Mondi Plc · LSE:MNDI

Mondi — Bank of America Merrill Lynch Pan European Paper & Packaging Forum 2013

47 slides from Mondi's conference presentation, Sep 17, 2013

  1. Slide 1: Bank of America Merrill Lynch Pan European Paper & Packaging Forum

    BANK OF AMERICA MERILL LYNCH PAN EUROPEAN PAPER & PACKAGING FORUM 17 September 2013

  2. Slide 2: Agenda

    Agenda Mondi overview Operational overview Capital allocation Summary Appendices 2

  3. Slide 3: Our journey since Mondi's demerger and listing

    Our journey since Mondi’s demerger and listing Share price development (index) and annual underlying EPS (cent/share) Highlights Index (2 July 2007 =100) Cent/share  Compound annual EPS growth 250% 80 of 20% 69.2  Cash dividends paid of €0.6 68.1 70 billion 200% 60  In specie dividend distributio

  4. Slide 4: Repositioned business delivering strongly

    Repositioned business delivering strongly EBITDA (€ million) and ROCE1 (%) 13.6% 18.0% 9.2% 15.0% 14.8% 16.0% 13.6% Hurdle 14.0% rate 13%12.0% 12.3% 10.0% 10.6% 9.5% 8.0% 7.6% 6.0% 4.0% 2.0% 870 814 645 798 964 923 554 0.0% 2007 2008 2009 2010 2011 2012 H1 2013 EBITDA ROCE % Key milestones:  Mondi

  5. Slide 5: Mondi today – a focused packaging and paper Group

    Mondi today – a focused packaging and paper Group Europe & International South Africa Packaging Fibre Consumer UFP Paper Packaging Packaging €1,896m €1,860m €1,167m €1,466m €702m 10% 9% 9% 2012 27% 30% 21% 23% Revenue1 8% 17% 26% 29% LTM 20.1% 12.0% 10.1%3 17.4% 12.8% ROCE%2 Products (1) Pro-forma s

  6. Slide 6: Our strategic pillars

    Our strategic pillars Achieve leading Maintain and/or develop leading market positions in our core packaging and market positions uncoated fine paper markets, with specific focus on higher-growth emerging markets Maintain a high-quality, Maintain our low-cost, high-quality asset base by selectively

  7. Slide 7: Our free cash flow priorities

    Our free cash flow priorities Maintain investment grade credit metrics Selective capital investment opportunities (optimisation of asset base) Free cash flow priorities Support dividends M&A and/or increased shareholder distributions As  Future growth focused on faster growing packaging segments ap

  8. Slide 8: Growth priorities

    Growth priorities Group 2012 pro forma revenues (%)1 Other 12% Consumer UFP 21% exposed 48% packaging 19%  Growth will be in packaging Industrial packaging  Within packaging, bias towards Packaging consumer exposed packaging Group 2012 sales by destination (%)  A geographic preference for emergin

  9. Slide 9: Half year 2013 highlights

    Half year 2013 highlights Underlying operating profit and ROCE Financial € million 14.8%  Record results:  Underlying operating profit up 35% 13.6% 13.4%  Underlying earnings per share up 60% 272 302 366  Cash generated from operations of H1 2012 H2 2012 H1 2013 €431 million, up 21% ROCE %  ROC

  10. Slide 10: Performance drivers

    Performance drivers  Focused on markets enjoying growth:  Geographic exposure – 50% of sales into higher growing emerging markets  Product mix – two-thirds of sales in packaging, A clear and typically enjoying structural growth consistent strategy, delivering a ROCE  Well invested asset base in

  11. Slide 11: The Mondi Way

    The Mondi Way To create solutions for our customers’ success, delivering exceptional value for stakeholders in a sustainable way Purpose  Leading market positions  High-quality, low-cost asset base Strategy  Customer focused development  Focus on performance  Operational Excellence  Cutting Ed

  12. Slide 12: Agenda

    Agenda Mondi overview Operational overview Capital allocation Summary Appendices Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division 12

  13. Slide 13: Packaging Paper

    Packaging Paper Underlying operating profit and ROCE  Strong performance with ROCE of 20.1% € million  Price increases in all containerboard 20.1% grades 18.5% 17.9%  Good production, particularly in Syktyvkar 14.2% 13.1% 10.8%  Benefited from lower input costs, particularly recovered fibre  Lo

  14. Slide 14: Packaging Paper | industry fundamentals

    Packaging Paper | industry fundamentals Selling prices Virgin containerboard Price indexed vs 2007 opening levels  Supply side contraction and lower imports 1.60  Average benchmark prices up 12% on 1.40 H1 2012 and 4% on H2 2012 1.20 Recycled containerboard 1.00  Improving pricing environment, bu

  15. Slide 15: Packaging Paper | industry fundamentals

    Packaging Paper | industry fundamentals Selling prices Kraft paper Price indexed vs 2008 opening levels 1.10  Pricing is stable 1.00  Demand in Europe remains under pressure, offset by continued good export 0.90 markets 0.80  No significant supply side changes 0.70 0.60 0.50 2008 2009 2010 2011 2

  16. Slide 16: Fibre Packaging

    Fibre Packaging Underlying operating profit and ROCE Corrugated packaging € million 12.5% 12.0%  Stable pricing and volumes 10.9%  Paper input price increases putting pressure on margins 5.0% 5.9% 4.8%  Benefited from 2012 acquisitions 47 54 48 H1 2012 H2 2012 H1 2013 Industrial bags ROCE % Under

  17. Slide 17: Consumer Packaging

    Consumer Packaging Underlying operating profit and ROCE1  Integration progressing well € million 14.6%  Net synergy gains and additional cost reduction activities 10.8% 10.1%  Partially offset by marginally lower sales volumes (pro-forma)  Closure of Lindlar plant on track 6.7% 6.5% 6.7% 10 23 3

  18. Slide 18: Uncoated Fine Paper

    Uncoated Fine Paper Underlying operating profit and ROCE  Strong operating performance with ROCE € million of 17.4% 15.7% 16.7% 17.4%  Volumes at similar levels to H1 2012 13.4% 13.8%  Average selling prices slightly down on H2 12.7% 2012 driven by market mix and weak European demand  Wood costs

  19. Slide 19: Uncoated Fine Paper | industry fundamentals

    Uncoated Fine Paper | industry fundamentals Pulp and A4 B-copy prices Demand Price indexed vs 2007 opening levels 1.60  Structural decline continuing in western Europe 1.40  Demand growth still seen in emerging 1.20 Europe and Russia 1.00 Supply 0.80 0.60  New capacity in Russia and France – so f

  20. Slide 20: South Africa Division

    South Africa Division Underlying operating profit, margin and ROCE  Improved result, with ROCE of 12.8%  Domestic sales volumes increased 13.5%  Pricing 11.3% 12.8%  Domestic price increases achieved  Higher average export pulp and white- 9.1% 9.6% top kraftliner prices 8.1%  Gains from weaker

  21. Slide 21: Agenda

    Agenda Mondi overview Operational overview Capital allocation Summary Appendices 21

  22. Slide 22: Major capital investments

    Major capital investments Description Progress  Frantschach recovery boiler  Finalisation of commissioning with start-up in H2 2013 Energy  Richards Bay turbine  Start-up late H2 2013 Projects  Stambolijski turbine  Start-up late H2 2013  Syktyvkar bark boiler  Completed Syktyvkar  Pulp dry

  23. Slide 23: Agenda

    Agenda Mondi overview Operational overview Capital allocation Summary Appendices 23

  24. Slide 24: Summary

    Summary  Strong financial performance  Underlying operating profit up 35%  ROCE of 14.8%, well in excess of Group’s through-the-cycle target of 13%  Integration of acquisitions and delivery of synergies on track  Major capital projects on time and within budget  Outlook  Demand in Europe gene

  25. Slide 25: Agenda

    Agenda Mondi overview Operational overview Capital allocation Summary Appendices 25

  26. Slide 26: Operating financial highlights

    Operating financial highlights % change % change H1 H2 H1 vs vs € million 2012 2012 2013 H1 2012 H2 2012 Group revenue 2,819 2,971 3,342 19% 13% Underlying EBITDA¹ 437 490 554 27% 13% % Margin 15.5% 16.5% 16.6% Underlying operating profit² 272 302 366 35% 21% % Margin 9.6% 10.2% 11.0% Group ROCE³ 13

  27. Slide 27: Variance analysis

    Variance analysis Underlying operating profit development € million 400 35 (3) (11) 65 (24) 5 366 1 4 350 22 300 272 250 200 150 100 50 0 H1 2012 Sales Net Increase Lower Currency Acquisitions Lower Write- Net H1 2013 volume positive in fixed effects and fair value down other improvements price vari

  28. Slide 28: Divisional underlying operating profit

    Divisional underlying operating profit¹ € million 160 148 140 123 120 104 102 100 100 91 80 60 54 47 48 44 39 40 40 29 20 10 9 0 Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division H1 2012 H2 2012 H1 2013 1 Underlying operating profit is operating profit befo

  29. Slide 29: Financial review

    Financial review % change % change H1 H2 H1 vs vs € million 20122 20122 2013 H1 2012 H2 2012 1 Underlying operating profit 272 302 366 35% 21% Net finance costs (55) (55) (57) -4% -4% Net income from associates (1) (4) 1 Underlying profit before tax 216 243 310 44% 28% Tax before special items (43)

  30. Slide 30: Finance costs

    Finance costs H1 H2 H1 € million 2012 2012 2013 Closing net debt 1,257 1,872 1,844 Average net debt 976 1,515 1,851 Finance costs 49 46 52 Net interest on defined benefit arrangements 6 9 5 Net finance costs 55 55 57 Effective interest rate (before capitalised interest) 9.4% 6.6% 5.5%  Finance cost

  31. Slide 31: Taxation and non-controlling interests

    Taxation and non-controlling interests Taxation % %  Benefiting from change change H1 H2 H1 vs vs € million 2012 2012 2013 H1 2012 H2 2012  Profit mix Underlying tax charge 43 47 56 -30% -19%  Investment incentives, notably Poland Effective tax rate 20% 20% 18% Non-controlling interests % %  Low

  32. Slide 32: Special items

    Special items Operating special items - €81 million loss  Consumer packaging (€13 million loss)  Closure of Lindlar operation, volumes redirected to other operations  Uncoated fine paper (€50 million loss)  Restructuring activities and asset impairment in Neusiedler  South Africa division (€18

  33. Slide 33: Cashflow effects – movement in net debt

    Cashflow effects – movement in net debt Movement in net debt 2 500 2 000 1,872 187 1,844 68 92 50 (41) (28) 75 129 1 500 (560) 1 000 500 0 Net debt at Cash Movement Income tax Dividends Dividends Financing Capex and Currency Other Net debt at 31 Dec 2012 generated in working paid paid to paid to cos

  34. Slide 34: Working capital

    Working capital Working capital management Working capital cash flows € million € million 22 12.7% 13.0% 11.9% 12% 10% 716 764 871 (105) (129) H1 2012 H2 2012 H1 2013 H1 2012 H2 2012 H1 2013 Working capital as a % of revenue  Increase in working capital as a percentage of turnover is driven largely

  35. Slide 35: Capital expenditure

    Capital expenditure Capital expenditure  Major expansionary projects progressing € million according to plan 102% 89%  Energy investments at Frantschach, 68% Richards Bay and Stambolijski mills will be completed in H2 2013  Štěti bleached kraft paper project on track 113 190 167 for H1 2014 start

  36. Slide 36: Debt facilities

    Debt facilities % change % change H1 H2 H1 vs vs € million 2012 2012 2013 H1 2012 H2 2012 Net debt 1,257 1,872 1,844 47% -1% Committed facilities 1,795 2,606 2,598 45% - Of which undrawn 584 762 743 27% -2% Gearing (Net debt / Trading capital employed) 31% 40% 40% Net debt / 12 month trailing EBITDA

  37. Slide 37: Dividends

    Dividends Dividends declared € cents per share 30 25 20 19.10 17.75 15 16.50 10 5 7.00 8.25 8.90 9.55 2.50 3.50 0 2009 2010 2011 2012 2013 Interim dividend Final dividend  Interim dividend of 9.55 € cents per share declared, 7% up on prior year 37

  38. Slide 38: Abridged income statement

    Abridged income statement1 % change % change H1 H2 H1 vs vs € million 20122 20122 2013 H1 2012 H2 2012 Group Revenue 2 819 2 971 3 342 19% 13% Materials, energy and consumables used (1 478) (1 546) (1 758) Variable selling expenses (266) (261) (282) Gross margin 1 075 1 164 1 302 21% 12% Maintenance

  39. Slide 39: Input costs

    Input costs Variable costs € million 600 500 400 300 200 100 0 Pulp Paper Wood Recovered Energy Chemicals Other Variable paper costs H1 2012 H2 2012 H1 2013 Nordenia H2 2012 Nordenia H2 2013  Lower average input costs per unit for the year  Total costs increased due to Nordenia acquisition 39

  40. Slide 40: Fixed costs

    Fixed costs Fixed costs composition € million 1 000 900 800 700 600 22.7% 22.4% 22.6% 500 400 300 200 100 0 H1 2012 H2 2012 H1 2013 Personnel costs Depreciation and amortisation Maintenance and other indirect costs Other net operating expenses Fixed costs excl. depreciation as a % of turnover Strong

  41. Slide 41: Cash flow

    Cash flow % change % change H1 H2 H1 vs vs € million 2012 2012 2013 H1 2012 H2 2012 Underlying EBITDA 437 490 554 27% 12% Working capital movements (105) 22 (129) Other operating cash flow items 23 (18) 6 Cash generated from operations 355 494 431 21% -13% Dividends from financial investments and as

  42. Slide 42: Statement of financial position

    Statement of financial position € million H1 2012 H2 2012 H1 2013 Intangible assets 243 695 684 Property, plant & equipment 3 431 3 709 3 446 Forestry assets 318 311 257 Other non-current assets 55 42 41 Total non-current assets 4 047 4 757 4 428 Inventories 663 783 767 Trade and other receivables 9

  43. Slide 43: Emerging market asset base leads to low cost positions across the Group's main grades

    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 Q1 2013 Cost quartile¹ Q4 12% 18% 7% Q3 62% 20% 25% 18% 38% Q2 100% 100% 100% 75% 20% 35% 100% Q1 White Top Unbleached NSSC Fluting Recycled fluting Unbleach

  44. Slide 44: Integrated value chain H1 2013

    Integrated value chain H1 2013 Pulp Kraft Paper Millions Millions of tonnes of tonnes 0.4 0.1 1.6 1.8 0.3 0.5 0.3 0.2 (0.2) Production Consumption Net long/(short) Production Consumption Net long position position E&I MSAD E&I Virgin Containerboard1 Recycled Containerboard1 Millions Millions of tonn

  45. Slide 45: Production volumes

    Production volumes % change % change H1 H2 H1 vs vs 2012 2012 2013 H1 2012 H2 2012 Europe & International Containerboard Tonnes 1 042 937 1 036 067 1 077 702 3% 4% Kraft Paper Tonnes 489 279 491 358 515 822 5% 5% Corrugated Board & Boxes m m2 606 607 678 12% 12% Industrial Bags m units 2 005 1 824 2

  46. Slide 46: Exchange rates

    Exchange rates % change % change H1 H2 H1 vs vs 2012 2012 2013 H1 2012 H2 2012 Closing rates against the euro South African rand 10.37 11.17 13.07 26% 17% Czech koruna 25.64 25.15 25.95 1% 3% Polish zloty 4.25 4.07 4.34 2% 7% Pounds sterling 0.81 0.82 0.86 6% 5% Russian rouble 41.37 40.33 42.84 4% 6

  47. Slide 47: Slide 47

Mondi — Bank of America Merrill Lynch Pan European Paper & Packaging Forum 2013 on 6ix