mondi group ubs emerging markets conference · 2016-08-31 · ubs emerging markets conference 13...

Mondi Group

UBS emerging markets conference

13 May 2013

Agenda

Highlights

Strategy

Industry fundamentals

Summary

2

Appendices

Highlights

Strategy


Summary

3

Appendices

441 294 458 622 568

9.5%7.6%

12.3%15.0%

13.7%

2008 2009 2010 2011 2012

€ million

H1 H2 ROCE%

Financial Highlights

2012

� Strong profitability in 2012 despite challenging start to the year with improved volumes and pricing after Q1, supported by excellent operating performance and cost management

� ROCE of 13.7%, in excess of the Group’s through-the-cycle target of 13%

� Strong cash generation from operations of €845 million

� Total dividend for the year of 28.0 euro cents per

Underlying operating profit and ROCE

4

33.9 18.7 45.6 71.8 69.6

12.79.5

20.0

26.028.0

2008 2009 2010 2011 2012Earnings per share Dividend per share

� Total dividend for the year of 28.0 euro cents per share, up 8%

Interim management statement Q1 2013

� Underlying operating profit of €162 million in line with expectations despite one-off write-down of energy credits of €11 million

� Improved market conditions in Packaging Paper and South African businesses as well as benefits from acquisitions

Earnings and dividend per share

€ cents per share

Highlights

Strategy


Summary

5

Appendices

Mondi at a glance

2012Revenue1

Packaging Paper

Fibre Packaging

Consumer Packaging UFP

South Africa

30%

9%

€1,896m

29%8%

23%

10%

€1,860m €1,167m1 €1,466m €653m

Europe & International

27%

26% 17%

21%

9%

6

Products

2012 ROCE% 17.9% 12.5% 10.8%2 16.7% 9.9%

1 Pro-forma segment revenues, before elimination of inter-segment revenues, including Nordenia’s full year 2012 revenues.2 ROCE% has been adjusted for the Nordenia one-off costs.

57% 43%

2012 Strategic highlights

� Significant progress with strategic initiatives

� €1.2 billion spent on acquisitions increasing exposure to higher growth packaging segments

� Disposal of interest in non-core Aylesford Newsprint

Capital employed in packaging

Packaging

67%

33%

Net operating assets development (% group total)

2011 2012

7

Emerging marketsMature markets

� Capital employed in packaging businesses now 67% of Group total

� Integration of acquisitions on track

� Cost synergies now estimated at €30 million per annum, up 33%

� Investment grade credit ratings maintained

Emerging marketsMature markets

17%

83%

50% 50%

Turnover by destination(% group total)

Net operating assets (Upstream businesses)

Today Mondi is a high-quality and focused

business

2008 2013

E&I

Uncoated Fine Paper

E&I

●Syktyvkar modernisation completed●Sold controlling interest in Hadera

Corrugated●470,000t RCB machine in Świecie●Focus on central & eastern Europe●Bought out Świecie minorities, acquired Saturn

& Duropack plantsBags & Coatings

●Kraft Paper & Industrial Bags: focus on export, expansion in MENA●Coatings & Consumer Packaging: Nordenia

acquisitionMondi South Africa

Division

Uncoated Fine Paper

Corrugated

Bags & Coatings

E&I

Packaging Paper

Fibre Packaging

Consumer Packaging

Uncoated Fine Paper

8

acquisitionDivision

Mondi South Africa Division/MSN

●Refocus on domestic market●Greater pulp exposure●Leveraging strong market position

Mondi South Africa DivisionMondi ShandukaNewsprint

Aylesford Sold

Mondi Packaging South Africa

Demerged

Europapier Sold

Aylesford

Mondi Packaging South Africa

Europapier

Paper

Our strategic pillars

Achieve leading market positions

Maintain and/or develop leading market positions in our core packaging and uncoated fine paper markets, with specific focus on higher-growth emerging markets

Maintain a high-quality, low-cost

asset base

Maintain our low-cost, high-quality asset base by selectively investing in production capacity enjoying sustainable cost advantages

1

2

9

Our required rate of return on capital employed through the cycle is 13%

Continuous focus on performance

Focus on performance through continuous productivity improvement and cost reduction, delivered through business excellence programmes and rigorous asset management

Grow through customer focused

development

Develop markets and products aligned to our customer needs by developing products according to their requirements, increasing our exposure to more value added, innovative, technologically advanced products and by following our customers into high growth emerging consumer markets

3

4

Achieving leading market positions

� Acquisition of Nordenia represents a significant step in the development of a leading consumer packaging business

� Acquisition of two corrugated packaging plants in Germany and the Czech Republic reinforces Mondi’s strong central European footprint in corrugated packaging

Delivering on our strategy

Market share in Europe*

20%

30%Packaging Paper Fibre Packaging Uncoated Fine Paper

No. 1 No. 1

No. 1

No. 1

No. 2No. 3

1

10

16% 9%0%

10%

20%

30%

Recycled containerboard

Corrugated packaging

Packaging Paper and Fibre Packaging

Regional share in Emerging Europe*

12% 24%0%

10%

Virgin containerboard

Kraft paper

22% 7% 14%

Industrial bags

Extrusion coatings

Release liner

15% 20%

Uncoated fine paper

Office paper

No. 1

No. 1

No. 2

No. 2

Market share in South Africa*

Mondi holds the number one position in South Africa in the following markets:

� Uncoated Fine Paper

� Newsprint

� White Top Kraftliner

* Sources and region definitions are disclosed in the appendix.

Maintain a high-quality, low-cost asset base

� Acquisition of the remaining non-controlling interest in Mondi Świecie

� Acquisition of heat and energy plant at Mondi Świecie

� €300 million committed to energy related and debottlenecking projects

� 83% of upstream paper assets located in emerging markets offering clear and sustainable cost advantages


Group revenue by destination

Group revenue by origin

Net operating assets Net operating assets

2

11

Upstream paper mills

Emerging markets

Maturemarkets

50% 50% 43% 57% 36% 64%

17%

83%

Our emerging market focus underpins our low-

cost position across the Group’s main grades

46% 20%

18% 7%

Quartile¹

Percentage of Mondi's capacity in overall cost curve in Q3 2012

Q4

Q3

2

12

100% 100% 100% 75% 25% 35%

25% 11% 38% 100%

White Top Kraftliner

Unbleached Kraftliner

NSSC Fluting Recycled fluting Unbleached Sack Kraft

Paper

UFP² BHKP (Pulp)³

Q2

Q1

1 Delivered to Frankfurt except where noted2 Includes specialties3 Delivered to Rotterdam Source: RISI and Mondi estimates

1.0 0.6

0.4 0.00.20.40.60.81.01.2

Production Consumption Net long position

Millionsof tonnes E&I

3.0 3.2

(0.2)

0.8 0.5

0.3

(1.0)

0.0

1.0

2.0

3.0

4.0

Production Consumption Net long/(short) position

Millionsof tonnes

E&I SAD

Integrated value chain1

Kraft PaperPulp

MSADE&I

2

13

1.1

0.5

0.6

0.0 0.2 0.4 0.6 0.8 1.0 1.2


Millionsof tonnes E&I

1.0

0.2

0.8

0.3 0.3

0.00.20.40.60.81.01.21.4


Millionsof tonnes

E&I SAD

Virgin Containerboard Recycled Containerboard

MSADE&I

1 Based on full year 2012 production volumes

Grow through customer focused development

� Acquisition of Nordenia contributes significantly due to its innovation driven culture

� €70m planned investment in a 155,000 tonne per annum bleached kraft paper machine in Štěti, Czech Republic in order to meet growing demand

� New consumer packaging plant in Taicang, China under construction to support an existing global customer


3

14

R&D centres

Continuous focus on performance

� Production and efficiency records in numerous operations

� Sale of our 50% interest in Aylesford Newsprint

� Cost base reduced in absolute terms for past four years adjusted for acquisitions and disposals


Underlying operating profit (€m) and ROCE (%)

4

15

441 294 458 622 568

9.5%7.6%

12.3%

15.0%13.7%

2008 2009 2010 2011 2012

€ million

ROCE %

Mondi has clear free cash flow priorities

Free Cash Flow

Maintain investment grade credit metricsRatings reaffirmedSuccessful launch of 3.375% 8-year €500 million Eurobond

Selective capital investment opportunities (optimisation of asset base) Energy projects (€140 million) on track to deliver from end 2013 New projects started - Ružomberok (€128 million)

16

Flow priorities

Support dividendsFull year dividend increase of 8%Compound annual growth from 2008 of 22%

M&A and/or increased shareholder distributions Świecie non-controlling interestsSaturn energy power plantNordeniaCorrugated box plants in Germany and Czech Republic

As appropriate

New projects started - Ružomberok (€128 million) - Štěti (€70 million)

Recently approved major capital investments

Ružomberok Štěti

Description Recovery boiler and improvements in chemical recovery and green energy

155,000 tonne capacity bleached kraftpaper machine

Cost €128 million €70 million

IRR ±40% ±20%

17

Benefits

� Increase pulp production

�Reduce the mill’s environmental footprint

� Improve overall cost position

� Improvements in chemical recovery and green energy and heat production during pulp production process

� Integrate remaining open market pulp production on site

�Additional volumes of bleached kraftpaper

�Growth for the kraft business

Approved Energy projects of €140 million are on track for completion by end 2013

Highlights

Strategy


Summary

18

Appendices

Selling prices - indexed

Packaging Paper | Containerboard

Virgin containerboard

� Supply side contraction and lower imports tightened markets in second half of 2012

� Markets remain firm in early 2013, €40/t price increases announced for the second quarter of the year

Recycled containerboard

� Surplus capacity weighed on pricing in 2012

Selling prices/differential - indexed

Indexed to 2007

0.50

0.70

0.90

1.10

1.30

1.50 Kraftliner White-top KraftlinerRB fluting-OCC differential

2007 2008 2009 2010 2011 2012

19


� Surplus capacity weighed on pricing in 2012

� Recent capacity closures and stable demand have firmed up the market

� New capacity in Poland – little impact as yet

� €40/t of the €60/t price increase announced in January 2013 was realised towards the end of Q1 2013

Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Divis ion


13925

178 295 227

13.6%

3.5%

17.0%

24.4%

17.9%

2008 2009 2010 2011 2012

€ million

H1 H2 ROCE %

0.50 2007 2008 2009 2010 2011 2012

0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50

2007 2008 2009 2010 2011 2012

Indexed to 2007

Packaging Paper | Kraft paper

Kraft paper

� 2012 Q3 price increases implemented on strong demand in export markets

� Sack kraft paper demand remained stable with sales volumes in Q1 2013 well above the previous quarter

� Sack kraft paper prices stable in Q1 2013


Sack Kraft Paper

20

2007 2008 2009 2010 2011 2012




13925

178 295 227

13.6%

3.5%

17.0%

24.4%

17.9%

2008 2009 2010 2011 2012

€ million

H1 H2 ROCE %

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

million

Corrugated Board & Boxes (m²)¹

Industrial Bags (units)

Extrusion Coatings & Release liner (m²)

Fibre Packaging

Corrugated packaging

� Demand stable in mature central Europe

� Pleasing growth in emerging Europe

� New corrugated plants in Germany & Czech Republic strengthening leading market positions

� Some margin erosion expected in Q2 2013 due to increased paper prices

Industrial bags

� Continued weak demand in western Europe

Production volumes

21

0

2008 2009 2010 2011 2012� Continued weak demand in western Europe

� Good growth in overseas markets

Coatings

� Demand for industrial applications remains weak

� Stable demand in consumer applications

� Near term focus on optimisation of new US plant

� Q1 2013 disappointing due to slower demand, margin pressure and operational issues

1 Reduction in volumes in 2008 to 2010 reflects divestitures and focus on central and emerging European market


57 63 52 86 101

5.0%

8.5%7.5%

11.0%12.5%

2008 2009 2010 2011 2012

€ million

H1 H2 ROCE %


Consumer Packaging

� Acquisition of 99.93% of Nordenia, effective 1 October 2012

� Integration on track

� Synergies expected of €20 million per annum (up from initial €15 million estimate)

� Strong product pipeline in development12 17 22 25 33

5.6%

10.2%

13.5%15.0%

10.8%

2008 2009 2010 2011 2012¹

€ million


22

� China plant to commence operations towards end 2013

� Q4 2012 Nordenia contribution after one-off items and other acquisition effects in line with expectations at €19 million EBIT

� Q1 2013 stable


2008 2009 2010 2011 2012¹

H1 H2 ROCE %

1 Underlying operating profit and ROCE% has been adjusted for the one-off costs

Uncoated Fine Paper

Demand

� Structural decline in western Europe

� Growing demand in emerging Europe and CIS

Supply

� New capacity in Russia and France, albeit effects not yet seen

Pulp and A4 B-copy prices

€ / tonne

100

200

300

400

500

600

700

800

600

650

700

750

800

850

900

A4 B-copy €/ton

Pulp (BHKP) - EUR/tonne

€ / tonne

23

Russia entry into WTO

� Reduction in import duties from 2013


126 146 179 205 191

11.4%

19.1%16.9% 16.7% 16.7%

2008 2009 2010 2011 2012

€ million

H1 H2 ROCE %


200920082007 2010 2011 2012

South Africa Division

� Improved result, with ROCE of 9.9% in 2012

� Continued positive domestic trading environment in uncoated fine paper

� Gains from weaker Rand

� Closure of woodchip export operations

118 38 71 63 68

16.4%

5.3%

8.9% 8.7%9.9%

2008 2009 2010 2011 2012

€ million


24

� Closure of woodchip export operations

� Q2 2013 Closure of one of the two newsprint machines in Merebank as a result of ongoing decline in domestic newsprint demand and reorganisation within the publishing sector. One newsprint machine with 120,000 tonnes per annum to continue to operate

Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division

2008 2009 2010 2011 2012

H1 H2 ROCE %

Highlights

Strategy


Summary

25

Appendices

Summary

� Mondi strategically well positioned. The Group continues to deliver on its four pillar strategic framework:

� Achieve leading market positions (favourable product and geographic exposure)

� Maintain a high-quality, low-cost asset base

� Grow through customer focused development

� Continuous focus on performance

� Industry dynamics and outlook:

26

� Industry dynamics and outlook:

� Macroeconomic environment, continued soft demand in European markets and expected capacity increases in recycled containerboard and uncoated fine paper remain a concern

� Recent price increases in the packaging paper grades provide support

� Good progress being achieved in integrating recent acquisitions

� €300 million committed to energy related and debottlenecking projects

Management remains confident of continuing to make progress in line with expectations

Highlights

Strategy


Summary

27

Appendices

Demonstrating our ability to act decisively

and deliver results through the cycle

441 294 458 622 568

9.5%7.6%

12.3%

15.0%13.7%

2008 2009 2010 2011 2012

€ million

Underlying operating profit (€m) and ROCE (%)

28

ROCE %

• Szolnok (UFP)• Holcombe (RCB)• Niedergösgen (RCB)• UK sheetfeeders• Converting plants

restructuring

• Merebank PM32 (UFP)• Corrugated

operations France• Monza (RCB)• Converting plants

restructuring

• Europapier• Controlling interest in

Hadera P&W• Merebank PM33 (UFP)• Corrugated UK• Frohnleiten (RCB)

• Demerger Mpact• Unterland

• Aylesford• Sale of remaining stake in

Hadera P&W (completed 1 Jan 2013)

• Ceske Budejovice (RCB) acquired

• Converting plants restructuring

• Dunapack• Certain Loparex

business units

• Commissioning Świecie ECO7

• CommissioningSyktyvkar STEP

• WE Bag plants SKG

• Two release liner plants in the US

• Bag plant in Poland

• Świecie minority interests• Świecie energy plant• Nordenia• Two Duropack plants

Co

mm

issi

on

ing

/A

cqu

isit

ion

sC

losu

res/

div

esti

ture

s

Abridged income statement1

€ million 2012 2011%

changeH2

2012H1

2012H2

2011Group Revenue 5,807 5,739 1% 2,967 2,840 2,797

Materials, energy and consumables used (3,049) (2,998) (2%) (1,549) (1,500) (1,470)

Variable selling expenses (523) (511) (2%) (259) (264) (254)

Gross margin 2,235 2,230 - 1,159 1,076 1,073

Maintenance and other indirect expenses (279) (272) (3%) (155) (124) (139)

Personnel costs (840) (808) (4%) (427) (413) (391)

Other net operating expenses (193) (186) (4%) (90) (103) (105)

29

Underlying EBITDA 923 964 (4%) 487 436 438

Depreciation and amortisation (355) (342) (4%) (188) (167) (170)

Underlying operating profit 568 622 (9%) 299 269 268

Net income from associates 1 1 - - 1 (1)

Net finance costs (107) (111) 4% (54) (53) (51)

Profit before tax 462 512 (10%) 245 217 216

Taxation charge (91) (102) 11% (48) (43) (43)

Profit for the period from continuing operations 371 410 (10%) 197 174 173

Non-Controlling Interest (35) (70) 50% (10) (25) (28)

Underlying earnings 336 340 (1%) 187 149 145

1 Excluding special items and Mpact discontinued operation in 2011

Market shares sources and region definitions

Region defitnitions:

Europe - Europe including Russia and Turkey.

Emerging Europe - Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Macedonia, Malta, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey, Ukraine.

Sources:

Virgin containerboard and Recycled containerboard - Based on capacity. Source: RISI Top European Paper Packaging Producers in 2012 and management estimates.

Kraft paper - Based on capacity. Source: Pöyry World of Paper Market up to 2025, RISI Mill Asset Database, Pöyry Smart Terminal Service and management estimates.

30

management estimates.

Industrial bags - Based on sales volume. Source: Eurosac, Freedonia World Industrial Bags 2011 study, AMI 2012 study prepared for Mondi and management estimates.

Extrusion coatings - Based on sales. Source: AWA Extrusion Coated Material European Market Study 2008, Dun & Bradstreet and management estimates.

Release liner - Based on sales volume in the commercial market. Source: AWA Release Liner Markets Global Review 2012 & AWA Industry Survey, September 2012 report and management estimates.

Uncoated fine paper and Office paper - Based on sales volume. Source: EMGE Woodfree Report, December 2011, Eurograph delivery statistics 2012, Pyrabelisk and management estimates.

Corrugated packaging - Based on production. Source: Henry Poole Consulting 2012 and management estimates.

South Africa Division – Based on sales volumes. Source: management estimates.

mondi group ubs emerging markets conference · 2016-08-31 · ubs emerging markets conference 13...

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