Mondi Plc · LSE:MNDI
Mondi — UBS Basic Materials Conference 2009
26 slides from Mondi's conference presentation, Jun 10, 2009
Slide 1: UBS Basic Materials Conference
UBS Basic Materials Conference Andrew King 10 June 2009
Slide 2: Mondi at a glance
Mondi at a glance Newsprint and Corrugated Bags & Specialities UCF South Africa MPSA merchant €1.6B €2.1B €1.6B €0.6B €0.5B €0.6B Sales 2008 (1) EBIT % 3.2% 7.4% 8.1% 18.9% 5.9% 1.2% Products Europe South Africa Europe/SA No. 2 Kraftliner(2) No. 1 Kraft Paper(2) No. 2 Office No. 1 kraftliner (5) No.
Slide 3: A creditable performance in challenging conditions
A creditable performance in challenging conditions € millions 2008 2007 % Change Group Revenue 6,345 6,269 +1 EBITDA1 814 870 -6 Underlying Operating Profit2 441 502 -12 Cash inflow from operations 795 957 -17 Net debt 1,690 1,507 +12 Group ROCE3 9.5% 10.6% -10 1EBITDA is operating profit of subsidi
Slide 4: Across Mondi's key grades, 2009 demand is weaker y-o-y but shows signs of recovery
Across Mondi’s key grades, 2009 demand is weaker y-o-y but shows signs of recovery since early 2009 lows UFP cumulative cut-size order inflow 2009 vs. 2008 (% growth)1 Weekly order book: total sack kraft paper (kt)2 22 0.0% 150 Week 125 -11 100 2009 2008 -25.0% 75 50 25 -50.0% 0 0 2 4 6 8 10 12 14 1
Slide 5: Industry is responding, albeit slowly: more action needed
Industry is responding, albeit slowly: more action needed Announced Net capacity changes (kt) Announced Net capacity changes Announced Net capacity changes Grade 2008 (kt) 2009 YTD (kt) H2 2009 - 2010 RCB (testliner / fluting)1 New machines + rebuilds 660 260 1,520 Shutdowns -425 -1,130 ? Net capaci
Slide 6: Pricing under pressure as industry adjusts to softer demand environment
Pricing under pressure as industry adjusts to softer demand environment Historical Price indexes 1.45 1.40 1.35 1.30 1.25 1.20 1.15 1.10 1.05 1.00 0.95 0.90 0.85 0.00 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008
Slide 7: How has Mondi responded to the downturn?
How has Mondi responded to the downturn? PAGE 7
Slide 8: A strategy which remains very much intact
A strategy which remains very much intact Leading market Build on leading positions in packaging and Uncoated Fine Paper positions (UFP), particularly in emerging markets Maintain position as lowest-cost producer in our markets: High quality, low Selectively investing in production capacity in lower
Slide 9: Focus on packaging and UFP in emerging markets
Focus on packaging and UFP in emerging markets Product mix1 Revenue by destination Revenue by origin 9% 29% 49% 51% 46% 54% 62% Packaging Emerging markets Emerging markets UFP Mature markets Mature markets Other (1) Based on segment revenues, including inter-segment revenues. PAGE 9
Slide 10: Emerging market asset base leads to low cost positions across the Group's main grades
Emerging market asset base leads to low cost positions across the Group’s main grades… Percentage of Mondi Capacity in overall cost curve Grade 1st 2nd 3rd 4th Quartile Quartile Quartile Quartile - WT Kraftliner 100% - - - Ubl. Kraftliner 95% 5% - Testliner 70% 8% 17% 5% Kraft Paper 28% 35% 34% 3% U
Slide 11: Driven primarily by access to low cost wood (HW)
Driven primarily by access to low cost wood (HW) EUR / m3 South Africa 21.2 Emerging Markets RUS WE Inland 21.4 Mature Markets Brazil 22.0 Thailand 25.0 Indonesia 28.3 Uruguay 28.9 US South 29.0 Chile 30.6 RUS WE 32.8 Poland 33.9 Canada East 34.2 Australia 34.8 Sweden 39.3 China Northeast 41.6 Finla
Slide 12: In Europe, Mondi maintains a mix of industrial and end consumer customer exposure
In Europe, Mondi maintains a mix of industrial and end consumer customer exposure Bags & Specialities1 Corrugated1 Corr. packaging end use 3% 1% 7% 7% 4% 4% 21% 10% 9% 4% 5% 34% 5% 10% 10% 50% 6% 18% 12% 10% 16% 13% 10% 12% 12% 7% American cases Pallets, Tools DieCut boxes Testliner Industry Bags Fl
Slide 13: Mondi's South Africa division is a key domestic and export producer
Mondi’s South Africa division is a key domestic and export producer SA Division Product Split 4% 12% 14% 48% Containerboard UFP 22% 23% 37% 37% Uncoated Fine Paper Woodchips (export) Containerboard Other (domestic) Pulp (export) 77% 26% Domestic Domestic Africa Export Export Based on segment revenue
Slide 14: The Group continues to focus on efficiency gains
The Group continues to focus on efficiency gains… 2008 Cost Structure (%) Cost savings Cost savings as % of cash cost base 6.3% 3.9% 3.6% 3.1% 2.3% 6.4% 32.5% 180 179 167 18.4% 128 5.1% EUR m 6.4% 15.7% 9.2% Wood, pulp and fibre Maintenance Personnel Other variable costs Variable selling expenses Ot
Slide 15: Resulting in a continuous reduction in fixed costs
…resulting in a continuous reduction in fixed costs Breakdown of costs as % of total costs 100% 20.0% 6.5 6.7 6.5 6.4 6.3 80% 30.0 28.0 27.3 27.2 32.5 60% 15.0% 40% 63.3 65.5 66.3 66.5 61.0 20% 0% 10.0% 2004 2005 2006 2007 2008 Personnel costs as % of revenue (RHS) Depreciation and Amortisation Fixe
Slide 16: Action on working capital is taking effect
Action on working capital is taking effect Working capital performance 1,200 20.0% 1,000 17.2% 800 16.3% 15.5% 600 14.6% 15.0% 13.7% 400 11.9% 200 0 10.0% 2004 2005 2006 2007 H1 2008 2008 Working capital as a % of LTM revenue (RHS) Working capital In second-half of 2008 took downtime to balance inve
Slide 17: Mondi continues to rationalise its asset portfolio
Mondi continues to rationalise its asset portfolio Bags & Specialities Corrugated UFP Closed Nyborg Bags & Sold three sheet feeder plants Hungary UFP mill closure Specialities plant in Denmark (UK) (140,000 tonne) completed Closed Zaragoza bag converting Sold Niedergösgen recycled European UFP reorg
Slide 18: Cutting back to low cost, high quality, well invested asset base
Cutting back to low cost, high quality, well invested asset base Closures and Divestitures1 ~600,000 tonne high cost paper removed Closure Divestiture 14% reduction of Europe & 11 International’s capacity 5% reduction in average 2 production cost per tonne of 6 7 relevant grades 4 5 10 10 10 5 5 5 6
Slide 19: Limiting capital expenditure approvals to 40% of depreciation
In response to the downturn, Mondi targets to limit capital expenditure approvals to 40% of depreciation % of % of € millions 2008 2007 depreciation depreciation Major Projects 324 87% 40 11% Other 369 99% 366 99% Capital Expenditure 693 186% 406 110% Depreciation 373 368 Mondi is well invested Exte
Slide 20: Key strategic projects to lower Mondi's cost base are on track
Key strategic projects to lower Mondi’s cost base are on track Both projects on time and within Syktyvkar - €525m budgeted capital cost Swiecie box plant (€45m) Targeted completion dates: Swiecie – mid to late 2009 Fibreline – civils Syktyvkar – 2010 Swiecie PM7 - €305m BOTH PROJECTS WILL SUSTAINABL
Slide 21: Polish expansion project puts Mondi at the bottom of the RCB cost curve
Polish expansion project puts Mondi at the bottom of the RCB cost curve 400 350 Manufacturing costs Brown field € / tonne Swiecie mill cost estimates at PLN 4.60: € 300 (current = approx PLN 4.80:€) 2008/Q4 expansion gives: ~€70m capital 250 Current cost benefit market price 1 200 ~€30-€40 / tonne o
Slide 22: The Syktyvkar mill modernisation will further enhance Mondi's low cost position
The Syktyvkar mill modernisation will further enhance Mondi’s low cost position On track for 2010 UNIVERSAL BUSINESS PAPER COST CURVE 1,200 1,000 Within capital cost target €/tonne 800 Syktyvkar PM14 600 Returns come from: 400 Cost reduction Energy production and sales 200 Modest increase in paper 0
Slide 23: Mondi's debt remains under control despite major project spend
Mondi’s debt remains under control despite major project spend Group’s net debt and EBITDA (in EURm) 3,500 2.4x 2.1x 3,000 1.7x 1.8x 2,500 EUR m 2,000 1,690 1.2x 1,507 1,500 1,000 0.6x 500 871 814 0 0.0x 2007 2008 Net debt / EBITDA Net debt EBITDA Increase in debt attributable to major expansionary
Slide 24: Mondi retains substantial headroom on committed facilities
Mondi retains substantial headroom on committed facilities 2000 Committed € millions Net debt Undrawn 1600 Facilities Greater than one year € millions Within one year Operating position as at 1 Jan. 2008 2,678 1,507 1,171 1200 Repaid / expired (196) (238) 800 New facilities 386 543 Exchange translat
Slide 25: Outlook
Outlook1 “Despite some evidence that the rapid de-stocking, which started in the fourth quarter of 2008, is coming to an end, there remains a high level of global economic uncertainty. This will undoubtedly continue to create challenges for the remainder of 2009. In this fast changing economic envir
Slide 26: Summary
Summary While current trading remains difficult we believe we are well positioned to weather the downturn due to our focus on cash and costs Working capital management Reducing capital expenditure Asset base rationalisation 2009 target cost savings of €180 million Strategy remains intact: Achieving