Mondi Plc · LSE:MNDI
Mondi — H1 2018 Earnings Presentation
52 slides from Mondi's earnings presentation, Aug 3, 2018
Slide 1: Half-yearly results for the six months ended 30 June 2018
Half-yearly results for the six months ended 30 June 2018 3 August 2018
Slide 2: Forward-looking statements disclaimer
Mondi: Forward-looking statements disclaimer This document includes forward-looking statements. All statements other than statements of historical facts included herein, including, without limitation, those regarding Mondi’s financial position, business strategy, market growth and developments, expe
Slide 3: Agenda
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 3
Slide 4: Highlights
Highlights Underlying EBITDA and ROCE ● Strong financial performance € million 21.3% ○ Underlying EBITDA of €852 million, up 17%, margin of 22.9% 22.0% 18.5% 19.3% 20.0% ○ Profit before tax of €490 million, up 6% 18.0% 16.0% ○ Basic underlying earnings of 89.2 euro cents per share, up 26% 14.0% 730
Slide 5: Financial overview
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 5
Slide 6: Operating financial highlights
Operating financial highlights H1 H2 H1 % change % change € million 2017 2017 2018 vs H1 2017 vs H2 2017 Group revenue 3,582 3,514 3,727 4% 6% Underlying EBITDA 730 752 852 17% 13% % Margin 20.4% 21.4% 22.9% Underlying operating profit 503 526 630 25% 20% % Margin 14.0% 15.0% 16.9% Group ROCE 18.5%
Slide 7: Underlying EBITDA development
Underlying EBITDA development Underlying EBITDA development € million 338 (123) (28) (50) (7) (8) 852 730 0 H1 2017 Sales Sales Variable Cash fixed Currency Fair value Other H1 2018 volumes prices costs costs effects gain on forestry assets Higher average selling prices more than offsetting higher c
Slide 8: Business unit contribution
Business unit contribution Business unit underlying EBITDA development H1 2018 underlying EBITDA contribution by business unit¹ € million % 129 4 (6) (10) 5 (28) Packaging Paper 26% 852 Fibre Packaging + 50% Consumer Packaging 730 12% Uncoated Fine Paper 12% H1 2017 Packaging Fibre Consumer Uncoated
Slide 9: Financial review
Financial review H1 H2 H1 % change % change € million 2017 2017 2018 vs H1 2017 vs H2 2017 Underlying EBITDA 730 752 852 17% 13% Depreciation, amortisation and impairments (227) (226) (222) 2% 2% Underlying operating profit 503 526 630 25% 20% Net finance costs (47) (38) (40) 15% (5%) Net profit fro
Slide 10: Net debt and interest
Net debt and interest H1 H2 H1 ● Net debt was up due to: € million 2017 2017 2018 ○ payment of the 2017 special dividend Net debt 1,679 1,532 2,450 (€484 million) Average net debt 1,564 1,596 1,708 ○ completion of acquisitions (€415 million1) 2 Net interest expense (before capitalised interest) 43 3
Slide 11: Cash flow effects – movement in net debt
Cash flow effects – movement in net debt Movement in net debt € million 484 2,450 414 1,532 (870) 224 1,552 143 375 148 Net debt at Cash generated Movement Capital Tax and Ordinary Net debt before Acquisitions2 Special Net debt at 31 December from operations in working expenditure interest paid divi
Slide 12: Continued growth in shareholder returns
Continued growth in shareholder returns Dividends declared euro cents per share Total ordinary dividend CAGR: 15% 62 57 52 42 36 19.10 21.45 2013 2014 2015 2016 2017¹ 2018 Interim dividend of 21.45 euro cents per share declared Interim dividend Final dividend 1 Excludes 2017 special dividend of 100
Slide 13: Reorganisation of business units
Reorganisation of business units ● Effective from 1 August 2018, the Group reorganised its business units to achieve improved strategic alignment and operational coordination across the fibre based packaging value chain ● The changes to the Group’s business units, and consequently to the Group’s seg
Slide 14: Market and operational review
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 14
Slide 15: Packaging Paper
Packaging Paper Underlying EBITDA, margin and ROCE ● Strong performance – underlying EBITDA up 43% € million ● Driven by: 32.8% ○ higher selling prices 29.4% ○ higher sales volumes 31.3% 26.4% 25.6% ○ mix improvements 22.8% ○ cost reduction programmes ● Partly offset by: + ○ higher costs, with the e
Slide 16: Packaging Paper | industry fundamentals
Packaging Paper | industry fundamentals Selling prices Containerboard €/tonne 900 ● Markets remain robust: good demand and limited capacity additions continue to support pricing 800 ● Higher average selling prices following increases 700 implemented during 2017 and Q1 2018 600 + ● Further price incr
Slide 17: Packaging Paper | industry fundamentals
Packaging Paper | industry fundamentals Selling prices Sack kraft paper Prices indexed to June 2013 ● Implemented sack kraft paper price increases (8% to 9% on 2017 average) from January 2018 1.10 ● Markets remain very tight 1.05 ○ good demand, particularly in our export markets 1.00 ○ constrained s
Slide 18: Fibre Packaging
Fibre Packaging Corrugated Packaging Underlying EBITDA, margin and ROCE ● Implemented price increases to compensate: € million o higher paper input costs 13.0% o negative currency effects 11.2% 11.2% ● Continues to benefit from growing e-commerce activity ● Stable sales volumes on strong comparable
Slide 19: Consumer Packaging
Consumer Packaging Underlying EBITDA, margin and ROCE ● Steady underlying performance offset by negative currency € million and one-off effects ● Benefiting from: ○ good growth in selected value-added segments in 14.0% technical films and consumer goods packaging 13.0% 12.5% ○ programme launched in
Slide 20: Uncoated Fine Paper
Uncoated Fine Paper Underlying EBITDA, margin and ROCE ● Strong performance € million ○ Underlying EBITDA of €230 million ○ ROCE of 26.5% 27.1% 26.6% 26.5% ● Higher average selling prices offset by: 25.3% ○ higher costs 25.3% 24.4% ○ extended shut at Richards Bay ○ lower fair value gain on forestry
Slide 21: Uncoated Fine Paper | industry fundamentals
Uncoated Fine Paper | industry fundamentals Pulp and A4 B-copy prices Uncoated Fine Paper €/tonne ● Higher European prices following the implementation of 900 price increases during 2017 and at the end of March 2018 850 800 ● Mondi’s uncoated fine paper sales volumes higher in 750 H1 2018 on prior y
Slide 22: Key strategic developments
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 22
Slide 23: Key strategic developments
Key strategic developments Acquisitions totalling €415 million1 completed in H1 2018: Growing through o Powerflute (Finland): €363 million acquisitions o NPP (Egypt): €25 million o Forest plantations (South Africa): €27 million Štětí kraft paper mill modernisation project on track to start-up to
Slide 24: Finding solutions with our customers
Finding solutions with our customers BarrierPack recyclable shoppingworld by Mondi Point-of-sale: Baca Stand ● Fully recyclable new plastic laminate, ● Leading European speciality kraft paper ● Awarded with a World Star award recipient of the ‘Best Technology producer offering a broad range of paper
Slide 25: Outlook
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 25
Slide 26: Outlook
Outlook The trading environment remains positive going into the second half of the year, with pricing in key fibre based product segments remaining supportive. The second half of the year will be impacted by the usual seasonal downturn in Uncoated Fine Paper. We also expect continued pressure on the
Slide 27: Summary
Summary
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Slide 29: Appendices
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 29
Slide 30: Mondi at a glance
Mondi at a glance Fibre Packaging2 Consumer Packaging Uncoated Fine Paper €3,735m €1,646m €1,832m 2017 revenue1 25% & 52% underlying 23% EBITDA margin 22.3% 13.5% 25.3% Products 1 Segment revenues, before elimination of inter-segment revenues 2 Packaging Paper and Fibre Packaging were replaced by a
Slide 31: Leading market positions
Leading market positions Global Europe Emerging Europe South Africa Kraft paper Virgin Uncoated Containerboard Uncoated containerboard fine paper fine paper Industrial #1 bags Commercial release liner Consumer flexible Corrugated packaging packaging #3 Please see sources and definitions at the end o
Slide 32: Strong global presence
Strong global presence Revenue by location of customer Revenue by location of production % % 1% 13% 7% 23% 8% 35% 10% 13% 6% + 9% 39% 36% Group revenue: €3,727 million Group revenue: €3,727 million Emerging Europe Western Europe Russia South Africa North America Other 32
Slide 33: Technical guidance
Technical guidance 2018 guidance Capital expenditure range in 2018 and 2019 (per annum) €700 – 800 million Depreciation and amortisation €440 – 470 million Estimated impact of maintenance shuts ± €115 million Working capital as a % of turnover 12 – 14% Effective tax rate ±22% 33
Slide 34: Our cash flow priorities remain unchanged
Our cash flow priorities remain unchanged Maintain our strong and stable financial position and investment grade credit metrics Grow through selective capital investment opportunities Free cash flow priorities Support payment of dividends to our shareholders Evaluate growth opportunities through M&A
Slide 35: Creating sustainable value through our strategic framework
Creating sustainable value through our strategic framework 35
Slide 36: Our cost advantaged operations
Our cost advantaged operations Mondi capacity by quartile of relevant industry cost curve1, 2, 3 % 1st quartile: 2nd quartile: 53% 26% Around 80% in the 1st or 2nd cost quartile 1 Includes unbleached kraftliner, white top kraftliner, nordic and semi chemical fluting, testliner, recycled fluting, unb
Slide 37: Acquisitions completed during H1 2018
Acquisitions completed during H1 2018 Powerflute ● Acquired for a total consideration of €363 million on a debt and cash-free basis (completed June 2018) ● Integrated pulp and paper mill in Kuopio (Finland) with an annual production capacity of 285,000 tonnes of high-performance semi-chemical flutin
Slide 38: Continued investment in our world class asset base
Continued investment in our world class asset base Capital expenditure € million 159% 164% 175% 158% 800 138% 155% 700 124% 135% 350 – 450 600 115% ● Good contributions from recently completed 500 95% 700 – 800 capital projects 400 75% 300 55% ● Ongoing progress made on our major capital 200 expendi
Slide 39: Ongoing major capital investment projects
Ongoing major capital investment projects Ružomberok mill, Slovakia Štětí mill, Czech Republic ● 300,000 tonne per annum kraft top white machine ● Replacement of recovery boiler, rebuild of fibre lines and debottlenecking of paper machines ● Debottlenecking pulp mill – increasing capacity by 100,000
Slide 40: Strong track record of acquisitions
Strong track record of acquisitions ● Fibre Packaging Ṥwiecie minorities (Containerboard) ● Consumer Packaging Nordenia KSP (Consumer Packaging) (Consumer Packaging) 2 Duropack plants Ascania Excelsior Technologies (Corrugated) (Consumer Packaging) (Consumer Packaging) 2012 2015 2017 2014 2016 2018
Slide 41: Pulp and paper integrated value chain (pro-forma 2017)
Pulp and paper integrated value chain (pro-forma 2017)1 Net exposure 1.7 mt Mondi managed Virgin forests containerboard AAC: 8 million m3 Consumption3 0.3 mt 2.0 mt Paper for recycling 1.3 mt Net exposure balanced Recycled containerboard Consumption3 0.6 mt Internally procured 0.6 mt wood2 4 million
Slide 42: With an integrated approach to sustainable development
With an integrated approach to sustainable development Looking ahead to 2020: 16 commitments across 10 action areas Solutions that create value for our customers Employee and contractor safety ● Encourage sustainable, responsibly produced ● Avoid work-related fatalities products ● Prevent life-alter
Slide 43: Input costs
Input costs Variable costs € million 2,000 1,500 1,000 500 0 H1 2017 H2 2017 H1 2018 Pulp Paper Wood Paper for recycling Energy Chemicals Plastics Other variable costs 43
Slide 44: Fixed costs
Fixed costs Fixed costs composition (excluding special items) € million 1,200 24.0% 23.3% 22.9% 22.6% 1,000 22.0% 800 20.0% 600 18.0% 400 16.0% 200 0 14.0% H1 2017 H2 2017 H1 2018 Depreciation, amortisation and impairments Other net operating expenses Personnel costs Maintenance and other indirect e
Slide 45: Net special item charge in H1 2018 – €100 million pre-tax
Net special item charge in H1 2018 – €100 million pre-tax Packaging Paper (€55 million) ● Discontinuation of in-line silicone coating production at Štětí. Restructuring costs of €8 million and related impairment of assets of €47 million were recognised Consumer Packaging (€27 million) ● Restructurin
Slide 46: Taxation and working capital
Taxation and working capital Taxation Taxation % change % change ● Effective tax rate of 22%, above the H1 H2 H1 vs H1 vs H2 comparable prior year period and in line with € million 2017 2017 2018 2017 2017 our expectation Underlying tax charge 87 94 132 (52%) (40%) ● Increase partly due to the full
Slide 47: Cash flow (reconciling to movement in net debt)
Cash flow (reconciling to movement in net debt) H1 H2 H1 % change % change € million 2017 2017 2018 vs H1 2017 vs H2 2017 Underlying EBITDA 730 752 852 17% 13% Working capital movements (141) 19 (148) Other operating cash flow items 23 (20) 18 Cash generated from operations 612 751 722 18% (4%) Inco
Slide 48: Statement of financial position
Statement of financial position 30 June 31 December 30 June € million 2017 2017 2018 Property, plant and equipment 3,994 4,128 4,187 Goodwill 696 698 932 Working capital 960 899 1,065 Other assets 516 529 506 Other liabilities (693) (715) (724) Net assets excluding net debt 5,473 5,539 5,966 Equity
Slide 49: Production volumes
Production volumes H1 H2 H1 % change % change 2017 2017 2018 vs H1 2017 vs H2 2017 Packaging Paper Containerboard '000 tonnes 1,119 1,178 1,189 6% 1% Kraft paper '000 tonnes 606 600 605 – 1% Softwood pulp '000 tonnes 1,005 1,005 1,028 2% 2% Hardwood pulp '000 tonnes 250 297 292 17% (2%) Fibre Packag
Slide 50: Exchange rates
Exchange rates % change1 % change1 H1 H2 H1 vs H1 vs H2 2017 2017 2018 2017 2017 Closing rates against the euro South African rand 14.92 14.81 16.05 (8%) (8%) Czech koruna 26.20 25.54 26.02 1% (2%) Polish zloty 4.23 4.18 4.37 (3%) (5%) Pounds sterling 0.88 0.89 0.89 (1%) – Russian rouble 67.54 69.39
Slide 51: Market position sources and definitions
Market position sources and definitions Mondi region definitions Europe – Europe including Russia and Turkey Emerging Europe – Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Macedonia, Malta, Mol
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