Slide 1: Mondi Group Full year results for the year ended 31 December 2017
Mondi Group Full year results for the year ended 31 December 2017 2 March 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
Agenda Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 3
Slide 4: Highlights
Highlights Underlying operating profit and ROCE ● Robust financial performance € million ○ Revenue up 7% and underlying EBITDA up 6% 20.5% 20.3% 19.7% 15.3% 17.2% 20.0% ○ Underlying operating profit up 4% 15.0% 10.0% ○ Underlying basic earnings per share up 8% 699 767 957 981 1,018 5.0% ● Over €750
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 % % € million 2017 2016 change H2 2017 H2 2016 change Group revenue 7,096 6,662 7% 3,514 3,350 5% Underlying EBITDA 1,444 1,366 6% 734 652 13% % Margin 20.3% 20.5% 20.9% 19.5% Underlying operating profit 1,018 981 4% 521 452 15% % Margin 14.3% 14.7% 14.8% 13.5% Group R
Slide 7: Underlying operating profit development
Underlying operating profit development Underlying operating profit development € million 270 (127) (43) (21) (32) (21) 1,018 981 11 2016 Sales Sales Variable Cash fixed Depreciation Currency Fair value 2017 volumes prices costs costs & effects gain on forestry amortisation assets Higher average pri
Slide 8: Business unit contribution
Business unit contribution Business unit underlying operating profit development 2017 underlying operating profit contribution by business unit¹ € million % 85 (12) 11 (44) (3) (28) Packaging Paper 31% Fibre Packaging 1,018 + 46% 981 Consumer Packaging 12% Uncoated Fine Paper 11% 2016 Packaging Fibr
Slide 9: Financial review
Financial review % % € million 2017 2016 change H2 2017 H2 2016 change Underlying operating profit 1,018 981 4% 521 452 15% Net finance costs (71) (101) 30% (31) (54) 43% Net profit from equity accounted investees 1 1 1 1 Underlying profit before tax 948 881 8% 491 399 23% Tax charge before special
Slide 10: Finance costs and net debt
Finance costs and net debt % ● Net debt down €57 million reflecting strong cash € million 2017 2016 change generating capacity despite ongoing capital expenditure Net debt 1,326 1,383 4% programme Average net debt 1,376 1,476 7% Net interest expense (before capitalised interest) 61 92 34% ● Lower fi
Slide 11: Cash flow effects – movement in net debt
Cash flow effects – movement in net debt Movement in net debt € million 1,383 (1,447) 53 1,326 273 234 48 49 611 122 Net debt at Cash generated Movement in Capital Investment in Acquisitions Tax and interest Dividends Other Net debt at 31 December from operations working capital expenditure forestry
Slide 12: Continued growth in shareholder returns
Continued growth in shareholder returns Dividends declared and recommended ● Ordinary dividend policy unchanged. Aim to offer euro cents per share shareholders long-term dividend growth within a target 110 cover range of two to three times underlying earnings 100 over the business cycle: 100 90 ○ Th
Slide 13: Technical guidance
Technical guidance 2018 guidance (unless specified) IFRS 16 – leases (early adopted from 2018) 1 Total assets increase 2 – 3% 1 Net debt increase 12 – 19% 1 Underlying EBITDA increase 2 – 3% 1 Underlying operating profit increase Marginal 1 ROCE decrease 0.4 – 0.5 points Capital expenditure range in
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 operating profit, margin and ROCE ● Strong performance with underlying operating profit € million up 21% 25.9% 26.3% 22.3% 24.3% 23.1% ● Driven by: 21.0% ○ higher average selling prices 17.9% 19.1% 18.9% 16.0% ○ sales volume growth in higher value added products 341 375 42
Slide 16: Packaging Paper | industry fundamentals: virgin containerboard
Packaging Paper | industry fundamentals Selling prices Virgin containerboard €/tonne ● Strong demand - industry deliveries to Europe grew by 800 around 2%, restricted by supply 750 ● Limited industry capacity additions 700 650 ● Lower kraftliner imports to Europe due to global pick up in 600 demand
Slide 17: Packaging Paper | industry fundamentals: recycled containerboard
Packaging Paper | industry fundamentals Selling prices Recycled containerboard €/tonne ● Strong demand - industry deliveries to Europe grew by 800 around 6% 750 ● Average benchmark European prices up 10% 700 year-on-year 650 600 ● Estimated European net industry capacity expansion in 550 2018 of aro
Slide 18: Packaging Paper | industry fundamentals: sack kraft paper
Packaging Paper | industry fundamentals Selling prices Sack kraft paper Prices indexed to December 2012 ● Selling price up around 5% to 6% on average in 2017 vs 2016 1.10 ● Good demand, particularly in our export markets 1.05 ● Implemented sack kraft paper price increases in all 1.00 markets from th
Slide 19: Fibre Packaging
Fibre Packaging Corrugated Packaging Underlying operating profit, margin and ROCE ● Strong organic volume growth of 6% driven by: € million ○ good growth across central and eastern Europe 13.4% 13.9% 13.5% ○ continued growth in e-commerce 11.8% 11.3% ○ contribution from recently completed capital in
Slide 20: Consumer Packaging
Consumer Packaging Underlying operating profit, margin and ROCE ● Underlying operating profit increased 9% on 2016 € million ● Benefiting from: 10.4% 10.7% 10.5% 10.4% ○ improved product mix 8.7% - focus on value-added segments - exiting lower margin business 8.0% 7.0% 7.4% 7.7% ○ one-off gains 5.6%
Slide 21: Uncoated Fine Paper
Uncoated Fine Paper Underlying operating profit, margin and ROCE ● Strong performance € million 32.3% ○ Underlying operating profit of €331 million 27.0% 27.8% ○ ROCE of 27.8% 17.0% ● Higher average selling prices achieved across all 15.0% 21.8% 19.3% 18.1% regions on stable volumes and focus on dri
Slide 22: Uncoated Fine Paper | industry fundamentals
Uncoated Fine Paper | industry fundamentals Pulp and A4 B-copy prices Demand €/tonne ● Flat year-on-year European demand, above expected long-term trend of 1-2% per annum decline 900 ● Demand in Russia and South Africa in line with our long-term estimate of 0-1% growth per annum 850 Supply 800 ● Tem
Slide 23: Key strategic developments
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 23
Slide 24: Well positioned to leverage global industry growth trends
Well positioned to leverage global industry growth trends Emerging markets growth Nominal €, 2016-2017E Key global industry trends +11.6% Sustainability +7.9% +2.4% Light-weighting Rigid to flexibles Recyclable Western Eastern Mondi Europe Europe revenue GDP1 GDP1 2017 vs 20162 E-commerce Convenienc
Slide 25: Creating sustainable value through our strategic framework
Creating sustainable value through our strategic framework 25
Slide 26: Partner with customers for innovation
Partner with customers for innovation Simple Sphere Courier Express Packaging – CornerPack + e-commerce paper bag + Replaces wooden crates used to transport Efficient and sustainable, light-weight Responding to consumers’ demand for car bonnets from Sweden to China packaging solution convenience in
Slide 27: Continued investment in our world class asset base
Continued investment in our world class asset base Capital expenditure € million ● Strong contribution from major capital projects 900 159% 164% 180% ○ €175 million of incremental operating profit over 800 147% 160% the last four years, including €25 million in 2017 700 140% ○ €15 million expected i
Slide 28: Outlook
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 28
Slide 29: Outlook
Outlook Supported by ongoing good demand, we have seen strong upward momentum in pricing across our key product segments in Packaging Paper and Fibre Packaging over the course of 2017 and into early 2018. We expect continued, but manageable pressure on the cost base across the Group, a consequence o
Slide 30: Q&A
émondi O&A
Slide 31: Appendices
Highlights Financial overview Market and operational review Key strategic developments Outlook Appendices 31
Slide 32: Mondi at a glance
Mondi at a glance Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper €2,292m €2,055m €1,646m €1,832m 24% 29% 2017 Revenue1 & 21% 26% ROCE 26.3% 11.3% 10.4% 27.8% Products 1 Segment revenues, before elimination of inter-segment revenues 32
Slide 33: Leading market positions
Leading market positions #1 #2 #3 Kraft paper Industrial Uncoated fine Virgin Consumer flexible Global bags paper containerboard packaging Global Europe Europe Europe Containerboard Commercial Uncoated fine Extrusion Corrugated Emerging Europe release liner paper coatings packaging Europe South Afri
Slide 34: Strong global presence
Strong global presence Revenue by location of customer Revenue by location of production % % 13% Emerging Europe 8% 1% Emerging Europe 22% 9% Western Europe 33% Western Europe 11% Russia Russia 13% 6% South Africa South Africa 10% 38% North America North America 36% Other Other + Product mix Net ope
Slide 35: Our cost advantaged operations
Our cost advantaged operations Cost quartile1,4 % 12% 8% 12% Q4 Q3 32% 11% Q2 27% 57% 25% 40% 100% Q1 100% 73% 43% 100% 35% 37% Unbleached Unbleached sack White top Recycled Semi-chemical UFP² BHKP (pulp)³ kraftliner fluting kraftliner kraft paper fluting 1 Delivered to Frankfurt except where noted
Slide 36: Strong market fundamentals in Packaging Paper
Strong market fundamentals in Packaging Paper European demand growth (%) & capacities 2018-20E, Demand growth (%) & capacities 2018-20E, Containerboard Sack & speciality kraft paper 2-3% ~3% 3%+ ~2% 0.5-1% Total Virgin Recycled Global sack European kraft paper speciality kraft paper Market demand Ma
Slide 37: 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 38: Reinvested for growth and distributed to shareholders
Reinvested for growth and distributed to shareholders Five-year cumulative cash flow (2013–2017) € billion Maintain our strong and Grow through selective Support payment of Evaluate growth stable financial position and capital dividends to our opportunities through M&A investment grade credit invest
Slide 39: Ongoing major capital investment projects
Ongoing major capital investment projects Ružomberok mill, Slovakia (€310 million) Štětí mill, Czech Republic (€335 million) ● 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 –
Slide 40: Acquisition in progress: Powerflute
Acquisition in progress Powerflute ● Signed agreement to acquire 100% interest for a total consideration of €365 million on a debt and cash-free basis in December 2017 ● Integrated pulp and paper mill in Kuopio (Finland) with an annual production capacity of 285,000 tonnes of high-performance semi-c
Slide 41: Pulp and paper integrated value chain (2017)
Pulp and paper integrated value chain (2017) Net exposure Virgin 1.4 mt containerboard Mondi managed 1.7 mt Consumption2 forests 0.3 mt AAC: 8 million m3 Paper for recycling Net exposure 1.3 mt Recycled balanced Internally containerboard procured wood1 0.6 mt Consumption2 4 million m3 0.6 mt Pulp mi
Slide 42: 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 • Avoid work-related fatalities • By 2020, reduce against 2015: • Prevent life-altering injur
Slide 43: Sustainable development highlights 2017
Sustainable development highlights 2017 43 43
Slide 44: Input costs
Input costs Variable costs € million 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2013 2014 2015 2016 2017 Pulp Paper Wood Paper for recycling Energy Chemicals Plastics Other variable costs 44
Slide 45: Fixed costs
Fixed costs Fixed costs composition (excluding special items) € million 2,500 23.5% 24.0% 23.1% 23.0% 23.2% 22.8% 2,000 22.0% 1,500 20.0% 1,000 18.0% 500 16.0% 0 14.0% 2013 2014 2015 2016 2017 Depreciation, amortisation and impairments Other net operating expenses Personnel costs Maintenance and oth
Slide 46: Special items – €61 million net charge
Special items – €61 million net charge Packaging Paper (€3 million net gain) ○ Partial impairment of kraft paper assets in the US of €16 million and partial reversal of the impairment of a kraft paper mill in Bulgaria of €14 million ○ Release of restructuring and closure provisions of €5 million on
Slide 47: Taxation and working capital
Taxation and working capital Taxation % Taxation € million 2017 2016 change ● Effective tax rate of 19% Underlying tax charge 181 166 (9%) ○ Benefits of tax incentives related to our capital investments in Poland and Russia Cash tax paid 151 173 13% ○ Recognition of deferred tax assets related to pr
Slide 48: Cash flow (reconciling to movement in net debt)
Cash flow (reconciling to movement in net debt) % € million 2017 2016 change Underlying EBITDA 1,444 1,366 6% Working capital movements (122) 68 Other operating cash flow items 3 (33) Cash generated from operations 1,325 1,401 (5%) Income tax paid (151) (173) 13% Dividends received from other invest
Slide 49: Statement of financial position
Statement of financial position € million 2017 2016 Property, plant and equipment 3,962 3,788 Goodwill 698 681 Working capital 899 799 Other assets 529 532 Other liabilities (723) (721) Net assets excluding net debt 5,365 5,079 Equity 3,714 3,392 Non-controlling interests in equity 325 304 Net debt
Slide 50: Production volumes
Production volumes % 2017 2016 change Packaging Paper Containerboard '000 tonnes 2,297 2,253 2% Kraft paper '000 tonnes 1,206 1,204 - Softwood pulp '000 tonnes 2,010 1,976 2% Hardwood pulp '000 tonnes 547 500 9% Fibre Packaging Corrugated board and boxes million m2 1,650 1,448 14% Industrial bags mi
Slide 51: Exchange rates
Exchange rates % 2017 2016 change Closing rates against the euro South African rand 14.81 14.46 (2%) Czech koruna 25.54 27.02 5% Polish zloty 4.18 4.41 5% Pounds sterling 0.89 0.86 (3%) Russian rouble 69.39 64.30 (8%) Turkish lira 4.55 3.71 (23%) US dollar 1.20 1.05 (14%) Average rates for the year
Slide 52: 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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