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MND / MNP - Mondi - Full-Year Results For The Year Ended 31 December 2008
and dividend declaration
Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND & ISIN: ZAE000097051
Mondi plc
(Incorporated in England and Wales)
(Registration number: 6209386)
JSE share code: MNP & ISIN: GB00B1CRLC47
Full-year results for the year ended 31 December 2008
Financial Summary
EUR million, except for % and per share
measures 2008 2007 Change %
Group revenue 6,345 6,269 +1
EBITDA 1 814 870 -6
Underlying operating profit 2 441 502 -12
Underlying profit before tax 3 284 405 -30
Reported (loss) / profit before tax 7 (103) 382 -127
Basic (loss)/ earnings per share (EUR cents)4 (41.6) 45.4 -192
Underlying earnings per share (EUR cents) 4,5 33.9 46.9 -28
Headline earnings per share (EUR cents) 4,5 20.3 39.5 -49
Cash inflow from operations 795 957 -17
Net debt 1,690 1,507 +12
Group ROCE 6 9.5% 10.6% -10
Total dividend per share (EUR cents) 4 12.7 23.0 -45
Highlights:
- Substantial cash inflow from operations of EUR795 million, despite the
adverse economic backdrop.
- Demonstrated excellent financial discipline with net debt at EUR1.7 billion
(broadly unchanged since 30 June 2008) and nearly EUR1.1 billion of undrawn
committed facilities as at end of December, despite EUR324 million spent on
major capital projects.
- Delivered cost savings of EUR128 million, representing 2.4% of cost base.
- Improved profit trend in South Africa Division.
- Achieved very strong control of working capital, resulting in a net working
capital inflow of EUR27 million for the year, following the EUR97 million
inflow in the prior year.
- Further rationalised the business in the face of a weakening trading
environment, exiting around 600,000 tonnes of high cost production capacity,
thereby enhancing the Group`s overall cost competitiveness.
- The costs of these disposal, restructuring and closure initiatives of EUR85
million before tax (cash component EUR56 million) are included in special
items, together with an impairment charge on the write-down of both goodwill
and tangible assets amounting to EUR293 million.
- Major projects in Poland and Russia are on schedule and within budgeted
capital cost.
- Despite weaker trading environment achieved ROCE of 9.5%.
- Proposed final dividend of 5.0 euro cents per share to give a total dividend
of 12.7 euro cents per share.
David Hathorn, Mondi Group Chief Executive, said:
"It is testament to Mondi`s low cost production strategy, ingrained cost focus
and ability to respond quickly to changing market conditions that a creditable
performance was delivered in a year which ended amid the most difficult trading
conditions in the Group`s history.
"We have responded early and decisively to the challenges posed by the global
economic turbulence, proactively rationalising the business through cost
cutting, asset closures and divestitures, thereby consolidating the Group`s
leading cost positions in its chosen markets and enhancing its resilience to
adverse market conditions. Similarly, working capital has reduced as a
percentage of sales and our capital expenditure programmes have been tailored
to the more challenging trading environment which we now face. We will continue
to engage in restructuring actions and cost reduction measures where
appropriate and as required by market conditions.
"Given the level of global economic uncertainty that emerged in the latter part
of 2008, the outlook inevitably remains challenging. However Mondi`s strong
financial position, our low cost, high quality asset base and our quick and
decisive response to rapidly changing economic events leave us well positioned
to benefit when market conditions improve. As such, the Boards remain confident
in the medium and long-term prospects for the Group."
1 EBITDA is operating profit of subsidiaries and joint ventures before special
items, depreciation and amortisation.
2 Underlying operating profit is operating profit of subsidiaries and joint
ventures before special items.
3 Underlying profit before tax is reported profit before tax before special
items.
4 2007 is pro forma and based on the number of shares admitted following the
demerger from Anglo American plc on 2 July 2007.
5 The Group has presented underlying earnings per share to exclude the impact
of special items, and headline earnings per share in accordance with circular
8/2007 `Headline Earnings` as issued by the South African Institute of
Chartered Accountants.
6 Group return on capital employed (ROCE) is an annualised measure based on
underlying operating profit plus share of associates net earnings divided by
average trading capital employed before impairments and adjusted for major
capital projects not yet commissioned.
7 Reported (loss) / profit before tax is reported profit before tax but after
special items of EUR387 million.
Contact details:
Mondi Group
David Hathorn +27 (0) 11 994 5418
Andrew King +27 (0) 11 994 5415
Lisa Attenborough +44 (0)1932 826380 / +44 (0)7872 672669
Financial Dynamics
Richard Mountain +44 (0)20 7269 7121 / +44(0)7802 877 243
Louise Brugman +27 (0)11 214 2415 / +27 (0)83 504 1186
Dial-in audio cast facility will be available via:
Please see below details of our dial-in conference call and audio cast that
will be held at 09:00 (UK) and 11:00 (SA).
The conference call dial-in numbers are:
South Africa: 0800 200 648
UK: 0800 917 7042
Europe & Other: 00800 246 78 700
An online audio cast facility will be available via:
www.mondigroup.com/fullyearresults08 Password: FYResults08
The presentation will be available online via the above web site address an
hour and a half before the audio cast commences.
Questions can be submitted either via the dial-in conference call or by email
via the audio cast.
Should you have any issues on the day with accessing the dial-in conference,
please call +27 (0)11 535 3600.
Should you have any issues on the day with accessing the audio cast, please
email mondi@kraftwerk.co.at and you will be contacted immediately.
An audio recording of the presentation will be available on Mondi`s website
from late afternoon on 26 February 2009.
Editors` notes:
Mondi is an international paper and packaging group and in 2008 had revenues of
EUR6.3 billion. Its key operations and interests are in western Europe,
emerging Europe, Russia and South Africa.
The Group is principally involved in the manufacture of packaging paper and
converted packaging products; uncoated fine paper; and speciality products
including coating and consumer flexibles.
Mondi is fully integrated across the paper and packaging process, the growing
of wood and the manufacture of pulp (including recycled paper) to the
conversion of packaging papers into corrugated packaging and industrial bags.
Mondi has production operations across 38 countries and had an average of
33,000 employees in 2008.
RESULTS
As indicated in Mondi`s Interim Management Statement in October 2008, the
worsening of the global economic environment had an adverse impact on our
business. In particular, from October we saw a marked downturn in trading in
Europe.
Group sales rose by 1% to EUR6.35 billion and underlying operating profit was
12% below the prior year, with the slowdown in Europe only partially offset by
a much improved performance from the South Africa Division. Within the Europe &
International Division underlying operating profit was down EUR52 million or
13%. We did not see the usual post-summer seasonal pick-up in demand and
trading in the last three months of 2008 was weak, resulting in falling volumes
and some price weakness. In response, we proactively took significant
market-related downtime in a number of our European operations (mainly in sack
kraft paper) amounting to 130,000 tonnes in the last quarter (12% of capacity)
and 212,000 tonnes for the full year. By the end of the year stock levels were
low across all paper grades, leaving us well placed for the coming year.
By contrast, the South Africa Division was successful in implementing price
increases and enjoyed an improved underlying operating performance, with
profits up EUR33 million or 42%.
Merchant and Newsprint saw a significant decline in underlying operating
profits (EUR33 million) as our joint venture, Aylesford Newsprint incurred
losses, suffering from both declining selling prices and increases in input
costs. Aylesford contributed nearly half of Merchant and Newsprint`s profits in
the year ending 2007.
A strong working capital performance (net inflow for the year of EUR27 million
despite higher revenues) coupled with renewed focus on cost reductions and cash
flow optimisation limited the increase in Group borrowings to EUR183 million,
despite capital expenditure of EUR324 million on the two major expansionary
capital projects in Poland and Russia. Mondi enjoys a strong liquidity position
and as at the end of December the Group had nearly EUR1.1 billion of undrawn
committed debt facilities (EUR0.7 billion of which is available under a EUR1.55
billion facility, expiring on 22 June 2012).
Cost pressures were evident throughout the year, most significantly chemicals
and energy, although there was some easing of key raw material input costs
towards the latter part of the year (notably recovered fibre, energy and
chemicals). Similarly, while the weaker South African rand supported margin
improvement in export sales from our South Africa Division, the strength of our
major emerging European production currencies negatively impacted on our cost
base. The continued strengthening of the Polish zloty in particular had a
significant negative effect on profitability, although this pressure eased
towards the end of the period.
In mitigation of ongoing cost pressures and the weaker trading environment,
significant additional cost reductions and further productivity improvements
were achieved. Overall, the Group delivered a further EUR128 million in cost
savings, representing approximately 2.4% of the cash cost base. Mondi remains
committed to targeting annual savings of at least 2% per annum. The 2009 target
is EUR180 million (3.3% of 2008 cash costs). We also completed the
restructuring and simplification of our European Uncoated Fine Paper (UFP)
business, which realised significant cost reductions during the year, with
further benefits flowing in 2009.
Disappointingly, the average return on capital employed, a key measure of
Mondi`s performance declined to 9.5% (2007: 10.6%), reflecting the more
difficult trading environment in the second-half. As noted elsewhere, actions
are being taken to improve the profitability of the Group which we are
confident, when taken with an improvement in the business cycle, will lead to
improving returns.
Net finance costs of EUR159 million were EUR60 million higher than in 2007 due
to higher borrowings and average interest rates (particularly in emerging
markets) and foreign currency charges on the devaluation of emerging market
currencies to which we are exposed. The effective tax rate before special items
of 29% was in line with the prior-year rate.
Underlying earnings per share were 33.9 euro cents per share, down 28% compared
to 2007.
The Group is proposing to pay a final dividend of 5.0 euro cents per share,
giving a total dividend of 12.7 euro cents per share for the year.
DECISIVE RESPONSE TO THE DOWNTURN
Mondi has acted to close or dispose of certain higher cost operations in
Europe. The total cost of disposal, closure and restructuring initiatives
excluding impairments amounted to EUR85 million and has been disclosed as a
special item. The cash element of this charge is EUR56 million.
Actions taken:
- The previously announced closure of our 140,000 tonne UFP mill in Hungary and
European UFP reorganisation were completed.
- The decision has been taken to mothball the integrated Stambolijski kraft
paper mill in Bulgaria and the Dynas PM5 kraft paper machine in Sweden.
- The recycled containerboard mill in Holcombe, UK was closed.
- Three sheet feeder plants in the UK and a recycled container board mill in
Switzerland were sold. The sale of two further corrugated converting operations
in France was also agreed.
- A restructuring exercise at the Turkish corrugated business was started.
- The Nyborg specialities plant in Denmark and the Zaragoza bag plant in Spain
were closed.
- A restructuring of the Finnish & UK coating businesses was initiated.
These moves have the effect of adjusting our production capacity in light of
the changing demand environment, lowering our overall cost base and
streamlining our asset portfolio to focus on those businesses that provide us
with a sustainable competitive advantage in their respective markets. In total
we will have exited around 600,000 tonnes of high cost capacity, thereby
lowering our average European cost per tonne for the related products by around
5%.This is very much in line with the Group`s stated strategic objective of
focusing on low cost, high quality assets and achieving cost leadership in its
chosen markets.
Furthermore, steps have been taken to significantly reduce capital expenditure
outside of the two major projects. This initiative is supported by the well
invested nature of our asset base. Capital expenditure approvals will be
limited to 40% of depreciation in 2009. The cash flow effects of this
initiative started to be seen towards the end of the reporting period, with the
main benefits expected to be realised in 2009 and 2010.
A special item impairment charge on the write-down of both goodwill and
tangible assets amounting to EUR293 million was taken in the period, reflecting
the weaker outlook for several of our business segments in light of the
worsening macro-economic environment.
OPERATIONAL REVIEW
Europe & International Division
EUR million 2008 2007 change %
Segment revenue 5,159 5,189 -1
- of which inter-segment revenue 155 153 +1
EBITDA 623 670 -7
Underlying operating profit 334 386 -13
Bags & Specialities 159 154 +3
Uncoated Fine Paper 126 99 +27
Corrugated 49 133 -63
Capital expenditure 1
-Major Projects 2 324 40
-Other 277 271 +2
Net segment assets 3,659 3,907 -6
Return on capital employed (%) 9.6 11.2 -14
1 Capital expenditure is cash payments and excludes business combinations.
2 Polish and Russian expansion projects which commenced in second-half of 2007.
The European business environment continues to be challenging and we remain
focused on driving down costs and rationalising any remaining low quality, high
cost assets. As a direct result of the slowdown in European demand, underlying
operating profit was down 13% versus the prior year. The Division delivered
EUR114 million in cost savings, with the benefits from the various
rationalisation and restructuring measures a significant contributor.
Operations
In the Bags & Specialities business underlying operating profits for the year
were up EUR5 million, although the second half saw profits down 33% versus the
comparable period. The business benefited from higher average kraft paper and
converted bag prices (up around 6%); however, volumes were soft in the second
half as demand, particularly from the building industry, slowed. This decline
in demand was exacerbated by an element of destocking as the supply chain
adjusted to the weaker economic outlook. In response, the kraft paper business
took significant market related downtime of around 100,000 tonnes in the fourth
quarter (around 40% of available capacity in the quarter) to balance
inventories. Industry statistics suggest the downstream bag demand was down
around 9% in the last quarter versus the comparable period in the prior year.
Specialities were impacted by lower volumes and margins and as a result profits
were marginally below the comparable period. The results benefited modestly
from the acquisition of Unterland in the second half of 2007.
In the Uncoated Fine Paper (UFP) business underlying operating profits were up
EUR27 million or 27%. Whilst average selling prices were slightly up against
the comparable period, volumes were impacted by the weaker trading environment
in the second half and the closure of Hungary (down 4% on the prior year).
Around 37,000 tonnes of commercial downtime (around 2.5% of available capacity)
was taken in the year. UFP benefited from the restructuring actions announced
at the end of 2007, as well as a better performance from all our mills, notably
our Russian pulp and paper mill in Syktyvkar where the local market continued
to experience good demand. Declining pulp prices in the second-half improved
the profitability of our Austrian non-integrated paper mill.
In the Corrugated business, underlying operating profits were down EUR84
million at EUR49 million as costs increased and selling prices fell back
following substantial increases achieved in 2007. Brown kraftliner and
testliner prices were down around 5% year-on-year (on average testliner
declined sharply in the second half, ending the year over 20% down on the prior
year close). Whitetop kraftliner, a key open market product for the Group, was
more stable with prices up around 1% year-on-year. The price declines were due
to a combination of slowing demand and, towards the latter part of the year,
falling input costs. Box prices, having increased in the first half, started to
taper off in the second half. Results were also impacted by market related
downtime in recycled containerboard (around 44,000 tonnes, representing 4% of
annual capacity). The continued strength in eastern European currencies
(particularly the Polish zloty) during the period served to further erode the
profitability of our eastern European production base. This currency trend
started to reverse towards the end of the period, although the positive
financial impact will only be seen in the 2009 due to the Group`s rolling
six-month currency hedging programme.
Our Turkish corrugated packaging subsidiary, Tire Kutsan, acquired in 2007,
continues to underperform. This is mainly the result of softer demand coupled
with new competitor capacity coming on-stream and the resulting impact on
prices in the local market. We have taken steps to restructure the business
appropriately, including streamlining the organisation and reducing headcount.
Restructuring
2008 saw significant restructuring in response to the economic downturn. In the
first-half, three sheet feeder plants in the UK were sold for an enterprise
value of approximately EUR21 million, the Nyborg specialities plant in Denmark
was closed and the closure of the Szolnok UFP mill in Hungary was completed. We
closed the Holcombe recycled containerboard mill in the UK (capacity 110,000
tonnes per annum), the Zaragoza bag converting plant in Spain (capacity 55
million units) in the second half. Towards the end of the year, the sales of
the 160,000 tonne per annum Niedergosgen recycled containerboard mill in
Switzerland and two corrugated converting operations in France were agreed for
total proceeds of approximately EUR22 million. Further initiatives include the
announced restructuring of the Turkish corrugated business and the
restructuring of the Coatings business in Finland and the UK. The total cost of
these and other closure, disposal and restructuring activities, excluding
impairments, is approximately EUR85 million and has been treated as a special
item in the accounts. After the year-end we sold the St Quentin corrugated
packaging plant in France and have taken the decision to mothball both the
110,000 tonnes per annum Stambolijski pulp and kraft paper mill in Bulgaria and
the PM5 kraft paper machine (capacity 75,000 tonnes per annum) at our mill in
Dynas in Sweden.
Major Projects
Despite the challenging business environment, we remain committed to completing
the development of our two major projects in Poland and Russia. We believe the
rationale behind the development of these projects, to secure our position as
cost leader in our chosen markets, is reinforced by current events.
The construction of the new 470,000 tonne recycled containerboard machine at
wiecie in Poland is progressing well (total cost of EUR305 million). We remain
on track for completion in the second half of 2009 within the budgeted cost. We
anticipate that this machine will have the lowest operating costs of its type.
Similarly, the related EUR45 million investment in the new box plant and
associated infrastructure on the wiecie mill site is in progress, with start-up
planned for the end of 2009.
The project to modernise our mill in Syktyvkar (total cost of EUR525 million)
is also making good progress and we remain on track for completion within the
budgeted cost by 2010. The key value drivers of this project are to improve
efficiency, lower our cost base in Russia and increase energy production and
revenue by selling surplus energy to the grid. In addition it will provide
modest extra capacity (both pulp and paper) for the domestic market.
By the end of the period, EUR364 million had been spent on these two projects
out of the total capital commitment of EUR875 million. The bulk of the
remaining expenditures of EUR511 million are expected to be incurred in 2009,
with some flowing into 2010.
South Africa Division
EUR million 2008 2007 change %
Segment revenue 587 591 -1
- of which inter-segment revenue 285 367 -22
EBITDA 152 122 +25
Underlying operating profit 111 78 +42
Uncoated Fine Paper 1 75 53 +42
Corrugated 36 25 +44
Capital expenditure 2 44 23 +91
Net segment assets 760 966 -21
Return on capital employed (%) 15.9 9.5 +67
1 Includes pulp and forestry business.
2 Capital expenditure is cash payments and excludes business combinations.
The South Africa Division recorded an increase in underlying operating profits
of EUR33 million. Profitability increased as the year progressed following a
slow start, due partially to the loss of more than three weeks` production at
Richards Bay (largely as a result of an extensive maintenance shut). Throughout
the period substantial progress was made on the management of product mix to
optimise margins as opposed to volumes, evidenced by 86,000 tonnes of
commercial downtime on UFP production, otherwise destined for low margin export
markets. Results towards the end of the period benefited from these product mix
changes as well as selling price increases for both domestic and export sales.
The Division also delivered EUR6 million in cost savings in the period.
In the domestic market (which represents about 37% of the Division`s UFP
volume), price increases during the year of around 20% were achieved. The
domestic market for UFP continues to grow at around 4% per annum. Sales to
Africa (which represent approximately one-quarter of the Division`s UFP volume)
became a major focus area, with price increases (quoted in USD) of around 10%
realised during the year. The remaining UFP volume, which is destined for non-
African markets, was significantly down, but margins benefited from the weaker
rand.
Pulp sales volumes were up by 19%, while price increases (quoted in USD) of 15%
year-on-year were achieved.
Almost 80% of the production from our corrugated operations, comprising the
whitetop linerboard machine at Richards Bay, is exported. Sales levels were
similar to the previous year, as global supply and demand remained in balance
throughout the year. Accordingly, profits were up in the period, with export
sales benefiting from the weaker rand.
A significant breakthrough was achieved in the settlement of land claims in
South Africa, with the signing of a land restitution settlement whereby the
first of Mondi`s forestry land will be transferred to two local communities
under a sale and leaseback agreement. Mondi retains ownership of the forests,
which ensures security of timber supply to Mondi`s operations, while meeting
the needs of the land restitution process in South Africa. It is anticipated
that this settlement will provide a framework for settling future forestry land
claims with Mondi.
Mondi Packaging South Africa (MPSA)
EUR million 2008 2007 change %
Segment revenue 474 419 +13
- of which inter-segment revenue 27 28 -4
EBITDA 52 53 -2
Underlying operating profit 28 35 -20
Capital expenditure 1 38 47 -19
Net segment assets 301 335 -10
Return on capital employed (%) 8.6 13.8 -38
1 Capital expenditure is cash payments and excludes business combinations.
Underlying operating profit was marginally up (1%) in local currency, including
a full year charge for the amortisation of Lenco intangibles acquired in July
2007. The local currency performance was, however, impacted on translation into
euros at the much weaker rand rate, resulting in an underlying operating profit
decline of EUR7 million to EUR28 million. Demand and pricing remained positive
and corrugated packaging and containerboard volumes were up 4% and 5%
respectively versus the comparable period. This performance was helped by good
demand from the agricultural sector. Price increases were implemented for the
domestic containerboard market with effect from 1 October 2008. However, price
increases lagged input cost pressures, particularly from recycled fibre. In
anticipation of a softer trading environment in early 2009, the corrugated
mills took market related downtime in the fourth quarter amounting to 7,000
tonnes (10% of the capacity in the quarter). The Lenco acquisition (rigid
plastics manufacturer) contributed positively to profits and is now performing
better after a slow start.
Progress on the execution of major projects has been good, with the Felixton
rebuild commissioned on time in April 2008 and within budget. This will
increase containerboard production by 45,000 tonnes per annum to 155,000 tonnes
per annum. This repositions Felixton to produce lightweight recycled
containerboard to serve the growing domestic market.
During the period MPSA was refinanced through a R1.0 billion cash injection
from Mondi Limited which allowed for the pay down of expensive external debt.
The funds were provided by way of loans and equity. As a result of the
refinancing, Mondi`s shareholding in the business increased from 55% to 70%
with effect from 17 December 2008.
Merchant and Newsprint
EUR million 2008 2007 change %
Segment revenue 593 591 0
- of which inter-segment revenue 1 1 0
EBITDA 24 60 -60
Underlying operating profit 7 40 -82
Capital expenditure 1 10 18 -44
Net segment assets 196 248 -21
Return on capital employed (%) 3.3 17.3 -81
1 Capital expenditure is cash payments and excludes business combinations.
Mondi`s joint venture operation, Aylesford Newsprint (which accounted for just
under half Merchant and Newsprint`s 2007 full-year operating profit), recorded
an operating loss for the year as a result of falling selling prices, due to
competition from imports, and rising energy and recycled fibre input costs. The
recent weakening of sterling, together with newsprint capacity closures in
Europe and North America, supported UK newsprint price increases of around 20%
for 2009, which will see a return to profitability of this business. At
Europapier margins came under pressure in the second half as trading was
impacted by the general economic slowdown and adverse currency movements. At
Mondi Shanduka Newsprint earnings were down in local currency, with volume and
price increases largely eroded by cost pressures. A significantly weaker rand
exchange rate exacerbated the earnings decrease on translation into euros.
Corporate and other
Net corporate costs after special items were EUR1 million higher than the
comparable period in 2007, due mainly to the disposal of non-core businesses at
the end of 2007 which contributed approximately EUR3 million of profits in the
comparable period.
FINANCIAL REVIEW
Special items (refer to note 6 of the condensed financial statements)
In aggregate, pre-tax special items amounted to a charge of EUR387 million
(EUR383 million after tax), made up as follows:
An operating special item charge of EUR358 million, principally comprising:
- goodwill impairment costs of EUR194 million;
- asset impairment costs of EUR99 million;
- closure and restructuring costs of EUR56 million; and
- charges related to demerger arrangements put in place for senior executives
following the demerger from Anglo American plc in July 2007 of EUR9 million.
A non-operating special item charge of EUR29 million was recognised, which
mainly comprises the loss on the sale of the Niedergosgen recycled
containerboard mill in Switzerland, the two corrugated converting operations in
France and three UK Corrugated sheet feeder plants.
Finance costs
Net finance charges of EUR159 million were EUR60 million higher than 2007 due
to higher borrowings and average interest rates, related particularly to
emerging market debt, and foreign currency charges. The latter were incurred
mainly in the fourth quarter and amounted to EUR28 million (2007: EUR2
million). This was largely due to significant devaluations of various emerging
market currencies (notably Turkey, the Ukraine, Mexico and Russia), resulting
in foreign exchange charges being incurred on non local currency denominated
loans made to our businesses in these markets. Excluding these charges, the
effective cost of net debt was 7.5% for the year. (Approximately 25% of the
debt is South African rand-denominated with average interest rates of 12.4% for
the year).
Taxation
The effective tax rate before special items of 29% was similar to the 2007
full-year rate. There is only minor tax relief on special items.
Minority interests
Minority interests for the year were EUR17 million lower than the comparable
period, as earnings were down at the significant operations where there are
non-controlling interests, particularly at wiecie in Poland within the Europe &
International Division.
Cash flow and borrowings
EBITDA of EUR814 million in the year was 6%, or EUR56 million, lower than 2007,
reflecting the more difficult trading environment. Cash inflows from operations
of EUR795 million were EUR162 million down on the comparable period, mainly due
to the lower EBITDA and lower inflows on working capital than achieved in the
prior year. Cash inflow from working capital of EUR27 million was achieved
despite a 1% increase in sales and an already strong performance in the prior
year (EUR97 million). Indeed, since the half-year working capital inflows
amounted to EUR153 million.
Capital expenditure of EUR369 million (excluding spend on the two major
strategic projects of EUR324 million) was slightly lower than depreciation of
EUR373 million. We have reviewed our capital expenditure plans with a view to
limiting 2009 capital expenditure approvals to below 40% of depreciation. The
remaining expenditure on the two major projects is estimated at EUR511 million,
the bulk of which will be spent in 2009 with some flow through to 2010.
Spending on acquisitions completed during the year totalled EUR89 million
(enterprise value). Acquisitions were primarily focused on the strengthening of
the product mix and geographic coverage of our Bags & Specialities business.
Balance sheet and returns on invested capital
Trading capital employed at the year-end was EUR4,367 million, EUR451 million
lower than 2007, mainly due to special item impairments of EUR293 million,
foreign exchange movements of EUR454 million and disposals of EUR94 million,
partially offset by capital expenditure of EUR816 million including business
combinations (EUR443 million in excess of depreciation).
Return on capital employed declined from 10.6% to 9.5% as a result of reduced
profitability. This return is below our target across the cycle of 13%.
Treasury and borrowings
The Group`s treasury function operates within clearly defined Board-approved
policies and limits, follows controlled reporting procedures and is subject to
regular internal and external reviews.
Net debt at year-end of EUR1,690 million was EUR183 million higher than 2007
(only EUR35 million up since the end of June 2008) as the rate of capital
expenditure increased on the two key capital projects in Poland and Russia.
Gearing as at 31 December 2008 was 38.7%, and the net debt to EBITDA ratio was
2.1.
Group liquidity is provided through a range of committed debt facilities of
EUR2.8 billion, which are in excess of the Group`s short-term needs. The
principal debt facilities are a EUR1.55 billion, 5 year, syndicated revolving
credit facility, and a R2.0 billion (EUR152 million) 3 year amortising term
loan maturing in 2010. Despite the unfavourable banking environment in 2008 the
Group secured additional long-term facilities to assist in funding its two
major investment projects; a EUR174 million, 11 year amortising facility from
Export Credit Agencies was signed to part fund the investment in Russia; and a
EUR140 million, 9 year facility from the European Investment Bank was arranged
to fund the investment in Poland. Additionally, R1 billion (EUR76 million) of
new facilities were arranged in South Africa with a 3 year maturity. The
average maturity of the committed debt facilities is 3.4 years (versus 3.5
years in 2007). Drawn facilities maturing over the next 12 months amount to
EUR371 million. We would expect the majority of these facilities to be renewed,
but to the extent they are not they will be financed out of existing undrawn
committed facilities (nearly EUR1.1 billion at year-end).
PRINCIPAL RISKS AND UNCERTAINTIES
It is in the nature of our business that Mondi is exposed to risks and
uncertainties which may have an impact on future performance and financial
results, as well as upon our ability to meet certain social and environmental
objectives. The Group believes that it has effective systems and controls in
place to manage the key risks identified below.
Mondi operates in a highly competitive environment
The markets for paper and packaging products are highly competitive. Similarly,
prices of Mondi`s key paper grades have experienced substantial fluctuations in
the past. However, Mondi is flexible and responsive to changing market and
operating conditions and the Group`s geographic and product diversification
provides some measure of protection. Uncertain future trading conditions may
have an impact on the carrying value of goodwill and tangible assets and may
result in further restructuring activities.
Input costs are subject to significant fluctuations
Materials, energy and consumables used by Mondi include significant amounts of
wood, pulp, recovered paper, packaging papers and chemicals. Increases in the
costs of any of these raw materials, or any difficulties in procuring wood in
certain countries, could have an adverse effect on Mondi`s business,
operational performance or financial condition. However, Mondi`s focus on
operational performance, and relatively high level of integration and access to
its own fibre in Russia and South Africa, act to mitigate these risks. It is
also anticipated that the recent settlement of land claims in South Africa will
provide a framework for settling future forestry land claims with Mondi.
Significant capital investments including acquisitions carry project risk
Mondi is in the process of completing two significant capital investments to
expand and upgrade existing facilities in Poland and Russia. These projects
carry risks and Mondi has put in place dedicated teams to ensure delivery of
the projects on time and within budget.
Going Concern
The current economic conditions will impact short-term demand growth for our
products, as well as place pressure on both customers and suppliers which may
face liquidity issues, and could have an adverse impact on Mondi`s business.
Furthermore, the lack of credit availability could impact the Group`s ability
to effectively execute its strategy. However, Mondi`s geographic spread,
product diversity and large customer base mitigate these risks. The proactive
initiatives by management in rationalising the business through cost-cutting,
asset closures and divestitures have consolidated the Group`s leading cost
position in its chosen markets. Working capital as a percentage of sales has
reduced and capital expenditure programmes have been reduced.
The Group meets its funding requirements through two principal loan facilities,
being a EUR1.55 billion, 5 year, syndicated revolving credit facility expiring
in June 2012, and a R2 billion (EUR152 million) 3 year amortising term loan
maturing in May 2010. The availability of these facilities is dependent upon
the Group meeting certain financing covenants, most significantly an EBITDA to
net debt ratio of 3.5. At the year end this ratio was 2.1. Mondi had nearly
EUR1.1 billion of undrawn committed debt facilities as at 31 December 2008 with
an average maturity of 4.0 years, which should provide sufficient liquidity for
Mondi in the medium term.
The Group`s forecasts and projections, taking account of reasonable possible
changes in trading performance, show that the Group should be able to operate
within the level of its current facility and the related covenants.
As a consequence, the directors believe that the Group is well placed to manage
its business risks successfully, despite the current uncertain economic
outlook.
After making enquiries, the directors have a reasonable expectation that the
company and the Group have adequate resources to continue in operational
existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the
annual report and accounts.
BOARD
Paul Hollingworth stepped down from the Boards as chief financial officer
during the fourth quarter. The Boards of Mondi would like to thank Paul for his
significant contribution to the Group and also for his work in helping to
establish Mondi as a separate listed Group following its demerger from Anglo
American plc. We are pleased that we have an excellent replacement, Andrew
King, who has worked for Mondi for seven years, latterly as Group strategy and
business development director. Andrew King joined the Boards as chief financial
officer on 23 October 2008 and is based in South Africa.
DIVIDEND
The Boards recognise the importance of dividends to shareholders. Mondi remains
well financed, with healthy operating cashflows and a strong balance sheet.
However, given the continued uncertain economic outlook and lack of liquidity
in the financial markets, it is proposed to pay a reduced full-year dividend
which remains in line with the targeted dividend cover range of two to three
times.
Accordingly, the boards of Mondi Limited and Mondi plc have recommended a final
dividend of 5.0 euro cents per share, payable on 20 May 2009 to shareholders on
the register at 24 April 2009. An equivalent final dividend will be paid in
South African rand on the same terms. Together with the interim dividend paid
in September 2008 of 7.7 euro cents per share, this gives a full-year dividend
of 12.7 euro cents per share.
MAINTAINING OUR COMPETITIVE ADVANTAGE
We believe that our strategy remains valid especially in the current economic
environment. Leading market positions, low cost operations and a robust focus
on performance have always been key elements of that strategy and in today`s
challenging economic times its benefits will be even more pronounced.
Building on market leadership
At a time of global uncertainty in our industry, we believe it is more
important than ever that we continue to strengthen our leading positions in
packaging and UFP, particularly in emerging markets. These markets will not be
immune to recession, as we indicated at the end of last year, but they continue
to offer above-average long-term growth potential.
Remaining a low cost producer
We are committed to delivering superior returns, above the average of our
competitors, and this commitment is undiminished by the difficult trading
conditions. The value of having much of our production in some of the world`s
lowest- cost regions is a significant benefit when volumes and selling prices
are under pressure.
Our high level of vertical integration in the supply chain, combining low-cost
upstream assets with low-cost production, gives us good security of supply and
greatly reduces our exposure to volatility in raw material prices.
Sharpening focus on performance
The requirement for continuous productivity improvements and cost reduction is
imperative in our business. Our highly-experienced management teams have
implemented a continuous series of business excellence programmes in recent
years and rigorous asset management is second nature for everyone in our
operations. This unwavering emphasis on cost control and operational
performance has never been more important than in the current economic climate
and we target further cost reductions of EUR180 million in 2009.
CURRENT YEAR OUTLOOK
Given the level of global economic uncertainty that emerged in the latter part
of 2008, the outlook inevitably remains challenging. However Mondi`s strong
financial position, our low cost, high quality asset base and our quick and
decisive response to rapidly changing economic events leave us well positioned
to benefit when market conditions improve. As such, the Boards remain confident
in the medium and long-term prospects for the Group.
Condensed combined and consolidated income statement
for the year ended 31 December 2008
2008
Before Special After
special items special
items (note 6) items
EUR million Notes
Group revenue 4 6,345 - 6,345
Materials, energy and
consumables used (3,384) - (3,384)
Variable selling expenses (542) - (542)
Gross margin 2,419 - 2,419
Maintenance and other indirect expenses (300) - (300)
Personnel costs (926) (41) (967)
Other net operating expenses (379) (24) (403)
Depreciation, amortisation and impairments (373) (293) (666)
Operating profit/(loss) from
subsidiaries and joint ventures 4 441 (358) 83
Net (loss)/profit on disposals 6 - (27) (27)
Impairment of assets held for sale 6 - (2) (2)
Net income from associates 2 - 2
Total profit/(loss) from
operations and associates 443 (387) 56
Investment income 15 - 15
Interest expense (174) - (174)
Net finance costs 7 (159) - (159)
Profit/(loss) before tax 284 (387) (103)
Taxation (charge)/credit 8 (82) 4 (78)
Profit/(loss) from continuing
operations 5 202 (383) (181)
Attributable to:
Minority interests 30 - 30
Equity holders 172 (383) (211)
Earnings per share (EPS) for
(loss)/profit attributable to
equity holders
Basic EPS (EUR cents) 10 (41.6)
Diluted EPS (EUR cents) 10 (41.6)
Basic underlying EPS (EUR cents) 10 33.9
Diluted underlying EPS (EUR cents) 10 33.4
Basic headline EPS (EUR cents) 10 20.3
Diluted headline EPS (EUR cents) 10 20.0
2007
Before Special After
special items special
items (note 6) items
EUR million
Group revenue 6,269 - 6,269
Materials, energy and consumables used (3,265) - (3,265)
Variable selling expenses (558) - (558)
Gross margin 2,446 - 2,446
Maintenance and other indirect expenses (289) - (289)
Personnel costs (906) (17) (923)
Other net operating expenses (381) - (381)
Depreciation, amortisation and impairments (368) (60) (428)
Operating profit/(loss) from
subsidiaries and joint ventures 502 (77) 425
Net (loss)/profit on disposals - 83 83
Impairment of assets held for sale - - -
Net income from associates 2 - 2
Total profit/(loss) from operations and
associates 504 6 510
Investment income 44 - 44
Interest expense (143) (29) (172)
Net finance costs (99) (29) (128)
Profit/(loss) before tax 405 (23) 382
Taxation (charge)/credit (117) 15 (102)
Profit/(loss) from continuing
operations 288 (8) 280
Attributable to:
Minority interests 47 - 47
Equity holders 241 (8) 233
Earnings per share (EPS) for
(loss)/profit attributable to equity
holders
Basic EPS (EUR cents) 45.4
Diluted EPS (EUR cents) 45.1
Basic underlying EPS (EUR cents) 46.9
Diluted underlying EPS (EUR cents) 46.7
Basic headline EPS (EUR cents) 39.5
Diluted headline EPS (EUR cents) 39.3
There were no discontinued operations in either of the years presented.
Condensed combined and consolidated balance sheet
as at 31 December 2008
EUR million Notes 2008 2007
Intangible assets 323 520
Property, plant and equipment 3,611 3,731
Forestry assets 214 224
Investments in associates 5 6
Financial asset investments 19 25
Deferred tax assets 36 32
Retirement benefits surplus - 11
Total non-current assets 4,208 4,549
Inventories 684 760
Trade and other receivables 1,104 1,304
Current tax assets 32 52
Cash and cash equivalents 155 180
Derivative financial instruments 73 17
Total current assets 2,048 2,313
Assets held for sale 5 -
Total assets 6,261 6,862
Short-term borrowings (378) (453)
Trade and other payables (1,035) (1,150)
Current tax liabilities (53) (81)
Provisions (25) (14)
Derivative financial instruments (38) (3)
Total current liabilities (1,529) (1,701)
Medium and long-term borrowings (1,467) (1,234)
Retirement benefits obligation (182) (200)
Deferred tax liabilities (292) (322)
Provisions (39) (50)
Other non-current liabilities (14) (17)
Derivative financial instruments (39) (2)
Total non-current liabilities (2,033) (1,825)
Liabilities directly associated with assets
classified as held for sale (3) -
Total liabilities (3,565) (3,526)
Net assets 4 2,696 3,336
Equity
Ordinary share capital 11/13 114 114
Share premium 11/13 532 532
Retained earnings and other reserves 11 1,677 2,317
Total attributable to equity holders 2,323 2,963
Minority interest in equity 373 373
Total equity 2,696 3,336
Condensed combined and consolidated cash flow statement
for the year ended 31 December 2008
EUR million Notes 2008 2007
Cash inflows from operations 15a 795 957
Dividends from associates 2 1
Income tax paid (71) (93)
Net cash inflows generated from operating
activities 726 865
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and cash
equivalents 14 (49) (193)
Proceeds from disposal of subsidiaries, net of
cash and cash equivalents 17 112
Proceeds from disposal of associates - 54
Purchases of property, plant and equipment 15f (693) (406)
Proceeds from the disposal of property, plant and
equipment 29 17
Investment in forestry assets (43) (41)
Purchases of financial asset investments (2) (2)
Purchase of intangible assets (7) (4)
Proceeds from the sale of financial asset investments 1 2
Loan repayments from related parties 1 15
Interest received 28 18
Other investing activities 8 (6)
Net cash used in investing activities (710) (434)
Cash flows from financing activities
Repayment of short-term borrowings 15c (214) (945)
Proceeds from medium and long-term borrowings 15c 543 564
Interest paid (169) (139)
Dividends paid to minority interests (20) (47)
Dividends paid to equity holders 9 (118) (38)
Dividends paid to Anglo American plc group companies - (202)
Increase in Anglo American plc invested capital - 120
Purchase of treasury shares (15) (33)
Other financing activities 1 3
Net cash used in financing activities 8 (717)
Net decrease in cash and cash equivalents 24 (286)
Cash and cash equivalents at start of year1 59 358
Cash movement in the year 15c 24 (286)
Cash acquired through business combinations 15c 3 -
Reclassifications 15c (2) (3)
Effects of changes in foreign exchange rates 15c (9) (10)
Cash and cash equivalents at end of year1 15b 75 59
Note:
1 `Cash and cash equivalents` includes overdrafts and cash flows from disposal
groups and is reconciled to the balance sheet in note 15b.
Condensed combined and consolidated statement of recognised income and
expense for the year ended 31 December 2008
EUR million 2008 2007
Fair value losses accreted on cash flow hedges, net of
amounts recycled to the combined and
consolidated income statement (39) (3)
Actuarial (losses)/gains on post-retirement benefit schemes (14) 12
Fair value losses on available for sale investments (1) (1)
Exchange gains on demerger - 9
Exchange losses on translation of foreign operations (248) (71)
Other movements - (1)
Total expense recognised directly in equity1 (302) (55)
(Loss)/profit for the year (181) 280
Total recognised income and expense for the year (483) 225
Attributable to:
Minority interests 26 56
Equity holders of the parent companies (509) 169
Note:
1 Net of related tax.
Notes to the condensed combined and consolidated financial statements
1 Basis of preparation
The condensed financial information included in this preliminary announcement
has been prepared in accordance with the measurement and recognition criteria
of International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) and have been prepared in
accordance with IAS34, `Interim Financial Reporting`. There are no differences
for the Group in applying IFRS as issued by the IASB and the European Union
(EU) and therefore the Group also complies with IFRS as endorsed by the EU.
Dual listed structure
The Group has two separate legal parent entities, Mondi Limited and Mondi plc,
which operate under a dual listed company (DLC) structure. The substance of the
DLC structure is such that Mondi Limited, and its subsidiaries, and Mondi plc,
and its subsidiaries, operate together as a single economic entity through a
sharing agreement, with neither parent entity assuming a dominant role.
Accordingly, Mondi Limited and Mondi plc are reported on a combined and
consolidated basis as a single reporting entity under IFRS.
Pre-demerger
During the period up to 2 July 2007 (the `pre-demerger period`), the Group did
not form a separate legal group. `The Anglo American plc investment in the
Group` is therefore presented for the pre-demerger period, representing the
aggregated share capital, share premium and reserve balances of the Group`s
constituent entities, together with debtor and creditor balances held in
respect of the Anglo American group and deemed to be equity funding in nature.
Any interest accruing on such balances is classified as a dividend in specie
and recorded separately through reserves, not through the condensed combined
and consolidated income statement.
The financial information set out does not constitue the Group`s statutory
accounts for the year ended 31 December 2008, but is derived from those
accounts. Statutory accounts for 2008 will be delivered to the Registrar of
Companies following the Group`s annual general meeting on 7 May 2009. The
auditors have reported on those accounts; their reports were unqualified and
did not draw attention to any matters by way of emphasis without qualifying
their reports and did not contain statements under s237 (2) or (3) of the UK
Companies Act 1985. Copies of their unqualified auditors` reports are available
for inspection at the Mondi Limited and Mondi plc registered offices.
2 Accounting policies
The same accounting policies, presentation and measurement principles have been
followed in the condensed combined and consolidated financial statements as
applied in the Group`s audited financial information for the year ended 31
December 2007.
3 Seasonality
The seasonality and cyclicality of the Group`s operations do not impact
significantly on the condensed combined and consolidated financial statements.
4 Segmental information
Based on the risks and returns of the Mondi Group, the Boards consider the
primary reporting format is by business segment and the secondary reporting
format is by geographical segment.
Primary reporting format - by business segment
2008
Inter-
Segment segment Group
revenue revenue 1 revenue
EUR million
Europe & International
Bags & Specialities 2,138 (22) 2,116
Uncoated Fine Paper 1,565 (174) 1,391
Corrugated 1,555 (58) 1,497
Intra-segment elimination (99) 99 -
Sub-total 5,159 (155) 5,004
South Africa
Uncoated Fine Paper 474 (174) 300
Corrugated 134 (132) 2
Intra-segment elimination (21) 21 -
Sub-total 587 (285) 302
Mondi Packaging South Africa 474 (27) 447
Merchant and Newsprint businesses 593 (1) 592
Corporate and other businesses - - -
Inter-segment revenue (468) 468 -
Total 6,345 - 6,345
2007
Inter-
Segment segment Group
revenue revenue 1 revenue
EUR million
Europe & International
Bags & Specialities 2,005 (19) 1,986
Uncoated Fine Paper 1,666 (177) 1,489
Corrugated 1,616 (55) 1,561
Intra-segment elimination (98) 98 -
Sub-total 5,189 (153) 5,036
South Africa
Uncoated Fine Paper 491 (267) 224
Corrugated 125 (125) -
Intra-segment elimination (25) 25 -
Sub-total 591 (367) 224
Mondi Packaging South Africa 419 (28) 391
Merchant and Newsprint businesses 591 (1) 590
Corporate and other businesses 28 - 28
Inter-segment revenue (549) 549 -
Total 6,269 - 6,269
Segment operating profit
before special items 2
EUR million 2008 2007
Europe & International
Bags & Specialities 159 154
Uncoated Fine Paper 126 99
Corrugated 49 133
Sub-total 334 386
South Africa
Uncoated Fine Paper 75 53
Corrugated 36 25
Sub-total 111 78
Mondi Packaging South Africa 28 35
Merchant and Newsprint businesses 7 40
Corporate and other businesses (39) (37)
Total 441 502
Segment operating
profit/(loss)
after special items
EUR million 2008 2007
Europe & International
Bags & Specialities (58) 153
Uncoated Fine Paper 98 36
Corrugated (62) 128
Sub-total (22) 317
South Africa
Uncoated Fine Paper 75 48
Corrugated 36 25
Sub-total 111 73
Mondi Packaging South Africa 28 35
Merchant and Newsprint businesses 7 40
Corporate and other businesses (41) (40)
Total 83 425
Note:
1 Inter-segment transactions are conducted on an arm`s length basis.
2 Segment result is defined as being segment revenue less segment expense; that
is operating profit and fair value gains/(losses) that have been recycled to
the combined and consolidated income statement on cash flow hedges of operating
transactions. There are no material inter-segment transfers or transactions
that would affect the segment result.
The segment result before special items, as shown above, is reconciled to
`Profit from continuing operations` in the Group`s combined and consolidated
income statement as follows:
EUR million 2008 2007
Operating profit before special items and associates` net
income 441 502
Operating special items (see note 6)
Subsidiaries and joint ventures: (358) (77)
Europe & International (356) (69)
South Africa - (5)
Corporate and other businesses (2) (3)
Operating profit after special items and before associates`
net income 83 425
Net (loss)/profit on disposal of subsidiaries and associates (27) 83
Impairment of assets held for sale (2) -
Net income from associates 2 2
Total profit from operations and associates 56 510
Net finance costs (159) (128)
Profit before tax (103) 382
Taxation charge (78) (102)
Group (loss)/profit from continuing operations (181) 280
Primary segment disclosures for segment assets, liabilities and capital
expenditure are as follows:
Segment assets 1
2008 2007
EUR million
Europe & International
Bags & Specialities 1,632 1,851
Uncoated Fine Paper 1,589 1,491
Corrugated 1,171 1,389
Intra-segment
elimination (76) (45)
Sub-total 4,316 4,686
South Africa
Uncoated Fine Paper 720 913
Corrugated 139 165
Intra-segment elimination (2) (4)
Sub-total 857 1,074
Mondi Packaging South
Africa 371 426
Merchant and Newsprint
businesses 283 337
Corporate and other
businesses 13 12
Inter-segment elimination (101) (157)
Segments total 5,739 6,378
Unallocated:
Investment in associates 5 6
Deferred tax
assets/(liabilities) 36 32
Other non-operating
assets/(liabilities) 4 307 241
Group trading capital
employed 6,087 6,657
Financial asset
investments 19 25
Net debt 5 155 180
Group net assets 6,261 6,862
Segment liabilities 2
2008 2007
EUR million
Europe & International
Bags & Specialities (315) (305)
Uncoated Fine Paper (177) (203)
Corrugated (241) (316)
Intra-segment
elimination 76 45
Sub-total (657) (779)
South Africa
Uncoated Fine Paper (80) (100)
Corrugated (19) (12)
Intra-segment elimination 2 4
Sub-total (97) (108)
Mondi Packaging South
Africa (70) (92)
Merchant and Newsprint
businesses (87) (90)
Corporate and other
businesses (3) (14)
Inter-segment elimination 101 157
Segments total (813) (926)
Unallocated:
Investment in associates - -
Deferred tax
assets/(liabilities) (292) (322)
Other non-operating
assets/(liabilities) 4 (615) (591)
Group trading capital
employed (1,720) (1,839)
Financial asset
investments - -
Net debt5 (1,845) (1,687)
Group net assets (3,565) (3,526)
Net segment assets
2008 2007
EUR million
Europe & International
Bags & Specialities 1,317 1,546
Uncoated Fine Paper 1,412 1,288
Corrugated 930 1,073
Intra-segment
elimination - -
Sub-total 3,659 3,907
South Africa
Uncoated Fine Paper 640 813
Corrugated 120 153
Intra-segment elimination - -
Sub-total 760 966
Mondi Packaging South
Africa 301 334
Merchant and Newsprint
businesses 196 247
Corporate and other
businesses 10 (2)
Inter-segment elimination - -
Segments total 4,926 5,452
Unallocated:
Investment in associates 5 6
Deferred tax
assets/(liabilities) (256) (290)
Other non-operating
assets/(liabilities) 4 (308) (350)
Group trading capital
employed 4,367 4,818
Financial asset
investments 19 25
Net debt5 (1,690) (1,507)
Group net assets 2,696 3,336
Capital expenditure 3
2008 2007
EUR million
Europe & International
Bags & Specialities 185 169
Uncoated Fine Paper 284 101
Corrugated 246 261
Intra-segment
elimination - -
Sub-total 715 531
South Africa
Uncoated Fine Paper 40 24
Corrugated 6 2
Intra-segment elimination - -
Sub-total 46 26
Mondi Packaging South
Africa 44 156
Merchant and Newsprint
businesses 11 18
Corporate and other
businesses - 5
Inter-segment elimination - -
Segments total 816 736
Unallocated:
Investment in associates
Deferred tax
assets/(liabilities)
Other non-operating
assets/(liabilities) 4
Group trading capital
employed
Financial asset
investments
Net debt5
Group net assets
Notes:
1 Segment assets are operating assets and at 31 December 2008 consist of
property, plant and equipment of EUR3,611 million (2007: EUR3,731 million),
intangible assets of EUR323 million (2007: EUR520 million), forestry assets of
EUR214 million (2007: EUR224 million), retirement benefits surplus of EURnil
(2007: EUR11 million), inventories of EUR684 million (2007: EUR760 million) and
operating receivables of EUR907 million (2007: EUR1,132 million).
2 Segment liabilities are operating liabilities and at 31 December 2008 consist
of non-interest bearing current liabilities of EUR619 million (2007: EUR711
million), provisions of EUR12 million (2007: EUR15 million) and provisions for
post-retirement benefits of EUR182 million (2007: EUR200 million).
3 Capital expenditure reflects cash payments and accruals in respect of
additions to property, plant and equipment and intangible assets of EUR761
million (2007: EUR429 million) and includes additions resulting from
acquisitions through business combinations of EUR55 million (2007: EUR307
million).
4 Other non-operating assets consist of derivative assets of EUR73 million
(2007: EUR17 million), current income tax receivables of EUR32 million (2007:
EUR52 million), other non-operating receivables of EUR197 million (2007:
EUR173 million) and assets held for sale of EUR5 million (2007: EURnil
million). Other non-operating liabilities consist of derivative liabilities of
EUR77 million (2007: EUR5 million), non-operating provisions of EUR52 million
(2007:EUR49 million), current income tax liabilities of EUR53 million (2007:
EUR81 million), other non-operating liabilities of EUR430 million (2007:
EUR456 million) and liabilities directly associated with assets held for sale
of EUR3 million (2007: EURnil million).
5 Overdrafts of EUR80 million (2007: EUR121 million) are included in
borrowings.
Primary segment disclosures for depreciation, amortisation and impairments are
as follows:
Depreciation and amortisation
EUR million 2008 2007
Europe & International
Bags & Specialities 113 106
Uncoated Fine Paper 94 104
Corrugated 82 75
Sub-total 289 285
South Africa
Uncoated Fine Paper 34 34
Corrugated 7 10
Sub-total 41 44
Mondi Packaging South Africa 25 18
Merchant and Newsprint businesses 17 20
Corporate and other businesses 1 2
Total 373 368
Impairments
EUR million 2008 2007
Europe & International
Bags & Specialities 190 -
Uncoated Fine Paper 1 57
Corrugated 102 -
Sub-total 293 57
South Africa
Uncoated Fine Paper - 4
Corrugated - -
Sub-total - 4
Mondi Packaging South Africa - -
Merchant and Newsprint businesses - -
Corporate and other businesses - -
Total 293 61
Secondary reporting format - by geographical segment
The Group`s geographical analysis of revenue, allocated based on the country in
which the customer is located, is presented as follows.
Revenue
EUR million 2008 2007
Subsidiaries and joint ventures
South Africa 616 618
Rest of Africa 251 213
Western Europe 2,932 3,162
Eastern Europe 1,326 1,148
Russia 430 421
North America 183 194
South America 31 29
Asia and Australia 576 484
Total 6,345 6,269
Additional disclosure of secondary segmental information of revenue by origin
is presented as follows:
Revenue
EUR million 2008 2007
Subsidiaries and joint ventures
South Africa 1,015 995
Rest of Africa 15 12
Western Europe 2,772 2,840
Eastern Europe 1,691 1,615
Russia 569 546
North America 120 121
Asia and Australia 163 140
Total 6,345 6,269
The Group`s geographical analysis of segment assets, liabilities and capital
expenditure, allocated based on where assets and liabilities are located, is
presented as follows:
Segment assets Segment liabilities
EUR million 2008 2007 2008 2007
Subsidiaries and joint
ventures
South Africa 1,195 1,444 (152) (139)
Rest of Africa 11 19 (1) (5)
Western Europe 1,993 2,376 (392) (546)
Eastern Europe 1,700 1,855 (190) (144)
Russia 618 446 (33) (27)
North America 86 112 (11) (20)
Asia and Australia 136 126 (34) (45)
Total 5,739 6,378 (813) (926)
Net segment assets Capital expenditure
EUR million 2008 2007 2008 2007
Subsidiaries and joint
ventures
South Africa 1,043 1,305 92 186
Rest of Africa 10 14 1 1
Western Europe 1,601 1,830 96 208
Eastern Europe 1,510 1,711 357 263
Russia 585 419 263 65
North America 75 92 2 3
Asia and Australia 102 81 5 10
Total 4,926 5,452 816 736
5 (Loss)/profit from continuing operations
2008 2007
EUR million
(Loss)/profit for the year has been arrived at after
charging/(crediting):
Depreciation of property, plant and equipment 364 363
Amortisation of intangible assets 9 5
Rentals under operating leases 71 31
Research and development expenditure 10 9
Restructuring/closure costs (excluding special items) 7 28
Operating special items (see note 6) 358 77
Net foreign currency (gains)/losses (7) 4
Green energy sales and disposal of emissions credits (53) (42)
Fair value gains on forestry assets (46) (32)
Felling costs 43 51
(Profit)/loss on disposal of property, plant and equipment (6) 1
6 Special items
2008 2007
EUR million
Operating special items
Asset impairments
Bags & Specialities (Europe & International) (70) -
Uncoated Fine Paper (Europe & International) (1) (57)
Uncoated Fine Paper (South Africa) - (4)
Corrugated (Europe & International) (28) -
Total asset impairments (99) (61)
Restructuring and closure costs
Bags & Specialities (Europe & International) (8) -
Uncoated Fine Paper (Europe & International) (15) -
Corrugated (Europe & International) (1) -
Total restructuring and closure costs (24) -
Goodwill impairments
Bags & Specialities (Europe & International) (120) -
Corrugated (Europe & International) (74) -
Total goodwill impairments (194) -
Mondi Packaging South Africa negative goodwill - 1
Demerger arrangements (9) (9)
Personnel costs relating to restructuring
Bags & Specialities (Europe & International) (18) -
Uncoated Fine Paper (Europe & International) (8) -
Corrugated (Europe & International) (6) -
Accelerated charge on Anglo American plc share-based award
schemes - (8)
Total operating special items (358) (77)
(Loss)/profit on disposals
Disposal of Niedergosgen (16) -
Disposal of Mondi Packaging Emball SAS (8) -
Disposal of UK Sheetfeeders (3) -
Disposal of partial interest in Mondi Packaging Paper
Swiecie S.A. - 57
Disposal of Bischof + Klein GmbH - 19
Sale of other businesses - 7
Net (loss)/profit on disposal (27) 83
Asset impairment of assets held for sale (2) -
Financing cost - (29)
Total non-operating special items (29) 54
Total special items before tax and minority interests (387) (23)
Taxation 4 15
Total special items attributable to equity holders (383) (8)
Year ended 31 December 2008
Operating special items
The sharp decline in demand experienced in a number of markets, together with
the recognition that we are entering a prolonged global economic slowdown has
resulted in management taking a number of actions.
Bags & Specialities
Significant market related down time has been taken due to overcapacity created
by a significant slowdown in demand. Various restructuring initiatives have
been implemented in response to the lower demand environment. As a result the
Group has incurred restructuring and closure costs of EUR26 million, and asset
impairment costs of EUR70 million. Management has also impaired goodwill by
EUR120 million.
Uncoated Fine Paper
Management has closed and restructured operations resulting in costs of EUR23
million, and asset impairment costs of EUR1 million.
Corrugated
Given the continued difficult trading conditions in the Corrugated Packaging
sector Mondi responded by closing, or restructuring, certain high cost
operations. This has resulted in restructuring and closure costs of EUR7
million and asset impairment costs of EUR28 million. The business has suffered
from price erosion due to a combination of overcapacity and slowing demand, and
has impaired goodwill of EUR74 million.
Demerger arrangements
Equity settled demerger arrangements for senior management have also resulted
in additional share based payments of EUR9 million. It is expected that a
further and final EUR5 million will be incurred by the Group in respect of
senior management demerger arrangements over the period ending 3 July 2009.
Non-operating special items
The Group disposed of 100% of its interest in Niedergosgen on 31 December 2008
for a consideration of approximately EUR19 million at a loss on disposal of
EUR16 million. The Group also disposed of its interest in Mondi Packaging
Emball SAS for a consideration of approximately EUR4 million at a loss of EUR8
million on 1 December 2008 and UK Sheetfeeders for a consideration of
approximately EUR21 million at a loss of EUR3 million on 12 May 2008. The Group
impaired the EUR2 million assets of Ile de France that is reflected as held for
sale on the balance sheet.
7 Net finance costs
Net finance costs and related foreign exchange gains/(losses) are presented
below:
2008 2007
EUR million
Investment income
Interest income
Bank deposits, loan receivables and other 22 22
Available for sale investments - 1
Past due receivables 1 1
Total interest income 23 24
Expected return on defined benefit arrangements 20 22
Foreign currency losses (28) (2)
Impairment of financial assets (excluding trade receivables) (1) -
Other financial income 1 -
Total investment income 15 44
Financing costs
Interest expense
Interest on bank overdrafts and loans (169) (119)
Interest on obligations under finance leases (1) (1)
Interest on defined benefit arrangements (28) (28)
Total interest expense (198) (148)
Other
Net gains on held for trading interest rate swaps - 2
Net losses arising on derivatives in a designated fair value
hedge accounting relationship - (1)
Total other - 1
Less: interest capitalised 24 4
Total financing costs prior to special items (174) (143)
Special items financing cost (see note 6) - (29)
Total financing costs after special items (174) (172)
Net finance costs (159) (128)
The weighted average interest rate applicable to interest on general borrowings
capitalised for the year ended 31 December 2008 is 13.0% (2007: 8.4%) mainly
related to loans in Russia and Poland.
8 Taxation charge
Analysis of charge for the year from continuing operations
2008 2007
EUR million
UK corporation tax at 28.5% (2007: 30%) (5) (1)
Overseas taxation 66 89
Current tax (excluding tax on special items) 61 88
Deferred tax in respect of the current period (excluding tax
on special items) 30 29
Deferred tax in respect of prior period over provision (9) -
Total tax charge before special items 82 117
Current tax on special items (2) (1)
Deferred tax on special items (2) (14)
Total tax credit on special items (4) (15)
Total tax charge 78 102
The Group`s effective rate of taxation before special items for the year ended
31 December 2008, which includes taxation on net income from associates, is 29%
(2007: 29%).
9 Dividends
Dividend payments
An interim dividend for the year ended 31 December 2008 of 88.68113 rand cents
/ 7.7 euro cents per share was paid on 16 September 2008 to all Mondi Limited
and Mondi plc ordinary shareholders on the relevant registers on 29 August
2008. A proposed final dividend for the year ended 31 December 2008 of 5.0 euro
cents per share will be paid on 20 May 2009 to all Mondi Limited and Mondi plc
ordinary shareholders on the relevant registers on 24 April 2009. The final
dividend is subject to the approval of the shareholders of Mondi Limited and
Mondi plc at the respective annual general meetings scheduled for 7 May 2009.
Dividend timetable
The proposed final dividend for the year ended 31 December 2008 will be paid in
accordance with the following timetable:
Mondi Limited Mondi plc
Last date to trade shares cum-dividend
JSE Limited 17 April 2009 17 April 2009
London Stock Exchange Not applicable 21 April 2009
Shares commence trading ex-dividend
JSE Limited 20 April 2009 20 April 2009
London Stock Exchange Not applicable 22 April 2009
Record date
JSE Limited 24 April 2009 24 April 2009
London Stock Exchange Not applicable 24 April 2009
Last date for Dividend Reinvestment
Plan (DRIP) 5 May 2009 5 May 2009
elections by Central Securities
Depository
Participants
Last date for DRIP elections to UK
Registrar and 6 May 2009 6 May 2009
South African Transfer Secretaries by
shareholders
of Mondi Limited and Mondi plc
Payment Date
South African Register 20 May 2009 20 May 2009
UK Register Notapplicable 20 May 2009
Depositary Interest Holders
(dematerialised DIs) 26 May 2009 Not applicable
Holders within the Equiniti Corporate
Nominee 28 May 2009 Not applicable
Currency conversion date
ZAR/euro 26 February 2009 26 February 2009
Euro/sterling Not applicable 11 May 2009
DRIP purchase settlement dates 27 May 2009 26 May 2009*
*27 May 2009 for Mondi plc South African branch register shareholders.
Share certificates on the South African registers of Mondi Limited and Mondi
plc may not be dematerialised or rematerialised between 20 April 2009 and 24
April 2009, both dates inclusive, nor may transfers between the UK and South
African registers of Mondi plc take place between 15 April 2009 and 24 April
2009, both dates inclusive.
In the event South African National Elections are confirmed for 22 April 2009,
a public holiday may be declared and the above dividend timetable would be
impacted. In such instance, Mondi would likely bring the Mondi Limited and
Mondi plc South African branch register cum-dividend dates forward by one day
to 16 April 2009, with the respective ex-dividend dates being changed to 17
April 2009. The record and payment dates would remain as stated above
10 Earnings per share
For 2007, the Group was not a stand-alone entity prior to the demerger date on
2 July 2007. The number of ordinary shares issued on admission was
retrospectively applied to the comparative period, so that a meaningful
comparison can be made.
EUR cents per share 2008 2007
(Loss)/profit for the financial year attributable to
equity-holders
Basic EPS (41.6) 45.4
Diluted EPS (41.6) 3 45.1
Underlying earnings for the financial year 1
Basic EPS 33.9 46.9
Diluted EPS 33.4 46.7
Headline earnings for the financial year 2
Basic EPS 20.3 39.5
Diluted EPS 20.0 39.3
Notes:
1 The Boards believes that underlying EPS provides a useful additional non-GAAP
measure of the Group`s underlying performance. Underlying EPS excludes the
impact of special items.
2 The presentation of Headline EPS is mandated under the JSE Listings
Requirements. Headline earnings has been calculated in accordance with
Circular8/2007, `Headline Earnings`, as issued by the South African Institute
of Chartered Accountants. Please see the reconciliation presented below.
3 Diluted EPS is consistent with Basic EPS as the impact of potential ordinary
shares is anti-dilutive.
The calculation of basic and diluted EPS, basic and diluted underlying EPS, and
basic and diluted Headline EPS is based on the following data.
Earnings
2008 2007
EUR million
(Loss)/profit for the financial year attributable to equity
holders (211) 233
Special items: operating 358 77
Net loss/(profit) on disposals 27 (83)
Impairment of assets held for sale 2 -
Special items: financing costs - 29
Related tax (4) (15)
Underlying earnings 172 241
(Profit)/loss on disposal of tangible fixed assets (6) 1
Special items: financing costs - (29)
Special items: demerger arrangements (9) (9)
Special items: accelerated charges on exiting Anglo American
plc share and option schemes - (8)
Special items: Restructuring and closure cost (56) -
Related tax 2 7
Headline earnings 103 203
Number of shares
million 2008 2007
Basic number of ordinary shares outstanding 1 507 513
Effect of dilutive potential ordinary shares 2 8 4
Diluted number of ordinary shares outstanding 515 517
Notes:
1 The basic number of ordinary shares outstanding represents the weighted
average number in issue for Mondi Limited and Mondi plc for the year, as
adjusted for the weighted average number of treasury shares held during the
year.
2 Diluted EPS is calculated by adjusting the weighted average number of
ordinary shares in issue, net of treasury shares, on the assumption of
conversion of all potentially dilutive ordinary shares.
11 Reconciliation of movement in combined and consolidated equity
Share capital
Mondi
Mondi Limited
Limited share Mondi plc
share capital premium share capital
2008/EUR million
At 1 January 11 532 103
Final dividend - 2007 - - -
Interim dividend - 2008 - - -
Retained loss - - -
Issue of shares under
employee share schemes - - -
Purchase of treasury
shares2 - - -
Share options exercised -
Anglo American share
scheme - - -
Disposal of business - - -
Minority share dilution - - -
Other - - -
At 31 December 11 532 103
Combined
share capital
and share Retained
premium earnings
2008/EUR million
At 1 January 646 2,154
Final dividend - 2007 - (80)
Interim dividend - 2008 - (38)
Retained loss - (211)
Issue of shares under
employee share schemes - 7
Purchase of treasury
shares2 - (15)
Share options exercised -
Anglo American share
scheme - (3)
Disposal of business - (1)
Minority share dilution - (4)
Other - -
At 31 December 646 1,809
Total
equity
attributable
Other to equity
reserves 1 holders
2008/EUR million
At 1 January 163 2,963
Final dividend - 2007 - (80)
Interim dividend - 2008 - (38)
Retained loss - (211)
Issue of shares under
employee share schemes (7) -
Purchase of treasury
shares2 - (15)
Share options exercised -
Anglo American share
scheme - (3)
Disposal of business - (1)
Minority share dilution - (4)
Other (288) (288)
At 31 December (132) 2,323
Notes:
1 Other reserves are further analysed below.
2 The treasury shares purchased represents the cost of shares in Mondi plc and
Mondi Limited purchased in the market and held by the Mondi Employee Share
Trust and the Mondi Incentive Schemes Trust respectively to satisfy options
under the Group`s share options schemes. The number of ordinary shares held by
the Mondi Employee Share Trust and the Mondi Incentive Schemes Trust at 31
December 2008 was 7,943,115 and 115,000 shares respectively (2007: 5,820,232
and nil respectively) at an average price of 3.95 and R47.51 per share
respectively (2007: 4.08 and Rnil per share respectively).
Share capital
Anglo Mondi Limited
investment in Mondi Limited share
2007/EUR million Mondi Group share capital premium
At 1 January - as restated 1,899 - -
Anglo American plc
contribution 120 - -
Dividend in specie 2 32 - -
Dividends paid to Anglo
American plc - - -
Retained profit pre-
demerger - - -
Termination of Anglo
American plc equity
interest (2,051) 3 540
Dividend in specie to
Anglo
American plc shareholders - - -
Share issue expenses - - -
Share capital reduction - - -
Dividend in specie to
Mondi plc shareholders - - -
Issue of special
converting
shares - 8 (8)
Interim dividend - - -
Purchase of treasury
shares3 - - -
Post-demerger retained
profit - - -
Share-based payments
transfer - - -
Other - - -
At 31 December - 11 532
Combined
share capital
Mondi plc and share Retained
2007/EUR million share capital premium earnings
At 1 January - as restated - 1,899 1,100
Anglo American plc
contribution - 120 -
Dividend in specie 2 - 32 (32)
Dividends paid to Anglo
American plc - - (202)
Retained profit pre-
demerger - - 164
Termination of Anglo
American plc equity
interest - (1,508) (832)
Dividend in specie to Anglo
American plc shareholders 2,938 2,938 -
Share issue expenses - - (74)
Share capital reduction (2,864) (2,864) 2,864
Dividend in specie to
Mondi plc shareholders - - (794)
Issue of special converting
shares 29 29 (29)
Interim dividend - - (38)
Purchase of treasury
shares3 - - (33)
Post-demerger retained
profit - - 68
Share-based payments
transfer - - (8)
Other - - -
At 31 December 103 646 2,154
Total
equity
Other attributable to
2007/EUR million reserves 1 equity holders
At 1 January - as restated (33) 2,966
Anglo American plc
contribution - 120
Dividend in specie 2 - -
Dividends paid to Anglo
American plc - (202)
Retained profit pre-
demerger - 164
Termination of Anglo
American plc equity
interest 2,411 71
Dividend in specie to Anglo
American plc shareholders (2,938) -
Share issue expenses - (74)
Share capital reduction - -
Dividend in specie to
Mondi plc shareholders 794 -
Issue of special converting
shares - -
Interim dividend - (38)
Purchase of treasury
shares3 - (33)
Post-demerger retained
profit - 68
Share-based payments
transfer - (8)
Other (71) (71)
At 31 December 163 2,963
Notes:
1 Other reserves are further analysed below.
2 The dividend in specie represents interest accrued to Anglo American plc
during the period ended 3 July 2007 on a loan instrument classified as equity
under IAS 32, `Financial Instruments: Presentation`. On demerger from Anglo
American plc, the Group`s obligation under this loan instrument ceased.
3 The treasury shares purchased represents the cost of shares in Mondi plc and
Mondi Limited purchased in the market and held by the Mondi Employee Share
Trust and the Mondi Incentive Schemes Trust respectively to satisfy options
under the Group`s share options schemes. The number of ordinary shares held by
the Mondi Employee Share Trust and the Mondi Incentive Schemes Trust at 31
December 2007 was 5,820,232 and nil shares respectively at an average price of
4.08 and Rnil per share respectively
Other reserves
Cumulative
Share-based translation Available Cash flow
payment adjustment for sale hedge
2008/EUR million reserve reserve reserve reserve
At 1 January 13 (88) - 4
Mondi share schemes`
charge 18 - - -
Issue of shares
under
employee share
schemes (7) - - -
Actuarial and
surplus
restriction
movements - - - -
Fair value losses
accreted - - (1) (25)
Fair value gains
recycled to the
income
statement - - - (14)
Call option issued - - - -
Currency translation
adjustment - (248) - -
At 31 December 24 (336) (1) (35)
Other reserves
Post
retirement
benefit
obligation Merger Other
2008/EUR million reserve reserve reserves Total
At 1 January (22) 259 (3) 163
Mondi share schemes`
charge - - - 18
Issue of shares under
employee share
schemes - - - (7)
Actuarial and surplus
restriction movements (14) - - (14)
Fair value losses
accreted - - - (26)
Fair value gains
recycled to the income
statement - - - (14)
Call option issued - - (4) (4)
Currency translation
adjustment - - - (248)
At 31 December (36) 259 (7) (132)
Other reserves
Cumulative
Share-based translation
payment adjustment Available for Cash flow
2007/EUR million reserve reserve sale reserve hedge reserve
At 1 January 12 (17) 1 7
Termination of Anglo
American plc equity
interest - 9 - -
Dividend in specie to
Anglo American plc
shareholders - - - -
Dividend in specie to
Mondi plc shareholders - - - -
Purchase of Anglo
American plc shares (19) - - -
Anglo American plc
share schemes` charge 10 - - -
Exiting Anglo American
plc share schemes (3) - - -
Mondi share schemes`
charge 13 - - -
Actuarial and surplus
restriction movements - - - -
Fair value
gains/(losses) accreted - - (1) (20)
Fair value
(gains)/losses recycled
to the income
statement - - - 17
Currency translation
adjustment - (80) - -
At 31 December 13 (88) - 4
Other reserves
Post
retirement
benefit
obligation Merger
2007/EUR million reserve reserve Other reserves Total
At 1 January (34) - (2) (33)
Termination of Anglo
American plc equity
interest - 2,403 (1) 2,411
Dividend in specie to
Anglo American plc
shareholders - (2,938) - (2,938)
Dividend in specie to
Mondi plc shareholders - 794 - 794
Purchase of Anglo
American plc shares - - - (19)
Anglo American plc
share schemes` charge - - - 10
Exiting Anglo American
plc share schemes - - - (3)
Mondi share schemes`
charge - - - 13
Actuarial and surplus
restriction movements 12 - - 12
Fair value
gains/(losses) accreted - - - (21)
Fair value
(gains)/losses recycled
to the income
statement - - - 17
Currency translation
adjustment - - - (80)
At 31 December (22) 259 (3) 163
12 Asset values per share
Asset values per share are disclosed in accordance with the JSE Listings
Requirements. Net asset value per share is defined as net assets divided by the
combined number of shares in issue as at 31 December 2008, less treasury shares
held. Tangible net asset value per share is defined as the net assets less
intangible assets divided by the combined number of shares in issue as at 31
December 2008, less treasury shares held.
2008 2007
Net asset value per share (EUR) 5.34 6.56
Tangible net asset value per share (EUR) 4.70 5.54
13 Share capital and share premium
Authorised
Number of
shares R million
Mondi Limited R0.20 ordinary shares 250,000,000 50
Authorised
Number of
shares EUR million
Mondi plc EUR0.20 ordinary shares 3,177,608,605 636
There has been no change to the authorised share capital of either Mondi
Limited or Mondi plc since listing on the respective stock exchanges on 3 July
2007.
Called up, allotted and fully paid/EUR million
Number of
2008 shares
Share
Share capital premium Total
Mondi Limited R0.20
ordinary shares
issued on the JSE 146,896,322 3 532 535
Mondi plc1 EUR0.20
ordinary shares
issued on the LSE 367,240,805 74 - 74
Total ordinary shares
in issue 514,137,127 77 532 609
Mondi Limited R0.20
special converting
shares 367,240,805 8 - 8
Mondi plc EUR0.20
special converting
shares 2 146,896,322 29 - 29
Total special
converting shares 514,137,127 37 - 37
Total shares 1,028,274,254 114 532 646
Called up, allotted and fully paid/EUR million
Number of
2007 shares
Share
Share capital premium Total
Mondi Limited R0.20
ordinary shares
issued on the JSE 146,896,322 3 532 535
Mondi plc1 EUR0.20
ordinary shares
issued on the LSE 367,240,805 74 - 74
Total ordinary shares
in issue 514,137,127 77 532 609
Mondi Limited R0.20
special converting
shares 2 367,240,805 8 - 8
Mondi plc EUR0.20
special converting
shares issued on the
JSE2 146,896,322 29 - 29
Total special
converting shares 514,137,127 37 - 37
Total shares 1,028,274,254 114 532 646
Notes:
1 Mondi plc also issued 50,000 5% cumulative GBP1 preference shares in 2007. The
Group classifies these preference shares as a liability, and not as equity
instruments, since they contractually obligate the Group to make cumulative
dividend payments to the holders. The dividend payments are treated as a
finance cost rather than distributions.
2 The special converting shares are held on trust and do not carry dividend
rights. The special converting shares provide a mechanism for equality of
treatment on termination for both Mondi Limited and Mondi plc ordinary equity
holders.
14 Business combinations
Name of entity acquired Nature of entity acquired Date of acquisition
Dunapack Bag converting April 2008
Rochester Coating April 2008
Loparex Group Coating and Kraft paper April 2008
Name of entity acquired Percentage acquired
Dunapack 100.0
Rochester 100.0
Loparex Group 100.0
Details of the aggregate net assets acquired, as adjusted from book to fair
value, and the attributable goodwill are presented as follows:
Book value Revaluation Fair value
EUR million
Net assets acquired:
Intangible assets 1 8 9
Property, plant and equipment 59 (32) 27
Financial asset investments 5 - 5
Deferred tax assets 1 2 3
Inventories 22 (1) 21
Trade and other receivables 44 2 46
Cash and cash equivalents 3 - 3
Short-term borrowings (3) - (3)
Other current liabilities (44) - (44)
Long-term borrowings (37) - (37)
Deferred tax liabilities (3) (1) (4)
Contingent liabilities 2 - 2
Retirement benefits obligation - - -
Equity minority interest 5 - 5
Net assets acquired 55 (22) 33
Goodwill arising on acquisition 19
Total cost of acquisition 52
Cash acquired net of overdrafts (3)
Net cash paid 49
The values used in accounting for the identifiable assets and liabilities of
these acquisitions are provisional in nature at the balance sheet date. If
necessary, adjustments will be made to these carrying values, and to the
related goodwill, within 12 months of the acquisition date.
During the year to 31 December 2008 adjustments totalling EUR7 million have
been made to the provisional values estimated of net assets of Tire Kutsan
acquired in the year to 31 December 2007.
The goodwill which arose on the acquisition of Dunapack represents the value
harnessed of further expanding into the emerging markets of Hungary and Ukraine
and consolidating the Group`s position in Bag Converting in the CEE region.
Furthermore it represents significant potential for synergies and
rationalisation in Hungary. The goodwill which arose in Rochester represent the
value assessed with strengthening our market position in Coatings and will
allow to utilise substantial synergies. No goodwill was recognised on
acquisition of the Loparex Group.
15 Consolidated cash flow analysis
(a) Reconciliation of profit before tax to cash inflows from operations
2008 2007
EUR million
(Loss)/profit before tax (103) 382
Depreciation and amortisation 373 368
Share option expense 9 6
Non-cash effect of special items of subsidiaries and joint
ventures 368 23
Net finance costs 159 99
Net income from associates (2) (2)
Decrease in provisions and post-employment benefits (21) (14)
Decrease/(increase) in inventories 26 (69)
Decrease/(increase) in operating receivables 106 25
(Decrease)/increase in operating payables (105) 141
Fair value gains on forestry assets (46) (32)
Cost of felling 43 51
(Profit)/loss on disposal of fixed assets (6) 1
Purchase of Anglo American plc shares - (19)
Other adjustments (6) (3)
Cash inflows from operations 795 957
(b) Cash and cash equivalents
2008 2007
EUR million
Cash and cash equivalents per balance sheet 155 180
Bank overdrafts included in short-term borrowings (80) (121)
Net cash and cash equivalents per cash flow statement 75 59
(c) Movement in net debt
The Group`s net debt position, excluding disposal groups is as follows:
Cash and Debt due
cash within one
equivalents1 year2
Balance at 1 January 2007 358 (1,181)
Cash flow (286) 945
Business combinations 3 - (38)
Disposal of businesses - 1
Reclassifications (3) (82)
Currency movements (10) 23
Closing balance at 31 December 2007 59 (332)
Cash flow 24 214
Business combinations 3 3 (3)
Disposal of businesses - 5
Reclassifications (2) (215)
Currency movements (9) 33
Closing balance at 31 December 2008 75 (298)
Debt due
after one Total net
year debt
Balance at 1 January 2007 (656) (1,479)
Cash flow (564) 95
Business combinations 3 (122) (160)
Disposal of businesses - 1
Reclassifications 85 -
Currency movements 23 36
Closing balance at 31 December 2007 (1,234) (1,507)
Cash flow (543) (305)
Business combinations 3 (37) (37)
Disposal of businesses 20 25
Reclassifications 215 (2)
Currency movements 112 136
Closing balance at 31 December 2008 (1,467) (1,690)
Notes:
1 The Group operates in certain countries (principally South Africa) where the
existence of exchange controls may restrict the use of certain cash balances.
These restrictions are not expected to have any material effect on the Group`s
ability to meet its ongoing obligations.
2 Excludes overdrafts, which are included as cash and cash equivalents. At 31
December 2008, short-term borrowings on the combined and consolidated balance
sheet of EUR378 million (2007: EUR453 million) include EUR80 million of
overdrafts (2007: EUR121 million).
3 See note 14.
(d) Reconciliation of cash inflows from operations to EBITDA for the years
ended 31 December
EUR million 2008 2007
Cash inflows from operations 795 957
Share option expense (9) (6)
Fair value gains on forestry assets 46 32
Cost of felling (43) (51)
Decrease in provisions and post employment benefits 21 14
(Decrease)/increase in inventories (26) 69
(Decrease)/increase in operating receivables (106) (25)
Decrease/(increase) in operating payables 105 (141)
Purchase of Anglo American plc shares - 19
Profit/(loss) on disposal of assets 6 (1)
Add back cash effect of operating special items of
subsidiaries and joint ventures 19 -
Other adjustments 6 3
EBITDA 1 814 870
Note:
1 EBITDA is operating profit before special items plus depreciation and
amortisation in subsidiaries and joint ventures.
(e) EBITDA by business segment
EUR million 2008 2007
Europe & International
Bags & Specialities 271 260
Uncoated Fine Paper 221 202
Corrugated 131 208
Sub-total 623 670
South Africa
Uncoated Fine Paper 109 87
Corrugated 43 35
Sub-total 152 122
Mondi Packaging South Africa 52 53
Merchant and Newsprint businesses 24 60
Corporate and other businesses (37) (35)
EBITDA 814 870
EBITDA is stated before special items and is reconciled to
`Total profit from operations and associates` as follows:
2008 2007
EUR million
Total profit from operations and associates 56 510
Special items (excluding associates) 358 77
Net loss/(profit) on disposals (excluding associates) 27 (83)
Impairment of assets held for sale 2 -
Depreciation and amortisation: subsidiaries and joint ventures 373 368
Share of associates` net income (2) (2)
EBITDA 814 870
(f) Capital expenditure cash payments 1
2008 2007
EUR million
By business segment
Europe & International
Bags & Specialities 136 102
Uncoated Fine Paper 266 98
Corrugated 199 111
Sub-total 601 311
South Africa
Uncoated Fine Paper 37 21
Corrugated 7 2
Sub-total 44 23
Mondi Packaging South Africa 38 47
Merchant and Newsprint businesses 10 18
Corporate and other businesses - 7
Total 693 406
Note:
1 Excludes business combinations and purchase of intangible assets.
16 Capital commitments
EUR million 2008 1 2007
Contracted for but not provided 405 74
Approved, not yet contracted for 219 824
Note:
1 The significant shift relates to the development of the new lightweight
recycled containerboard machine and new box plant at the Swiecie mill in
Poland, and the modernisation and expansion of the Syktyvkar mill in Russia.
17 Contingent liabilities and contingent assets
Disclosable contingent liabilities comprise aggregate amounts at 31 December
2008 of EUR17 million (2007: EUR16 million) in respect of loans and guarantees
given to banks and other third parties. Acquired contingent liabilities of EUR2
million (2007: EUR5 million) have been recorded on the Group`s combined and
consolidated balance sheet.
There are a number of legal or potential claims against the Group. Provision is
made for all liabilities that are expected to materialise.
There were no significant disclosable contingent assets at 31 December 2008 or
31 December 2007.
18 Related party transactions
The Group has a related party relationship with its associates and joint
ventures and, up to the date of demerger, with certain Anglo American plc group
companies. Transactions between Mondi Limited, Mondi plc and their respective
subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
The Group and its subsidiaries, in the ordinary course of business, enter into
various sale, purchase and service transactions with joint ventures and
associates and others in which the Group has a material interest. These
transactions are under terms that are no less favourable than those arranged
with third parties. These transactions, in total, are not considered to be
significant.
Anglo
American plc Joint
group Ventures Associates
EUR million
2008
Sales to related parties - 11 -
Purchases from related parties - (1) (32)
Loans to related parties - 10 -
Receivables due from related
parties - 7 1
2007
Sales to related parties - 8 8
Purchases from related parties - (2) (1)
Net finance costs (22) - -
Dividends paid to related parties (202) - -
Dividends in specie (32) - -
Loans to related parties - 13 -
Receivables due from related
parties - 5 -
Cyril Ramaphosa, joint chairman of Mondi, has a 32.7% (2007:39.96%) stake in
Shanduka Group (Pty) Limited, an entity that has controlling interests in
Shanduka Advisors (Pty) Limited, Shanduka Resources (Pty) Limited, Shanduka
Packaging (Pty) Limited and Shanduka Newsprint (Pty) Limited and participating
interests in Mondi Shanduka Newsprint (Pty) Limited, Kangra Coal (Pty) Limited,
Rennies Distribution Services (Pty) Limited and Mondi Packaging South Africa
(Pty) Limited. Fees of EUR340,000 (2007: EUR379,000) and EUR392,000 (2007:
EUR681,000) were paid to Shanduka Advisors (Pty) Limited and Shanduka Resources
(Pty) Limited respectively for management services provided to the Group during
the year ended 31 December 2008. Shanduka Packaging (Pty) Limited and Shanduka
Newsprint (Pty) Limited have also provided a shareholder`s loan to the Group.
The balance outstanding at 31 December 2008 was EUR12.9 million (2007: EUR16.8
million) and EUR7.1 million (2007: EUR9.2 million), respectively. In the normal
course of business, and on an arm`s length basis, the Group purchased supplies
from Kangra Coal (Pty) Limited totalling EUR12 million (2007: EUR9 million) and
made use of transport and warehousing services provided by Rennies Distribution
Services (Pty) Limited totalling EUR9 million (2007: EUR13 million) during the
period. EUR1 million (2007: EUR1 million) remains outstanding on these
purchases at 31 December 2008.
Production statistics
Year Ended Year Ended
31 December 31 December
2008 2007
Europe & International
Containerboard Tonnes 1,926,829 1,849,702
Kraft paper Tonnes 814,187 891,385
Corrugated board and boxes Mm2 2,104 2,088
Bag converting m units 3,536 3,642
Coating and release liners Mm2 2,667 2,971
Uncoated fine paper Tonnes 1,452,058 1,517,792
Newsprint Tonnes 192,921 192,329
Total hardwood pulp Tonnes 1,012,470 1,182,476
Total softwood pulp Tonnes 1,620,155 1,748,294
External hardwood pulp Tonnes 126,479 76,244
External softwood pulp Tonnes 200,676 213,218
South Africa
Containerboard Tonnes 251,944 251,661
Uncoated fine paper Tonnes 416,509 469,782
Wood chips Bone dry tonnes 780,932 690,447
Total hardwood pulp Tonnes 595,449 630,210
Total softwood pulp Tonnes 106,390 98,613
External hardwood pulp Tonnes 139,235 86,802
Mondi Packaging South Africa
Packaging papers Tonnes 388,199 368,574
Corrugated board and boxes Mm2 381 367
Total hardwood pulp Tonnes 82,554 65,829
Total softwood pulp Tonnes 43,090 64,274
Newsprint Joint Ventures
(attributable share)
Newsprint Tonnes 331,929 314,847
Aylesford Tonnes 200,540 185,990
Shanduka Tonnes 131,389 128,857
Total softwood pulp Shanduka Tonnes 86,464 86,469
Exchange rates
Year Ended Year Ended
31 December 31 December
2008 2007
Closing rates against the euro
South African rand 13.07 10.03
Pounds sterling 0.95 0.73
Polish zloty 4.15 3.59
Russian rouble 41.28 35.99
Slovakian koruna 30.13 33.58
US dollar 1.39 1.47
Czech koruna 26.87 26.63
Average rates for the period against the euro
South African rand 12.06 9.66
Pounds sterling 0.80 0.68
Polish zloty 3.52 3.78
Russian rouble 36.45 35.02
Slovakian koruna 31.28 33.77
US dollar 1.47 1.37
Czech koruna 24.97 27.76
26 February 2009
Sponsor
UBS South Africa (Pty) Ltd
Date: 26/02/2009 09:00:25 Supplied by www.sharenet.co.za
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