Mondi Plc · LSE:MNDI

Mondi — FY2012 Earnings Presentation

52 slides from Mondi's earnings presentation, Feb 21, 2013

  1. Slide 1: Mondi Group Results for the year ended 31 December 2012

    Mondi Group Results for the year ended 31 December 2012 21 February 2013

  2. Slide 2: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 2

  3. Slide 3: Financial highlights

    Financial highlights Underlying operating profit and ROCE  Strong profitability despite challenging start € million to the year 15.0% 13.7% 12.3%  Improved volumes and pricing after Q1 9.5% 7.6%  Supported by excellent operating performance and cost management 441 294 458 622 568 2008 2009 2010 2

  4. Slide 4: Strategic highlights

    Strategic highlights Net operating assets development (% group total)  Significant progress with strategic initiatives  €1.2 billion spent on acquisitions 33% 43% increasing exposure to higher growth 57% 67% packaging segments  Disposal of interest in non-core Aylesford 2011 2012 Packaging Newspr

  5. Slide 5: Today Mondi is a high-quality and focused business

    Today Mondi is a high-quality and focused business 2008 2012 Uncoated Uncoated • Syktyvkar modernisation completed Packaging Paper Fine Paper Fine Paper • Sold controlling interest in Hadera E&I Corrugated Fibre Packaging • 470,000t RCB machine in Świecie E&I Corrugated •• Focus on central & eastern

  6. Slide 6: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 6

  7. Slide 7: Operating financial highlights

    Operating financial highlights % H2 H1 H2 € million 2012 2011 change 2012 2012 2011 Group Revenue 5,807 5,739 1% 2,967 2,840 2,797 1 Underlying EBITDA 923 964 (4%) 487 436 438 % Margin 15.9% 16.8% 16.4% 15.4% 15.7% 2 Underlying operating profit 568 622 (9%) 299 269 268 % Margin 9.8% 10.8% 10.1% 9.5%

  8. Slide 8: Variance analysis

    Variance analysis Underlying operating profit development € million 700 622 9 600 21 568 40 106 (1) 500 400 (229) 300 200 100 0 2011 Volume Net Reduction Currency Acquisitions Net 2012 improvements negative in costs effects and other price disposals impacts variances 8

  9. Slide 9: Divisional underlying operating profit

    Divisional underlying operating profit Divisional underlying operating profit¹ € million H1 2011 200 180 173 H2 2011 160 H1 2012 140 H2 2012 122 123 118 120 104 100 100 87 91 80 60 54 46 40 47 36 40 40 27 28 20 14 11 10 9 0 Packaging Paper Fibre Packaging Consumer Uncoated Fine South Africa Packagin

  10. Slide 10: Consumer Packaging – Nordenia acquisition effects

    Consumer Packaging – Nordenia acquisition effects Q1 Q2 Q3 Q4 Q4 € million 2012 2012 2012 2012 2012 EBITDA EBIT As reported, excluding special items 25 27 26 16 1 One-off costs - - - 10 14 ‘Fair value’ depreciation and amortisation - - - - 4 Underlying 25 27 26 26 19  Acquisition completed on 1 Oct

  11. Slide 11: Financial review

    Financial review % H2 H1 H2 € million 2012 2011 change 2012 2012 2011 1 Underlying operating profit 568 622 (9%) 299 269 268 Net finance costs (107) (111) 4% (54) (53) (51) Net income from associates 1 1 - - 1 (1) Underlying profit before tax 462 512 (10%) 245 217 216 Tax before special items (91) (

  12. Slide 12: Finance costs

    Finance costs % € million 2012 2011 change Closing net debt 1,864 831 (>100%) Average net debt 1,249 1,165 (7%) Finance costs 95 99 4% Net interest on defined benefit arrangements 12 12 - Net finance costs 107 111 4% Effective interest rate (before capitalised interest) 7.5% 8.6%  Lower net finance

  13. Slide 13: Taxation and non-controlling interests

    Taxation and non-controlling interests Taxation Non-controlling interests % % € million 2012 2011 change € million 2012 2011 change Non-controlling share before special Underlying tax charge 91 102 11% 35 70 50% items Non-controlling share of special Tax on special items 1 (2) >100% - - - items Taxa

  14. Slide 14: Special items

    Special items Operating special items (€27 million loss) Non-operating special items (€64 million loss)  Fibre packaging (€16 million loss)  South Africa Division (€6 million gain)  Restructuring activities and asset  Profit on sale of land impairment (€21 million loss)  Gain on settlement of i

  15. Slide 15: Cashflow effects – movement in net debt

    Cashflow effects – movement in net debt Movement in net debt € million Net debt at Net debt Net debt at 31 December before 31 December 500 2011 acquisitions 2012 (831) (650) (1,864) - (107) (157) (92) (500) (367) 59 845 (1 000) (1 500) (2 000) (1,214) Cash Income tax Dividends Financing Capex Other

  16. Slide 16: Working capital

    Working capital Working capital management Working capital cash flows € million € million 248 11.9% 11.8% 12% 27 10.0% 10.0% 9.9% 10% 753 527 660 575 761 (68) (80) (121) 2008 2009 2010 2011 2012¹ 2008 2009 2010 2011 2012 Working capital as a % of turnover  Working capital remains within targeted ra

  17. Slide 17: Capital expenditure

    Capital expenditure Capital expenditure € million 800 188% 700 149% 600 117% 500 400 86% 78% 300 200 100 700 522 398 268 307 0 2008 2009 2010 2011 2012 Capital expenditure, incl. intangible assets Capex as % of depreciation and amortisation  €140 million of energy projects announced in early 2012 o

  18. Slide 18: Debt facilities

    Debt facilities % € million 2012 2011 change Net debt 1,864 831 (>100%) Committed facilities 2,606 1,839 42% Of which undrawn 762 889 (14%) Gearing (Net debt / Trading capital employed) 39% 22% Net debt / 12 month trailing EBITDA (times) 2.0 0.8  Successful launch of 8-year 3.375% €500 Maturity pro

  19. Slide 19: Dividends

    Dividends Dividends declared and dividend cover € cents per share 30.0 28.0 26.0 25.0 20.0 2.8 3x 20.0 2.7 2.5 2.3 12.7 2.0 15.0 2x 9.5 10.0 5.0 - 2008 2009 2010 2011 2012 Interim Dividend Final Dividend Dividend cover  Final dividend recommended of 19.1 euro cents per share  Full year dividend of

  20. Slide 20: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division 20

  21. Slide 21: Packaging Paper

    Packaging Paper Underlying operating profit and ROCE  Good performance with ROCE of 17.9% € million after difficult start to the year 24.4%  Demand improved through first half, enabling price increases in second half of 17.0% 17.9% 13.6% year in virgin grades  Recycled containerboard remained und

  22. Slide 22: Packaging Paper | industry fundamentals

    Packaging Paper | industry fundamentals Selling prices - indexed Virgin containerboard Price indexed vs 2007 opening levels  Supply side contraction and lower imports 1.50 Kraftliner White-top Kraftliner tightened markets in second half 1.40 RCB/Recovered paper differential 1.30  Markets remain fi

  23. Slide 23: Packaging Paper | industry fundamentals

    Packaging Paper | industry fundamentals Selling prices Sack Kraftliner - indexed - indexed Kraft paper Price indexed vs 2007 opening levels  Difficult start to 2012 1.50 Sack Kraft Paper 1.40 1.30  Weak demand 1.20 1.10  Commercial downtime 1.00 0.90  Q3 price increases implemented on strong 0.8

  24. Slide 24: Fibre Packaging

    Fibre Packaging Underlying operating profit and ROCE  17% improvement in underlying operating € million profit and ROCE of 12.5% Corrugated packaging  Stable pricing and volumes 12.5% 11.0%  Lower paper input costs 8.5% 5.0% 7.5%  Improved margin and profitability 57 63 52 86 101 Industrial bags

  25. Slide 25: Fibre Packaging | industry fundamentals

    Fibre Packaging | industry fundamentals Production volumes Corrugated packaging million  Demand stable in mature central Europe 4 500 4 000  Pleasing growth in emerging Europe 3 500  New corrugated plants in Germany & 3 000 Czech Republic strengthening leading 2 500 market positions 2 000 1 500 I

  26. Slide 26: Consumer Packaging

    Consumer Packaging Underlying operating profit and ROCE  Acquisition of 99.93% of Nordenia, € million effective 1 October 2012 15.0% 13.5% 10.2% 10.8%  Integration on track 5.6%  Synergies expected of €20 million per annum (up from initial €15 million estimate) 12 17 22 25 33 2008 2009 2010 2011

  27. Slide 27: Uncoated Fine Paper

    Uncoated Fine Paper Underlying operating profit and ROCE  Strong operating performance with ROCE € million of 16.7% 19.1% 16.9% 16.7% 16.7% 11.4%  Volumes at similar levels to 2011  Average selling prices stable 126 146 179 205 191 2008 2009 2010 2011 2012 H1 H2 ROCE % Packaging Paper | Fibre Pac

  28. Slide 28: Uncoated Fine Paper | industry fundamentals

    Uncoated Fine Paper | industry fundamentals Pulp and A4 B-copy prices Demand € / tonne € / tonne  Structural decline in western Europe 900 800 700  Growing demand in emerging Europe and 850 CIS 600 800 500 Supply 750 400  New capacity in Russia and France 700 300 A4 b-copy €/tonne 650 200 Pulp (B

  29. Slide 29: South Africa Division

    South Africa Division Underlying operating profit and ROCE  Improved result, with ROCE of 9.9% € million 16.4%  Sales volumes increased on back of increasing domestic demand 9.9% 8.9% 8.7% 5.3%  Pricing 118 38 71 63 68  Domestic price increases achieved for 2008 2009 2010 2011 2012 uncoated fine

  30. Slide 30: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 30

  31. Slide 31: Delivering against free cash flow priorities

    Delivering against free cash flow priorities Maintain investment grade credit metrics Ratings reaffirmed during period Successful launch of 3.375% 8-year €500 million Eurobond Selective capital investment opportunities (optimisation of asset base) Free Cash Energy projects (€140 million) on track to

  32. Slide 32: Recently approved major capital investments

    Recently approved major capital investments Ružomberok Štěti Description Recovery boiler and improvements in 155,000 tonne capacity bleached kraft chemical recovery and green energy paper machine Cost €128 million €70 million IRR ±40% ±20%  Increase pulp production  Integrate remaining open market

  33. Slide 33: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 33

  34. Slide 34: Summary

    Summary  Significant progress on strategic initiatives  Strong profitability despite challenging start to the year  Supported by excellent operating performance and cost management  ROCE of 13.7%, in excess of Group’s through-the-cycle target of 13%  Strong cash generation from operations  Int

  35. Slide 35: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 35

  36. Slide 36: Our strategic pillars

    Our strategic pillars  Focused on developing and maintaining leading market positions in our core packaging and Achieve leading uncoated fine paper markets with a specific focus on higher growth emerging markets market positions  Our leading market positions place us in a unique position to better

  37. Slide 37: Delivering on our strategy

    Delivering on our strategy  Acquisition of Nordenia represents a significant step in the development of a leading consumer Achieve leading packaging business market positions  Acquisition of two corrugated packaging plants in Germany and the Czech Republic reinforces Mondi’s strong central Europea

  38. Slide 38: Demonstrating our ability to act decisively and deliver results through the cycle

    Demonstrating our ability to act decisively and deliver results through the cycle Underlying operating profit (€m) and ROCE (%) € million 15.0% 13.7% 12.3% 9.5% 7.6% 441 294 458 622 568 2008 2009 2010 2011 2012 ROCE % • Szolnok (UFP) • Merebank PM32 (UFP) • Europapier • Demerger Mpact • Aylesford di

  39. Slide 39: Abridged income statement

    Abridged income statement1 % H2 H1 H2 € million 2012 2011 change 2012 2012 2011 Group 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

  40. Slide 40: Input costs

    Input costs Variable costs € million 1200 1000 800 600 400 200 0 Pulp¹ Paper¹ Wood Recovered Energy Variable selling Other variable paper expenses costs² 2008 2009 2010 2011 2012  Lower average input costs for the year  Total costs increased due to Nordenia acquisition 1 Due to Mondi’s integration

  41. Slide 41: Fixed costs

    Fixed costs Fixed costs composition € million 2 500 26.1% 25.3% 2 000 1 500 23.4% 22.6% 1 000 22.1% 500 0 2008 2009 2010 2011 2012 Personnel costs Depreciation and amortisation Maintenance and Other net operating expenses Fixed costs excl. depreciation as a % of turnover other indirect costs Strong

  42. Slide 42: Cash flow

    Cash flow % H2 H1 H2 € million 2012 2011 change 2012 2012 2011 1 Underlying EBITDA 923 996 (7%) 487 436 438 Working capital movements (80) (68) (18%) 22 (102) 75 Other operating cash flow items 2 (11) >100% (17) 19 1 Cash generated from operations 845 917 (8%) 492 353 514 Dividends from financial in

  43. Slide 43: Statement of financial position

    Statement of financial position € million 2012 2011 Intangible assets 695 238 Property, plant & equipment 3,706 3,377 Forestry assets 311 297 Other non-current assets 43 59 Total non-current assets 4,755 3,971 Inventories 779 637 Trade and other receivables 1,007 829 Other current assets 73 208 Tota

  44. Slide 44: Packaging Paper | performance history

    Packaging Paper | performance history Unbleached sack kraft Kraftliner RB Fluting-OCC differential 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mondi’s ROCE (%), kraftliner price, RB fluting – OCC price differential and sack kraft (€/tonne) % ROCE Unbleached sack kraft Kraftliner RB F

  45. Slide 45: Uncoated Fine Paper | performance history

    Uncoated Fine Paper | performance history A4 B-copy 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mondi’s ROCE (%), Uncoated fine paper price (€/tonne) % ROCE A4 B-copy 19.1% 16.9% 16.7% 16.7% 11.4% 8.2% 2007 2008 2009 2010 2011 2012 Source: RISI and Mondi 45

  46. Slide 46: Emerging market asset base leads to low cost positions

    Emerging market asset base leads to low cost positions across the Group’s main grades… Percentage of Mondi's capacity in overall cost curve in Q3 2012 Cost quartile¹ Q4 18% 7% Q3 46% 20% Q2 25% 11% 38% 100% Q1 100% 100% 100% 75% 25% 35% White Top Unbleached NSSC Fluting Recycled fluting Unbleached U

  47. Slide 47: Integrated value chain 2012

    Integrated value chain 20121 Pulp Kraft Paper Millions Millions of tonnes of tonnes E&I E&I MSAD 4.0 1.2 0.8 0.5 E&I SAD 3.0 1.0 0.8 2.0 0.6 3.0 3.2 0.6 1.0 1.0 0.3 0.4 0.0 0.2 0.4 (0.2) (1.0) 0.0 Production Consumption Net long position Production Consumption Net long/(short) position Virgin Contai

  48. Slide 48: Mondi at a glance

    Mondi at a glance Packaging Fibre Consumer Paper Packaging Packaging UFP South Africa €1,896m €1,860m €502m €1,466m €653m 10% 9% 2012 30% 23% Revenue1 8% 29% 2012 ROCE% 17.9% 12.5% 10.8%2 16.7% 9.9% Products 1 Segment revenues, including inter-segment revenues 2 ROCE% has been adjusted for the Norde

  49. Slide 49: Focus on Packaging and UFP in emerging markets

    Focus on Packaging and UFP in emerging markets1 Group revenue Group revenue Net operating Net operating Revenue by by destination by Origin assets assets product Emerging markets 4%4% 5% 9% 31% Mature markets 50% 50% 43% 57% 36% 64% 17% 83% 23% 24% Upstream Fibre packaging paper mills Packaging pape

  50. Slide 50: Production volumes

    Production volumes % H2 H1 H2 2012 2011 change 2012 2012 2011 Europe & International Containerboard Tonnes 2,079,005 2,009,984 3% 1,036,068 1,042,937 1,018,014 Kraft Paper Tonnes 980,637 955,741 3% 491,358 489,279 420,503 Corrugated Board & Boxes m m2 1,213 1,213 - 607 606 604 Industrial Bags m unit

  51. Slide 51: Exchange rates

    Exchange rates % H2 H1 H2 2012 2011 change 2012 2012 2011 Closing rates against the euro South African rand 11.17 10.48 7% 11.17 10.37 10.48 Czech koruna 25.15 25.79 (2%) 25.15 25.64 25.79 Polish zloty 4.07 4.46 (9%) 4.07 4.25 4.46 Pounds sterling 0.82 0.84 (2%) 0.82 0.81 0.84 Russian rouble 40.33 4

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Mondi Group — FY2012 Earnings Presentation on 6ix