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MONDI PLC - Address to shareholders by the joint chairmen, chairman of the social and ethics committee and CEO

Release Date: 03/05/2013 11:30
Code(s): MNP MND     PDF:  
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Address to shareholders by the joint chairmen, chairman of the social and ethics committee and CEO

Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND ISIN: ZAE000156550

Mondi plc
(Incorporated in England and Wales)
(Registered number: 6209386)
JSE share code: MNP ISIN: GB00B1CRLC47
LSE share code: MNDI


As part of the dual listed company structure, Mondi Limited and Mondi plc notify both
the JSE Limited and the London Stock Exchange of matters required to be disclosed
under the JSE Listing Requirements and/or the Disclosure and Listing Rules of the
United Kingdom Listing Authority.

3 May 2013

MONDI LIMITED AND MONDI plc – ANNUAL GENERAL MEETINGS

ADDRESS TO SHAREHOLDERS BY THE JOINT CHAIRMEN, CHAIRMAN OF
THE SOCIAL & ETHICS COMMITTEE AND CHIEF EXECUTIVE OFFICER

Cyril Ramaphosa, Joint Chairman, speaking from Johannesburg:

Good morning, ladies and gentlemen. On behalf of the boards of Mondi Limited and
Mondi plc, we welcome you to the sixth annual general meeting of the Mondi Group.
We are delighted that you are joining us here in Johannesburg and there in London. As
is custom at our meeting, although we’re on separate continents with the use of
modern technology, David Williams and I, and our fellow board directors, take great
pleasure in being able to talk to you this morning, as one.

As you know, we share the chair of the Mondi Group and David Williams and I would
both like to say a few words this morning about Mondi’s progress over the last year.
Imogen will then report on the Social and Ethics Committee before your chief
executive, David Hathorn, reviews the Group’s performance and strategy in a little
more detail as well as updating you on the Group’s interim management statement that
we published earlier today. After this we will be delighted, as a board, to take your
questions. But first, let me introduce you to your Directors.

To my immediate left is Imogen Mkhize, an independent non-executive director and
Chair of the Mondi Limited Social and Ethics Committee. Next to her is David Hathorn,
your chief executive officer. And on his left is Philip Laubscher, company secretary of
Mondi Limited. Next to Philip is Andrew King, your chief financial officer.

With David Williams in London, we have Stephen Harris, an independent non-
executive director and chairman of the DLC sustainable development committee. Anne
Quinn, our senior independent director and chair of the DLC remuneration committee
and beside her Carol Hunt, company secretary of Mondi plc.

To David’s right, we have Peter Oswald, chief executive officer of the Europe &
International Division and, finally, John Nicholas independent non-executive director
and chairman of the DLC audit committee.
For the benefit of our new shareholders I should point out that, although the dual listed
company structure means that Mondi Limited in South Africa and Mondi plc in the UK
are separate corporate entities, each with its own board and shareholders, Mondi
operates as a single corporate group, managed as a single economic enterprise. The
two companies have the same board members and the same management team. The
DLC structure means that shareholders in each company fully share in the
performance of the Group as a whole.

In 2012 the Mondi Group delivered solid results in what was initially a particularly
challenging year but culminated in a strong final quarter.


The Group’s streamlined high quality assets performed very well throughout the year,
with the focus on low-cost production and high-growth emerging markets again
delivering positive outcomes for shareholders, despite the uncertain economic
environment.

Mondi remains a strong Group with a robust strategy and operational model. As a low-
cost producer, we are fully integrated across the packaging and paper process, adding
value at every stage of the product chain, from forestry, pulp and paper to the
conversion of packaging paper into corrugated packaging and industrial bags and the
manufacture of consumer packaging products.

Given the Group’s strong financial position, notwithstanding the significant debt-funded
acquisitions during the year, and the board’s stated objective to increase distributions
to shareholders, we are pleased to recommend an increase in the final dividend to 19.1
euro cents per share. If approved, this will make a total dividend for the year of 28.0
euro cents per share.

Before I hand over to David Williams, I would just like to highlight a few areas in which
we made particular progress last year.

At the end of 2012 Mondi employed some twenty five thousand people at one hundred
and two separate operating sites across thirty countries, with a particularly strong
presence in Central and Eastern Europe, Russia and South Africa. Often, we are the
single largest employer in the area in which we are located. This brings with it a great
responsibility, which we take very seriously. We want Mondi to be a sustainable,
socially-responsible business that makes a real and lasting contribution to every
community within which we operate.

We evaluate the economic and social impact of our operations on its local community.
This enables us to build tailored programmes that bring tangible benefits to those
communities. In 2012 we contributed EUR14.3 million in charitable donations and
community projects with a focus on health and education.

Here in South Africa, we continue to be a supporter of the government’s policy of
broad-based black economic empowerment, which influences many of our employment
and procurement practices.

We continue to make progress with land restitution and to date we have concluded
nineteen claims using our successful model for engaging and settling with land
claimant communities which ensures that the community derives an income and Mondi
retains a reliable source of wood supply. Mondi has also achieved significant
milestones in improving working conditions in its forestry operations in Russia and
South Africa. The objective over several years has been to develop practices that meet
international good practice standards and to ensure international competitiveness.

All of these developments and more are covered in detail in our integrated report and
the sustainability section on our website, additional copies of our reports are available
today – or you can download these from our web site.

As this is my last annual general meeting I would like to take the opportunity to
highlight how much I have enjoyed being part of the boards of the Mondi Group.
Seeing the Group grow in stature and success since it became an independently listed
company in 2007, has been particularly pleasing. I also wish to thank David Williams,
my Co Chairman and the directors for the very positive and constructive manner in
which the boards have worked together. A special thank you also goes to David
Hathorn and the Group executive team. I wish Mondi much continued success in the
future.

With that, I’d like to hand over to my co-chairman, David Williams, in London. David.



David Williams, Joint Chairman, speaking from London:

Thank you, Cyril.

As Cyril said, although Mondi is a dual listed company domiciled on two continents, it is
a single group with a unified management. Our boards comprise the same directors,
with independent non-executives on each, and those boards remain independent of the
executive committee, led by David Hathorn, which manages the Group on a day-to-day
basis.

We continue to strive to maintain the highest standards of governance practice. The
operation of the boards and committees is regularly reviewed and the performance of
the directors in 2012 was evaluated, producing a clear action plan for further
improvement in 2013.

Safety remains paramount to us across the Group and we continued to reduce
accidents in the workplace. However, despite these improvements, we deeply regret
that two people were fatally injured during the year, one in Finland and one in Russia.
The Group is committed to its goal of zero harm and thorough investigations were
undertaken after each incident to ensure that we continue to refine the safety
measures, including training programmes necessary to keep all our employees and
contractors safe. Safety is a key item on the agenda at every DLC board meeting and
we have tasked management with further entrenching safe behaviour throughout our
business.

Our focus and commitment to sustainability across the Group, is of course, much wider
than safety. Our sites are monitored against our integrated sustainable development
management system and the DLC sustainable development committee reviews regular
reports.

We are particularly pleased with our continued progress in sustainable forestry, the
increased use of renewable energy sources and emission reductions. All our forests in
Russia and South Africa have retained forest stewardship council certification.

The Group’s track record remains impressive in the sustainability area.
You can read more about our achievements and significant progress in areas such as
resource usage in the sustainability section of our web site.

The commendable set of financial results in 2012 was achieved by Mondi’s dedicated
twenty five thousand employees across the globe. We thank them all for their
considerable efforts.

2012 was another challenging year, with broader macroeconomic weakness continuing
to impact business across the globe. Against this backdrop, we are pleased with
Mondi’s performance in 2012 as the Group again demonstrated its ability to deliver
good results. The Group’s high-quality well invested assets and its focus on low-cost
production continue to be major competitive advantages.

The important acquisitions made during the past year will strengthen the Group’s
exposure to high-growth product segments and complement its strategic positioning to
continue to deliver value to shareholders into the future.

Before I hand you back to South Africa, I would like to say a few words about Cyril, my
co chairman. As announced on 23 January this year, Cyril will be stepping down at the
conclusion of this annual general meeting. On behalf of the boards and myself
personally I would like to thank Cyril for his significant contribution to the Mondi Group
over many years and wish him well for the future in the important role he has assumed
as deputy president of the African National Congress. Our search for a replacement co-
chair is on-going.

I now hand you back to South Africa and Imogen Mkhize, who will provide the report on
the social and ethics committee. Imogen.



Imogen Mkhize, Chairman of the Mondi Limited Social & Ethics Committee,
speaking from Johannesburg:

Thank you, David.

The South African Companies Act requires a report at the Annual General Meeting to
shareholders on the matters within the mandate of the Social and Ethics Committee.

A full report on the activities of the committee has been included in the Governance
section of the Group’s Integrated Report. I do not intend to repeat everything covered
in that report but can advise that, during 2012, the Committee held two meetings,
during which it assessed the scope of its activities and considered the policies,
practices and procedures of Mondi Limited relevant to that scope. I am pleased to
report that it is the opinion of the Committee that the existing policies, practices and
procedures are sufficient to address the statutory scope of the Committee, and that no
material shortcomings had been identified. During 2013 the Committee will follow its
work plan ensuring that all areas of its mandate are adequately monitored.

With that, I’d like to hand over to your Chief Executive, David Hathorn. David.



David Hathorn, Chief Executive Officer, speaking from Johannesburg:

Thank you, Imogen.

As your chairmen have said, in 2012 Mondi Group delivered a solid financial
performance in what remains an uncertain economic environment. While the early
part of the year was particularly challenging, trading picked up as the year
progressed, culminating in a strong final quarter.

In addition, Mondi has continued to make significant progress with growing its
packaging interests. The share of the Group’s capital employed in packaging
businesses, with typically higher structural growth rates, has increased from 54% to
67% over the last year.

The difficult first quarter was characterised by a continuation of the weak order book
seen towards the end of 2011, with trading picking up as the year progressed. Sales
volumes recovered into the second quarter and this, in turn, saw some price recovery
in certain of the Group’s major grades going into the second half of the year. The third
quarter was impacted by the traditional European summer slowdown in trading, but a
strong finish to the year, with good volumes and reasonable price levels in Europe,
meant the Group was able to deliver full year underlying operating profit of EUR568
million, 9% down on the very strong prior year result.

It is pleasing to see that the progress already made in integrating our recent
acquisitions is exemplified by the fact we have increased our estimate of expected
synergies by 33%, to EUR30 million per annum within two years.

Continued strong profitability resulted in a return on capital employed of 13.7%, once
again above our through-the-cycle target of 13%. The Group continued to be strongly
cash generative with cash generated from operations of EUR845 million.

During the year good progress was made in the ongoing process of shifting Mondi’s
portfolio to higher growth products. This included EUR1.2 billion of acquisitions in the
growing corrugated packaging and consumer packaging value chains.

The successful Nordenia acquisition complements and strengthens Mondi’s existing
consumer packaging business with a complementary product portfolio which
positions the Group well to develop a leading consumer packaging business, with an
enlarged geographic footprint and strong competitive advantages.

Mondi’s investment grade credit ratings first issued in 2010 were reaffirmed during
the year by both Moody’s Investors Service (Baa3 outlook positive) and Standard &
Poors (upgraded to BBB- outlook positive).

Working capital levels were maintained within the Group’s targeted level of 10% to
12% of turnover.

During the year capital expenditure amounted to EUR298 million, EUR35 million
higher than the previous year. The capital expenditure to depreciation ratio was 86%
including expenditure on a number of the Group’s strategic energy projects.

In early 2012, Mondi announced that it had approved various energy related
investments totaling approximately EUR140 million. The benefits of these
investments, mainly in the form of reduced energy costs, improved efficiencies and
energy self-sufficiency are expected to be realised from the end of 2013 as these
projects reach completion. As announced a number of additional energy related
projects, amounting to approximately EUR250 million, were under consideration. In
this regard, the Boards have since approved a further EUR128 million strategic
energy investment at the 51% held Ruzomberok mill in Slovakia which is expected to
be completed in the fourth quarter of 2014, delivering an after-tax internal rate of
return in excess of 40%. The Boards also approved a EUR70 million project at the
Steti kraft paper mill which is expected to be completed in the latter part of 2014,
delivering an after-tax internal rate of return of around 20%. Including the announced
strategic projects, capital expenditure is expected to be approximately 125% of the
Group’s depreciation charge on average over the next two years.

Our focus in the near term is on the integration and optimisation of the recent
acquisitions and successful delivery of the significant capital investment projects we
have initiated over the course of the past year.

As you know, earlier today we released our Interim Management Statement. I would
like to take this opportunity to briefly summarise the main points of the announcement.

Underlying operating profit for the first quarter of 2013 was EUR162 million, in line
with our expectations despite the write-down in the value of green energy credits of
EUR11 million. This reflects a 35% increase on the comparable prior year period of
EUR120 million and is in line with the EUR163 million in the previous quarter. The
significant increase over the comparable prior year period is a result of improved
market conditions in the Packaging Paper and South African businesses as well as
the benefits from the acquisitions of Nordenia and the corrugated packaging plants in
Germany and the Czech Republic completed towards the end of 2012.

In summary, the effects of expected capacity increases in recycled containerboard
and uncoated fine paper, coupled with prevailing demand softness across the
European businesses, remain a concern. However, recent price increases in the
packaging paper grades provide support and good progress is being made in
integrating the Group’s recent acquisitions. Management remains confident of
continuing to make progress, in line with its expectations.

In closing, I extend the Group’s sincere appreciation to Cyril Ramaphosa for his role
as Co-Chairman. I have thoroughly enjoyed our working relationship and am grateful
for Cyril’s invaluable contribution to Mondi over the years.

Now I would like to hand you back to our joint chairman David Williams.

ENDS

About Mondi
Mondi is an international packaging and paper Group, with production operations
across 30 countries and revenue of EUR5.8 billion in 2012. The Group’s key
operations are located in central Europe, Russia and South Africa and as at the end
of 2012, Mondi employed 25,700 people.

Mondi Group is fully integrated across the packaging and paper value chain, from the
growing of wood and the production of pulp and paper (packaging paper and
uncoated fine paper), to the conversion of packaging paper into corrugated
packaging, industrial bags, extrusion coatings and release liner. Mondi is also a
supplier of innovative consumer packaging solutions, advanced films and hygiene
products components.

Mondi Group has a dual listed company structure, with a primary listing on the JSE
Limited for Mondi Limited under the ticker code MND and a premium listing on the
London Stock Exchange for Mondi plc, under the ticker code MNDI. The Group has
been recognised for its sustainability through its inclusion in the FTSE4Good Global,
European and UK Index Series (since 2008) and the JSE’s Socially Responsible
Investment (SRI) Index since 2007. The Group was also included in the Carbon
Disclosure Project’s (CDP) FTSE 350 Carbon Disclosure Leadership Index (CDLI)
for the third year and in CDP’s FTSE 350 Carbon Performance Leadership Index
(CPLI) for the first time in 2012.


Sponsor in South Africa: UBS South Africa (Pty) Ltd

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