Mondi Plc · LSE:MNDI
Mondi — FY2010 Earnings Presentation
42 slides from Mondi's earnings presentation, Feb 21, 2011
Slide 1: Mondi Group Results for the Year Ended 31 December 2010
MONDI GROUP RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010 21 February 2011
Slide 2: Agenda
Agenda Highlights Financial overview Operational review Summary Appendices Page 2
Slide 3: Key financial highlights
Key financial highlights Earnings significantly up versus 2009 EBITDA up 37% at €882 million Underlying operating profit up 73% at €509 million Underlying EPS up 151% at 47.0 euro cents Group ROCE of 12.3% Cash inflow from operations of €778 million Strong EBITDA growth €121 million investment in wo
Slide 4: Key operational highlights
Key operational highlights Sustained improvement in order inflows, volumes and prices across all main products Strong operating performance – production records at 6 out of the 8 largest paper mills Restructuring activities Corrugated restructuring successfully completed Disposal of Europapier succe
Slide 5: Agenda
Agenda Highlights Financial overview Operational review Summary Appendices Page 5
Slide 6: Operating financial highlights
Operating financial highlights % H2 H1 H2 € Millions 2009 2010 Change 2009 2010 2010 Group Revenue 5 257 6 228 18% 2 643 3 033 3 195 1 EBITDA 645 882 37% 337 405 477 % Margin 12.3% 14.2% 12.8% 13.4% 14.9% 2 Underlying operating profit 294 509 73% 156 222 287 % Margin 5.6% 8.2% 5.9% 7.3% 9.0% Underly
Slide 7: Divisional underlying operating profits
Divisional underlying operating profits1 120 100 98 H1 2009 81 H2 2009 80 78 75 H1 2010 71 71 H2 2010 60 55 € millions 48 46 46 40 36 33 28 25 22 20 18 18 11 8 4 4 1 1 0 (5) Uncoated Fine Paper Bags & Coatings Corrugated South Africa division Mondi Packaging Newsprint South Africa (20) Strong perfor
Slide 8: Input costs
Input costs 4,500 Variable costs 160 Average recovered paper ~ 4,000 140 € / tonne 3,500 120 100 3,000 80 € million 2,500 60 2,000 40 20 1,500 0 2007 2008 2009 2010 1,000 500 800 Pulp 700 2007 2008 2009 2010 600 500 Variable selling expenses Other variable costs € / tonne Energy Wood 400 Recovered p
Slide 9: Fixed costs
Fixed costs Fixed costs as % of Revenue 2 500 Fixed costs 25.0% 2 000 20.0% 1 500 € million 15.0% 26.2% 25.3% 26.1% 1 000 25.1% 23.7% 10.0% 500 5.0% 0 2006 2007 2008 2009 2010 - Personnel costs Maintenance and 2006 2007 2008 2009 2010 other indirect costs Fixed costs excl. depreciation Other net ope
Slide 10: Financial review
Financial review % H2 H1 H2 € Millions 2009 2010 Change 2009 2010 2010 1 Underlying operating profit 294 509 73% 156 222 287 Net Finance Costs (114) (117) (3%) (56) (48) (69) Associate net earnings 2 2 1 2 - 2 Underlying profit before tax 182 394 118% 101 176 218 Tax before special items (58) (93) (
Slide 11: Finance charges and net debt
Finance charges and net debt % H2 H1 H2 € Millions 2009 2010 Change 2009 2010 2010 Net debt (1 517) (1 364) 10% (1 517) (1 632) (1 364) Interest expense, net of investment income 158 133 16% 71 66 67 Less: interest capitalised (45) (8) (82%) (14) (7) (1) Net debt finance charges and other financial
Slide 12: Taxation and non-controlling interests
Taxation and non-controlling interests Taxation Non-controlling interests % % € Millions 2009 2010 € Millions 2009 2010 Change Change Minority share before special items 29 62 (114%) Underlying tax charge 58 93 (60%) Minority share of special items 1 (1) Tax on special items (6) (6) Profit attributa
Slide 13: Special items
Special items Operating items (€3 million gain): Non-operating items (€25 million loss): Uncoated fine paper (€5 million gain) Corrugated (€17 million loss) release of closure provisions no longer required loss on disposal of the UK corrugated Bags & Coatings (€28 million net gain) packaging plants
Slide 14: Cash flow
Cash flow % H2 H1 H2 € Millions 2009 2010 Change 2009 2010 2010 1 EBITDA 645 882 37% 337 405 477 Working capital movements 248 (121) (149%) 149 (141) 20 Other operating cash flow items (26) 17 165% (11) 5 12 Cash generated from Operations 867 778 (10%) 475 269 509 Dividends from financial investment
Slide 15: Working capital
Working capital Working capital management Working capital cash flows 1 200.0 17.2% €248m 1 000.0 14.6% 800.0 11.9% * 11.5% 12% 10.0% €97m 600.0 10% 400.0 €27m 200.0 2006 2007 2008 2009 2010 - 2006 2007 2008 2009 2010 (€82m) Working Capital (€121m) Working Capital % of Turnover * Working capital as
Slide 16: Capital expenditure
Capital expenditure Capital expenditure 400 200% Cash spend, excluding major 300 projects was 64% of depreciation 189 13 135 (2009: 63%; 2008: 101%) € millions 200 179 100% 68 121 92 Approximately €50 million still to 27 256 100 182 194 145 spend on major projects 114 116 106 93 0 0% H1 H2 H1 H2 H1
Slide 17: Debt facilities
Debt facilities % € Millions 2009 2010 Change Net debt (1 517) (1 364) 10% Committed facilities 2 541 2 889 14% Of which undrawn 990 1 481 50% Gearing (Net debt / Trading capital employed) 35.1% 29.7% Net debt / 12 month trailing EBITDA (times) 2.4 1.5 Strong operational cash flows used to pay down
Slide 18: Dividends
Dividends Final dividend of 16.5 euro cents per share proposed (20.0 euro cents for the year) Dividend cover of 2.35 times within stated cover range of 2 to 3 times 25.0 Dividends paid and proposed Record date 15 April 2011 20.0 20.0 Payment date 12 May 2011 Eur cents per share 15.0 12.7 16.5 10.0 5
Slide 19: Agenda
Agenda Highlights Financial overview Operational review Summary Appendices Page 19
Slide 20: Uncoated Fine Paper
Uncoated Fine Paper Excellent full year result on the back of a strong operating performance and improved pricing Cost pressures Especially pulp at non-integrated mills Second half impacted by Extended Syktyvkar shut for final commissioning (€15m) Lower speciality volumes 1.5 Fundamentals remain att
Slide 21: Uncoated Fine Paper – Commodity cycle and returns
Uncoated Fine Paper – Commodity cycle and returns 1,100 A4 B-copy 1 1,050 1,000 950 900 €/tonne 850 800 750 700 650 600 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2010 2010 2009 2009 2008 2008 2007 2007 2006 2006 900 25.0% 880 19.7% 860 20.0% 840 15.2% 14.4%
Slide 22: Corrugated
Corrugated Further improvement in product prices and volumes Partly offset by significant input cost pressures – specifically recovered paper Recent strengthening of eastern-European currencies placed some pressure on export-focused operations Box prices tracking paper – further increases required B
Slide 23: Corrugated – Commodity cycle and returns
Corrugated – Commodity cycle and returns 700 Kraftliner RB Fluting-OCC 600 differential 500 €/tonne 400 300 200 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2010 2010 2009 2009 2008 2008 2007 2007 2006 2006 700 20.0% 18.1% 17.1% 18.0% 600 16.0% 16.0% 12.9%
Slide 24: Bags and Coatings
Bags and Coatings Significant Kraft Paper selling price increases achieved Partially offset by sharp rise in input costs, mainly wood Recent pressure from strong eastern European currencies European volumes largely recovered, supported by exports Negligible market-related downtime (2009: ~87,000t) R
Slide 25: Bags and Coatings – Commodity cycle and returns
Bags and Coatings – Commodity cycle and returns Unbleached sack Kraft (€/tonne) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 850.0 16.0% 15.3% 800.0 14.0% 13.3% 10.2% 11.9% 10.9% 750.0 12.0% 10.0% 10.0% 700.0 6.7% 8.3% 8.0% 7.3% 7.0% 650.0 6.0% 600.0 4.0% 550.0 2.0% 0.0% 500.0 2006 2006 2007 20
Slide 26: South Africa Division
South Africa Division Improved result, however still short of targeted levels Strong recovery in average pulp export selling prices Partially offset by rand strength Domestic cost inflation, most notably electricity Exited the European uncoated fine paper market Now focused on domestic and Africa Fu
Slide 27: Mondi Packaging South Africa
Mondi Packaging South Africa Very pleasing performance, especially on costs Pricing broadly unchanged until final quarter Demand largely back to pre-recession levels Growth in agricultural products for export supported the stronger second half result Industrial sector remains under pressure 6 month
Slide 28: Newsprint
Newsprint Sale of Europapier completed November 2010 €6 million profit up to October 2010 Aylesford severely impacted by lower selling prices and input cost pressures, notably recycled paper Plus additional waste disposal costs Price increases in excess of 20% have been negotiated in 2011 – more req
Slide 29: Syktyvkar mill modernisation
Syktyvkar mill modernisation Project returns Wood / Pulp production Sales growth New recovery boiler ~30% woodyard capacity ~50,000 tonnes Uncoated Fine ~100% increased heat supply increase, ~10% efficiency gain Paper (~5% of domestic market) ~571 Mwh additional energy ~170,000 tonnes pulp ~63,000 t
Slide 30: Świecie's new machine performing well
Świecie’s new machine performing well ECO7 410,580 tonnes production achieved >85% of full design capacity well ahead of business plan ~213,000 tonnes produced in second half, including impact of a maintenance shut RCB cost curve1 Looking for a further >10% increase in 400 Manufacturing costs output
Slide 31: Agenda
Agenda Highlights Financial overview Operational review Summary Appendices Page 31
Slide 32: Summary
Summary Sustained improvement in order inflows, volumes and prices across all main products Strong operational performance Significant earnings recovery New Polish and Russian investments performing well Further refined portfolio with sale of non-core assets Significant increase in full year dividen
Slide 33: Outlook
Outlook “Demand growth over the past 18 months has been very encouraging, with volumes in most grades and geographic regions back at satisfactory levels. In 2011, further demand growth is expected, albeit at more modest rates. Recent industry capacity adjustments have also resulted in generally stro
Slide 34: Agenda
Agenda Highlights Financial overview Operational review Summary Appendices Page 34
Slide 35: Delivering on Group strategy
Delivering on Group strategy Leading market High quality, low Focus on positions cost asset base performance • European Corrugated •Syktyvkar mill modernisation • Relentless focus on costs restructuring completed completed, securing the mills’ cost entrenched leadership • Expanded Uncoated fine • Wo
Slide 36: Mondi at a glance
Mondi at a glance UFP Corrugated Bags & Coatings South Africa MPSA Newsprint €1.5B €1.2B €2.2B €0.6B €0.6B €0.5B 7% 2010 10% Sales 23% 9% (1) 18% 33% 2010 EBIT % 9.6% 6.0% 11.8% 11.1% 7.8% (0.9)% Products Europe South Africa Europe/SA No. 1 in Office No. 1 in Kraft Paper No. 1 in Office No.
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 27% 39% 45% 55% 61% 73% Emerging markets Emerging markets Emerging markets Mature markets Mature markets Mature markets Virgin-based production Revenue by product Corrugated products 22% 26%
Slide 38: Integrated value chain
Integrated value chain Leading market Pulp Virgin Containerboard positions 1.2 4.0 3.5 0.2 + 3.0 0.7 0.4 1 0.3 0.3 0.8 2.5 High quality, low Millions 2.0 of tonnes Millions of tonnes 0.6 1.5 3.1 cost asset base 1.0 2.8 0.4 0.8 0.7 0.5 0.2 0.0 0.3 (0.3) 0 (0.5) Production Consumption Net long positio
Slide 39: Abridged income statement
Abridged income statement 1 % H2 H1 H2 € Millions 2009 2010 Change 2009 2010 2010 Group Revenue 5 257 6 228 18% 2 643 3 033 3 195 Materials, energy and consumables used (2 768) (3 322) (20%) (1 381) (1 624) (1 698) Variable selling expenses (472) (548) (16%) (247) (277) (271) Gross margin 2 017 2 35
Slide 40: Exchange rates
Exchange rates % H2 H1 H2 2009 2010 Change 2009 2010 2010 Closing rates against the euro South African rand 10.67 8.86 (17%) 10.67 9.38 8.86 Pounds sterling 0.89 0.86 (3%) 0.89 0.82 0.86 Polish zloty 4.10 3.97 (3%) 4.10 4.15 3.97 Russian rouble 43.15 40.82 (5%) 43.15 38.28 40.82 US dollar 1.44 1.34
Slide 41: Production volumes
Production volumes % H2 H1 H2 € Millions 2009 2010 Change 2009 2010 2010 Europe & International Uncoated fine paper Tonnes 1 470 381 1 524 225 4% 760 948 790 748 733 477 Containerboard Tonnes 1 768 696 1 939 935 10% 932 240 1 008 305 931 630 Kraft paper Tonnes 841 378 984 607 17% 458 005 466 156 518
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