Mondi Plc · LSE:MNDI
Mondi — Investor Presentation (November 2007)
51 slides from Mondi's investor presentation, Nov 28, 2007
Slide 1: Mondi Investor and Analyst Presentation
MONDI INVESTOR AND ANALYST PRESENTATION 28 November, 2007 Ružomberok, Slovakia
Slide 2: Agenda
Agenda z Overview Adrian Fowler z Strategic drivers Adrian Fowler z Market overview Michael Sablatnig z Productive capability Michael Sablatnig z Summary Michael Sablatnig z Wood dynamics Rinat Starkov z Step project Rinat Starkov PAGE 1
Slide 3: Overview
OVERVIEW
Slide 4: Uncoated Fine Paper History
UNCOATED FINE PAPER HISTORY 2007 2006 Disposal of Dunaújváros / 2002 Hungary 2000 Acquisition of 1999 Syktyvkar / 1995 Acquisition of Russia 1997 Hadera Paper / 1995 Acquisition of Israel Dunaújváros / Acquisition of Acquisition of Pre 1995 Hungary Szolnok / Ružomberok / Mondi Hungary Slovakia compa
Slide 5: Uncoated Fine Paper – Overview
UNCOATED FINE PAPER – OVERVIEW z Total paper production capacity 2.3 m tons 15 PMs at 7 sites in 6 countries z Total pulp production capacity 1.9 m tons 4 sites in 4 countries z Number of employees YE 2006 14,077 z Turnover 2006 € 1,889 M z EBITDA & Margin 2006 € 237 M / 13% z Turnover HY 2007 € 966
Slide 6: Products and Market Positions
PRODUCTS AND MARKET POSITIONS Products Positions Universal Segment Speciality Segment z No. 2 in Uncoated z ~ 82% of paper sales z ~ 18% of paper sales Woodfree (UCWF) in z Universal products z Speciality products Europe1 | Office Paper | Office Paper – Multifunctional office paper – Colour laser pa
Slide 7: Total Production Capacities (per mill)
TOTAL PRODUCTION CAPACITIES (per mill) Paper Pulp Israel Hungary (PM7) Austria (PM8) Russia 5.8% (PM11, PM14, 2.6% 5.4% PM15) Slovakia Austria 25.3% 22.5% (PM3, PM4 Russia PM5, PM6) 16.7% 36.4% 24.4% 22.4% South Africa 38.5% Slovakia (PM31, PM32, (PM16, PM17, PM33) South Africa PM18) Total productio
Slide 8: Experienced Management Team
EXPERIENCED MANAGEMENT TEAM CEO Peter Machacek CFO (from Jan 1, 2008) 55 years old CFO (until Dec 31,2007) Gerhard Kornfeld Adrian Fowler 38 years old z 28 years of paper and packaging experience 39 years old z 1 year of paper industry z CEO Mondi Packaging Paper z 2 years of paper industry experien
Slide 9: Financial Indicators
FINANCIAL INDICATORS Sales1 (EUR B) / ROCE2 (in %) Profitability (HY 2007) Sales ROCE 2007 2006 (EUR B) (%) 2,0 8 7 7 EBITDA3 €149M €114M +31% 6 1,5 6 6 5 5 EBITDA 15% 12% +29% Margin 1,0 1,89 4 1,77 1,75 3 Capital €1.9B €1.9B +1% 0,5 0,96 0,97 2 Employed 1 0,0 0 ROCE2 7,3% 5,7% +28% 2004 2005 2006
Slide 10: Strategic Drivers
STRATEGIC DRIVERS
Slide 11: Uncoated Fine Paper Strategic Drivers
UNCOATED FINE PAPER STRATEGIC DRIVERS Strong market z Leading market positions in European UCWF market position z High exposure to fastest growing product segments and geographies Strong asset z Integrated value chain base z Low-cost upstream paper production in Russia, Slovakia and South Africa Foc
Slide 12: Market Shares in Europe and Emerging Europe per Segment
MARKET SHARES IN EUROPE AND EMERGING EUROPE PER SEGMENT Strong market position Top 5 Uncoated Woodfree Top 5 Office Paper z Leading market Stora Enso 16% Mondi 17% position in European UCWF Mondi 13% Stora Enso 16% market M-Real 11% IP 14% IP 10% M-Real 13% Portucel 10% Portucel 11% Mondi Uncoated F
Slide 13: Benefiting from Integrated Value Chain
BENEFITING FROM INTEGRATED VALUE CHAIN Strong market position Forestry Pulp Paper Strong asset base Mondi’s Own 5.4 Mm3 2) 1.4 M tons Availability1 z Integrated value 2.1 M tons3 chain UCWF Mondi’s Own 6.0 Mm3 1.8 M tons Demand Potential Self 89% 77% Sufficiency 1 Regardless of whether sold external
Slide 14: Low-Cost Position
LOW-COST POSITION Strong market Universal Grades (Office Paper) Delivered Cash Cost position EUR/tons 1.400 Strong asset 1.200 1 base 1.000 z Integrated value chain 800 z Low-cost upstream 600 paper production (I) 400 91% of Mondi Universal Office 200 Paper Capacity 0 0 500 1.000 1.500 2.000 2.500 3
Slide 15: Superior Access to Low-Cost Wood
SUPERIOR ACCESS TO LOW-COST WOOD Strong market Average Hardwood and Softwood Costs position (EUR/m3, Q2 2007) 47 42 z ~ 68% of Mondi Strong asset 39 37 Uncoated Fine base 33 Paper wood 30 30 consumption from z Integrated value 25 25 26 Russia and South chain Africa z Low-cost upstream paper producti
Slide 16: Continuous Profitability Improvements (I)
CONTINUOUS PROFITABILITY IMPROVEMENTS (I) Leading Strong market market Example: Time Efficiency position 95% Strong asset ∆ 0.4% z Mondi exceeds base ∆ 0.6% benchmark – ∆ 0.4% despite rebuilds in 91.2% 91.5% 91.1% these years (2006 Focus on 90.6% efficiency excluding 90.3% performance 89.9% PM31 reb
Slide 17: Performance Improvements in Acquired Companies
PERFORMANCE IMPROVEMENTS IN ACQUIRED COMPANIES Strong market Ruzomberok (Slovakia) position 350 Volume 300 .¹ z Site acquired in 2000 p.a per capita % Strong asset 250 20 z Integrated operations % 200 base z PM18 is world class 150 100 leader in productivity3 2000 2001 2002 2003 2004 2005 2006 Focus
Slide 18: Innovation – A Way of Life
INNOVATION – A WAY OF LIFE 2007 2007 Until 2012 World's first Until 2009 Implemented 2007 nano-hybrid NILE EMILIE SurFunC ell Mona Lisa 2 OPTONAN NOA/DigiQ Mona Lisa 1 ADF paper neox Crystallinity 2000 HANS Color NanoTech OWL Fun Fibres EMR neox offset Fun Fillers Nano Dust Tester Nano Coated Filler
Slide 19: Market Overview
MARKET OVERVIEW
Slide 20: Strong Distribution Network Across All Sales Channels
STRONG DISTRIBUTION NETWORK ACROSS ALL SALES CHANNELS UNCOATED FINE PAPER ~78% ~8% ~14% Original Equipment Office Suppliers Merchants Manufacturers and Retailers Note: Mondi estimate based on sales data. Source: Mondi PAGE 19
Slide 21: European UCWF Market Around €9 bn – Office Paper Segment Experienced Good Growth
EUROPEAN UCWF MARKET AROUND € 9 bn – OFFICE PAPER SEGMENT EXPERIENCED GOOD GROWTH European UCWF Market 2000–20061 European Office Paper Market 2000–20061 CAGR2 CAGR2 €9B 3% € 4B 4% 100% 100% East Europe 18% 7%3 Other UCWF 55% 2% (e.g. Offset) West Europe 82% 2% Office Paper 45% 4% 2006 2006 1 Transl
Slide 22: Forecasted European Demand and Operating Rates
FORECASTED EUROPEAN DEMAND AND OPERATING RATES UCWF 2006 - 2011 demand growth (in %)1 West Europe 16 Demand (k tons) Operating Rate (%) 1,3% 100 9,8 10.000 80 7.405 7.495 7.645 7.555 7.705 7.880 60 5.000 40 20 6,6 0 0 2006 2007 2008 2009 2010 2011 East Europe 14 Demand (k tons) Operating Rate (%) 6,
Slide 23: Productive Capability
PRODUCTIVE CAPABILITY
Slide 24: Overview of Mondi UCWF Production
OVERVIEW OF MONDI UCWF PRODUCTION Uncoated Fine Paper Non / Partly Integrated Mills Integrated Mills Theresienthal/ Merebank/ Szolnok Hadera Ruzomberok Syktyvkar Kematen Richards Bay (Hungary) (Israel) (Slovakia) (Russia) (Austria) (South Africa) Own Wood 3.2 mm³ 1 4.4 mm³ 1 ∑ 7.6 mm³ (1) availabili
Slide 25: Austria
AUSTRIA z Mills Hausmening, Kematen z Management Board Karl Grill, Gerhard Schwiegk z Number of employees ~800 YE 2006 z Paper production capacity 384,000 tons z Pulp production capacity 49,000 tons PAGE 24
Slide 26: Hungary
HUNGARY z Mills Szolnok z Management Board Gábor Ferencz, Thomas Rost z Number of employees ~400 YE 2006 z Paper production capacity 125,000 tons PAGE 25
Slide 27: Israel
ISRAEL z Mills Hadera z Management Board Avner Solel, Yehonatan Roash, David Muhlgay, Dror Cohen, Lior Peretz z Number of employees ~300 YE 2006 z Paper production capacity 132,000 tons PAGE 26
Slide 28: Slovakia
SLOVAKIA z Mills Ružomberok z Management Board Eliaz Amar, Richard Zigmund, Dusan Simo, Franz Aigner z Number of employees ~1,800 YE 2006 z Paper production capacity 513,000 tons z Pulp production capacity 421,000 tons PAGE 27
Slide 29: Russia
RUSSIA z Mills Syktyvkar z Management Board Andrey Dribny, Maxim Smirnov z Number of employees ~8,4001 YE 2006 z Paper production capacity 580,000 tons1 z Pulp production capacity 680,000 tons2 z Own wood availability 3.2 M m³ (annual allowable cut) 1 Excludes the board business (PM 21), which is ma
Slide 30: South Africa
SOUTH AFRICA z Mills Merebank, Richards Bay z Management Board Ron Traill, Rory Sharp, Viv McMenamin z Number of employees ~2,200 YE 2006 z Paper production capacity 560,000 tons z Pulp production capacity 720,000 tons1 z Own wood availability 4.4 M m³ 1 The Richards Bay pulp mill capacity includes
Slide 31: Summary
SUMMARY
Slide 32: Highlights of the Last 18 Months
HIGHLIGHTS OF THE LAST 18 MONTHS Strong market position Strengthen z Maintaining of strong positions of key brands & low-cost position market positions in key markets & market { Top rating of Color Copy brand by EMGE positioning 2nd place ranking of Mondi in mill performance Strong asset { base z Im
Slide 33: Highlights of the Next 18 Months
HIGHLIGHTS OF THE NEXT 18 MONTHS Strong market z Strengthening position in the fast growing office supply retail channels position Strengthen z Maintain strong market positions in key markets low-cost position z Delivering on the targets of taking out complexity and costs & market positioning z Conc
Slide 34: Wood Dynamics
WOOD DYNAMICS
Slide 35: Integrated Value Chain Combined with Access to Low-Cost Wood
INTEGRATED VALUE CHAIN COMBINED WITH ACCESS TO LOW-COST WOOD Average Hardwood and Softwood Costs Forestry Pulp Paper (EUR/m3, Q2 2007) 47 z ~ 68% of Mondi 42 Uncoated fine 39 Mondi’s Own 37 Paper wood Availability1 5.4 Mm3 2) 1.4m tons 33 consumption from 30 30 2.1 m tons3 Russia and South 25 25 26
Slide 36: Wood Dynamics
WOOD DYNAMICS z Recently a number of studies have been conducted on wood availability and pulp wood prices in the European region. z The results show that the wood processing industry in Western Europe is under pressure from increased fibre demand and bio-mass burning for energy and is forecasted to
Slide 37: Total Harvesting Eastern Europe & West Russia
TOTAL HARVESTING EASTERN EUROPE & WEST RUSSIA Million m3 Million m3 20 150 HW SW 120 15 90 10 60 5 30 0 0 20 120 Fuelwood Industrial wood 15 90 10 60 5 30 0 0 W Russia Slovenia Croatia Bosnia Serbia Romania Ukraine Latvia Estonia Slovakia Belarus Hungary Bulgaria Lithuania Source: Pöyry: Wood availa
Slide 38: Eastern Europe (Excl. Russia): Stable Demand/Supply Situation
EASTERN EUROPE (EXCL. RUSSIA): STABLE DEMAND/SUPPLY SITUATION Expected Wood Availability in CEE1 (excl. Russia) CEE1 (excl. Russia) CEE1 (excl. Russia) demand / supply – 2005 (in Mm3) demand / supply – 2020 (in Mm3) 12 163 151 8 118 110 Other Other 5 Pulpwood 33 Pulpwood 18 7 Local demand Net export
Slide 39: West Russia: Increasingly Balanced Demand/Supply Situation
WEST RUSSIA: INCREASINGLY BALANCED DEMAND/ SUPPLY SITUATION, BUT STILL HOLDING A CONSIDERABLE RESERVE OF WOOD Expected Wood Availability in Western Russia West Russian West Russian West Russian demand / supply – 2005 (in Mm3) demand / supply – 2020 (in Mm3) theoretical supply – 2020 (in Mm3) 112 284
Slide 40: Market Wood Prices Increased in Recent Quarters
MARKET WOOD PRICES INCREASED IN RECENT QUARTERS Market Softwood prices (USD/m³) Market Hardwood prices (USD/m³) US$/m³ US$/m³ Delivered to local Delivered to local Pulp mills Pulp mills 105 105 100 100 95 95 90 90 85 85 80 80 75 75 70 70 65 65 60 60 55 55 50 50 45 1q/2005 45 40 2q/2005 40 35 3q/2005
Slide 41: Conclusions from Recent Wood / Bio Energy Studies
CONCLUSIONS FROM RECENT WOOD / BIO ENERGY STUDIES z General raw material demand, combined with bio-energy demand is increasing pressure on fibre supply. z Bio-energy subsidies do seem to be slowing. z Overall European fibre supply is considered to remain tight with further cost increases anticipated
Slide 42: STEP Project – Russia
STEP PROJECT – RUSSIA
Slide 43: Syktyvkar Modernisation and Expansion Project
SYKTYVKAR MODERNISATION AND EXPANSION PROJECT Modernisation and expansion of low-cost Pulp and paper mill in Syktyvkar, Russia Capex: EUR 525 m PAGE 42
Slide 44: Wood Resources
WOOD RESOURCES Annual Allowable Cut (in M m3) 550 Total z Russia offers an abundant, volume high quality fibre resource 26 that Mondi is well positioned to take advantage of, to supply the tight global Eco- market for wood products nomical viable 250 z The STEP Project will volume augment Mondi’s ac
Slide 45: Wood Costs
WOOD COSTS Average Hardwood and Softwood Costs (EUR/m3, Q2 2007) 47 42 39 37 33 30 30 z Wood costs of Russia rank 25 25 26 at the bottom of the international wood cost benchmark from Pöyry z Future wood costs largely depend on efficiency of our own operations il l d lia le a a nd ce en ga az an si r
Slide 46: Cost Positioning
COST POSITIONING Universal Business Paper Cost Curve EUR t Cost level 2006/III 1,200 1,000 z The Syktyvkar mill enjoys an excellent cost position on 800 the cost curve. z The STEP Project will take 600 Mondi further down the cost curve by expanding 400 production in the lowest cost environment Sykty
Slide 47: Market Forecast
MARKET FORECAST White-top liner UCWF / Cut size Paper Demand Forecast Demand Forecast CEE incl. Russia, M tons CIS cutsize (C+ Grade)1 Russia, k tons CAGR CAGR CAGR 5.7% 3.1 8.7% 0.8 9.1% 275 The STEP Project 0.7 will enable Mondi 2.6 0.7 0.6 to benefit from the 195 strong growth in 1.7 demand for U
Slide 48: Syktyvkar Operational Achievements
SYKTYVKAR OPERATIONAL ACHIEVEMENTS z The Russian operation Syktyvkar has been a success story for Mondi, outperforming in the areas of safety, productivity, costs and environmental management Syktyvkar (Russia)² 180 ( ) ¹ Volume 160 p . a. per capita 13% z Management control % 140 acquired in 2002 1
Slide 49: STEP Project – Project Scope
STEP PROJECT – PROJECT SCOPE New and expanded Upgraded / Rebuilt Benefits include z Wood handling facilities z Two chemical pulp lines z Lower operating costs z Recovery boiler and turbine z PM14 UCWF machine z Improved efficiencies z Evaporation of Black Liquor z PM21 containerboard z Expanded elec
Slide 50: Milestones of the Project
MILESTONES OF THE PROJECT 2007 2008 2009 2010 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Main equipment July / August 2007 vendors chosen Start construction April 2008 Project completion Mid 2010 PAGE 49
Slide 51: Q&A
Q&A