Mondi Plc · LSE:MNDI
Mondi — FY2009 Earnings Presentation
48 slides from Mondi's earnings presentation, Feb 23, 2010
Slide 1: Mondi Group Results for the Year Ended 31 December 2009
MONDI GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009 23 February 2010
Slide 2: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Results for the year ended 31 December 2009 Page 2
Slide 3: Key highlights
Key highlights Resilient performance in challenging circumstances Clear pick-up in European trading resulting in strong fourth-quarter Delivered annual cost savings of €251 million Strong cash management with net debt down at €1.52 billion, €173 million lower than 2008 year-end Restructuring complet
Slide 4: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Results for the year ended 31 December 2009 Page 4
Slide 5: Operating financial highlights
Operating financial highlights % H2 H1 H2 € Millions 2008 2009 Change 2008 2009 2009 Group Revenue 6,345 5,257 (17%) 3,082 2,614 2,643 EBITDA 1 814 645 (21%) 358 308 337 % Margin 12.8% 12.3% 11.6% 11.8% 12.8% Underlying operating profit 2 441 294 (33%) 178 138 156 % Margin 7.0% 5.6% 5.8% 5.3% 5.9% C
Slide 6: Divisional underlying operating profits
Divisional underlying operating profits1 Business segment results - by half Year-on-year variance (€147 million) 120 109 40 100 20 H1 2008 5 20 2 80 75 H2 2008 8 69 71 0 66 H1 2009 60 57 H2 2009 (26) € millions 50 (20) 46 45 € millions 40 36 37 (40) (77) (79) 28 25 22 20 14 14 Corporate (60) 12 11 1
Slide 7: Income statement overview
Income statement overview Year-on-Year variances (€'m and %) Materials, energy and consumables Other net operating used €616m 18% Variable selling expenses €86m expenses €70m 23% Personnel costs 13% Depreciation and €88m 10% Maintenance €59m amortisation €22m 20% 6% Restructuring impacts Group Reven
Slide 8: Rigorous asset management…
Rigorous asset management… 2009 trading impact of closures and divestitures: €484 million decline in segment revenue Closures and Divestitures1 €107 million of fixed costs removed Underlying operating profit marginally up Revenue impact by business 5 (€484m in total) South Africa 6 Division, 5 (€45m
Slide 9: …and focus on cost savings
…and focus on cost savings Cost savings COST SAVINGS --€251 €251 million MILLION YTD Cost structure 275 3.1% 2.4% 5.4% 250 Depreciation 251 225 Other net and 200 Other operating amortisation Maintenance Personnel expenses 7% 175 Energy 6% € million Material inputs Wood, pulp 150 167 and fibre 125 29
Slide 10: Financial review
Financial review % H2 H1 H2 € Millions 2008 2009 Change 2008 2009 2009 Underlying operating profit 1 441 294 (33%) 178 138 156 Net Finance Costs (159) (114) 28% (104) (58) (56) Associate net earnings 2 2 1 1 1 Underlying profit before tax 2 284 182 (36%) 74 81 101 Tax before special items (82) (58)
Slide 11: Finance charges and net debt
Finance charges and net debt % H2 H1 H2 € Millions 2008 2009 Change 2008 2009 2009 Net debt (1,690) (1,517) 10% (1,690) (1,661) (1,517) Net debt finance charges and other financial income 123 104 15% 70 52 52 Net post-retirement finance costs 8 9 (13%) 5 4 5 Foreign currency losses / (gains) 28 1 96
Slide 12: Taxation and minorities
Taxation and minorities Taxation Minorities % % € Millions 2008 2009 € Millions 2008 2009 Change Change Underlying tax charge 82 58 (29%) Minority share before special items 30 29 (3%) Tax on special items (4) (6) (50%) Minority share of special items 0 1 Profit attributable to minority interests 30
Slide 13: Special items
Special items € Millions 2008 2009 € Millions 2008 2009 Operating loss (358) (128) Non-operating loss (29) (5) Impairments & restructuring (133) Profit on disposals 3 - By business: (2) Held for sale impairments 1 (8) Europe & International - Uncoated Fine Paper Europe & International - Bags & Speci
Slide 14: Cash flow
Cash flow % H2 H1 H2 € Millions 2008 2009 Change 2008 2009 2009 EBITDA 1 814 645 (21%) 358 308 337 Working capital movements 27 248 819% 153 99 149 Other operating cash flow items (46) (26) 43% (26) (15) (11) Cash generated from operations 795 867 9% 485 392 475 Dividends from financial investments
Slide 15: Sharp focus on working capital resulted in significant cash benefits
A sharp focus on working capital has resulted in significant cash benefits Working capital management Working Working capital cash capital cash flows flows 1,200 20% 1,100 18% 15.5% 14.6% 16% 12.9% 1,000 11.9% 14% €153m €149m 900 12% €97m €99m € Millions 10.0% 800 10% 700 8% 6% 600 4% (€126m) 500 2%
Slide 16: Limiting capital expenditure approvals to 40% of depreciation
Limiting capital expenditure approvals to 40% of depreciation, without compromising the asset base Capital expenditure, excluding major projects 2009 capital expenditure1 300 200% 200 Emerging markets € millions 11% 100% Mature markets 256 100 194 182 114 116 106 89% 0 0% H1 H2 H1 H2 H1 H2 2007 2007
Slide 17: Adequate debt facilities available in medium-term
Adequate debt facilities available in medium-term % € Millions 2008 2009 Change Net debt (1,690) (1,517) 10% Committed facilities 2,752 2,541 (8%) Of which undrawn 1,062 990 (7%) Gearing (Net debt / Trading capital employed) 39% 35% Net debt / 12 month trailing EBITDA (times) 2.1 2.4 Main facility i
Slide 18: Dividends
Dividends Final dividend of 7.0 euro cents per share proposed (9.5c for the year) Dividend cover of 2.0 times Record date 23 April 2010 Payment date 19 May 2010 Increased final dividend Results for the year ended 31 December 2009 Page 18
Slide 19: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Results for the year ended 31 December 2009 Page 19
Slide 20: Europe & International
Europe & International Segment Revenue Results significantly impacted by European slow-down €5,159m H2 €4,099m 21% drop in revenues €2,417m H2 €2,036m ~173,000 tonnes of market-related downtime taken, ~163,000 H1 tonnes in first-half €2,742m H1 €2,063m Selling prices lower in all grades 2008 2009 Un
Slide 21: Uncoated Fine Paper
Uncoated Fine Paper Segment Revenue Strong results in the current climate €1,565m Low-cost asset base €1,351m H2 Cost reductions €719m H2 €671m Favourable market positioning H1 Pricing down year-on-year H1 €846m €680m Russian domestic market robust 2008 2009 Input cost pressures in the second-half U
Slide 22: Industry fundamentals – Uncoated Fine Paper
Industry fundamentals – Uncoated Fine Paper UFP cumulative cut-size order inflow 2009 vs. 2008 (% growth)1 UFP capacity developments2 0 2 4 6 8 10 1214 16 1820 2224 26 2830 3234 36 3840 42 4446 4850 52 150 499 0% 6% net capacity 000 tonnes reduction expected 2008-2010 300 (511) Cut-size Other All UF
Slide 23: Bags and Specialities
Bags and Specialities Volumes up on prior year, mainly in second-half Segment Revenue €2,138m ~ 87,000 tonnes downtime, nearly all in first-half €1,787m H2 €1,017m H2 €894m Recent paper pricing improvements to impact in new year European bag outlook remains difficult – awaiting recovery H1 H1 €1,121
Slide 24: Industry fundamentals – Kraft Paper
Industry fundamentals – Kraft Paper cumulative sack kraft paper order inflow 2009 vs. 2008 (% growth)1 Sack Kraft Paper capacity developments2 6% 40 0% 0 2 4 6 8 10121416182022242628303234363840424446485052545658 10 000 tonnes (25%) 5% net capacity reduction 2008-2009 (160) (50%) Capacity Rational-
Slide 25: Corrugated
Corrugated Trading environment challenging Segment Revenue €1,555m Weak demand and slow supply-side response Clear improvement in trading in second-half, especially in fourth- H2 €1,041m €725m quarter H2 €514m H1 €830m H1 €527m 2008 2009 Kraftliner - indexed Average recycled containerboard - indexed
Slide 26: Industry fundamentals – Corrugated
Industry fundamentals – Corrugated cumulative corrugated order inflow 2009 vs. 2008 (% growth)1 RCB2 capacity developments4 3% net capacity increase May Aug Sep Nov Dec Feb Mar Jan Jun Oct Apr 1,133 Jul expected 2008-2010 000 tonnes 1,137 0% Need for 351 further (5%) (6%) closures?? (400) (10%) (1,4
Slide 27: Corrugated restructuring
Corrugated restructuring European Recycled Fluting Supply Delivered costs to Frankfurt1 Corrugated Business EU footprint 500 EUR/t Before: After: (CEE focus) 450 400 350 New Mondi PM7 300 Weighted av. cost Pre restructuring 250 and investment in CEE Light2 Weighted av. cost 200 Post restructuring an
Slide 28: South Africa Division
South Africa Division Segment Revenue Lower export margins across all grades - lower prices and a stronger €587m 140% €478m South African rand H2 €313m H2 120% €229m H1 H1 100% €274m €249m A4 B-Copy PIX in ZAR (nominal) - indexed A4 B-Copy PIX in ZAR (real) - indexed 2008 2009 80% Underlying operati
Slide 29: Mondi Packaging South Africa
Mondi Packaging South Africa Segment Revenue €474m €498m Strong second-half across all businesses despite slow- H2 H2 down in local economy, €251m €271m Able to maintain prices over the year H1 H1 Benefits on translation into euros from South African €223m €227m rand strength 2008 2009 Underlying op
Slide 30: Merchant & Newsprint
Merchant & Newsprint Segment Revenue €593m €528m Aylesford pricing up around 20% on contract business, H2 €300m H2 although rising input cost pressures and structurally weak €274m European newsprint market a concern going forward H1 H1 €293m €254m 2008 2009 Mondi Shanduka Newsprint (“MSN”) marginall
Slide 31: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Results for the year ended 31 December 2009 Page 31
Slide 32: Operational excellence evidenced in start-up of Swiecie's PM7
Operational excellence evidenced in the start-up of Swiecie’s PM7 Brown field expansion – lowest operating Swiecie PM7 - €305m Actual average daily production - tonnes / day cost of its type : 1000 968 903t / day – budget Jan 2010 ~€70m capital cost benefit 900 800 775t / day – business plan Dec 200
Slide 33: Syktyvkar mill modernisation will enhance low cost position
The Syktyvkar mill modernisation will further enhance Mondi’s low cost position Syktyvkar 2010 second-half completion Small overrun expected (up to 4%), resulting in capital cost up to €545 million Limited market risk UFP (universal) cost curve1 Project returns 1,200 1,000 Wood/pulp production €/ton
Slide 34: Major mill modernisation programme
Major mill modernisation programme Expansionary capital spend 2004 to 20091 2009 Net operating assets South Africa 7% 29% Emerging Europe, incl Russia 25% Emerging markets Rest of world (mainly Western Mature markets Europe) 64% 75% Coming to the end of 10 year programme of modernising its asset bas
Slide 35: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Results for the year ended 31 December 2009 Page 35
Slide 36: Structurally improved performance in 2009 second-half
Structurally improved performance in 2009 second-half 13.9% (8%) 12.8% 11.7% (9%) Q1 2007 - Q2 2008 Q3 2008 - Q2 2009 Q3 2009 - Q4 2009 Impact of: Benefit of: -lower volumes and -improved volumes pricing -lower input costs -offset by lower -lower costs input costs following the restructuring EBITDA
Slide 37: Summary
Summary Resilient performance in challenging conditions / strong financial position Uncoated fine paper continues to perform Low-cost base supported continued profitability in downturn Substantial cash inflow from operations Debt under control despite major project spend – substantial headroom on co
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Slide 39: Agenda
Agenda Highlights Financial overview Operational review Major projects Summary Appendices Results for the year ended 31 December 2009 Page 39
Slide 40: Three key pillars to our strategy
Three key pillars to our strategy Leading market Build on leading positions in packaging and Uncoated Fine Paper positions (UFP), particularly in emerging markets Maintain position as lowest-cost producer in our markets: High quality, low z Selectively investing in production capacity in lower-cost
Slide 41: Focus on packaging and UFP in emerging markets
Focus on packaging and UFP in emerging markets1 Revenue by destination Revenue by origin Net operating assets Of which, 13% relates to Mondi’s two major projects in 25% Poland (on-stream 47% 42% in September 2009) 53% 58% and in Russia (on- stream in second- 75% half 2010) Emerging markets Emerging
Slide 42: Mondi at a glance
Mondi at a glance Bags & Newsprint and UFP Specialities Corrugated South Africa MPSA merchant €1.4B €1.8B €1.0B €0.5B €0.5B €0.5B 9% 2009 9% Sales 24% (1) 8% 32% 18% 2009 EBIT % 10.8% 4.5% 2.3% 6.7% 7.2% 2.1% Products Europe South Africa Europe/SA z No. 1 in Office z No. 1 in Kraft Paper z No. 1 Con
Slide 43: Emerging market asset base leads to low cost positions
Emerging market asset base leads to low cost positions across the Group’s main grades… 1 Percentage of Mondi's Capacity in overall cost curve at Feb 2010 Grade 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile Unbleached Sack Paper 27% 4% 60% 9% NSSC Fluting 100% - - - Unbleached Kraftliner 34% 66
Slide 44: Production volumes
Production volumes % H2 H1 H2 2008 2009 Change 2008 2009 2009 Europe & International Containerboard Tonnes 1,926,828 1,768,696 (8%) 961,509 836,456 932,240 Kraft paper Tonnes 814,187 841,378 3% 352,433 383,373 458,005 Corrugated board and boxes m m² 2,104 1,697 (19%) 961 924 773 Bag converting m uni
Slide 45: Abridged income statement
Abridged income statement 1 % H2 H1 H2 € Millions 2008 2009 Change 2008 2009 2009 Group Revenue 6,345 5,257 (17%) 3,082 2,614 2,643 Materials, energy and consumables used (3,384) (2,768) 18% (1,655) (1,387) (1,381) Variable selling expenses (542) (472) 13% (261) (225) (247) Gross margin 2,419 2,017
Slide 46: Exchange rates
Exchange rates % H2 H1 H2 2008 2009 Change 2008 2009 2009 Closing rates against the euro South African rand 13.07 10.67 (18%) 13.07 10.89 10.67 Pounds sterling 0.95 0.89 (7%) 0.95 0.85 0.89 Polish zloty 4.15 4.10 (1%) 4.15 4.45 4.10 Russian rouble 41.28 43.15 5% 41.28 43.88 43.15 US dollar 1.39 1.44
Slide 47: Integrated value chain
Integrated value chain Containerboard Kraft paper 2009 production = 2.4 million tonnes, of which: 2009 production = 0.8 million tonnes Virgin containerboard = 1.1 million tonnes Potential self-sufficiency = 164% Recycled containerboard = 1.3 million tonnes Potential self-sufficiency = 205% 39% 40% M
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