Slide 1: Mondi Group Results for the six months ended 30 June 2014
Mondi Group Results for the six months ended 30 June 2014 7 August 2014
Slide 2: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Outlook Appendices 2
Slide 3: Highlights
Highlights Underlying operating profit Financial € million Underlying operating profit up 3% on prior 16.0% 17.0% year and 13% sequentially 15.3% ROCE of 16.0% 16.0% 14.8% 15.0% 14.0% Well in excess of through-the-cycle hurdle 13.0% 12.0% rate of 13% 366 333 377 11.0% Strong cash generation
Slide 4: Track record of strong returns
Track record of strong returns 5 year ROCE % history 16.0% 15.0% 15.3% 13.6% 13% hurdle rate 12.3% 2010 2011 2012 2013 H1 2014 Returns consistently above hurdle rate of 13% Achieved in conjunction with growth Continual investment in our high quality, low cost asset base with capital expenditur
Slide 5: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Outlook Appendices 5
Slide 6: Operating financial highlights
Operating financial highlights % change % change H1 H2 H1 vs vs € million 2013 2013 2014 H1 2013 H2 2013 Group Revenue 3,342 3,134 3,148 (6%) - Underlying EBITDA 554 514 553 - 8% % margin 16.6% 16.4% 17.6% Underlying operating profit 366 333 377 3% 13% % margin 11.0% 10.6% 12.0% Group ROCE 14.8% 15.
Slide 7: Underlying operating profit development
Underlying operating profit development € million 11 377 8 0 (3) 366 (4) 4 (5) H1 2013 Volume Price Variable costs Fixed costs Currency Acquisitions Fair value H1 2014 effects and disposals gains on forestry assets and other 7
Slide 8: Divisional underlying operating profit
Divisional underlying operating profit Half-year splits € million 180 162 160 148 150 140 120 102 100 85 80 70 58 60 48 53 49 45 44 39 40 35 34 20 0 Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division H1 2013 H2 2013 H1 2014 8
Slide 9: Financial review
Financial review % change % change H1 H2 H1 vs vs € million 2013 2013 2014 H1 2013 H2 2013 Underlying operating profit 366 333 377 3% 13% Net finance costs (57) (58) (50) 12% 14% Underlying profit before tax 310 276 328 6% 19% Tax (56) (42) (62) (11%) (48%) Non-controlling interests (15) (13) (15) -
Slide 10: Finance costs
Finance costs % change % change H1 H2 H1 vs vs € million 2013 2013 2014 H1 2013 H2 2013 Closing net debt 1,844 1,621 1,751 5% (8%) Average net debt 1,851 1,740 1,638 Finance costs 52 52 45 13% 13% Net interest on defined benefit arrangements 5 6 5 - 17% Net finance costs (excluding special item) 57
Slide 11: Cash flow effects - movement in net debt
Cash flow effects - movement in net debt € million 77 1 1,751 129 1,621 (545) 249 64 49 106 Net debt Cash Movement Income Financing Capex Dividends Acquisitions Other Net debt at 31 generated by in working tax paid costs paid investment paid to at 30 June December operations1 capital equity 2014 201
Slide 12: Working capital
Working capital Working capital management Working capital cash flows € million € million 14.0% 13.0% 12.7% 12.8% 13.0% 12% 12.0% 102 22 11.9% 11.0% 11.0% 10% 10.0% (105) (106) 9.0% (129) 716 764 871 711 807 8.0% H1 2012 H2 2012 H1 2013 H2 2013 H1 2014¹ H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 Workin
Slide 13: Capital expenditure
Capital expenditure Capital expenditure Capital expenditure by business segment € million € million 138% 143% 89% 164 241 249 H1 2013 H2 2013 H1 2014 H1 2013 H2 2013 H1 2014 Packaging Paper Fibre Packaging Capital expenditure as a % of depreciation & amortisation¹ Consumer Packaging Uncoated Fine Pa
Slide 14: Debt and liquidity
Debt and liquidity H1 H2 H1 € million 2013 2013 2014 Net debt 1,844 1,621 1,751 Committed facilities 2,598 2,487 2,488 Of which undrawn 743 792 745 Gearing (Net debt / Trading capital employed) 40% 36% 38% Net debt / 12 month trailing EBITDA (times) 1.8 1.5 1.6 Currency split of net debt €1,751 mill
Slide 15: Continued strong growth in shareholder returns
Continued strong growth in shareholder returns Dividends declared € cents per share 40 3.0 2.6 2.6 35 2.5 2.5 30 2.0 2.0 25 26.45 20 1.5 17.75 19.10 15 1.0 10 16.50 13.23 0.5 5 8.25 8.90 9.55 0 3.50 - 2010 2011 2012 2013 H1 2014 Interim dividend Final dividend Dividend cover Interim dividend of 13
Slide 16: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Outlook Appendices Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division 16
Slide 17: Packaging Paper
Packaging Paper Underlying operating profit, margin and ROCE Strong performance with ROCE of 22.6%, € million underlying operating profit up 9% 21.9% 22.6% Pricing mixed 20.1% Lower average pricing in virgin 16.5% 14.2% 15.7% containerboard and kraft paper Higher average recycled containerbo
Slide 18: Packaging Paper | industry fundamentals
Packaging Paper | industry fundamentals Selling prices Virgin containerboard Price indexed to 2009 Lower average pricing in kraftliner in 1.60 H1 2014 1.40 1.20 Price increases announced for unbleached 1.00 kraftliner and semi-chemical fluting on 0.80 good demand and low inventory levels 0.60 0.
Slide 19: Packaging Paper | industry fundamentals
Packaging Paper | industry fundamentals Selling prices Sack Kraft paper Price indexed to 2009 Average prices down 4% on the second 1.4 1.3 half of 2013, in line with expectations 1.2 Strong pick up in demand in Europe in H1, 1.1 supported by mild winter 1.0 0.9 Selling price increases being im
Slide 20: Fibre Packaging
Fibre Packaging Underlying operating profit, margin and ROCE Corrugated Packaging € million Price and margin increases achieved 12.0% 11.6% Benefited from volume growth in central 10.8% Europe Negative forex impact Industrial Bags 4.8% 4.7% 5.3% Strong volume growth driven by building sector
Slide 21: Consumer Packaging
Consumer Packaging Underlying operating profit, margin and ROCE Good growth in emerging markets with € million market share gains 9.1% Production capacity recently acquired in 8.5% 7.8% growing CEE region In mature markets business impacted by 6.7% volume declines 6.2% Phase out of lower val
Slide 22: Uncoated Fine Paper
Uncoated Fine Paper Underlying operating profit, margin and ROCE Lower sales volumes following Neusiedler € million restructuring in 2013 17.4% Lower average selling prices in H1 2014 in 16.2% 15.8% Europe Price increases in Russia with further 13.8% 12.6% increases announced for H2 in certain
Slide 23: Uncoated Fine Paper | industry fundamentals
Uncoated Fine Paper | industry fundamentals Pulp and A4 B-copy prices Demand Price indexed to 2009 H1 saw modest growth in Europe on 1.80 cyclical recovery with Russia stable Structural decline in mature markets still 1.60 expected 1.40 Supply 1.20 Net European capacity expansion in 2013/2014
Slide 24: South Africa Division
South Africa Division Underlying operating profit, margin and ROCE Strong performance, with ROCE of 20.5% € million Pricing 20.4% Higher average domestic selling prices 20.5% across all grades 16.4% 13.5% Lower average export pulp price 16.0% White-top containerboard export prices 12.8% st
Slide 25: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Outlook Appendices 25
Slide 26: Graphic Packaging Acquisition
Graphic Packaging Acquisition Transaction completed on 30 June 2014 Acquired 100% of bags and kraft paper business from Graphic Packaging International Inc. for US$105 million (€76 million) US$437 million revenue (unaudited pro forma) in 12 months ended 31 March 2014 Production base comprise
Slide 27: Capital expenditure allocation
Capital expenditure allocation €1.1 billion over 2014 and 2015 Capital spend by segment 7% Packaging Paper 26% 40% Fibre Packaging Consumer Packaging Uncoated Fine Paper 11% South Africa Division 16% Packaging Fibre Consumer Uncoated South Paper Packaging Packaging Fine Paper Africa Division Capex a
Slide 28: Strong cash flow generation through the cycle
Strong cash flow generation through the cycle 5 year cash generated by operations¹ € million 715 648 549 516 354 312 H2 2009 2010 2011 2012 2013 H1 2014 €3.1 billion cash generated from operations over last 5 years 1 Net cash generated before capital expenditure, shareholder distributions, acquisiti
Slide 29: Balance between re-investment for growth and shareholder distributions
…with a balance between re-investment for growth and shareholder distributions 5 year cumulative Cash Flow € billion 3.1 1.8 0.6 1.3 (0.1) 0.5 Cash generated Invested in Distributed to Spent on Received from Change in net debt from operations asset base shareholders1 acquisitions disposals and adjus
Slide 30: Delivering against free cash flow priorities
Delivering against free cash flow priorities Maintain investment grade credit metrics • Net debt/EBITDA is 1.6 times • Investment grade credit ratings reaffirmed Selective capital investment opportunities • €1.1 billion capex programme in 2014/2015 Free Cash • All strategic capital investment projec
Slide 31: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Outlook Appendices 31
Slide 32: Outlook
Outlook In the near term, anticipated price increases in some of the Group’s packaging paper grades should provide positive momentum. As in prior years, the second half of the year will be impacted by the planned annual mill maintenance shuts. Market fundamentals remain sound, which, coupled with a
Slide 33: Agenda
Agenda Highlights Financial overview Operational overview Capital allocation Outlook Appendices 33
Slide 34: Our strategic pillars
Our strategic pillars We develop and maintain leading positions in our core packaging and uncoated fine paper Achieve leading markets. This brings us cost benefits and allows us to better serve our customers. Our focus market positions on higher-growth emerging markets contributes to our sustained p
Slide 35: Graphic Packaging Acquisition
Graphic Packaging Acquisition Mondi Consumer Packaging Mondi Coatings Mondi Industrial Bags GPK Industrial Bags GPK Sack Kraft Paper Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division 35
Slide 36: Capital expenditure - Major project timeline
Capital expenditure - Major project timeline 2014 2015 Total Capex Project start-up €m H1 H2 H1 H2 Štĕti bleached kraft (155,000 tonnes) 70 Syktyvkar pulp dryer (100,000 tonnes) 30 Ružomberok recovery boiler 128 Świecie recovery boiler, turbine and biomass boiler 166 Expected capital expenditure of
Slide 37: Input costs
Input costs Variable costs € million 2,000 1,500 1,000 500 0 H1 2013 H2 2013 H1 2014 Pulp Paper Wood Paper for recycling Energy Chemicals Plastics Other variable costs 37
Slide 38: Fixed costs
Fixed costs Fixed costs composition € million 1,000 24.0% 900 23.8% 23.5% 800 700 23.0% 600 22.5% 500 22.4% 21.9% 22.0% 400 300 21.5% 200 21.0% 100 0 20.5% H1 2013 H2 2013 H1 2014 Maintenance and other indirect expenses Personnel costs Other net operating expenses Depreciation and amortisation Fixed
Slide 39: Integrated value chain H1 2014
Integrated value chain H1 2014 Pulp Kraft Paper Millions Millions of tonnes of tonnes 0.4 0.1 1.6 1.8 0.5 0.3 0.3 0.2 (0.2) Production Consumption Net long/(short) Production Consumption Net long position position E&I MSAD E&I Virgin Containerboard Recycled Containerboard Millions Millions of tonnes
Slide 40: Non-controlling interests
Non-controlling interests Non-controlling interests % change % change H1 H2 H1 vs vs € million 2013 2013 2014 H1 2013 H2 2013 Profit attributable to non-controlling interests 15 13 15 - (15%) • Ružomberok 15 12 12 20% - • Other - 1 3 % of underlying earnings 5.9% 5.6% 5.6% 40
Slide 41: Taxation
Taxation Taxation % change % change H1 H2 H1 vs vs € million 2013 2013 2014 H1 2013 H2 2013 Underlying tax charge 56 42 62 (11%) (48%) Effective tax rate 18% 15% 19% Higher tax rate reflecting Shift in underlying profit mix Reduction in the benefits from investment related incentives 41
Slide 42: Special items
Special items Operating special items – €3 million charge Fibre packaging (€7 million charge) Restructuring activities in Coatings business (Belgium) Consumer Packaging (€4 million gain) Release of unutilised provision for transaction costs (Nordenia acquisition) Financing special item – €13
Slide 43: Cash flow
Cash flow % change % change H1 H2 H1 vs vs € million 2013 2013 2014 H1 2013 H2 2013 Underlying EBITDA 554 514 553 - 8% Working capital movements (129) 102 (106) Other operating cash flow items 6 (11) (8) Cash generated from operations 431 605 439 2% (27%) Dividends from financial investments and ass
Slide 44: Statement of financial position
Statement of financial position € million H1 2013 H2 2013 H1 2014 Intangible assets 684 675 670 Property, plant and equipment 3,446 3,428 3,505 Forestry assets 257 233 233 Other non-current assets 41 38 37 Total non-current assets 4,428 4,374 4,445 Inventories 767 746 834 Trade and other receivables
Slide 45: Production volumes
Production volumes % change % change H1 H2 H1 vs vs 2013 2013 2014 H1 2013 H2 2013 Europe & International Containerboard Tonnes 1,077,702 1,061,012 1,075,226 - 1% Kraft paper Tonnes 515,822 495,063 531,040 3% 7% Total softwood pulp Tonnes 1,014,483 993,476 1,025,692 1% 3% Corrugated board and boxes
Slide 46: Exchange rates
Exchange rates % change % change H1 H2 H1 vs vs € million 2013 2013 2014 H1 2013 H2 2013 Closing rates against the euro South African rand 13.07 14.57 14.46 (11%) 1% Czech koruna 25.95 27.43 27.45 (6%) - Polish zloty 4.34 4.15 4.16 4% - Pounds sterling 0.86 0.83 0.80 7% 4% Russian rouble 42.84 45.32
Slide 47: mondi
mondi