Mondi Plc · LSE:MNDI

Mondi — H1 2012 Earnings Presentation

48 slides from Mondi's earnings presentation, Aug 7, 2012

  1. Slide 1: Half-yearly results for the six months ended 30 June 2012

    HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012 7 August 2012

  2. Slide 2: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 2

  3. Slide 3: Highlights

    Highlights Underlying operating profit  Good operating performance after a € million challenging start to the year 12.0% 9.6% 9.5%  Return on Capital Employed of 13.3%, above through-the-cycle target of 13%  Interim dividend of 8.9 euro cents per 354 268 269 share, up 8% H1 2011 H2 2011 H1 2012 

  4. Slide 4: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 4

  5. Slide 5: Operating financial highlights

    Operating financial highlights % change % change H1 H2 H1 vs vs € million 2011 2011 2012 H1 2011 H2 2011 Group Revenue 2,942 2,797 2,840 -3% +2% 1 Underlying EBITDA 526 438 436 -17% - % Margin 17.9% 15.7% 15.4% 2 Underlying operating profit 354 268 269 -24% - % Margin 12.0% 9.6% 9.5% Basic underlyin

  6. Slide 6: Divisional underlying operating profit

    Divisional underlying operating profit¹ € million H1 2011 140 128 118 H2 2011 120 105 100 96 100 100 H1 2012 87 80 73 65 60 40 35 27 29 20 0 (5) (3) -20 (13) -40 Corrugated Bags & Coatings Uncoated Fine South Africa Newsprint Paper division Capital employed2 1,087 1,347 1,270 840 66 1 Underlying ope

  7. Slide 7: Input costs

    Input costs Variable costs € million 600 500 400 300 200 100 0 Pulp Paper Wood Recovered Energy Variable selling Other variable paper expenses costs¹ H1 2011 H2 2011 H1 2012  Average benchmark pulp prices lower than H1 2011 by 7% in euro terms  Wood costs lower than H1 2011, but higher than H2 201

  8. Slide 8: Fixed costs

    Fixed costs Fixed costs composition € million 900 22.7% 22.5% 21.5% 800 700 600 500 400 300 200 100 0 H1 2011 H2 2011 H1 2012 Personnel costs Depreciation and amortisation Maintenance and other indirect costs Other net operating expenses Fixed costs as a % of revenue excluding depreciation  Continu

  9. Slide 9: Financial review

    Financial review % change % change H1 H2 H1 vs vs € million 2011 2011 2012 H1 2011 H2 2011 1 Underlying operating profit 354 268 269 -24% - Net finance costs (60) (51) (53) +12% -4% Net income from associates 2 (1) 1 Underlying profit before tax 296 216 217 -27% - Tax before special items (59) (43)

  10. Slide 10: Net debt and finance costs

    Net debt and finance costs % change % change H1 H2 H1 vs vs € million 2011 2011 2012 H1 2011 H2 2011 Net debt (1,200) (831) (1,273) -6% -53% Net debt finance charges and other financial income 58 53 50 +14% +6% Foreign currency losses / (gains) 2 (2) 3 Net finance costs 60 51 53 +12% -4% Effective i

  11. Slide 11: Taxation and non-controlling interests

    Taxation and non-controlling interests Taxation Non-controlling interests H1 H2 H1 H1 H2 H1 € million 2011 2011 2012 € million 2011 2011 2012 Non-controlling share before special Underlying tax charge 59 43 43 42 28 25 items Non-controlling share of special Tax on special items - (2) 2 - - - items T

  12. Slide 12: Cash flow

    Cash flow % change % change H1 H2 H1 vs vs € million 2011 2011 2012 H1 2011 H2 2011 Underlying EBITDA 526 438 436 -17% - Working capital movements (143) 75 (102) 1 Other operating cash flow items 20 1 19 Cash generated from operations 403 514 353 -12% -31% Dividends from financial investments and as

  13. Slide 13: Working capital

    Working capital Working capital management Working capital cash flows € million € million 12.6% 75 11.9% 9.9% 20 10.0% 10.0% 12% 10% (102) 527 660 702 575 718 (141) (143) 2009 2010 H1 2011 H2 2011 H1 2012 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 Working capital as % of turnover  Working capital abov

  14. Slide 14: Capital expenditure

    Capital expenditure € million 400 250% 350 200% 300 250 150% 200 150 100% 100 50% 50 317 383 295 227 185 209 126 137 109 0 0% H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 Capital expenditure excl. intangible assets Capex as % of depreciation  Capital expenditure at 67% of

  15. Slide 15: Debt facilities and net debt

    Debt facilities and net debt H1 H2 H1 € million 2011 2011 2012 Net debt (1,200) (831) (1,273) Gearing (Net debt / Trading capital employed) 27% 22% 31% Net debt / 12 month trailing EBITDA (times) 1.3 0.8 1.5 Committed facilities 1,897 1,839 1,795 Of which undrawn 781 889 584  Net debt increased by

  16. Slide 16: Dividends

    Dividends € cents per share 30.0 26.0 25.0 20.0 20.0 15.0 12.7 9.5 10.0 5.0 17.75 5.0 7.0 16.5 7.7 2.5 3.5 8.25 8.9 0.0- 2008 2009 2010 2011 2012 Interim Dividend Final Dividend  Interim dividend of 8.9 euro cents per share, up 8%  Record date – 24 August 2012  Payment date – 18 September 2012 16

  17. Slide 17: New Europe & International Management and Reporting Structure

    New Europe & International Management and Reporting Structure¹ Packaging Fibre Consumer Paper Packaging Packaging2 UFP Corrugated Former Bags & Coatings business Containerboard Consumer Bags UFP Packaging Former Corrugated business Kraft paper Industrial Bags Nordenia Coatings H2 H1 H2 H1 H2 H1 H2 H

  18. Slide 18: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices Corrugated | Bags & Coatings | Uncoated Fine Paper | South Africa Division 18

  19. Slide 19: Corrugated

    Corrugated Underlying operating profit  Significantly lower average containerboard € million selling prices than H1 and H2 2011 14.9%  Containerboard sales volumes marginally 10.7% 9.6% up on H1 2011  Fibre and energy input costs lower than H1 and H2 2011  Planned maintenance shut for Świecie in

  20. Slide 20: Corrugated | industry fundamentals

    Corrugated | industry fundamentals Selling prices - indexed Demand Price indexed vs 2007 opening levels  Sluggish short-term growth due to macro- 1.50 Kraftliner - indexed economic slowdown 1.40 White-top Kraftliner - indexed 1.30 RCB / Recovered paper differential - indexed  Structural growth dri

  21. Slide 21: Bags & Coatings

    Bags & Coatings Underlying operating profit Kraft paper € million 9.7%  Commercial downtime ended in Q1 with full 8.6% 8.3% production in Q2  Lower average selling prices than H1 and H2 2011, although price increases 128 100 96 announced to take effect in H2 2012 H1 2011 H2 2011 H1 2012  Lower wo

  22. Slide 22: Bags & Coatings

    Bags & Coatings Industrial Bags Consumer packaging  Selling prices in line with H1 2011  Stable profitability from continuing  Demand weaker, especially in southern operations Europe  Benefited from stable demand  Business benefited from  Improved product mix  lower paper input costs than H1

  23. Slide 23: Uncoated Fine Paper

    Uncoated Fine Paper Underlying operating profit  Continued strong performance € million  Planned maintenance shut at Syktyvkar 16.1% during June 2012 compared to July 2011 12.5% 13.4%  Marginally lower average selling prices than H1 and H2 2011  Lower pulp and chemical costs, offset by higher en

  24. Slide 24: Uncoated Fine Paper | industry fundamentals

    Uncoated Fine Paper | industry fundamentals Pulp and A4 B-copy prices Demand €/tonne €/tonne  Western Europe impacted by both short- 900 800 term cyclical pressures and ongoing 700 850 structural decline 600 800  Emerging Europe and Russia softer in light 500 750 of macroeconomic downturn, still e

  25. Slide 25: South Africa Division

    South Africa Division Underlying operating profit  Underlying operating profit marginally € million higher than H1 2011 11.7% 10.1%  Richards Bay shut in Q3 2012 (Q2 in 10.0% prior year)  Lower average selling prices for pulp and white top containerboard  Business benefited from – increase in pr

  26. Slide 26: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 26

  27. Slide 27: Delivering against free cash flow priorities

    Delivering against free cash flow priorities Maintain investment grade credit metrics Ratings reaffirmed during period Selective capital investment opportunities, Good progress on energy projects mainly around cost optimisation Syktyvkar pulp dryer on hold Support dividends Interim dividend increase

  28. Slide 28: Nordenia acquisition | highlights

    Nordenia acquisition | highlights  Acquisition of 93.9% of Nordenia for implied enterprise value of €655 million  Combination creates a leading consumer packaging business  Significant cost and revenue synergy opportunities  By 2014, double digit underlying EPS enhancing¹ and beats Mondi’s throu

  29. Slide 29: Nordenia acquisition | a leading consumer packaging business

    Nordenia acquisition | a leading consumer packaging business A significant step for Mondi’s existing CP business Pro forma combined CP revenue¹ (2011) Acquisitions of: Acquisition of € million Korneuburg (Austria) Nordenia Solec (Poland) Békéscsaba (Hungary) Acquisition of Wheatley (UK) Hygiene and

  30. Slide 30: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 30

  31. Slide 31: Summary

    Summary  Good financial performance – delivering ROCE of 13.3%  Significant strategic acquisitions  Świecie minorities acquired for €296 million and Saturn Management for €88 million  €655 million acquisition of Nordenia agreed  Investment grade credit ratings reaffirmed  Outlook  Macroeconom

  32. Slide 32: Agenda

    Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 32

  33. Slide 33: Abridged income statement

    Abridged income statement % change % change H1 H2 H1 vs vs € million 2011 2011 2012 H1 2011 H2 2011 Group Revenue 2,942 2,797 2,840 -3% +2% Materials, energy and consumables used (1,528) (1,470) (1,500) Variable selling expenses (257) (254) (264) Gross margin 1,157 1,073 1,076 -7% - Maintenance and

  34. Slide 34: Production volumes

    Production volumes H1 H2 H1 Production statistics 2011 2011 2012 Europe & International Containerboard Tonnes 991,970 1,018,014 1,042,937 Kraft Paper Tonnes 535,238 420,503 489,279 Corrugated Board and Boxes M m2 609 604 606 Industrial Bags M units 2,050 1,908 2,005 Coatings and Release liners M m2

  35. Slide 35: Exchange rates

    Exchange rates H1 H2 H1 2011 2011 2012 Closing rates against the euro South African rand 9.86 10.48 10.37 Pounds sterling 0.90 0.84 0.81 Czech koruna 24.34 25.79 25.64 Polish zloty 3.99 4.46 4.25 Russian rouble 40.40 41.77 41.37 Turkish lire 2.35 2.44 2.28 US dollar 1.45 1.29 1.26 Average rates for

  36. Slide 36: Corrugated | performance history

    Corrugated | performance history Mondi’s ROCE (%), kraftliner price and RB fluting – OCC price differential (€/tonne) €/tonne % ROCE 700 25% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2012 2011 2011 2010 2010 2009 2009 2008 2008 2007 2007 21.9% 18.1% 600 20% 500 17.1% 15.0% 400 13.3% 15% 12.9% 11.9% 300 10% 7

  37. Slide 37: Bags & Coatings | performance history

    Bags & Coatings | performance history Mondi’s ROCE (%), sack kraft (€/tonne) and indexed bags prices €/tonne % ROCE 900 25% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2012 2011 2011 2010 2010 2009 2009 2008 2008 2007 2007 21.4% 850 20% 800 16.5% 16.6% 15.3% 750 11.9% 15% 13.3% 10.2% 700 10.9% 650 8.3% 10% 7.0

  38. Slide 38: Uncoated Fine Paper | performance history

    Uncoated Fine Paper | performance history Mondi’s ROCE (%), Uncoated fine paper price (€/tonne) €/tonne % ROCE 900 25% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2012 2011 2011 2010 20102009 2009 2008 2008 2007 2007 880 18.9% 19.7% 860 20% 17.1% 840 13.8% 15.2% 820 14.4% 14.4% 15% 12.1% 800 10.5% 780 8.4% 10%

  39. Slide 39: 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 at Q1 2012 Delivered cost¹ Q1 Q2 Q3 Q4 Unbleached Sack Kraft Paper 24% 15% 43% 18% NSSC Fluting 100% - - - Unbleached Kraftliner 100% - - - White Top Kraftliner

  40. Slide 40: Integrated value chain 2012

    Integrated value chain 20121 Pulp Kraft Paper Millions Millions of tonnes of tonnes E&I 2.5 E&I SAD 0.6 2.0 0.1 0.5 0.4 1.5 0.4 1.0 0.3 0.5 0.2 0.3 1.5 1.7 0.3 0.0 0.1 0.5 0.2 (0.5) (0.2) 0.0 Production Consumption Net long/(short) Production Consumption Net long position position Virgin Containerbo

  41. Slide 41: Nordenia acquisition

    Nordenia acquisition 17,000m² Hubble Creek building in Jackson, Missouri, USA 41

  42. Slide 42: An innovative consumer packaging solutions provider

    An innovative consumer packaging solutions provider Production facilities  Nordenia is an international supplier of innovative consumer packaging solutions and hygiene Nordenia plant components  Competitive advantage through proprietary technology and customer-focused innovation  International pr

  43. Slide 43: Material cost synergies

    Material cost synergies Productivity benefits Operational 40% excellence Plant optimisation External purchasing Procurement 35% €15 million p.a. pre-tax by 2014 Sourcing film internally Operations Central 25% Systems 43

  44. Slide 44: A complementary product portfolio

    A complementary product portfolio Consumer packaging Hygiene components Re-closable bags and Feminine hygiene Advanced films Lamination Diaper components stand-up pouches release liner Nordenia • Advanced films for labels, • Pre-made, re-closable • Printed laminates to • Film based elastic • Film ba

  45. Slide 45: Acquisition and financing structure

    Acquisition and financing structure  Acquisition EV of €655 million (100% basis), including assumption of €280 million bond and €118 million other debt and debt-like liabilities¹  €242 million cash funding requirement for acquisition of 93.9% shareholding financed by a new two year €250 million co

  46. Slide 46: Mondi at a glance

    Mondi at a glance Packaging Fibre Consumer Paper Packaging Packaging UFP South Africa Newsprint €960m €946m €150m €749m €287m €83m 3% 9% H1 2012 30% 23% Revenue1 30% 5% H1 2012 10.8% 5.0% 6.7% 13.4% 10.1% (3.6%) EBIT %² Products 1 Segment revenues, including inter-segment revenues. 2 EBIT % is befor

  47. Slide 47: Focus on Packaging and UFP in emerging markets

    Focus on Packaging and UFP in emerging markets1 Revenue Revenue Net Revenue by by destination by origin operating assets product Emerging markets 5%5% 15% 5% Mature 5% 32% markets 29% 48% 43% 52% 57% 71% 85% 24% 24% Fibre packaging products Packaging paper Uncoated fine paper Consumer packaging prod

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Mondi — H1 2012 Earnings Presentation on 6ix