Mondi Plc · LSE:MNDI
Mondi — FY2008 Earnings Presentation
48 slides from Mondi's earnings presentation, Feb 26, 2009
Slide 1: Mondi Group Results for the Year Ended 31 December 2008
MONDI GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008 26 February 2009
Slide 2: Agenda
AGENDA 1. Highlights 2. Financial overview 3. Operational review 4. Response to downturn 5. Major projects 6. Outlook 7. Summary 8. Appendices Results for the year ended 31 December 2008 Page 2
Slide 3: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS Earnings down versus 2007 EBITDA1 down 6% at €814 million Underlying operating profit 2 down 12% at €441 million Underlying EPS down 28% at 33.9 euro cents Group ROCE 3 of 9.5% Substantial cash inflow from operations of €795 million despite the adverse economic backdrop Stro
Slide 4: Key Operational Highlights
KEY OPERATIONAL HIGHLIGHTS Delivered cost savings of €128 million, representing 2.4% of cost base Improved operating performance and profit in South Africa Division Tight control of working capital, resulting in a substantial working capital inflow in the second-half Further rationalised the busines
Slide 5: Agenda
AGENDA 1. Highlights 2. Financial overview 3. Operational review 4. Response to downturn 5. Major projects 6. Outlook 7. Summary 8. Appendices Results for the year ended 31 December 2008 Page 5
Slide 6: Operating Financial Highlights
OPERATING FINANCIAL HIGHLIGHTS € millions 2008 2007 % Change Group revenue 6,345 6,269 +1 1 EBITDA 814 870 -6 2 Underlying operating profit 441 502 - 12 Cash inflow from operations 795 957 - 17 Net debt 1,690 1,507 + 12 3 Group ROCE 9.5% 10.6% - 10 1 EBITDA is operating profit of subsidiaries and jo
Slide 7: Divisional Results
DIVISIONAL RESULTS 1 1 Underlying operating profit Underlying operating profit € millions 2008 2007 Change H2 2008 H1 2008 Change EUROPE & INTERNATIONAL Bags & Specialities 159 154 5 50 109 (59) Uncoated Fine Paper 126 99 27 57 69 (12) Corrugated 49 133 (84) 12 37 (25) Intra-segment elimination 334
Slide 8: Costs and Cost Saving Initiatives
COSTS AND COST SAVING INITIATIVES COST STRUCTURE 2008 COST SAVINGS - €128 MILLION Depreciation and 3.9% 3.6% 3.1% 2.4% amortisation 175 6.3% 179 180 167 Other net operating 150 expenses Wood, pulp and 6.4% fibre 125 32.5% 128 € million Other variable 100 costs 18.4% 75 50 Maintenance 25 5.1% Energy
Slide 9: Active Cost Management
ACTIVE COST MANAGEMENT 100 20.0% 6.5 6.7 6.5 6.4 6.3 90 19.0% 80 30.0 28.0 27.3 27.2 18.0% 32.5 70 17.0% 60 16.0% 50 15.0% 40 14.0% 63.3 65.5 66.3 66.5 30 61.0 13.0% 20 12.0% 10 11.0% - 10.0% 2004 2005 2006 2007 2008 Variable costs Fixed costs Depreciation and amortisation Personnel costs as a % of
Slide 10: Financial Review
FINANCIAL REVIEW € millions, except for % and per share measures 2008 2007 % Change 1 Underlying operating profit 441 502 - 12 Net finance costs (159) (99) - 61 2 Underlying profit before tax 284 405 - 30 Taxation charge (82) (117) - 30 Minority interests (30) (47) - 36 Underlying earnings attributa
Slide 11: Special Items
SPECIAL ITEMS Operating Non-operating € millions 2008 2007 € millions 2008 2007 Loss (358) (77) (Loss)/profit (29) 83 Impairments & restructuring €349m Disposals: - By business: Niedergösgen €18m Bags & Specialities €216m Mondi Packaging Emball SAS €5m Uncoated Fine Paper €24m Other €6m Corrugated b
Slide 12: Finance Charges and Net Debt
FINANCE CHARGES AND NET DEBT € millions 2008 2007 (1) Change Net debt 1,690 1,507 183 Net debt finance charges and other financial income 122 91 31 Foreign currency losses 28 2 26 Net post retirement finance costs 9 6 3 Net finance costs 159 99 60 (1) For 2007 finance charges were under old capital
Slide 13: Debt Facilities
DEBT FACILITIES Committed Net debt Undrawn 1,800 € millions facilities 1,600 1,400 Opening position at 1 January 2008 2,678 1,507 1,171 € millions 1,200 1,000 800 Repaid/expired (196) (238) 600 400 New facilities 386 543 200 - Exchange translation (116) (136) Net Debt Undrawn Committed facilities (1
Slide 14: Cash Flow
CASH FLOW € millions 2008 2007 Change EBITDA 814 870 (56) Working capital movements 27 97 (70) Other operating cash flow adjustments (46) (10) (36) Cash inflows from operations 795 957 (162) Dividends from associates and financial investments 2 1 1 Tax paid (71) (93) 22 Net cash inflow from operatin
Slide 15: Working Capital Management
WORKING CAPITAL MANAGEMENT 1,200 17.2% 18% 16.3% 17% 1,000 15.5% 16% 14.6% 800 € Millions 15% 13.7% 600 14% 11.9% 13% 400 12% 200 11% - 10% 2004 2005 2006 2007 H1 2008 2008 Working capital % revenue Substantial reduction in both absolute and relative levels In second-half took downtime to balance in
Slide 16: Capital Expenditure
CAPITAL EXPENDITURE € millions 2008 2007 Major projects 324 40 Other 369 366 Capital expenditure 693 406 Depreciation 373 368 Mondi well invested Extensive programme of mill modernisation since 2001 (> €1.2 billion) On completion of the Syktyvkar capex programme, all our major mills have seen substa
Slide 17: Dividends
DIVIDENDS Final proposed dividend of 5.0 euro cents per share Record date 24 April 2009 Payment date 20 May 2009 Total dividend for 2008 of 12.7 euro cents per share Dividend cover of 2.7 times based on 2008 underlying earnings DIVIDEND REDUCED BUT REMAINS WITHIN POLICY Results for the year ended 31
Slide 18: Capital Invested and Financing
CAPITAL INVESTED AND FINANCING € millions, except for % and per share measures 2008 2007 % Change Trading capital employed 4,367 4,818 -9 (1) Group ROCE 9.5% 10.6% - 10 Shareholders' funds 2,323 2,963 - 22 Shareholders' funds per share (€) 4.52 5.76 - 22 (2) Return on shareholders funds (post tax) 6
Slide 19: Agenda
AGENDA 1. Highlights 2. Financial overview 3. Operational review 4. Response to downturn 5. Major projects 6. Outlook 7. Summary 8. Appendices Results for the year ended 31 December 2008 Page 19
Slide 20: Europe & International
EUROPE & INTERNATIONAL 2008 2007 % change Corrugated performance: € millions Segment revenue 5,159 5,189 -1 Impact of strengthening Polish zloty (18) Underlying operating profit 334 386 - 13 Profit decline in units subsequently sold / closed (17) Bags & Specialities 159 154 +3 Corrugated Turkey unde
Slide 21: Corrugated
CORRUGATED % change Industry estimate Kraftliner 175 g Full Q4 Closing Testliner 2 year White top kraftliner 1 Volumes: Boxes -3 - 10 Own containerboard down 4% for the year, 2 €/tonne after downtime in Q4 2 Pricing1: Testliner -5 - 12 - 24 2 Brown kraftliner -5 -1 -7 2 Whitetop kraftliner +1 -2 -3
Slide 22: Bags and Specialities
BAGS AND SPECIALITIES % change Industry estimate Unbleached sack kraft Full Q4 Closing year 1 Kraft paper - 14 - 38 Volumes: 1 Bags -6 -9 € / tonne2 1 Pricing: Kraft paper 2 +6 -6 - 10 3 Bags +6 +7 +5 Mondi Kraft paper prices benefitted from downtime actions Capacity closures / mothball announced (k
Slide 23: Uncoated Fine Paper
UNCOATED FINE PAPER % change Industry estimate UFP Full Q4 Closing year Volumes: UFP 1 -4 -6 €/tonne 2 Pricing: UFP 2 +2 - 0.4 -1 Capacity closures announced (kilo-tonnes) Industry Mondi UFP - 1,050 - 140 % of capacity 11% 9% 2001 2002 2003 2004 2005 2006 2007 2008 2009 ~10 million tonne market Mond
Slide 24: South Africa Division
SOUTH AFRICA DIVISION 2008 2007 % change Segment revenue 587 591 -1 Underlying operating profit 111 78 + 42 Uncoated Fine Paper 75 53 + 42 Corrugated 36 25 + 44 Business re-organised with improved operating performance – benefits flowing to bottom line Pricing UFP - domestic demand remain robust wit
Slide 25: Divisional Performance (Cont)
DIVISIONAL PERFORMANCE (Cont) Mondi Packaging South Africa Merchant and Newsprint 2008 2007 % change 2008 2007 % change Segment revenue 474 419 + 13 Segment revenue 592 591 - Underlying operating profit 28 35 - 20 Underlying operating profit 7 40 - 83 Marginally up in local currency, Aylesford loss
Slide 26: Agenda
AGENDA 1. Highlights 2. Financial overview 3. Operational review 4. Response to downturn 5. Major projects 6. Outlook 7. Summary 8. Appendices Results for the year ended 31 December 2008 Page 26
Slide 27: Rationalised business through asset closures and disposals
Rationalised business through asset closures and disposals Bags & Specialities Closed Nyborg Bags & Specialities plant in Denmark Closed Zaragoza bag converting plant in Spain (55 million units) Initiated restructuring of Finnish & UK Coatings businesses Decided to mothball integrated Stambolijski k
Slide 28: Rationalised business through asset closures and disposals
Rationalised business through asset closures and disposals ~600,000 tonne high cost paper removed 10 14% reduction of Europe & International’s capacity 5 5% reduction in average 10 5 6 production cost per tonne 11 10 7 of relevant grades 5 4 4 2 2002 2003 2004 2005 2006 2007 2008 Closure Divestiture
Slide 29: Summary
SUMMARY Focused on cash and costs Working capital management Reducing capital expenditure Plant rationalisation 2009 target cost savings of €180 million Actively manage inventory levels (downtime) Started 2009 with low inventory Focusing on low cost, high quality assets and achieving cost leadership
Slide 30: Agenda
AGENDA 1. Highlights 2. Financial overview 3. Operational review 4. Response to downturn 5. Major projects Machine hall - Swiecie, 6. Outlook Poland 7. Strategy 8. Appendices Results for the year ended 31 December 2008 Page 30
Slide 31: Major Projects
MAJOR PROJECTS Both projects on time and within Syktyvkar - €525m budgeted capital cost Swiecie box plant (€45m) Targeted completion dates: Swiecie – mid to late 2009 Fibreline – civils Syktyvkar – 2010 Swiecie PM7 - €305m Mid-cycle return expectations of 15- 20% ROCE BOTH PROJECTS WILL SUSTAINABLY
Slide 32: Mondi's cost positioning in European recycled supply
Mondi’s cost positioning in European recycled supply 400 350 Manufacturing costs Brown field € / tonne Swiecie mill cost estimates at PLN 4.60: € (current = approx PLN 4.80:€) 2008/Q4 expansion gives: 300 ~€70m capital Current 250 cost benefit market price 1 200 ~€30-€40 / tonne operating cost 150 b
Slide 33: Syktyvkar Mill Modernisation
SYKTYVKAR MILL MODERNISATION On track for 2010 UNIVERSAL BUSINESS PAPER COST CURVE 1,200 Within capital cost target 1,000 €/tonne 800 Syktyvkar Returns come from: 600 PM14 Cost reduction 400 Energy production and sales 200 Modest increase in paper 0 1,000 2,000 3,000 4,000 volumes Cumulative capacit
Slide 34: Agenda
AGENDA 1. Highlights 2. Financial overview 3. Operational review 4. Response to downturn 5. Major projects 6. Outlook 7. Summary 8. Appendices Results for the year ended 31 December 2008 Page 34
Slide 35: Outlook Trading
OUTLOOK TRADING Given the level of global economic uncertainty that emerged in the latter part of 2008, the outlook inevitably remains challenging. However Mondi’s strong financial position, our low cost, high quality asset base and our quick and decisive response to rapidly changing economic events
Slide 36: Agenda
AGENDA 1. Highlights 2. Financial overview 3. Operational review 4. Response to downturn 5. Major projects 6. Outlook 7. Summary 8. Appendices Results for the year ended 31 December 2008 Page 36
Slide 37: Summary
SUMMARY Creditable performance for 2008 in challenging conditions Difficult second-half in Europe Pricing mixed, adverse movement in production currencies South Africa performing well Focused on cash and costs Continuous reduction in fixed cost base with more to come 2009 target cost savings of €180
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Slide 39: Appendices
APPENDICES
Slide 40: Benefiting from Integrated Value Chain
BENEFITING FROM INTEGRATED VALUE CHAIN Forestry Pulp Paper Mondi’s own 9.2mm3 5.8Mt 3.5Mt Kraftliner: 0.8Mt availability Testliner: 1.2Mt Mondi’s own 3.8Mt 2.1Mt(1) 15.4mm3 demand Self 60% 93% 159%(1) sufficiency (1) Refers to Mondi’s demand and self-sufficiency of packaging paper (including E&I and
Slide 41: Production Volumes
PRODUCTION VOLUMES 2008 2007 % Change Europe & International Containerboard Tonnes 1,926,829 1,849,702 +4 Kraft paper Tonnes 814,187 891,385 -9 Corrugated board and boxes m m² 2,104 2,088 +1 Bag converting m units 3,536 3,642 -3 Coating and release liners m m² 2,667 2,971 - 10 Uncoated fine paper To
Slide 42: Europe & International Market Dynamics
Europe & International Market dynamics Bags & Specialities Corrugated Pallets, Merchant Semi-Chemical Flexibles Film Sack paper Tools 1% Fluting 9% 13% 4% Kraftliner Corrugated 5% 10% sheets Flexibles Kraft paper 10% 10% 7% Whitetop Other boxes Kraftliner Pulp (NBSK) 4% 12% 3% Release Liner Waste Ba
Slide 43: SA Division Market Dynamics
SA Division Market dynamics Product and geographic mix to improve margins not volumes Local price increases of 18% achieved over the year Africa price increases of 10% in US$ achieved over the year Woodchips Pulp (export) (export) 14% 12% Other (domestic) 4% Containerboard Uncoated Fine 22% Paper Do
Slide 44: Abridged Income Statement
ABRIDGED INCOME STATEMENT 1 € millions 2008 2007 Change Group revenue 6,345 6,269 76 Materials, energy and consumables used (3,384) (3,265) (119) Variable selling expenses (542) (558) 16 Gross margin 2,419 2,446 (27) Maintenance and other indirect expenses (300) (289) (11) Personnel costs (926) (906
Slide 45: Exchange Rates
EXCHANGE RATES 2008 2007 Change Closing rates against the euro South African rand 13.07 10.03 (30%) Pounds sterling 0.95 0.73 (30%) Polish zloty 4.15 3.59 (16%) Russian rouble 41.28 35.99 (15%) Slovakian koruna 30.13 33.58 10% US dollar 1.39 1.47 5% Czech koruna 26.87 26.63 (1%) Average rates for th
Slide 46: Currency Equivalents
CURRENCY EQUIVALENTS GBP Rand US Dollar € millions 2008 2007 % Change 2008 2007 % Change 2008 2007 % Change Group revenue 5,076 + 4,263 + 19 76,521 + 60,559 + 26 9,327 + 8,589 +9 1 EBITDA 651 + 592 + 10 9,817 + 8,404 + 17 1,197 + 1,192 - 2 Underlying operating profit 353 + 341 +3 5,318 + 4,849 + 10
Slide 47: Taxation
TAXATION € millions 2008 2007 Change Underlying tax charge (82) (117) 35 Tax on special items 4 15 (11) Total tax charge (78) (102) 24 Effective tax rate before special items of 29%, in line with 2007. Limited tax relief on special items. Results for the year ended 31 December 2008 Page 47
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