 - - 14.8
employed (%)
Year ended 31 December 2013
Europe & International South
Africa Corporate Intersegment Segments
Division & other elimination total
€ million, unless Uncoated
otherwise stated Packaging Fibre Consumer Fine
Paper Packaging Packaging Paper
Segment revenue 2,073 1,690 1,414 1,335 624 - (660) 6,476
Internal revenue (506) (43) (4) (6) (101) - 660 -
External revenue 1,567 1,647 1,410 1,329 523 - - 6,476
EBITDA 408 146 143 266 135 (30) - 1,068
Depreciation, (100) (60) (64) (102) (42) (1) - (369)
amortisation and
impairments
Underlying 308 86 79 164 93 (31) - 699
operating profit/
(loss)
Special items - (3) (13) (60) (11) - - (87)
Operating segment 1,905 1,001 1,121 1,270 731 2 (140) 5,890
assets
Operating net 1,543 771 964 1,099 622 1 - 5,000
segment assets
Additions to 165 66 65 85 93 - - 474
non-current
non-financial
assets
Capital expenditure 141 71 61 80 52 - - 405
cash payments
Operating margin 14.9 5.1 5.6 12.3 14.9 - - 10.8
(%)
Return on capital 21.7 11.8 8.7 16.0 16.0 - - 15.3
employed (%)
Year ended 31 December 2012
Europe & International South
Africa Corporate Intersegment Segments
Division & other elimination total
€ million, unless Uncoated
otherwise stated Packaging Fibre Consumer Fine
Paper Packaging Packaging Paper
Segment revenue 1,970 1,583 765 1,415 702 - (645) 5,790
Internal revenue (470) (50) (4) (13) (108) - 645 -
External revenue 1,500 1,533 761 1,402 594 - - 5,790
EBITDA 334 151 57 292 125 (32) - 927
Depreciation, (98) (58) (34) (106) (56) (1) - (353)
amortisation and
impairments
Underlying 236 93 23 186 69 (33) - 574
operating profit/
(loss)
Special items - (16) (11) - 6 (70) - (91)
Operating segment 1,896 1,065 1,156 1,410 975 5 (150) 6,357
assets
Operating net 1,523 821 985 1,215 821 1 - 5,366
segment assets
Additions to 256 129 631 58 94 - - 1,168
non-current
non-financial
assets
Capital expenditure 95 62 36 58 43 - - 294
cash payments
Operating margin 12.0 5.9 3.0 13.1 9.8 - - 9.9
(%)
Return on capital 17.8 13.9 5.6 16.7 9.6 - - 13.7
employed (%)
Contact details:
Mondi Group
David Hathorn +27 11 994 5418
Andrew King +27 11 994 5415
Lora Rossler +27 83 627 0292
FTI Consulting
Richard Mountain +44 7909 684 466
Sue I Ong +44 20 3727 1340
Editors' notes
Mondi is an international packaging and paper Group, employing around 26,000
people in production facilities across 31 countries. In 2013, Mondi had
revenues of EUR6.5 billion and a ROCE of 15.3%. The Group's key operations are
located in central Europe, Russia, the Americas and South Africa.
The Mondi Group is fully integrated across the packaging and paper value chain
- from the management of its own forests and the production of pulp and paper
(packaging paper and uncoated fine paper), to the conversion of packaging paper
into corrugated packaging, industrial bags, extrusion coatings and release
liner. Mondi is also a supplier of innovative consumer packaging solutions,
advanced films and hygiene products components.
Mondi has a dual listed company structure, with a primary listing on the JSE
Limited for Mondi Limited under the ticker code MND and a premium listing on
the London Stock Exchange for Mondi plc, under the ticker code MNDI. The
Group's performance, and the responsible approach it takes to good business
practice, has been recognised by its inclusion in the FTSE4Good Global,
European and UK Index Series (since 2008) and the JSE's Socially Responsible
Investment (SRI) Index since 2007.
Sponsor in South Africa: UBS South Africa Pty Ltd
ND