Mondi Plc · LSE:MNDI
Mondi — H1 2017 Earnings Presentation
50 slides from Mondi's earnings presentation, Aug 3, 2017
Slide 1: Half-yearly results for the six months ended 30 June 2017
Mondi Group Half-yearly results for the six months ended 30 June 2017 3 August 2017
Slide 2: Agenda
Agenda Highlights Financial overview Operational review Key strategic developments Outlook Appendices 2
Slide 3: Highlights
Highlights Underlying operating profit ● Continued robust financial performance € million 30.0% ○ Revenue up 8% 21.2% ○ Return on capital employed a strong 18.7% 25.0% 20.3% 18.7% 20.0% 15.0% 10.0% ○ Underlying operating profit of €497 million 529 452 497 5.0% ○ Underlying EBITDA of €710 million ● L
Slide 4: Financial overview
Highlights Financial overview Operational review Key strategic developments Outlook Appendices 4
Slide 5: Operating financial highlights
Operating financial highlights % % H1 H2 H1 change vs change vs € million 2016 2016 2017 H1 2016 H2 2016 Group Revenue 3,312 3,350 3,582 8% 7% Underlying EBITDA 714 652 710 (1%) 9% % Margin 21.6% 19.5% 19.8% Underlying operating profit 529 452 497 (6%) 10% % Margin 16.0% 13.5% 13.9% Group ROCE 21.2%
Slide 6: Underlying operating profit development
Underlying operating profit development € million 56 (23) (29) 15 (11) 529 (7) 7 (28) (12) 497 H1 2016 Sales Sales Variable Cash fixed Depreciation Currency Acquisitions Fair value Other H1 2017 volumes prices costs costs & effects gain on forestry amortisation assets Higher average prices, volume g
Slide 7: Divisional operating profit contribution
Divisional operating profit contribution H1 2017 underlying operating profit contribution by segment¹ € million 15 1 (1) 2 (43) (15) Fair value gain on (28) Packaging Paper forestry assets (6) 11% Fibre Packaging 40% 497 26% Consumer Packaging 529 Uncoated Fine Paper 12% 11% South Africa H1 2016 Pac
Slide 8: Financial review
Financial review % % H1 H2 H1 change vs change vs € million 2016 2016 2017 H1 2016 H2 2016 Underlying operating profit 529 452 497 (6%) 10% Net finance costs (47) (54) (40) 15% 26% Net profit from equity accounted investees - 1 - Underlying profit before tax 482 399 457 (5%) 15% Tax before special i
Slide 9: Finance costs and net debt
Finance costs and net debt ● Lower finance costs than in prior year period € million H1 2016 H2 2016 H1 2017 Net debt 1,491 1,383 1,468 ○ Lower average net debt Average net debt 1,462 1,493 1,377 ○ Lower effective interest rate Net interest expense (before capitalised interest) 43 49 36 ○ Redeemed 5
Slide 10: Cash flow effects – movement in net debt
Cash flow effects – movement in net debt € million 11 18 1,468 125 1,383 (733) 201 43 279 141 Investing in the business Net debt at Cash generated Movement in Capex and Acquisitions Dividends paid to Tax and Currency effects Other Net debt at 31 December from operations working forestry shareholders
Slide 11: Continued growth in shareholder returns
Continued growth in shareholder returns Dividends declared euro cents per share 70 60 CAGR: 19% 57 52 50 42 40 36 30 28 20 10 18.81 19.10 0 2012 2013 2014 2015 2016 2017 Interim dividend Final dividend Interim dividend of 19.10 euro cents per share declared 11
Slide 12: Operational review
Highlights Financial overview Operational review Key strategic developments Outlook Appendices 12
Slide 13: Packaging Paper
Packaging Paper Underlying operating profit, margin and ROCE ● Strong performance with underlying operating profit € million up 8% on H1 2016 23.5% 22.4% 22.6% ● Driven by: ○ Higher average selling prices 18.4% 18.6% ○ Marginally higher sales volumes (constrained by 16.7% project implementation) ○ S
Slide 14: Packaging Paper | industry fundamentals
Packaging Paper | industry fundamentals Selling prices Virgin containerboard (VCB) €/tonne ● Unbleached kraftliner: 800 ○ Strong demand during the period supported by limited 750 capacity additions and lower imports into Europe 700 ○ Average benchmark European selling prices up 4% on 650 H1 2016, 6%
Slide 15: Packaging Paper | industry fundamentals
Packaging Paper | industry fundamentals Selling prices Sack kraft paper Price indexed to June 2012 ● Good demand, particularly in our export markets, coupled 1.10 with constrained supply 1.05 ● Selling price increases achieved: 1.00 ○ 3-4% from beginning of 2017 in all markets 0.95 ○ During the seco
Slide 16: Fibre Packaging
Fibre Packaging Underlying operating profit, margin and ROCE Corrugated Packaging € million ● 9% like-for-like volume growth compared to H1 2016 13.5% 13.0% ○ Good growth in central Europe and Turkey 12.6% ○ E-commerce ○ Supported by capital investment programme ● Good progress made in implementing
Slide 17: Consumer Packaging
Consumer Packaging Underlying operating profit, margin and ROCE ● Underlying operating profit marginally down on H1 2016, € million impacted by one-off effects in 2016 11.6% ● Steady like-for-like performance 10.5% 9.7% ● Low growth in certain value-added product segments 8.4% 7.5% 7.2% ● Margin pre
Slide 18: Uncoated Fine Paper
Uncoated Fine Paper Underlying operating profit, margin and ROCE ● Excellent performance delivering ROCE of 36.7% € million ● Benefited from 36.0% 36.7% ○ Marginally higher sales volumes compared to 30.3% H1 2016 ○ Ongoing cost improvement initiatives ○ Stable Russian domestic pricing 21.3% 21.1% 19
Slide 19: Uncoated Fine Paper | industry fundamentals
Uncoated Fine Paper | industry fundamentals Pulp and A4 B-copy prices Demand €/tonne ● Demand decline in line with long term expectations of 900 around 1-2% per annum in Europe 850 800 Supply 750 ● Stable supply in Europe 700 ● Reduced imports compared to H1 2016 650 Prices 600 ● Average benchmark E
Slide 20: South Africa
South Africa Underlying operating profit, margin and ROCE ● Underlying operating profit down 44% on H1 2016 € million ○ Fair value gain on forestry assets down 37.4% €28 million on the unusually high gain recorded during H1 2016 33.8% 27.8% ○ Negative impact of a stronger rand ○ Higher input costs -
Slide 21: Key strategic developments
Highlights Financial overview Operational review Key strategic developments Outlook Appendices 21
Slide 22: Key strategic developments during H1 2017
Key strategic developments during H1 2017 SIMET (April 2016) and Lebedyan (October 2016) (Corrugated Packaging) Continue to integrate recent acquisitions Kalenobel and Uralplastic (July 2016) and Excelsior Technologies (February 2017) (Consumer Packaging) Start up of Świecie phase II: 100 ktpa
Slide 23: Growth options | Organic capital investments
Growth options | Organic capital investments Capital expenditure ● Strong contributions from recently completed capital € million projects in Packaging Paper, Fibre Packaging and 900 164% 180% South Africa 159% 800 160% ● Final phase of Świecie investment commissioned 700 140% 124% 122% 600 113% 120
Slide 24: Innovating with our customers
Innovating with our customers Power(8)Box SKOG – natural packaging for food ● Unique 8 corner transport box for automated ● Mondi’s FSC® kraft paper combined with extrusion erecting coating technology ● Duo material construction reinforces walls with ● First paper based biodegradable FFS solution ov
Slide 25: Reorganisation of business units
Reorganisation of business units ● From 1 October 2017, business units to be reorganised to reflect the nature of the underlying products produced ● Group’s segmental reporting to change according to reorganised business units as follows: ○ Uncoated Fine Paper and South Africa (excluding containerbo
Slide 26: Outlook
Highlights Financial overview Operational review Key strategic developments Outlook Appendices 26
Slide 27: Outlook
Outlook The market outlook remains broadly positive. We saw strong demand across Packaging Paper and Corrugated Packaging in the first half and successfully implemented price increases across certain paper grades, the full effect of which is anticipated in the second half. The second half of the yea
Slide 28: Q&A
Q&A 28
Slide 29: Appendices
Highlights Financial overview Operational review Key strategic developments Outlook Appendices 29
Slide 30: Mondi at a glance
Mondi at a glance Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa €1,113m €1,031m €839m €679m €337m 10% 8% H1 2017 30% 28% 23% 17% Revenue1 & 8% 21% 29% 26% ROCE 22.6% 13.0% 9.7% 36.7% 17.6% Products 1 Segment revenues, before elimination of inter-segment revenues
Slide 31: Leading market positions
Leading market positions #2 #3 #1 #3 #1 Virgin Corrugated Industrial bags Consumer goods Uncoated fine containerboard packaging producer producer in North packaging producer paper producer in producer in Europe in emerging Europe America and MENA in Europe Europe #1 #1 #2 #1 #1 Hardwood pulp, Contai
Slide 32: Strong global presence
Strong global presence Sales by location of customer Sales by location of production 11% Emerging Europe 8% Emerging Europe 21% Russia Russia 32% Emerging markets Emerging markets Asia & Australia South Africa 11% South Africa 35% 34% Other Other United Kingdom 10% United Kingdom markets Mature 13%
Slide 33: Consistent, clear strategic focus
Consistent, clear strategic focus Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa €1,893m €1,049m €1,312m €829m €735m Net segment 13% assets 32% 14% 10% (June 2017) 23% 30% 18% 23% 8% Capex €1,026m €482m €396m €408m €263m 2012 – H1 2017 Capex as a % of D&A 176% 13
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: Our low-cost operations
Our low-cost operations Emerging market asset base leads to low cost positions across the Group’s main grades Cost quartile1,4 12% 8% 12% Q4 24% 11% Q3 27% 65% 33% 40% Q2 Q1 100% 73% 35% 100% 35% 37% 100% White-top NSSC fluting Recycled Unbleached sack BHKP (pulp)³ Unbleached UFP² kraftliner fluting
Slide 36: Integrated value chain
Integrated value chain External sales Virgin 1.4 mt containerboard Mondi managed 1.6 mt Consumption forests 0.2 mt AAC: 8 million m3 Paper for recycling External sales 1.3 mt Recycled 0.1 mt Internally containerboard procured wood 26% (potentially 48%)1 0.6 mt Consumption 4.3 million m3 0.5 mt Pulp
Slide 37: Ongoing major capital investment projects
Ongoing major capital investment projects Ružomberok mill, Slovakia (€310 million) Štětí mill, Czech Republic (€470 million) ● 300,000 tonne per annum kraft top white machine ● Replacement of recovery boiler, rebuild of fibre lines and ● Debottlenecking pulp mill – increasing capacity by 100,000 deb
Slide 38: Creating sustainable value – our Strategy
Creating sustainable value – our Strategy 38
Slide 39: Integrated approach to sustainable development
Integrated approach to sustainable development Growing responsibly Looking ahead to 2020: 16 commitments across 10 action areas Employee and contractor safety Constrained resources and environmental impacts • Promote a safe and healthy workplace • Reduce specific contact water consumption (5%)², was
Slide 40: Input costs
Input costs Variable costs € million 2,000 1,500 1,000 500 0 H1 2016 H2 2016 H1 2017 Pulp Paper Wood Paper for recycling Energy Chemicals Plastics Other variable costs 40
Slide 41: Fixed costs
Fixed costs Fixed costs composition € million 1,200 24.3% 23.8% 24.0% 1,000 22.1% 22.0% 800 20.0% 600 18.0% 400 200 16.0% 0 14.0% H1 2016 H2 2016 H1 2017 Depreciation, amortisation and impairments Other net operating expenses Personnel costs Maintenance and other indirect expenses Fixed costs exclud
Slide 42: Special items
Special items Operating special items – €5 million Packaging Paper ○ Gain of €5 million recognised on the release of restructuring and closure provisions following finalisation of the sale of our speciality kraft paper mill in Finland Restructuring and closure costs and related impairment of assets
Slide 43: Taxation and Working capital
Taxation and Working capital Taxation % % change vs change vs Taxation € million H1 2016 H2 2016 H1 2017 H1 2016 H2 2016 ● Effective tax rate of 19% Tax charge 92 74 87 5% (18%) ○ Benefits of tax incentives related to our capital investments in Poland and Russia Cash tax paid 104 69 73 30% (6%) ○ Re
Slide 44: Cash flow (reconciling to movement in net debt)
Cash flow (reconciling to movement in net debt) % % change vs change vs € million H1 2016 H2 2016 H1 2017 H1 2016 H2 2016 Underlying EBITDA 714 652 710 (1%) 9% Working capital movements (61) 129 (141) Other operating cash flow items (33) - 23 Cash generated from operations 620 781 592 (5%) (24%) Tax
Slide 45: Statement of financial position
Statement of financial position € million H1 2016 H2 2016 H1 2017 Property, plant and equipment 3,598 3,788 3,822 Goodwill 592 681 696 Working capital 883 799 960 Other assets 457 532 515 Other liabilities (679) (721) (700) Net assets excluding net debt 4,851 5,079 5,293 Equity 3,078 3,392 3,520 Non
Slide 46: Production volumes
Production volumes % % change vs change vs H1 2016 H2 2016 H1 2017 H1 2016 H2 2016 Packaging Paper Containerboard '000 tonnes 1,001 999 987 (1%) (1%) Kraft paper '000 tonnes 601 603 606 1% - Softwood pulp '000 tonnes 950 920 952 - 3% Hardwood pulp '000 tonnes 181 183 183 1% - Fibre Packaging Corruga
Slide 47: Exchange rates
Exchange rates % % change vs change vs H1 2016 H2 2016 H1 2017 H1 2016 H2 2016 Closing rates against the euro South African rand 16.45 14.46 14.92 (9%) 3% Czech koruna 27.13 27.02 26.20 (3%) (3%) Polish zloty 4.44 4.41 4.23 (5%) (4%) Pounds sterling 0.83 0.86 0.88 6% 2% Russian rouble 71.52 64.30 67
Slide 48: Market positions sources and definitions
Market positions 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, M
Slide 49: Mondi: 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 50: mondi
mondi