Mondi Plc · LSE:MNDI
Mondi — H1 2013 Earnings Presentation
43 slides from Mondi's earnings presentation, Aug 8, 2013
Slide 1: Half-yearly results for the six months ended 30 June 2013
HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013 8 August 2013
Slide 2: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 2
Slide 3: Highlights
Highlights Underlying operating profit and ROCE Financial € million 14.8% Record results 13.6% Underlying operating profit up 35% 13.4% Underlying earnings per share up 60% 366 272 302 H1 2012 H2 2012 H1 2013 Cash generated from operations of ROCE % €431 million, up 21% ROCE of 14.8%, well
Slide 4: 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, typically enjoying structural growth Well invested asset base in regions enjoying low operating cost structures 83%
Slide 5: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 5
Slide 6: 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 EBITDA 437 490 554 27% 13% % Margin 15.5% 16.5% 16.6% Underlying operating profit 272 302 366 35% 21% % Margin 9.6% 10.2% 11.0% Group ROCE 13.4%
Slide 7: 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
Slide 8: 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
Slide 9: 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)
Slide 10: 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
Slide 11: 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
Slide 12: 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
Slide 13: 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
Slide 14: 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
Slide 15: 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
Slide 16: 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
Slide 17: 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, 7.3% up on prior year 17
Slide 18: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division 18
Slide 19: Packaging Paper
Packaging Paper Underlying operating profit and ROCE Strong performance with ROCE of 20.1% € million 20.1% Price increases in all containerboard 18.5% 17.9% grades 14.2% 13.1% 10.8% Good production, particularly in Syktyvkar Benefited from lower input costs, particularly recovered fibre 104
Slide 20: 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
Slide 21: 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 0.90 pressure, offset by continued good export markets 0.80 0.70 No significant supply side changes 0.60 0.50 2008 2009 2010 2011 2
Slide 22: 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
Slide 23: Consumer Packaging
Consumer Packaging Underlying operating profit and ROCE1 Integration progressing well € million 14.6% Net synergy gains and additional cost 10.8% reduction activities 10.1% Partially offset by marginally lower sales volumes (pro-forma) 6.7% 6.5% 6.7% Closure of Lindlar plant on track 10 23 3
Slide 24: 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
Slide 25: 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
Slide 26: 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 12.8% 11.3% Domestic price increases achieved Higher average export pulp and white- 9.1% 9.6% top kraftliner prices 8.1% Gains from weaker
Slide 27: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 27
Slide 28: Delivering against free cash flow priorities
Delivering against free cash flow priorities Maintain investment grade credit metrics Ratings reaffirmed Net debt/EBITDA is 1.8 times, down from 2.0 times at end 2012, despite normal seasonal working capital increases Selective capital investment opportunities Free Cash €370 million of major capital
Slide 29: Major capital investments
Major capital investments Description Progress Finalisation of commissioning with start-up in H2 Frantschach recovery boiler 2013 Energy Richards bay turbine Start-up late H2 2013 Projects Stambolijski turbine Completed Syktyvkar bark boiler Completed Start-up H2 2014 Syktyvkar P
Slide 30: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 30
Slide 31: 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
Slide 32: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Summary Appendices 32
Slide 33: Our strategic pillars
Our strategic pillars Achieve leading Maintain and/or develop leading market positions in our core packaging and uncoated market positions 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
Slide 34: 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
Slide 35: 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 35
Slide 36: Fixed costs
Fixed costs Fixed costs composition € million 1,000 900 800 700 600 22.6% 22.7% 22.4% 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
Slide 37: 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
Slide 38: 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
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… 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
Slide 40: 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
Slide 41: 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
Slide 42: 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
Slide 43: mondi
mondi