Slide 1: Half-yearly results for the six months ended 30 June 2010
HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 10 August 2010
Slide 2: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Half-year results for the six months ended 30 June 2010 │ Page 2
Slide 3: Key financial highlights
Key financial highlights Underlying operating profit 7.3% 8.0% Earnings significantly up versus a difficult first-half 2009 7.0% 5.9% 6.0% EBITDA1 up 31% at €405 million 5.3% 5.0% Underlying operating profit 2 up 61% at €222 million 4.0% €222m 3.0% Underlying EPS3 up 145% at 20.3 euro cents €156m €1
Slide 4: Key operational highlights
Key operational highlights 2010 reflecting further improvement in European trading with strong order inflows Sustained improvement in order inflows, volumes and prices across all key paper grades Strong production performance Corrugated restructuring successfully completed Ongoing cost savings of €7
Slide 5: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Half-year results for the six months ended 30 June 2010 │ Page 5
Slide 6: Operating financial highlights
Operating financial highlights H1 H2 H1 % Change % Change € Millions (vs H1 2009) (vs H2 2009) 2009 2009 2010 Group Revenue 2,614 2,643 3,033 +16% +15% EBITDA 1 308 337 405 +31% +20% % Margin 11.8% 12.8% 13.4% +2% +1% Underlying operating profit 2 138 156 222 +61% +42% % Margin 5.3% 5.9% 7.3% +2% +1
Slide 7: Divisional underlying operating profits
Divisional underlying operating profits1 120 98 100 H1 2009 80 75 71 H2 2009 H1 2010 60 55 46 48 € millions 40 36 28 25 22 18 18 20 11 Corporate 8 4 4 & other 1 1 0 Uncoated Fine Bags & Corrugated South Africa MPSA Newsprint Paper Coatings Division (20) (17) (16) (20) (40) Strong performance from Eu
Slide 8: Cost review
Cost review Cost structure first-half 2010 Cost savings - €75 million 275 3.1% 2.4% 5.4% 2.9% 6% Wood, pulp and fibre 5% Energy 250 Other variable costs 225 34% 16% Variable selling expenses 200 Maintenance Personnel costs 175 5% € million Other net operating 150 expenses 10% 8% Depreciation and 125
Slide 9: Financial review
Financial review H1 H2 H1 % Change % Change € Millions (vs H1 2009) (vs H2 2009) 2009 2009 2010 Underlying operating profit 1 138 156 222 +61% +42% Net finance costs (58) (56) (48) +17% +14% Associate net earnings 1 1 2 +100% +100% Underlying profit before tax 2 81 101 176 +117% +74% Tax before spec
Slide 10: Finance charges and net debt
Finance charges and net debt H1 H2 H1 % Change % Change € Millions (vs H1 2009) (vs H2 2009) 2009 2009 2010 Net debt (1,661) (1,517) (1,632) +2% -8% Interest expense, net of investment income 87 71 66 -24% -7% Less: interest capitalised (31) (14) (7) +77% +50% Net debt finance charges and other fina
Slide 11: Taxation and non-controlling interests
Taxation and non-controlling interests Taxation Non-controlling interests H1 H2 H1 H1 H2 H1 € Millions € Millions 2009 2009 2010 2009 2009 2010 Underlying tax charge 28 30 46 Non-controlling share before 12 17 27 special items Tax on special items (4) (2) (4) Non-controlling share of special - 1 (1)
Slide 12: Special items
Special items Operating items (€36 million gain): Non-operating items (€35 million loss): Uncoated fine paper (€10 million gain) Corrugated (€17 million loss) release of closure provisions no longer required loss on disposal of the UK corrugated packaging plants Bags & Coatings (€48 million net gain
Slide 13: Cash flow
Cash flow H1 H2 H1 % Change % Change € Millions (vs H1 2009) (vs H2 2009) 2009 2009 2010 EBITDA1 308 337 405 +31% +20% Working capital movements 99 149 (141) Other operating cash flow items (15) (11) 5 Cash generated from Operations 392 475 269 -31% -43% Dividends from financial investments and asso
Slide 14: Focus on working capital maintained
Focus on working capital maintained Working capital management Working capital cash flows 1,200 20% 1,100 18% 15.5% 14.6% 12.9% 16% 1,000 14% 11.9% 900 10.7% 10.0% 12% €149m € Millions €97m €153m €99m 800 10% 700 8% 6% 600 4% (€126m) (€141m) 500 2% 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 400 0%
Slide 15: Capital expenditure management
Capital expenditure management Capital expenditure 400 200% Continued conservative approach to investment 300 189 13 135 Cash spend, excluding major projects € millions 200 179 100% 121 was 51% of depreciation (2009: 63%; 92 100 27 256 2008: 101%) 182 194 114 116 106 93 0 0% Approximately €120 milli
Slide 16: Debt facilities
Debt facilities H1 H2 H1 € Millions 2009 2009 2010 Net debt 1,661 1,517 1,632 Committed facilities 2,838 2,541 2,948 of which undrawn 1,073 990 1,358 Gearing (Net debt / Trading capital employed) 38% 35% 37% Net debt / 12 month trailing EBITDA (times) 2.5 2.4 2.2 Net debt up €115 million since year
Slide 17: Dividends
Dividends Interim dividend of 3.5 euro cents per share Record date 27 August 2010 Payment date 14 September 2010 Increased interim dividend Half-year results for the six months ended 30 June 2010 │ Page 17
Slide 18: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Half-year results for the six months ended 30 June 2010 │ Page 18
Slide 19: Europe & International
Europe & International Underlying operating profit Continued improvement in profitability m 8.5% 9.0% 8.0% 7.0% m 7.0% 5.2% 6.0% m 5.0% Improved European demand environment and strong 4.0% m €201m €143m 3.0% 2.0% sack kraft exports m €108m 1.0% m 0.0% Volumes recovering towards pre-recession levels
Slide 20: Uncoated Fine Paper
Uncoated Fine Paper Underlying operating profit Excellent result following strong second half in prior year m 14.0% 12.9% Positive trading environment – good demand recovery 11.2% 12.0% m Strong operating performance 10.0% m 10.4% 8.0% m €98m 6.0% Positive price momentum m €75m €71m 4.0% Supported b
Slide 21: Uncoated Fine Paper – Commodity cycle and returns
Uncoated Fine Paper – Commodity cycle and returns 1,100 A4 B-copy 1,050 1,000 950 900 €/tonne 850 800 750 700 650 600 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 H1 H2 H1 H2 H1 H2 H1 H2 H1 2010 2009 2009 2008 2008 2007 2007 2006 2006 900 25.0% 880 Improving returns despite declining 19.7%
Slide 22: Bags and Coatings
Bags and Coatings Significant Kraft Paper selling price increases achieved Underlying operating profit 6.0% Mitigated in part by sharp Unbleached sack kraft 5.1% 5.2% 5.0% rise in input costs, 4.0% mainly wood €/tonne average 4.0% 3.0% €55m €46m €36m 2.0% Source : Mondi - Nominal prices 2001 2002 20
Slide 23: Bags and Coatings – Commodity cycle and returns
Bags and Coatings – Commodity cycle and returns Unbleached sack Kraft (€/tonne) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 800.0 16.0% 15.3% 750.0 14.0% 11.9% 12.0% 10.9% 700.0 10.0% 9.9% 10.2% 10.0% 8.3% 650.0 8.0% 7.0% 6.7% 6.0% 600.0 4.0% 550.0 2.0% 0.0% 500.0 2006 2006 2007 2007 2008 2008
Slide 24: Corrugated
Corrugated Further improvement in product prices and volumes Underlying operating profit Partly offset by significant input cost pressures – specifically 9.0% 7.9% 8.0% recovered paper 7.0% 6.0% 4.3% 5.0% 4.0% €48m €1m 3.0% 2.0% €22m Kraftliner - indexed 0.2% 1.0% White-top Kraftliner - indexed 0.0%
Slide 25: Corrugated – Commodity cycle and returns
Corrugated – Commodity cycle and returns 600 Kraftliner 550 RB Fluting-OCC differential 500 450 400 €/tonne 350 300 250 200 150 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 H1 H2 H1 H2 H1 H2 H1 H2 H1 2010 2009 2009 2008 2008 2007 2007 2006 2006 600 18.0% 550 17.1% 16.0% 500 14.0% 12.9%
Slide 26: South Africa Division
South Africa Division Underlying operating profit Disappointing result, but improving run rate 11.2% 12.0% 10.0% 6.5% 8.0% Export margins across all grades impacted by South €28m 6.0% African Rand strength 140% €18m 4.0% 1.7% 120% 2.0% €4m 0.0% 100% H1 2009 H2 2009 H1 2010 EBIT margin 80% A4 B-Copy
Slide 27: Mondi Packaging South Africa
Mondi Packaging South Africa Underlying operating profit 9.2% 10.0% Earnings and margins well up on first-half 2009 9.0% 8.0% Pricing unchanged versus prior year 6.0% 7.0% 4.8% 6.0% Increased operating margins versus comparable 5.0% €25m 4.0% period due to improving volumes, cost savings and €18m 3.
Slide 28: Newsprint
Newsprint Underlying operating profit Sale of Europapier 3.1% 3.5% 3.0% Sale agreed – subject to competition clearance €8m 2.5% Benefiting from improved European trading conditions 2.0% 1.5% 1.5% €4m €1m 0.4% 1.0% Significant decline at Aylesford driven by weak European 0.5% 0.0% newsprint market an
Slide 29: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Half-year results for the six months ended 30 June 2010 │ Page 29
Slide 30: Syktyvkar mill modernisation
Syktyvkar mill modernisation Project returns Wood / Pulp production Sales growth New recovery boiler ~30% woodyard capacity ~50,000 tonnes Uncoated Fine ~100% increased heat supply increase, ~10% efficiency gain Paper (~5% of domestic market) ~571 Mwh additional energy ~170,000 tonnes pulp ~63,000 t
Slide 31: Świecie's new machine performing well
Świecie’s new machine performing well €285 million capital cost ~€20 million below budget Start-up Q3 2009 – ahead of schedule More than 400,000 tonnes production expected for the full year >84% of full design capacity RCB cost curve1 well ahead of business plan 400 Manufacturing costs ~197,000 tonn
Slide 32: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Half-year results for the six months ended 30 June 2010 │ Page 32
Slide 33: Summary
Summary 2010 Improvement driven by a strong performance in Europe & International Earnings significantly up versus a difficult first half of 2009 Sustained improvement in order inflows, volumes and prices across all key paper grades New Polish machine performing well and Russian project approaching
Slide 34: Outlook
Outlook “Despite cost pressures, the positive pricing momentum witnessed in Europe since the beginning of the fourth quarter of 2009 in most of the Group’s key grades should see the business continue to deliver a strong performance in the second half. The South Africa Division should benefit from th
Slide 35: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Half-year results for the six months ended 30 June 2010 │ Page 35
Slide 36: Mondi at a glance
Mondi at a glance UFP Bags & Specialities Corrugated South Africa MPSA Newsprint €1.4B €1.8B €1.0B €0.5B €0.5B €0.5B 2009 9% 9% Sales 24% (1) 8% 32% 18% 2009 EBIT % 10.8% 4.5% 2.3% 6.7% 7.2% 2.1% Products Europe South Africa Europe/SA No. 1 in Office No. 1 in Kraft Paper No. 1 Containerboard i
Slide 37: Three key pillars to our strategy
Three key pillars to our strategy Leading market Build on leading positions in packaging and Uncoated Fine Paper positions (UFP), particularly in emerging markets Maintain position as lowest-cost producer in our markets: High quality, low Selectively investing in production capacity in lower-cost
Slide 38: Focus on Packaging and UFP in emerging markets
Focus on Packaging and UFP in emerging markets1 Revenue by destination Revenue by origin Net operating assets Of which, 14% relates to Mondi’s two major projects in 24% Poland (on-stream 40% in September 2009) 46% and in Russia (on- 54% 60% stream in second- 76% half 2010) Emerging markets Emerging
Slide 39: Emerging market asset base leads to low cost positions
Emerging market asset base leads to low cost positions across the group’s main grades… Leading market Percentage of Mondi's capacity in overall cost curve at Feb 2010 1 positions st nd rd th Grade 1 Quartile 2 Quartile 3 Quartile 4 Quartile + Unbleached Sack Paper 24% 4% 53% 19% High quality, low co
Slide 40: Integrated value chain
Integrated value chain Leading market Pulp Virgin Containerboard positions 4.0 1.2 3.5 1 0.2 0.4 0.3 + 3.0 2.5 0.7 0.8 0.3 Millions 2.0 Millions 0.6 High quality, low of tonnes 1.5 2.7 3.1 of tonnes 0.4 0.9 1.0 cost asset base 0.7 0.5 0.2 0.3 0.0 (0.4) 0 (0.5) Production Consumption Net long/(short)
Slide 41: Superior access to low cost wood
Superior access to low cost wood Leading market Average Hardwood and Softwood costs (€/m3, Q4 2009) positions Russian wood regenerates + naturally; South African wood is High quality, low farmed, maturing in ±8 years cost asset base Russian and South African costs low cost asset are largely under
Slide 42: Abridged income statement
Abridged income statement 1 H1 H2 H1 % Change % Change € Millions (vs H1 2009) (vs H2 2009) 2009 2009 2010 Group Revenue 2,614 2,643 3,033 +16% +15% Materials, energy and consumables used (1,387) (1,381) (1,624) -17% -18% Variable selling expenses (225) (247) (277) -23% -12% Gross margin 1,002 1,015
Slide 43: Exchange rates
Exchange rates H1 H2 H1 2009 2009 2010 Closing rates against the euro South African rand 10.89 10.67 9.38 Pounds sterling 0.85 0.89 0.82 Polish zloty 4.45 4.10 4.15 Russian rouble 43.88 43.15 38.28 US dollar 1.41 1.44 1.23 Czech koruna 25.88 26.47 25.69 Average rates for the period against the euro
Slide 44: Currency equivalents
Currency equivalents H1 H2 H1 % Change % Change Millions (vs H1 2009) (vs H2 2009) 2009 2009 2010 Pound's Sterling equivalents Group Revenue 2,326 2,353 2,639 +13% +12% EBITDA 274 300 352 +29% +17% Underlying operating profit 123 139 193 +57% +39% Cash flow from operations 349 423 234 -33% -45% Net
Slide 45: Production volumes
Production volumes H1 H2 H1 2009 2009 2010 Europe & International Containerboard Tonnes 836,456 932,240 1,008,305 Kraft paper Tonnes 383,373 458,005 466,156 Corrugated board and boxes m m² 924 773 713 Bag converting m units 1,655 1,648 1,858 Coating and release liners m m² 1,258 1,414 1,601 Uncoated
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