Slide 1: Mondi Group Results for the Year Ended 31 December 2011
MONDI GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011 23 February 2012
Slide 2: Agenda
Agenda Hi hli ht Highlights Financial overview Operational review Capital allocation Summary Appendices Page 2
Slide 3: Highlights
Highlights Underlying operating profit EBIT margin % €622m 1 Record financial performance Underlying operating profit up 36% €502m €458m 1 H2 €441m Earnings per share – alternative measure up 57% 10.8% €294m p Return on capital p y of 15% employed 8.0% 8.2% 7.0% 5.6% H1 Excellent cash generation Net
Slide 4: Agenda
Agenda Hi hli ht Highlights Financial overview Operational review Capital allocation Summary Appendices Page 4
Slide 5: Basis of preparation
Basis of preparation Income statement 2010 comparative figures restated to reflect continuing operations Mpact (including gain on disposal) reflected as a discontinued operation Statement of financial position Mpact p is included in the 2010 figures g Statement of cash flows Incl des Mpact cash flo
Slide 6: Operating financial highlights
Operating financial highlights % H2 H1 H2 € millions 2010 2011 Ch Change 2010 2011 2011 Group revenue 5,610 5,739 2% 2,858 2,942 2,797 1 EBITDA 798 964 21% 427 526 438 % Margin 14.2% 16.8% 14.9% 17.9% 15.7% 2 Underlying operating profit 458 622 36% 254 354 268 % Margin 8.2% 10.8% 8.9% 12.0% 9.6% Bas
Slide 7: Divisional underlying operating profit
Divisional underlying operating profit1 Underlying operating profit 140 128 118 120 105 100 H1 2010 98 100 H2 2010 87 81 H1 2011 78 80 71 73 H2 2011 € millions 60 55 48 46 40 35 27 18 20 1 (5) (5) (13) 0 Uncoated Fine Paper Corrugated Bags & Coatings South Africa division Newsprint (20) All major Eu
Slide 8: Input costs
Input costs Variable costs Recovered paper2 180 4 500 160 4 000 140 3 500 120 € / tonne 100 3 000 80 € million n 2 500 60 2 000 40 20 1 500 0 1 000 2007 2008 2009 2010 2011 500 Chemical prices3 2008 2009 2010 2011 700 Wood Recovered paper 1 600 Energy Other variable costs Variable selling expenses P
Slide 9: Fixed costs
Fixed costs Fixed costs as % of revenue Fixed costs composition € million 2 500 25% 2 000 20% 15% 1 500 25.3% 26.1% 23.4% 22 1% 22.1% 10% 1 000 5% 500 0% 0 2008 2009 2010 2011 2008 2009 2010 2011 Personnel costs Maintenance and Fixed costs excl. depreciation other th iindirect di t costs t Other net
Slide 10: Financial review
Financial review % H2 H1 H2 € millions 2010 2011 Change 2010 2011 2011 Underlying operating profit 1 458 622 36% 254 354 268 Net finance costs ((106)) ((111)) ((5%)) ((64)) ((60)) ((51)) Associate net earnings 2 1 (50%) - 2 (1) Underlying profit before tax 354 512 45% 190 296 216 Tax before special
Slide 11: Finance charges
Finance charges % H2 H1 H2 € millions 2010 2011 Change 2010 2011 2011 Net debt (1,364) (831) 39% (1,364) (1,200) (831) Total investment income ( ) (31) ( ) (30) ((3%)) ((17)) ((15)) ((15)) Total interest expense 152 141 7% 78 74 67 Interest expense, net of investment income 121 111 8% 61 59 52 Less:
Slide 12: Taxation and non-controlling interests
Taxation and non-controlling interests Taxation Non-controlling Non controlling interests % % € millions 2010 2011 € millions 2010 2011 Change Change Underlying tax charge 88 102 (16%) Non-controlling share before 62 70 (13%) special items Tax on special items (6) (2) 67% Non-controlling share of (1
Slide 13: Special items
Special items Operating items (€54 million loss): Non-operating Non operating items (€1 million loss): Uncoated fine paper (€2 million gain) Corrugated (€3 million gain) release of restructuring provisions no longer finalisation of sale of Frohnleiten and UK required corrugated plants Bags & Coating
Slide 14: Cash flow
Cash flow % H2 H1 H2 € millions 2010 2011 Change 2010 2011 2011 EBITDA (including Mpact) 1 882 996 13% 477 562 434 Working capital movements (121) (68) 44% 20 (143) 75 Other operating cash flow items 17 (11) (>100) 12 (16) 5 Cash generated from operations 778 917 18% 509 403 514 Dividends from finan
Slide 15: Working capital
Working capital Working g capital p management g 1 Working g capital p cash flows2 1,200.0 €248m 17.2% 1,000.0 14.6% 800.0 11.9% 12% 10.0% 10.0% €97m 600.0 10% 9.9% €27m 400.0 2006 2007 2008 2009 2010 2011 200.0 - (€68m) 2006 2007 2008 2009 2010 2011 (€82m) Working g Capital p (€121m) Working Capita
Slide 16: Capital expenditure
Capital expenditure Capital expenditure Cash spend, excluding major projects and Mpact was 63% of 400 200% depreciation (2010: 63%) 350 300 150% 189 13 250 135 € milliions 200 179 100% 121 68 150 92 14 27 256 18 100 182 194 50% 141 50 114 116 106 93 108 123 0 0% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2007 20
Slide 17: Debt facilities & net debt
Debt facilities & net debt % H2 H1 H2 € millions 2010 2011 Change 2010 2011 2011 Net debt (1 364) (831) 39% (1 364) (1 200) (831) Committed facilities 2 889 1 839 (36%) 2 889 1 897 1 839 Of which undrawn 1 481 889 (40%) 1 481 781 889 Gearing (Net debt / Trading capital employed) 30% 22% 30% 27% 22%
Slide 18: Dividends
Dividends Final dividend of 17.75 euro cents per Dividends p per share share recommended (26 euro cents for 30 the year) 26 Dividend Di id d cover off 2 2.8 8 titimes 25 23 20 Record date 13 April 2012 20 hare Eurr cents per sh 17.75 Payment date 10 May 2012 15 15.7 12.7 16 5 16.5 9.5 10 5.0 7.7 8.2
Slide 19: Agenda
Agenda Hi hli ht Highlights Financial overview Operational review Capital allocation Summary Appendices Page 19
Slide 20: Uncoated Fine Paper
Uncoated Fine Paper Underlying operating profit Continued strong performance EBIT margin % P iti ttrading Positive di environment i t €205m Annual production records achieved €179m H2 14.3% % Low cost base €146m €126m 11.8% Benefiting from first full year contribution 10.8% from Syktyvkar mill moder
Slide 21: Uncoated Fine Paper – Performance vs Industry
Uncoated Fine Paper – Performance vs Industry Mondi and Industry sales volume growth in Mondi’s ROCE (%) (%), Uncoated fine paper 2011 vs 2007 and 2010 (%) price (EUR/tonne) 1 2 €/tonne 0 ROCE H % 11 vs 07 11 vs 10 2 1 900 25% 2% 880 1% 860 20% 16.9% 16.7% 840 14.5% 820 15% -2% 11.4% 800 780 10% 8 2
Slide 22: Corrugated
Corrugated Underlying operating profit Continued improvement in performance EBIT margin % €178m Improved trading conditions, although 12.8% 9.6% slow down in demand in H2 2011 €133m H2 Converting plants delivered pleasing 8.2% €119m margin improvement and improved 3.2% contribution €49m 2.2% H1 Rebu
Slide 23: Corrugated – Performance vs Industry
Corrugated – Performance vs Industry VCB Mondi and Industry y sales volume Mondi’s ROCE (%), kraftliner price and RB growth in 2011 vs 2007 and 2010 (%) fluting – OCC price differential (EUR/tonne) 11 vs 07 11 vs 10 5% €/tonne H 2% ROCE 700 18.5% 20% 18% 600 15.1% 14.9% 16% 2% 14% 500 12% 0% 400 10%
Slide 24: Bags & Coatings
Bags & Coatings Underlying operating profit Kraft Paper EBIT margin % €228m 20% increase in average g selling gpprices H2 Strong sales volumes in 1st half €154m €159m €133m Significant downtime in 2nd half – ±10% of annual 9.2% capacity 7.6% 7.4% €82m 6.0% 4.5% H1 Some price weakness going into 2012
Slide 25: Bags & Coatings (continued)
Bags & Coatings (continued) Sales revenue mix (%) Industrial Bags M i iimprovements Margin t Selling price increases More than offsetting g higher g p paper p input p costs Restructuring following Smurfit Kappa acquisitions delivering positive returns 39% 61% Coatings & Consumer Packaging Restructur
Slide 26: Bags & Coatings – Performance vs Industry
Bags & Coatings – Performance vs Industry Sack kraft paper Mondi and Industry y sales Mondi’s ROCE (%), sack kraft paper prices volume growth in 2011 vs 2007 and 2010 (%) (EUR/tonne) and indexed bags price (%) 900 0 900.0 11 vs 07 11 vs 10 20.0% 850.0 0.4% 0.0% 19.0% 800.0 -0.2% 15.0% 750.0 700 0 70
Slide 27: South Africa Division
South Africa Division Underlying operating profit €111m EBIT margin % Good performance in line with prior year despite weaker pulp prices and domestic €78m cost inflation €64m €62m 18.9% H2 Higher average selling prices for 13.2% €32m containerboard 11.1% 10.9% 6.7% H1 Improved efficiencies 2007 200
Slide 28: Agenda
Agenda Hi hli ht Highlights Financial overview Operational review Capital allocation Summary Appendices Page 28
Slide 29: Free cash flow priorities
Free cash flow priorities Maintain investment grade credit metrics Selective capital investment opportunities, mainly 1 around cost optimisation Support dividends M&A, if appropriate 2 Increased shareholder distributions Continued disciplined cash flow allocation Page 29
Slide 30: Capital investment opportunities
Capital investment opportunities Syktyvkar Bark Boiler & Pulp Dryer Approved Świecie Biomass Dryer ± €170 million investment Stambolijski Steam Turbine & Recovery Boiler Economiser Two to three years to completion Frantschach Recovery Boiler ROCE > 40% Richards Bay Steam Turbine Under Three to four
Slide 31: Selected mergers & acquisitions opportunities
Selected mergers & acquisitions opportunities Saturn Investment (± €90 million) Intention to exercise call option to acquire 100% of the power and heat generating plant Expected p to complete p by y mid 2012 Tender offer for Świecie minorities (± €280 million) Cash C h public bli ttender d offer ff
Slide 32: Agenda
Agenda Hi hli ht Highlights Financial overview Operational review Capital allocation Summary Appendices Page 32
Slide 33: Summary
Summary Very strong performance – delivering ROCE of 15% Strong operational performance Investment grade credit ratings Successful demerger of Mpact leading to a further refined portfolio Cash utilised to Strengthen balance sheet Invest in selected high return projects Grow dividend Outlook Macroeco
Slide 34: Agenda
Agenda Hi hli ht Highlights Financial overview Operational review Capital allocation Summary Appendices Page 34
Slide 35: Key pillars to our strategy
Key pillars to our strategy Leading market Build on leading positions in packaging and UFP, particularly in high- positions growth emerging markets High-quality, Maintain our low-cost, high-quality asset base by: low-cost Selectively investing in production capacity in lower-cost regions asset
Slide 36: Mondi at a glance
Mondi at a g glance UFP Corrugated Bags & Coatings South Africa Newsprint €1 4B €1.4B €1 4B €1.4B €2 5B €2.5B €0 6B €0.6B €0 2B €0.2B 3% 2011 9% Sales 1 24% 41% 23% 2011 EBIT % 14.3% 12.8% 9.2% 10.9% (11.1)% P d t Products Europe South Africa Europe/SA No. 1 in Office No. 2 Virgin No. 1 in Kra
Slide 37: 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 29% 44% 50% 50% 56% 71% Mature markets Mature markets Mature markets Emerging markets Emerging markets Emerging markets Virgin-based production Revenue by product 19% 14% Corrugated products
Slide 38: Emerging market asset base leads to low cost positions
Emerging market asset base leads to low cost positions across the group’s main grades… Leading market 1 Percentage of Mondi's capacity in overall cost curve at Q3 2011 positions st nd rd th Grade 1 Quartile 2 Quartile 3 Quartile 4 Quartile + High quality, low Unbleached Sack Paper 40% - 35% 26% cost
Slide 39: Integrated value chain 2011
Integrated value chain 2011 Leading market Pulp Virgin Containerboard positions + High quality, low cost asset base Low cost asset base Kraft Paper Recycled Containerboard Upstream production cost advantages g Exploiting benefits of upstream integration Source: Mondi – 2011, excluding Mpact Page
Slide 40: Abridged income statement
Abridged income statement 1 % H2 H1 H2 € millions 2010 2011 Change 2010 2011 2011 Group Revenue 5,610 5,739 2% 2,858 2,942 2,797 Materials, energy and consumables used (3,006) (2,998) 0% (1,526) (1,528) (1,470) Variable selling expenses (494) (511) (3%) (242) (257) (254) Gross margin 2,110 2,230 6%
Slide 41: Exchange rates
Exchange rates % H2 H1 H2 2010 2011 Change 2010 2011 2011 Closing rates against the euro South African rand 8.86 10.48 18% 8.86 9.86 10.48 Pounds sterling 0.86 0.84 (3%) 0.86 0.90 0.84 Polish zloty 3.97 4.46 12% 3.97 3.99 4.46 Russian rouble 40.82 41.77 2% 40.82 40.40 41.77 US dollar 1.34 1.29 (3%)
Slide 42: Production volumes
Production volumes % H2 H1 H2 € millions 2010 2011 Change 2010 2011 2011 Europe & International Uncoated fine paper Tonnes 1 524 225 1 400 991 (8%) 733 477 712 886 688 105 Containerboard Tonnes 1 939 935 2 009 984 4% 931 630 991 970 1 018 014 Kraft paper Tonnes 984 607 955 741 (3%) 518 451 535 238 4
Slide 43: Slide 43