Wrap Text
Full year results for the year ended 31 December 2013
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 (together 'Mondi Group') notify both
the JSE Limited and the London Stock Exchange of matters required to be disclosed under the Listings
Requirements of the JSE Limited and/or the Disclosure and Transparency and Listing Rules of the United
Kingdom Listing Authority.
Full year results for the year ended 31 December 2013
Highlights
- Record financial performance
- Underlying operating profit of EUR699 million, up 22%
- Underlying earnings of 95 euro cents per share, up 37%
- ROCE of 15.3%, up 170 basis points
- 2012 packaging acquisitions integrated and synergies on track
- Strategic capital investments on track, with a number of projects completed
- Strong de-leveraging with net debt down by EUR251 million to EUR1,621 million
- Cash generated from operations exceeded EUR1 billion for the first time
- Total dividend proposed of 36 euro cents per share, up 29%
Financial Summary (Restated)(4) (Restated)(4)
Year ended Year ended Six months Six months
31 31 ended 31 ended 31
EUR million, except for percentages and per share December December December December
measures 2013 2012 Change % 2013 2012 Change %
Group revenue 6,476 5,790 12 3,134 2,971 5
Underlying EBITDA(1) 1,068 927 15 514 490 5
Underlying operating profit(1) 699 574 22 333 302 10
Operating profit 605 547 11 320 275 16
Profit before tax 499 368 36 270 146 85
Per share measures
Basic underlying earnings per share(2) (EUR
cents) 95.0 69.2 37
Basic earnings per share (EUR cents) 79.8 50.1 59
Total dividend per share (EUR cents) 36.0 28.0 29
Free cash flow per share(2) (EUR cents) 64.1 52.7 22
Cash generated from operations 1,036 849 22
Net debt 1,621 1,872
Group return on capital employed (ROCE)(3) 15.3% 13.6%
Notes:
(1) The Group presents underlying EBITDA, operating profit and related per share information as measures which exclude special items in order to
provide a more effective comparison of the underlying financial performance of the Group between financial reporting periods. A reconciliation
of underlying operating profit to profit before tax is provided in note 3 of the condensed financial statements.
(2) Free cash flow per share is the net increase in cash and cash equivalents before the effects of acquisitions and disposals of businesses,
changes in net debt and dividends paid divided by the net number of shares in issue at year end.
(3) ROCE is underlying profit expressed as a percentage of the average capital employed for the year, adjusted for impairments and spend on
strategic projects which are not yet in operation.
(4) The Group has restated comparative information following the adoption of revised IFRS standards. Full details of the restatements are set out in
note 2b of the condensed financial statements.
David Hathorn, Mondi Group chief executive, said:
"I am pleased to report a record financial performance, driven by our low cost position, exposure to
higher growth markets and ongoing focus on operational excellence. While growth in demand for the
Group's key products has remained generally subdued, supply-side constraint has been supportive of
pricing.
It is particularly pleasing to see how well the integration of the businesses acquired in late 2012 has
gone, with synergies delivered in line with target. Despite a difficult trading environment, the new
business segment of Consumer Packaging has demonstrated its resilience. With order books
strengthening in the new year and the structural growth dynamics still very much in place, we remain
confident in the future development of this business.
A further priority in 2013 was the successful development of the various capital expenditure projects
initiated over the past two years. It is again pleasing to report that a number of these were delivered
during the year, all within budget. The projects that are still in progress remain within budget and on
target for their scheduled completion dates over the coming two years.
The trading environment in the Group’s main markets remains mixed.The increase in the price of recycled containerboard
in the second half of 2013 on solid demand growth is encouraging, and should lend support to our other key containerboard grades.
However, price pressure in most virgin paper grades in the second half of 2013 means that we start the new year with lower
pricing than the average for 2013. The near-term outlook for pricing is largely dependent on the strength of the European macroeconomic recovery.
In this regard it is encouraging to see a recent pick-up in orders in some of our main product segments and we are in discussions with customers
on price increases in certain virgin packaging grades.
Recent exchange rate volatility in several of the emerging markets in which we operate does create its
challenges. However, the Group's positioning as a net exporter from most of these markets typically
allows us to benefit from the devaluation of these currencies relative to the euro.
We are confident that the ongoing capital investment programme will contribute meaningfully to our
performance going forward. Our proven ability to generate strong cash flow through the cycle
provides valuable optionality. As such, we remain confident in the Group's ability to continue
delivering industry-leading performance."
Contact details
Mondi Group
David Hathorn +27 11 994 5418
Andrew King +27 11 994 5415
Lora Rossler +27 83 627 0292
FTI Consulting
Richard Mountain / Sophie McMillan +44 20 7269 7186 / +44 20 7909 684 466
Bheki Mpofu / Lerato Matsaneng +27 88 552 2109 / +27 11 214 2407
Conference call dial-in and audio cast details
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 (toll-free)
UK 0808 162 4061 (toll-free)
Europe 00800 246 78 700 (toll-free)
Alternate +27 11 535 3600
An online audio cast facility will be available via: www.mondigroup.com/FYResults13.
The presentation will be available online via the above website address an hour before the audio cast
commences. Questions can be submitted via the dial-in conference call or by e-mail via the audio cast.
Should you have any issues on the day with accessing the dial-in conference call, please call +27 11 535 3600.
Should you have any issues on the day with accessing the audio cast, please e-mail mondi@kraftwerk.co.at
and you will be contacted immediately.
An audio recording of the presentation will be available on Mondi's website during the afternoon of 28
February 2014.
Editors' notes
Mondi is an international packaging and paper Group, employing around 24,000 people in production facilities
across 30 countries. In 2013, Mondi had revenues of EUR6.5 billion and a ROCE of 15.3%. The Group's key
operations are located in central Europe, Russia, the Americas and South Africa.
The Mondi Group is fully integrated across the packaging and paper value chain - from the management of its
own forests 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 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's performance, and the responsible approach it takes to good business practice, has
been recognised by its inclusion in the FTSE4Good Global, European and UK Index Series (since 2008) and
the JSE's Socially Responsible Investment (SRI) Index since 2007.
Forward-looking statements
This document includes forward-looking statements. All statements other than statements of historical facts
included herein, including, without limitation, those regarding Mondi's financial position, business strategy,
market growth and developments, expectations of growth and profitability and plans and objectives of
management for future operations, are forward-looking statements. Forward-looking statements are
sometimes identified by the use of forward-looking terminology such as "believe", "expects", "may", "will",
"could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes",
"positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of Mondi, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements and other statements contained in this document regarding
matters that are not historical facts involve predictions and are based on numerous assumptions regarding
Mondi's present and future business strategies and the environment in which Mondi will operate in the future.
These forward-looking statements speak only as of the date on which they are made.
No assurance can be given that such future results will be achieved; various factors could cause actual future
results, performance or events to differ materially from those described in these statements. Such factors
include in particular but without any limitation: (1) operating factors, such as continued success of
manufacturing activities and the achievement of efficiencies therein, continued success of product
development plans and targets, changes in the degree of protection created by Mondi's patents and other
intellectual property rights and the availability of capital on acceptable terms; (2) industry conditions,
such as strength of product demand, intensity of competition, prevailing and future global market prices for
Mondi's products and raw materials and the pricing pressures thereto, financial condition of the customers,
suppliers and the competitors of Mondi and potential introduction of competing products and technologies by
competitors; and (3) general economic conditions, such as rates of economic growth in Mondi's principal
geographical markets or fluctuations of exchange rates and interest rates.
Mondi expressly disclaims a) any warranty or liability as to accuracy or completeness of the information
provided herein; and b) any obligation or undertaking to review or confirm analysts' expectations or estimates
or to update any forward-looking statements to reflect any change in Mondi's expectations or any events that
occur or circumstances that arise after the date of making any forward-looking statements, unless required to
do so by applicable law or any regulatory body applicable to Mondi, including the JSE Limited and the LSE.
Any reference to future financial performance included in this announcement has not been reviewed or
reported on by the Group's auditors.
Overview
Mondi delivered a record financial performance in 2013, benefiting from a strong operating performance and
the strategic acquisitions completed in the latter part of 2012.
Underlying operating profit of EUR699 million was up 22% on that achieved in 2012. Excluding the effects of
acquisitions made in the prior year, underlying operating profit was still up 11%, driven by particularly strong
performances from Packaging Paper and the South Africa Division.
Return on capital employed (ROCE), a key performance metric for the Group, was 15.3%, a record for the
Group despite the dilutive effect of the acquisitions made in 2012. ROCE over the past three years, averaging
14.6%, has been consistently above the Group's through-the-cycle hurdle rate of 13%.
The focus over the last year has been on integrating and optimising the significant acquisitions made towards
the end of 2012 and delivering the major capital projects initiated over the past two years. Excellent
progress has been made in this regard, with synergy targets delivered, a number of the capital projects having
been completed in the latter part of 2013, and the remaining projects on track for completion within budget
and on schedule over the next two years.
The Packaging Paper business was the standout performer, benefiting from higher average pricing in all key
grades and good volume growth. The downstream Fibre Packaging business was challenged by rising paper
prices, but generally made good progress in recovering margins. The Uncoated Fine Paper business
continued to deliver strong results despite the structural demand decline seen in mature western European
markets, a testament to the business' superior cost and market positioning. The South Africa Division made
very good progress during the year and is now delivering well in excess of the Group's 13% through-the-cycle
hurdle rate.
The Group benefited from currency weakness in certain of the emerging markets in which it operates, most
significantly in the South Africa Division from the rand's devaluation relative to the euro and US dollar.
The strong culture of continuous productivity improvement, relentless focus on cost management and the
benefits of restructuring activities completed during the year ensured that fixed cost increases were contained
to well below inflationary levels.
The Group remains strongly cash generative with net debt reducing to EUR1,621 million, compared to
EUR1,872 million at 31 December 2012, notwithstanding the EUR405 million (2012 : EUR294 million)
invested in capital expenditure projects during the year. Cash generated from operating activities exceeded
EUR1 billion for the first time.
Underlying earnings of 95 euro cents per share grew 37% compared to 2012, with higher finance charges
offset by a lower effective tax rate and reduced non-controlling interest charges.
We continue to refine our product and geographic mix in line with our strategic focus. Our emphasis is on
growing our packaging interests, which currently account for around 70% of the Group's revenues, while at
the same time continuing to invest appropriately to maintain and improve the competitiveness of our uncoated
fine paper business. Within the broader packaging sphere, we see greater opportunities to develop those
segments offering exposure to consumer related packaging. This includes both our Consumer Packaging
business, and the corrugated packaging value chain. We continue to develop our presence in emerging
markets, which offer us inherent cost and growth benefits, while recognising in some areas, most notably
Consumer Packaging, that there are also opportunities to develop and leverage our competencies in mature
markets. Overall, approximately 62% of the Group's net operating assets and 51% of revenue by destination
are currently in emerging markets.
The Boards are recommending payment of a final dividend of 26.45 euro cents per share, bringing the total
dividend for the year to 36 euro cents per share, an increase of 29% on 2012.
Europe & International - Packaging Paper
Year ended Year ended Six months Six months
31 31 ended 31 ended 31
December December December December
EUR million 2013 2012 Change % 2013 2012 Change %
Segment revenue 2,000 1,896 5 957 936 2
Underlying EBITDA 394 321 23 199 171 16
Underlying operating profit 298 227 31 150 123 22
Underlying operating profit margin 14.9% 12.0% 15.7% 13.1%
Capital expenditure 139 89 84 55
Net segment assets 1,484 1,466
ROCE 21.9% 17.9%
Packaging Paper benefited from positive trading conditions in all key paper grades and a strong operating
performance, resulting in an underlying operating profit of EUR298 million, an increase of 31%, and ROCE of
21.9%.
The average benchmark selling price for recycled containerboard was 4% higher than the comparable prior
year period, and by December was 14% up on the same stage in the prior year, with increases being
implemented at various stages throughout the year. Price increases were driven by reasonable demand
growth supported by limited net capacity additions, with new capacity brought on stream during the year
largely offset by closures.
Selling prices for the virgin containerboard grades increased modestly over the first half of the year before
coming under some pressure during the second half. At year-end benchmark selling prices were around 2%
lower than the average levels during the year. The price weakness in the second half was seen as a reaction
to increased substitution towards recycled grades due to the abnormally high price differential that developed
between virgin and recycled containerboard grades, competition from imports due to the weaker US dollar and
an increase in supply as producers converted production from less profitable grades. The price differential
has now reduced to levels towards the lower half of the historic trading range, typically seen as supportive of
virgin containerboard pricing. With improving demand seen in early 2014, discussions are underway with customers
around price increases in unbleached kraftliner grades.
Kraft paper prices were relatively stable for much of the year while volumes were up on the prior year,
supported by stable European markets and strong gains in export markets. As anticipated, there was some
price erosion seen towards the end of the fourth quarter and into early 2014 on the back of seasonally weaker
demand in Europe and increased competition in key export markets. By the end of the year, average selling
prices had declined by around 9% from their highs in mid-2013. It is, however, encouraging to note a recent
pick-up in orders. Sack kraft paper price increases are currently under discussion with customers.
The uncertain regulatory environment surrounding renewable energy in Poland led to a significant decline in
market prices for green energy in the first quarter of the year. As a consequence, the Group recognised an
EUR11 million write down in the value of its existing green energy credits in the first quarter. The lower
market prices prevailed throughout the year and income from the sale of green energy credits in the
Packaging Paper business was EUR17 million lower than in 2012 (excluding the impact of the one-off write-
down).
Input costs were well contained. The cost of paper for recycling was relatively stable throughout the year
following a sharp drop in prices seen in the second half of 2012, although there was some regional pressure in
Poland following the start-up of new competitor capacity. The average benchmark price was approximately
7% lower than in 2012. Wood costs in central Europe were generally well contained.
Following the acquisitions, in Fibre Packaging, of the Duropack corrugated packaging plants in the latter part
of 2012, Packaging Paper benefited from the realisation of supply chain synergies.
A strong operating performance and significant productivity improvements, most notably in Syktyvkar, ensured
that increases in fixed costs were contained well within inflation.
Europe & International - Fibre Packaging
Year ended Year ended Six months Six months
31 31 ended 31 ended 31
December December December December
EUR million 2013 2012 Change % 2013 2012 Change %
Segment revenue 1,967 1,860 6 965 914 6
Underlying EBITDA 163 168 (3) 80 88 (9)
Underlying operating profit 93 101 (8) 45 54 (17)
Underlying operating profit margin 4.7% 5.4% 4.7% 5.9%
Special items (3) (16) (3) (16)
Capital expenditure 78 76 43 48
Net segment assets 903 958
ROCE 10.8% 12.5%
Underlying operating profit declined by 8% to EUR93 million as the business was impacted by rising input
costs, adverse currency movements and market and operational challenges in the coatings segment.
Corrugated packaging benefited from higher sales volumes and higher prices, although margins were
squeezed by the lag in passing on increasing paper input costs to customers, currency effects and aggressive
competitor activity in certain markets. The business benefited from the successful integration of the
acquisitions of the Duropack corrugated plants in Germany and the Czech Republic in the latter part of 2012.
Industrial bags continued to deliver solid results. Selling prices and paper input costs were at similar levels to
2012, while the business realised the benefits of its restructuring activities, mainly in western Europe, with
fixed costs reducing significantly compared to 2012. Sales volumes increased with good demand in Russia
and the CIS as well as in Africa, Middle East and north and central America. Sales volumes in Europe were
marginally down on the previous year. The weaker export currencies relative to the euro had a negative
impact on margins.
The coatings business experienced volume declines and margin pressures, mainly due to weak demand in
the industrial and automotive markets and increased competitor activity in the main European markets.
Europe & International - Consumer Packaging
Year ended Year ended Six months Six months
31 31 ended 31 ended 31
December December December December
EUR million 2013 2012 2013 2012
Segment revenue 1,153 502 571 352
Underlying EBITDA 129 45 63 30
Underlying operating profit 74 19 35 9
Underlying operating profit margin 6.4% 3.8% 6.1% 2.6%
Special items (13) (11) - (11)
Capital expenditure 56 28 32 21
Net segment assets 855 872
ROCE - adjusted 9.1% 10.8%
ROCE for 2012 has been adjusted to exclude one-off costs related to the acquisition of Nordenia.
The benefits of the acquisition of Nordenia in October 2012 are reflected in the increase in underlying
operating profit of EUR55 million to EUR74 million. On a pro-forma basis, assuming Nordenia was acquired
at the beginning of 2012, and excluding the effects of acquisition accounting, the underlying operating profit of
the combined business was in line with the prior year, with synergy gains offset by a weaker trading
performance, the impact of some one-off costs, and higher fixed costs.
Synergies related to the Nordenia acquisition of EUR16 million were realised during the year, well on track to
achieve the targeted EUR20 million in 2014. One-off costs of EUR5 million were incurred in achieving these synergies.
Sales volumes in the commoditised segments of the films business were lower than the previous year. With focus on higher
value added products, it is pleasing to see volumes for fully converted packaging products held up well, up 2%, with
good performances from the emerging European and north American operations. It is encouraging to note a pick-up in order
intake in early 2014 following a weak finish to 2013.
An increase in fixed costs, excluding synergy effects, due in part to costs incurred on new product launches
and a new plant start-up further impacted the underlying result.
The closure of the Lindlar operation and redirection of production to existing Consumer Packaging facilities in
Germany and Hungary and to the Fibre Packaging business in the Czech Republic was completed.
Europe & International - Uncoated Fine Paper
Year ended Year ended Six months Six months
31 31 ended 31 ended 31
December December December December
EUR million 2013 2012 Change % 2013 2012 Change %
Segment revenue 1,388 1,466 (5) 648 717 (10)
Underlying EBITDA 277 300 (8) 120 146 (18)
Underlying operating profit 172 191 (10) 70 91 (23)
Underlying operating profit margin 12.4% 13.0% 10.8% 12.7%
Special items (60) - (10) -
Capital expenditure 80 58 44 34
Net segment assets 1,135 1,248
ROCE 16.2% 16.7%
Uncoated Fine Paper continued to deliver robust results, with underlying operating profit of EUR172 million
and a ROCE of 16.2%.
Sales volumes in uncoated fine paper were around 1.5% down on the prior year, reflecting mainly the effects
of the decision to restructure the Neusiedler mill. In May 2013, Mondi announced plans to restructure the non-
integrated Neusiedler operation to improve the competitiveness of the mill. The restructuring was successfully
completed and the mill is now focused on production of speciality paper grades enjoying higher margins.
Selling prices were largely unchanged in the first part of the year compared to the levels at the end of 2012,
but decreased in the second half in the face of continuing weak demand and the introduction of additional
capacity from industry competitors in an already oversupplied market. Average benchmark selling prices for
uncoated fine paper were around 2% lower than the prior year, while prices at the year-end were around 1%
below the average for the year.
Input costs increased, with higher wood costs in Ruzomberok, higher pulp input costs at the unintegrated
Neusiedler mill in Austria and higher gas and transportation costs in Syktyvkar. In Syktyvkar, wood costs
reduced as a result of a number of cost reduction initiatives. On average, own wood costs in Syktyvkar have
decreased by more than 10% from 2012 average costs.
Profit improvement initiatives and productivity improvements more than offset inflationary fixed cost increases,
enabling the business to realise a net reduction in fixed costs compared to 2012.
South Africa Division (Restated) (Restated)
Year ended Year ended Six months Six months
31 31 ended 31 ended 31
December December December December
EUR million 2013 2012 Change % 2013 2012 Change %
Segment revenue 624 702 (11) 299 354 (16)
Underlying EBITDA 135 125 8 68 69 (1)
Underlying operating profit 93 69 35 49 40 23
Underlying operating profit margin 14.9% 9.8% 16.4% 11.3%
Special items (11) 6 7 -
Capital expenditure 52 43 38 26
Net segment assets 622 821
ROCE 16.0% 9.6%
The South Africa Division delivered a very strong performance. Underlying operating profit was
EUR93 million, an increase of 35%, and ROCE was 16.0%, despite net fair value gains from the revaluation of
the Division's forestry assets being around EUR23 million lower than those realised in the prior year.
The business benefited from higher domestic selling prices, good domestic containerboard volume growth,
and improved export margins due to the weaker South African rand coupled with higher average export pulp
prices.
In May 2013, the closure of one of the two newsprint machines located in Merebank was announced as a
result of the continued decline in demand for newsprint in South Africa. The machine stopped production with
effect from 1 July 2013.
The South African rand came under significant pressure during the year, closing the year more than 30%
weaker against the euro than in December 2012. The Division generates approximately 40% of its revenue
from exports, with a predominantly rand cost base and thus benefited from the weakening currency.
The Division has continued to invest in the modernisation of its forestry operations, with a focus on silviculture
and harvesting in the current year. The benefits of these investments, further productivity improvements and
strong cost management ensured that fixed costs were contained to well within inflationary levels.
Tax
The Group's underlying effective tax rate of 17% is below that of the prior year, and reflects a favourable
underlying profit mix, the continued benefits arising from the utilisation of certain tax incentives available to the
Group, most notably in Poland, and further tax incentives received during the year related to the recovery
boiler investment project in Slovakia.
Non-controlling interests
The non-controlling interest charge of EUR28 million is EUR7 million lower than the previous year, primarily
due to the impact of the acquisition of the remaining minority interest in Mondi Swiecie during the first half of
2012.
Special items
Special items are those items of financial performance that the Group believes should be separately disclosed
to assist in the understanding of the underlying financial performance achieved by the Group and its
businesses. These items are considered to be material either in nature or in amount.
The net special item charge of EUR87 million before tax, the cash component of which amounted to
EUR20 million, included the following:
- Closure of Consumer Packaging's Lindlar operation in Germany (EUR13 million);
- Closure of the Newsprint machine in Merebank, South Africa and related restructuring activities
(EUR18 million);
- Impairment of Uncoated Fine Paper's Neusiedler mill in Austria and related restructuring costs
(EUR51 million);
- Write-down of unutilised assets in Uncoated Fine Paper's Syktyvkar mill in Russia (EUR9 million);
- Gain from the sale of land in South Africa Division (EUR7 million); and
- Further restructuring and impairment costs in the Industrial Bags segment of Fibre Packaging in
France and Mexico (EUR3 million).
Further detail is provided in note 5 of the condensed financial statements.
After taking special items into consideration, earnings of EUR386 million (79.8 euro cents per share) were
59% higher than the previous year (EUR242 million, 50.1 euro cents per share).
Cash flow
The Group is strongly cash generative with EBITDA of EUR1,068 million, reflecting an increase of 15%
compared to the prior year. The Group generated EUR1,036 million of cash from operations (2012:
EUR849 million) after taking into account a net increase in working capital of EUR27 million. Working capital
as a percentage of revenue was 11%, in line with the target of 10-12% of turnover, and represents a reduction
on the prior year comparable figure of 11.9% (adjusted for acquisitions).
The strong cash flow generation was applied to fund the Group's capital expenditure of EUR405 million, the
payment of finance charges of EUR124 million, and the payment of dividends to holders of non-controlling
interests of EUR60 million and to shareholders of EUR138 million. The net cash flow generated by the Group
of EUR174 million was applied to reduce the Group's net debt.
Capital investments
Capital expenditure of EUR405 million was EUR111 million higher than the prior year as expenditure on a
number of the Group's previously announced energy and debottlenecking investments ramped up. The
capital expenditure to depreciation ratio was 113%.
The major strategic investments initiated over the past two years and completed during 2013 include the
rebuild of the bark boiler at the Syktyvkar uncoated fine paper and containerboard mill in Russia, a new
recovery boiler at the Group's Frantschach kraft paper mill in Austria, a recovery boiler economiser and
turbine at the Stambolijski kraft paper mill in Bulgaria and a new steam turbine at the Richards Bay pulp and
containerboard mill in South Africa. With the exception of the bark boiler, completed in the first half of 2013,
these projects were completed in the second half of the year, with the benefits of reduced energy costs,
improved efficiencies and improved electricity self-sufficiency expected to be realised from 2014 onwards. In
total, approximately EUR140 million has been invested in these, and other smaller energy related projects.
Early in 2013, the construction of a 150,000 tonne bleached kraft paper machine at the Steti kraft paper mill in
the Czech Republic was approved. This will enable the mill to integrate its remaining open market pulp
production on site, providing further growth opportunities for this business. The EUR70 million project is
expected to be completed in the first half of 2014.
Good progress is being made on the EUR30 million investment in a 100,000 tonne pulp dryer in the Syktyvkar
mill and the project is on schedule for completion in the second half of 2014.
In the first half of the year, a EUR128 million project to replace the recovery boiler at the Ruzomberok
uncoated fine paper mill in Slovakia commenced. Completion is scheduled towards the end of 2014. The
project will reduce the mill's environmental footprint and improve its overall cost position. Some of the benefits
from this project also result from avoiding otherwise essential stay-in-business capital expenditure.
In the second half of the year, the Boards approved a EUR166 million investment at the Mondi Swiecie
containerboard mill in Poland, bringing forward the planned replacement of the recovery boiler and the mill's
coal fired boilers. The investment will result in a reduction of ongoing maintenance costs, an improvement in
overall energy efficiency and a reduction in CO2e emissions. The project is expected to be completed towards
the end of 2015.
These investments are all proceeding according to schedule.
As a consequence of the major capital projects approved during 2013, coupled with some delay in the
expected spend on previously approved projects, capital expenditure is expected to increase to around
EUR500 million per annum, on average, over the next two years.
Treasury and borrowings
Net debt at 31 December of EUR1,621 million decreased by EUR251 million from 31 December 2012 as a
consequence of the Group's strong cash flow generation and currency effects. The weakening of a number of
the emerging market currencies in which the Group's debt is denominated resulted in a net currency gain of
EUR59 million being recorded.
Gearing reduced to 36.3% at the end of 2013, down from 39.5% at the end of 2012. The net debt to 12 month
trailing EBITDA ratio was 1.5 times, well within the Group's key financial covenant requirement of 3.5 times.
Finance charges of EUR115 million were EUR5 million higher than the previous year, with higher average net
debt as a consequence of the acquisitions made at the end of 2012 offset by a lower effective interest rate.
Mondi's public credit ratings, first issued in March 2010, were again reaffirmed during the year at BBB-
(Standard and Poor's) and Baa3 (Moody's Investors Service).
The Group actively manages its liquidity risk by ensuring it maintains diversified sources of funding and debt
maturities. The weighted average maturity of the Eurobonds and committed debt facilities was 3.7 years at
31 December 2013. At the end of the year EUR792 million of the Group's EUR2.5 billion committed debt
facilities remained undrawn.
Dividend
The Boards' aim is to offer shareholders long-term dividend growth within a targeted dividend cover range of
two to three times over the business cycle. Given the Group's strong financial position and the Boards' stated
objective to increase distributions to shareholders through the ordinary dividend, the Boards have
recommended an increase in the final dividend.
The Boards of Mondi Limited and Mondi plc have recommended a final dividend of 26.45 euro cents per share
(2012: 19.1 euro cents per share), payable on 22 May 2014 to shareholders on the register on 25 April 2014.
Together with the interim dividend of 9.55 euro cents per share, paid on 17 September 2013, this amounts to
a total dividend for the year of 36.0 euro cents per share. In 2012, the total dividend for the year was 28.0
euro cents per share. 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 14 May 2014.
Outlook
The trading environment in the Group's main markets remains mixed. The increase in the price of recycled
containerboard in the second half of 2013 on solid demand growth is encouraging, and should lend support to
the other key containerboard grades. However, price pressure in most virgin paper grades in the second half
of 2013 means that the new year started with lower pricing than the average for 2013. The near-term outlook
for pricing is largely dependent on the strength of the European macroeconomic recovery. In this regard it is
encouraging to see a recent pick-up in orders in some of the Group's main product segments and discussions are
underway with customers on price increases in certain virgin packaging grades.
Recent exchange rate volatility in several of the emerging markets in which the Group operates does create
some challenges. However, the Group's positioning as a net exporter from most of these markets typically
allows it to benefit from the devaluation of these currencies relative to the euro.
The Group is confident that its ongoing capital investment programme will contribute meaningfully to Mondi's
performance going forward. Mondi's proven ability to generate strong cash flows through the cycle provides
valuable optionality. As such, the Group remains confident in its ability to continue delivering industry-leading
performance.
Principal risks and uncertainties
It is in the nature of Mondi's business that the Group is exposed to risks and uncertainties which may have an
impact on future performance and financial results, as well as on its ability to meet certain social and
environmental objectives.
The executive committee, mandated by the Boards, has established a Group-wide system of internal control
to manage Group risks. The Group-wide system, which complies with corporate governance codes in South
Africa and the UK, supports the Boards in discharging their responsibility for ensuring that the wide range of
risks associated with Mondi's diverse international operations is effectively managed.
Continuous monitoring of risk and control processes across all key risk areas provides the basis for regular
reports to management, the executive committee and the Boards. On an annual basis, the executive
committee, the audit committee and the Boards conduct a formal systematic review of the Group's most
significant risks and uncertainties and the monitoring of and response to those risks. These risks are
assessed against pre-determined risk tolerance limits, established by the Boards, taking both the likelihood
and severity of the risk factors into consideration.
The risk management framework addresses all significant strategic, sustainability, financial, operational and
compliance-related risks which could undermine the Group's ability to achieve its business objectives in a
sustainable manner. The risk management framework is designed to be flexible, to ensure that it remains
relevant at all levels of the business given the diversity of the Group's locations, markets and production
processes; and dynamic, to ensure that it remains current and responsive to changing business conditions.
The directors are satisfied that the Group has effective systems and controls in place to manage its key risks
within the risk tolerance levels established by the Boards.
Competitive environment in which Mondi operates
The industry in which Mondi operates is highly competitive and selling prices are subject to significant
volatility. New capacity additions are usually in large increments which, combined with product substitution
towards lighter weight products, electronic substitution, alternative packaging solutions and increasing
environmental considerations, have a significant impact on the supply-demand balance and hence on market
prices.
The Group monitors industry developments in terms of changes in capacity as well as trends and
developments in its product markets and potential substitutes. Mondi's strategic focus on low-cost production
in growing markets with consistent investment in its operating capacity ensures that the Group remains
competitive. Mondi invests in research and development activities to improve existing processes and to
identify new markets and new products.
The locations in which the Group operates
The Group operates in a number of geographical locations in countries with differing levels of political,
economic and legal systems.
The Group continues to actively monitor and adapt to changes in the environments in which it operates.
Management engages in regular formal and informal interaction with the authorities to ensure they remain
abreast of new developments. Thorough country risk assessments are conducted and return requirements
adjusted to take country risk into consideration.
The Group's geographical diversity and decentralised management structure, utilising local resources in
countries in which it operates, reduces exposure to any specific jurisdiction. The Boards have established
limits on exposure to any particular geographic environment and new investments are subject to rigorous
strategic and commercial evaluation.
Capital intensive operations
Mondi operates large facilities, often in remote locations. The ongoing safety and sustainable operation of all
its facilities is critical to the success of the Group.
The management systems in place ensure ongoing monitoring of all operations to ensure they meet the
requisite standards and performance requirements. The Group has adequate insurance in place to cover
material property damage, business interruption and liability risks. A structured maintenance programme is in
place under the auspices of the Group technical director. Emergency preparedness and response procedures
are in place and subject to periodic drills.
Cost and availability of a sustainable supply of fibre
Paper for recycling and wood account for approximately one-third of input costs. It is the Group's objective to
acquire fibre from sustainable sources and to avoid the use of any illegal or controversial supply.
International market prices are constantly monitored and, where possible, cost pass through mechanisms are
in place with customers.
The Group maintains strong forestry management teams in Russia and South Africa to actively monitor
environmental influences impacting its own sources of fibre. Mondi's relatively high levels of integration and
access to own FSC (TM) certified wood in Russia and South Africa serve to mitigate this risk. All the Group's
mills have chain-of-custody certificates in place ensuring that wood procured is from non-controversial
sources.
Cost of energy and related input costs
Energy and related input costs comprise approximately a third of the Group's variable costs. Increasing
energy costs, and the consequential impact thereof on both chemical and transport costs, may impact profit
margins.
Energy usage levels, emission levels and usage of renewable energy are monitored and energy costs are
benchmarked against external sources. The Group continues to invest in energy infrastructure at its key
operating facilities in order to improve energy efficiency and electricity self-sufficiency as well as to reduce its
environmental footprint.
Attraction and retention of key skills and talent
The complexity of operations and geographic diversity of the Group is such that high-quality, experienced
employees are required in all locations.
The Group monitors its staff turnover levels, diversity and training activities and conducts regular employee
surveys. Appropriate reward and retention strategies are in place to attract and retain talent across the
organisation. At more senior levels, these include a share based incentive scheme.
Employee and contractor safety
The Group's employees work in potentially dangerous environments where hazards are ever-present and
must be managed.
The Group engages in extensive safety communication sessions, involving employees and contractors, at all
operations. The Nine Safety Rules to Live By, applied across the Group, are integral to the safety strategy.
Operations conduct statutory safety committee meetings where management and employees are represented.
A risk-based approach underpins all safety and health programmes. All business units and operations are
required to have safety improvement plans in place.
Governance risks
The Group operates in a number of legal jurisdictions and non-compliance with legal and governance
requirements in these jurisdictions could expose the Group to significant risk if not adequately managed.
The Group operates a comprehensive training and compliance programme, supported by regular self-
certification and reporting as well as its confidential reporting hotline for all stakeholders, Speakout.
Financial risks
Mondi's trading and financing activities expose the Group to financial risks that, if left unmanaged, could
adversely impact current or future earnings. These risks relate to the currencies in which the Group conducts
its activities, interest rate and liquidity risks as well as exposure to customer credit risk.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance
and position, the most significant risks and the Group's related management and mitigating actions are set out
above. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are
described in the condensed financial statements.
Mondi's geographical spread, product diversity and large customer base mitigate potential risks of customer or
supplier liquidity issues. Ongoing initiatives by management in implementing profit improvement initiatives
which include ongoing investment in its operations, plant optimisation, cost-cutting, and restructuring and
rationalisation activities have consolidated the Group's leading cost position in its chosen markets. Working
capital levels and capital expenditure programmes are strictly monitored and controlled.
The Group meets its funding requirements from a variety of sources as more fully described in note 11 of the
condensed financial statements. The availability of some of these facilities is dependent on the Group
meeting certain financial covenants all of which have been complied with. Mondi had EUR792 million of
undrawn committed debt facilities as at 31 December 2013 which should provide sufficient liquidity in the
medium term. The Group's debt facilities have maturity dates of between 1 and 12 years, with a weighted average
maturity of 3.7 years.
The Group's forecasts and projections, taking account of reasonably possible changes in trading performance,
including an assessment of the current macroeconomic environment indicate that the Group should be able to
operate well within the level of its current facilities and related covenants.
The directors have reviewed the overall Group strategy, the budget for 2014 and subsequent years,
considered the assumptions contained in the budget and reviewed the critical risks which may impact the
Group's performance. After making such enquiries, the directors are satisfied that the Group remains solvent
and has adequate liquidity in order to meet its obligations and continue in operational existence for the
foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing this
report.
Directors' responsibility statement
These financial statements have been prepared under the supervision of the Group chief financial officer,
Andrew King CA (SA), and have been audited in compliance with the applicable requirements of the
Companies Act of South Africa 2008 and the UK Companies Act 2006.
The directors confirm that to the best of their knowledge:
- the condensed set of combined and consolidated financial statements has been prepared in
accordance with International Financial Reporting Standards and in particular with International
Accounting Standard 34, 'Interim Financial Reporting';
- the full year results report includes a fair review of the important events during the year ended
31 December 2013 and a description of the principal risks and uncertainties; and
- there have been no significant changes in the Group's related party relationships from that reported in
the half yearly results for the six months ended 30 June 2013.
The Group's condensed combined and consolidated financial statements, and related notes, were approved
by the Boards and authorised for issue on 27 February 2014 and were signed on its behalf by:
David Hathorn Andrew King
Director Director
27 February 2014 27 February 2014
Audited financial information
The condensed combined and consolidated financial statements for the year ended 31 December 2013 have
been audited by the Group's auditors, Deloitte LLP and Deloitte & Touche. Their unqualified audit reports are
available for inspection at the Group's registered offices.
Condensed combined and consolidated income statement
for the year ended 31 December 2013
(Restated)
2013 2012
Before Special After Before Special After
special items special special items special
EUR million Notes items (note 5) items items (note 5) items
Group revenue 3 6,476 - 6,476 5,790 - 5,790
Materials, energy and consumables used (3,391) - (3,391) (3,024) - (3,024)
Variable selling expenses (523) - (523) (527) - (527)
Gross margin 2,562 - 2,562 2,239 - 2,239
Maintenance and other indirect expenses (278) - (278) (279) - (279)
Personnel costs (940) (17) (957) (834) (16) (850)
Other net operating expenses (276) (10) (286) (199) (10) (209)
Depreciation, amortisation and impairments (369) (67) (436) (353) (1) (354)
Operating profit/(loss) 3 699 (94) 605 574 (27) 547
Non-operating special items 5 - 7 7 - (64) (64)
Net profit/(loss) from associates 2 - 2 (5) - (5)
Total profit/(loss) from operations and associates 701 (87) 614 569 (91) 478
Net finance costs 6 (115) - (115) (110) - (110)
Investment income 3 - 3 4 - 4
Foreign currency losses (1) - (1) (2) - (2)
Finance costs (117) - (117) (112) - (112)
Profit/(loss) before tax 586 (87) 499 459 (91) 368
Tax (charge)/credit 7 (98) 13 (85) (90) (1) (91)
Profit/(loss) for the year 488 (74) 414 369 (92) 277
Attributable to:
Non-controlling interests 28 35
Shareholders 386 242
Earnings per share (EPS) for profit attributable to
shareholders
Basic EPS (EUR cents) 8 79.8 50.1
Diluted EPS (EUR cents) 8 79.6 49.9
Basic underlying EPS (EUR cents) 8 95.0 69.2
Diluted underlying EPS (EUR cents) 8 94.8 68.9
Basic headline EPS (EUR cents) 8 91.3 62.9
Diluted headline EPS (EUR cents) 8 91.1 62.7
Condensed combined and consolidated statement of comprehensive
income
for the year ended 31 December 2013
(Restated)
2013 2012
Before tax Net of tax Before tax Net of tax
EUR million amount Tax expense amount amount Tax benefit amount
Profit for the year 414 277
Other comprehensive (expense)/income
Items that may subsequently be
reclassified to the combined and
consolidated income statement:
Effect of cash flow hedges: (2) - (2) 2 - 2
Gains on available-for-sale investments 2 - 2 1 - 1
Exchange differences on translation of
foreign operations (233) - (233) 49 - 49
Share of other comprehensive income of
associates(1) (1) - (1) - - -
Items that will not subsequently be
reclassified to the combined and
consolidated income statement:
Remeasurements on retirement benefits
plans 19 (6) 13 (33) 8 (25)
Other comprehensive (expense)/income
for the year (215) (6) (221) 19 8 27
Other comprehensive (expense)/income
attributable to:
Non-controlling interests (11) - (11) 7 - 7
Shareholders (204) (6) (210) 12 8 20
Total comprehensive income for the year 193 304
Total comprehensive income attributable to:
Non-controlling interests 17 42
Shareholders 176 262
Note:
1 Associates' share of exchange differences on translation of foreign operations.
Condensed combined and consolidated statement of financial position
as at 31 December 2013
(Restated) (Restated)
At 1 January
EUR million Notes 2013 2012 2012
Intangible assets 675 695 238
Property, plant and equipment 3,428 3,709 3,355
Forestry assets 10 233 311 309
Investments in associates 6 6 19
Financial asset investments 27 26 22
Deferred tax assets 4 10 5
Net retirement benefits asset - - 8
Derivative financial instruments 1 - 3
Total non-current assets 4,374 4,757 3,959
Inventories 746 783 633
Trade and other receivables 954 1,010 814
Current tax assets 26 10 6
Financial asset investments 1 1 1
Cash and cash equivalents 13b 130 56 193
Derivative financial instruments 5 4 10
Assets held for sale 4 2 -
Total current assets 1,866 1,866 1,657
Total assets 6,240 6,623 5,616
Short-term borrowings 11 (181) (281) (268)
Trade and other payables (989) (1,029) (877)
Current tax liabilities (76) (66) (78)
Provisions (46) (67) (44)
Derivative financial instruments (4) (4) (8)
Total current liabilities (1,296) (1,447) (1,275)
Medium and long-term borrowings 11 (1,571) (1,648) (746)
Net retirement benefits liability 12 (211) (253) (202)
Deferred tax liabilities (264) (344) (313)
Provisions (32) (33) (30)
Derivative financial instruments (1) (1) -
Other non-current liabilities (19) (24) (18)
Total non-current liabilities (2,098) (2,303) (1,309)
Total liabilities (3,394) (3,750) (2,584)
Net assets 2,846 2,873 3,032
Equity
Share capital and stated capital 542 542 542
Retained earnings and other reserves 2,049 2,030 2,044
Total attributable to shareholders 2,591 2,572 2,586
Non-controlling interests in equity 255 301 446
Total equity 2,846 2,873 3,032
The Group's condensed combined and consolidated financial statements, and related notes, were approved
by the Boards and authorised for issue on 27 February 2014 and were signed on its behalf by:
David Hathorn Andrew King
Director Director
Mondi Limited company registration number: 1967/013038/06
Mondi plc company registered number: 6209386
Condensed combined and consolidated statement of cash flows
for the year ended 31 December 2013
(Restated)
EUR million Notes 2013 2012
Cash generated from operations 13a 1,036 849
Dividends from associates 1 1
Dividends from other investments - 1
Income tax paid (126) (109)
Net cash generated from operating activities 911 742
Cash flows from investing activities
Investment in property, plant and equipment (405) (294)
Investment in intangible assets (12) (9)
Investment in forestry assets 10 (41) (51)
Investment in financial asset investments (4) (7)
Proceeds from the disposal of tangible and intangible assets 36 15
Proceeds from the disposal of financial asset investments 1 4
Acquisition of subsidiaries, net of cash and cash equivalents - (381)
Investment in associates - (43)
Proceeds from disposal of associates 4 -
Proceeds from the disposal of businesses, net of cash and cash equivalents 2 1
Loan repayments from related parties 1 -
Loan repayments from external parties 2 16
Interest received 3 3
Net cash used in investing activities (413) (746)
Cash flows from financing activities
Repayment of short-term borrowings 13c (77) (114)
Proceeds from medium and long-term borrowings 13c 107 613
Repayment of medium and long-term borrowings 13c (117) (65)
Interest paid (124) (92)
Dividends paid to shareholders (138) (128)
Purchases of treasury shares (30) (34)
Dividends paid to non-controlling interests (60) (29)
Non-controlling interests bought out (4) (298)
Net realised gain/(loss) on held-for-trading derivatives 30 (9)
Government grants received 2 -
Net cash used in financing activities (411) (156)
Net increase/(decrease) in cash and cash equivalents 87 (160)
Cash and cash equivalents at beginning of year (37) 119
Cash movement in the year 13c 87 (160)
Effects of changes in foreign exchange rates 13c 14 4
Cash and cash equivalents at end of year 13b 64 (37)
Condensed combined and consolidated statement of changes in equity
for the year ended 31 December 2013
Combined
share capital Total
and stated Retained attributable to Non-controlling Total
EUR million capital earnings Other reserves shareholders interests equity
At 31 December 2011, as previously
reported 542 2,041 3 2,586 449 3,035
Effect of restatement - - - - (3) (3)
At 1 January 2012 (restated) 542 2,041 3 2,586 446 3,032
Total comprehensive income for the year - 242 20 262 42 304
Dividends paid - (128) - (128) (29) (157)
Issue of shares under employee share
schemes - 9 (9) - - -
Purchases of treasury shares - (34) - (34) - (34)
Non-controlling interests bought out - (141) - (141) (157) (298)
Disposal of businesses - - 15 15 - 15
Reclassification - (12) 12 - - -
Other - 2 10 12 (1) 11
At 31 December 2012 (restated) 542 1,979 51 2,572 301 2,873
Total comprehensive income/(expense) for the year - 386 (210) 176 17 193
Dividends paid - (138) - (138) (60) (198)
Issue of shares under employee share
schemes - 12 (11) 1 - 1
Purchases of treasury shares - (30) - (30) - (30)
Non-controlling interests bought out - (1) - (1) (3) (4)
Reclassification - 1 (1) - - -
Other - - 11 11 - 11
At 31 December 2013 542 2,209 (160) 2,591 255 2,846
Other reserves(1) (restated)
Cumulative
Share-based translation
payment adjustment Cash flow Post-retirement Statutory
EUR million reserve reserve hedge reserve benefits reserve reserves(2) Total
At 1 January 2012 17 (208) (2) (56) 252 3
Total comprehensive income/(expense) for the year - 42 2 (25) 1 20
Mondi share schemes' charge 10 - - - - 10
Issue of shares under employee share
schemes (9) - - - - (9)
Disposal of businesses - 15 - - - 15
Reclassification - - - 12 - 12
At 31 December 2012 18 (151) - (69) 253 51
Total comprehensive income/(expense) for the year - (223) (2) 13 2 (210)
Mondi share schemes' charge 11 - - - - 11
Issue of shares under employee share
schemes (11) - - - - (11)
Reclassification - - - (1) - (1)
At 31 December 2013 18 (374) (2) (57) 255 (160)
Notes:
(1) All movements in other reserves are disclosed net of non-controlling interests. The movement in non-controlling interests as a direct result of the
movement in other reserves for the year ended 31 December 2013 was a decrease in non-controlling interests related to total comprehensive
income for the year of EUR11 million (2012: increase of EUR7 million).
(2) Statutory reserves consist of the merger reserve of EUR259 million (2012: EUR259 million) and other sundry reserves in deficit of EUR4 million
(2012: deficit of EUR6 million).
Notes to the condensed combined and consolidated financial statements
for the year ended 31 December 2013
1 Basis of preparation
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.
The Group's condensed combined and consolidated financial statements included in this preliminary
announcement have been prepared in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB) and contain the information required by IAS
34, 'Interim Financial Reporting'. There are no differences for the Group in applying IFRS as issued by the
IASB and IFRS as adopted by the European Union (EU) and therefore the Group also complies with Article 4
of the EU IAS Regulation. The Group has also complied with the South African Institute of Chartered
Accountants Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by the Reporting Standards Council of South Africa. The condensed
combined and consolidated financial statements have been prepared on a going concern basis as set out
above.
The financial information set out above does not constitute the Company's statutory accounts for the years
ended 31 December 2013, 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 and
2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course.
The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii)
did not contain a statement under section 498 (2) or (3) of the UK Companies Act 2006. Copies of their
unqualified auditors' reports on the Integrated report and financial statements 2013 as well as the condensed
combined and consolidated financial statements are available for inspection at the Mondi Limited and Mondi
plc registered offices.
These condensed combined and consolidated financial statements have been prepared on the historical cost
basis, except for the fair valuing of financial instruments and forestry assets.
2a Accounting policies
The same accounting policies, methods of computation and presentation have been followed in the
preparation of the condensed combined and consolidated financial statements as were applied in the
preparation of the Group's annual financial statements for the year ended 31 December 2012, except as set
out below.
Standards and Interpretations early adopted by the Group
There were no Standards or Interpretations early adopted by the Group in the current year. An amendment to
IAS 36 - Impairment of Assets which clarifies certain disclosure requirements, was adopted with effect from
1 January 2013.
Standards, amendments to published Standards and Interpretation effective during 2013
The Group has adopted the following Standards and amendments to published Standards during the current
year, and their impact on the Group's results are detailed in note 2b:
- IFRS 10 - Consolidated Financial Statements
- IFRS 11 - Joint Arrangements
- IAS 19 (revised) - Employee Benefits
The following Standards, amendments to published Standards and Interpretation which the Group has
adopted during the current year, had no significant impact on the Group's results except for the addition of
certain disclosures:
- IFRS 1 - First-time Adoption of International Financial Reporting Standards
- IFRS 7 - Financial Instruments: Disclosure
- IFRS 12 - Disclosure of Interests in Other Entities
- IFRS 13 - Fair Value Measurement
- IAS 1 - Presentation of Financial Statements
- IAS 16 - Property, Plant and Equipment
- IAS 27 - Separate Financial Statements
- IAS 28 - Investments in Associates and Joint Ventures
- IAS 32 - Financial Instruments: Presentation
- IAS 34 - Interim Financial Reporting
- IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine
2b Restatement of comparative information
IFRS 10 and IFRS 11 broadened the concept of control and eliminated the option of proportionate
consolidation for joint ventures, except in certain circumstances. The impact of these Standards has been that
Mondi Shanduka Newsprint Proprietary Limited has been consolidated whilst Aylesford Newsprint Limited has
been accounted for using the equity method up to the date of sale in 2012. Comparative information has been
restated.
IAS 19 (revised) impacted the measurement of the various components representing movements in the
defined benefit pension obligation and associated disclosures. As the Group has always recognised actuarial
gains and losses immediately, the Group's total obligation was unchanged. This Standard has been adopted
with effect from 1 January 2012 as it was impractical to complete revised actuarial valuations prior to that
date. Following the replacement of expected returns on plan assets with a net finance cost in the combined
and consolidated income statement, the profit for the period was reduced and accordingly other
comprehensive income increased in 2012. Comparative information for the year ended 31 December 2012
has been restated.
The following tables summarise the impacts resulting from the changes in accounting policies above on the
Group's financial position, comprehensive income and cash flows.
Combined and consolidated income statement
Year ended 31 December 2012
As previously Effect of
EUR million reported restatement As restated
Group revenue 5,807 (17) 5,790
Gross margin 2,235 4 2,239
Operating profit 541 6 547
Non-operating special items (64) - (64)
Net profit/(loss) from associates 1 (6) (5)
Total profit from operations and associates 478 - 478
Net finance costs (107) (3) (110)
Investment income 10 (6) 4
Foreign currency losses (2) - (2)
Finance costs (115) 3 (112)
Profit before tax 371 (3) 368
Tax charge (92) 1 (91)
Profit for the year 279 (2) 277
Attributable to:
Non-controlling interests 35 - 35
Shareholders 244 (2) 242
The restatement had no impact on special items.
As previously Effect of
Earnings per share (EPS) for profit attributable to shareholders reported restatement As restated
Basic EPS (EUR cents) 50.5 (0.4) 50.1
Diluted EPS (EUR cents) 50.3 (0.4) 49.9
Basic underlying EPS (EUR cents) 69.6 (0.4) 69.2
Diluted underlying EPS (EUR cents) 69.3 (0.4) 68.9
Basic headline EPS (EUR cents) 63.4 (0.5) 62.9
Diluted headline EPS (EUR cents) 63.1 (0.4) 62.7
Combined and consolidated statement of comprehensive income
Year ended 31 December 2012
As previously Effect of
EUR million reported restatement As restated
Profit for the year 279 (2) 277
Other comprehensive income/(expense):
Items that may subsequently be reclassified to the combined and consolidated
income statement 52 - 52
Items that will not subsequently be reclassified to the combined and consolidated
income statement (27) 2 (25)
Other comprehensive income for the year, net of tax 25 2 27
Total comprehensive income for the year 304 - 304
Attributable to:
Non-controlling interests 42 - 42
Shareholders 262 - 262
Combined and consolidated statement of financial position
As at 31 December 2012 As at 1 January 2012
As As
previously Effect of previously Effect of
EUR million reported restatement As restated reported restatement As restated
Non-current assets 4,755 2 4,757 3,971 (12) 3,959
Current assets 1,859 7 1,866 1,674 (17) 1,657
Total assets 6,614 9 6,623 5,645 (29) 5,616
Current liabilities (1,443) (4) (1,447) (1,306) 31 (1,275)
Non-current liabilities (2,295) (8) (2,303) (1,304) (5) (1,309)
Total liabilities (3,738) (12) (3,750) (2,610) 26 (2,584)
Net assets 2,876 (3) 2,873 3,035 (3) 3,032
Equity
Share capital and stated capital 542 - 542 542 - 542
Retained earnings and other reserves 2,030 - 2,030 2,044 - 2,044
Total attributable to shareholders 2,572 - 2,572 2,586 - 2,586
Non-controlling interests in equity 304 (3) 301 449 (3) 446
Total equity 2,876 (3) 2,873 3,035 (3) 3,032
Net debt (1,864) (8) (1,872) (831) 11 (820)
Combined and consolidated statement of cash flows
Year ended 31 December 2012
As previously Effect of
EUR million reported restatement As restated
Net cash generated from operating activities 740 2 742
Net cash used in investing activities (725) (21) (746)
Net cash used in financing activities (173) 17 (156)
Net decrease in cash and cash equivalents (158) (2) (160)
Cash and cash equivalents at beginning of year 117 2 119
Cash movement in the year (158) (2) (160)
Effects of changes in foreign exchange rates 4 - 4
Cash and cash equivalents at end of year (37) - (37)
3 Operating segments
Mondi Shanduka Newsprint was incorporated into the South Africa Division during 2012 due to similarities in
geographical location, production processes and the integrated nature of the production facilities and is now
consolidated as a subsidiary. The effects of this change on the comparative periods are set out in note 2b.
The Group's segmental information for the comparative periods has been restated to reflect this change in
accounting policy.
Year ended 31 December 2013
South Africa Corporate & Intersegment Segments
Europe & International Division other elimination total
Packaging Fibre Consumer Uncoated
EUR million, unless otherwise stated Paper Packaging Packaging Fine Paper
Segment revenue 2,000 1,967 1,153 1,388 624 - (656) 6,476
Internal revenue (503) (33) (5) (14) (101) - 656 -
External revenue 1,497 1,934 1,148 1,374 523 - - 6,476
EBITDA 394 163 129 277 135 (30) - 1,068
Depreciation, amortisation and
impairments(1) (96) (70) (55) (105) (42) (1) - (369)
Operating profit/(loss) from
operations before special items 298 93 74 172 93 (31) - 699
Special items - (3) (13) (60) (11) - - (87)
Operating segment assets 1,837 1,156 993 1,311 731 2 (140) 5,890
Operating net segment assets 1,484 903 855 1,135 622 1 - 5,000
Additions to non-current non-
financial assets 155 72 60 94 93 - - 474
Capital expenditure cash
payments 139 78 56 80 52 - - 405
Operating margin (%) 14.9 4.7 6.4 12.4 14.9 - - 10.8
Return on capital employed (%) 21.9 10.8 9.1 16.2 16.0 - - 15.3
Note:
(1) Excluding impairments included in special items (see note 5).
Year ended 31 December 2012 (restated)
South Africa Corporate & Intersegment Segments
Europe & International Division other elimination total
Packaging Fibre Consumer Uncoated
EUR million, unless otherwise stated Paper Packaging Packaging Fine Paper
Segment revenue 1,896 1,860 502 1,466 702 - (636) 5,790
Internal revenue (469) (42) (4) (13) (108) - 636 -
External revenue 1,427 1,818 498 1,453 594 - - 5,790
EBITDA 321 168 45 300 125 (32) - 927
Depreciation, amortisation and
impairments(1) (94) (67) (26) (109) (56) (1) - (353)
Operating profit/(loss) from
operations before special items 227 101 19 191 69 (33) - 574
Special items - (16) (11) - 6 (70) - (91)
Operating segment assets 1,829 1,229 1,019 1,450 975 5 (150) 6,357
Operating net segment assets 1,466 958 872 1,248 821 1 - 5,366
Additions to non-current non-
financial assets 249 144 621 60 94 - - 1,168
Capital expenditure cash
payments 89 76 28 58 43 - - 294
Operating margin (%) 12.0 5.4 3.8 13.0 9.8 - - 9.9
Return on capital employed (%) 17.9 12.5 6.2 16.7 9.6 - - 13.6
Note:
(1) Excluding impairments included in special items (see note 5).
The description of each business segment reflects the nature of the main products they sell. In certain
instances the business segments sell minor volumes of other products and due to this reason the external
segment revenues will not necessarily reconcile to the external revenues by product type presented below.
External revenue by product type
(Restated)
EUR million 2013 2012
Products
Fibre packaging products 1,891 1,785
Packaging paper products 1,482 1,393
Uncoated fine paper 1,284 1,355
Consumer packaging products 1,148 498
Pulp 269 276
Newsprint 177 215
Other 225 268
Group total 6,476 5,790
External revenue by External revenue by
location of customer location of production
(Restated) (Restated)
EUR million 2013 2012 2013 2012
Revenue
Africa
South Africa 432 448 623 702
Rest of Africa 231 242 11 8
Africa total 663 690 634 710
Western Europe
Austria 161 145 958 1,025
Germany 1,003 783 993 486
United Kingdom 262 230 48 53
Rest of western Europe 1,390 1,287 720 693
Western Europe total 2,816 2,445 2,719 2,257
Emerging Europe
Poland 450 364 877 766
Rest of emerging Europe 893 816 1,168 1,086
Emerging Europe total 1,343 1,180 2,045 1,852
Russia 608 592 741 729
North America 349 270 274 196
South America 57 41 - -
Asia and Australia 640 572 63 46
Group total 6,476 5,790 6,476 5,790
Reconciliation of operating profit before special items
(Restated)
EUR million 2013 2012
Operating profit before special items 699 574
Special items (see note 5) (87) (91)
Net profit/(loss) from associates 2 (5)
Net finance costs (115) (110)
Group profit before tax 499 368
Reconciliation of operating segment assets
(Restated)
2013 2012
Net Net
Segment segment Segment segment
EUR million assets assets assets assets
Segments total 5,890 5,000 6,357 5,366
Unallocated:
Investments in associates 6 6 6 6
Deferred tax assets/(liabilities) 4 (260) 10 (334)
Other non-operating assets/(liabilities) 182 (306) 167 (319)
Group capital employed 6,082 4,440 6,540 4,719
Financial asset investments (non-current) 27 27 26 26
Cash and current financial asset investments/(net debt) 131 (1,621) 57 (1,872)
Group 6,240 2,846 6,623 2,873
4 Write-down of inventories to net realisable value
(Restated)
EUR million 2013 2012
Write-down of inventories to net realisable value (21) (19)
Aggregate reversal of previous write-down of inventories 12 13
5 Special items
EUR million 2013 2012
Operating special items
Asset impairments (67) (1)
Restructuring and closure costs:
Restructuring and closure costs excluding related personnel costs (10) (4)
Personnel costs relating to restructuring (17) (16)
Transaction costs incurred on the acquisition of Nordenia - (11)
Gain on insurance settlement - 5
Total operating special items (94) (27)
Non-operating special items
Loss on disposals - (70)
Gain on sale of land 7 6
Total non-operating special items 7 (64)
Total special items before tax and non-controlling interests (87) (91)
Tax (see note 7) 13 (1)
Total special items attributable to shareholders (74) (92)
Operating special items
During the first quarter of the year a decision was taken to close the Lindlar operation in Germany and redirect
production to existing plants in Germany, Hungary and the Czech Republic. An impairment charge of EUR2 million
and restructuring and closure costs amounting to EUR11 million were recognised.
In May 2013, Mondi announced the closure of one of the two newsprint machines located in Merebank, South
Africa. Further restructuring activities in the Merebank mill as a result of the closure of the newsprint machine
were also implemented. An impairment charge of EUR13 million and associated closure and restructuring
costs of EUR5 million were recognised.
In May 2013, Mondi announced plans to restructure the Neusiedler operation in Austria to improve the cost
base of this mill. An impairment charge of EUR42 million and restructuring costs of EUR9 million were
recognised.
During the third quarter of the year, unutilised assets amounting to EUR9 million in the Syktyvkar mill, Russia
were written off.
Additional impairment charges of EUR1 million, and restructuring costs of EUR2 million were recognised in
the Industrial Bags segment of the Fibre Packaging business in France and Mexico.
Non-operating special items
In December 2013, land in the South Africa Division with a carrying value of EUR1 million was sold for EUR8
million, realising a gain of EUR7 million.
6 Net finance costs
(Restated)
EUR million 2013 2012
Total investment income 3 4
Foreign currency losses (1) (2)
Finance costs
Interest expense
Interest on bank overdrafts and loans (108) (98)
Net interest expense on net retirement benefits liability (11) (15)
Total interest expense (119) (113)
Less: interest capitalised 2 1
Total finance costs (117) (112)
Net finance costs (115) (110)
7 Tax charge
(Restated)
EUR million 2013 2012
UK corporation tax at 23.25% (2012: 24.5%) 1 -
SA corporation tax at 28% (2012: 28%) 21 19
Overseas tax 105 66
Current tax 127 85
Deferred tax in respect of the current period (1) 13
Deferred tax in respect of prior period over provision (28) (8)
Total tax charge before special items 98 90
Current tax on special items (5) 2
Deferred tax on special items (8) (1)
Total tax (credit)/charge on special items (see note 5) (13) 1
Total tax charge 85 91
The Group's effective rate of tax before special items for the year ended 31 December 2013, calculated on
profit before tax before special items and including net profit from associates, is 17% (2012: 20%).
8 Earnings per share
(Restated)
EUR cents per share 2013 2012
Profit for the year attributable to shareholders
Basic EPS 79.8 50.1
Diluted EPS 79.6 49.9
Underlying earnings for the year
Basic EPS 95.0 69.2
Diluted EPS 94.8 68.9
Headline earnings for the year
Basic EPS 91.3 62.9
Diluted EPS 91.1 62.7
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
(Restated)
EUR million 2013 2012
Profit for the year attributable to shareholders 386 242
Special items (see note 5) 87 91
Related tax (see note 5) (13) 1
Underlying earnings for the year 460 334
Special items: restructuring and closure costs (27) (20)
Transaction costs incurred on the acquisition of Nordenia - (11)
Profit on disposal of tangible and intangible assets (2) (4)
Impairments not included in special items 4 4
Related tax 7 1
Headline earnings for the year 442 304
Weighted average number of
shares
million 2013 2012
Basic number of ordinary shares outstanding 484 483
Effect of dilutive potential ordinary shares 1 2
Diluted number of ordinary shares outstanding 485 485
9 Dividends
An interim dividend for the year ended 31 December 2013 of 126.03689 rand cents/9.55 euro cents per share
was paid on 17 September 2013 to all Mondi Limited and Mondi plc ordinary shareholders on the relevant
registers on 23 August 2013.
A proposed final dividend for the year ended 31 December 2013 of 26.45 euro cents per ordinary share will be
paid on 22 May 2014 to those shareholders on the register of Mondi plc on 25 April 2014. An equivalent South
African rand final dividend will be paid on 22 May 2014 to shareholders on the register of Mondi Limited on
25 April 2014. 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 14 May 2014.
The proposed final dividend for the year ended 31 December 2013 of 26.45 euro cents per share will be paid
in accordance with the following timetable:
Mondi Limited Mondi plc
Last date to trade shares cum-dividend
JSE Limited 16 April 2014 16 April 2014
London Stock Exchange Not applicable 22 April 2014
Shares commence trading ex-dividend
JSE Limited 17 April 2014 17 April 2014
London Stock Exchange Not applicable 23 April 2014
Record date
JSE Limited 25 April 2014 25 April 2014
London Stock Exchange Not applicable 25 April 2014
Last date for receipt of Dividend Reinvestment Plan 2 May 2014 2 May 2014
(DRIP) elections by Central Securities Depository
Participants
Last date for DRIP elections to UK Registrar and 5 May 2014 27 April 2014*
South African Transfer Secretaries by shareholders
of Mondi Limited and Mondi plc
Payment Date
South African Register 22 May 2014 22 May 2014
UK Register Not applicable 22 May 2014
DRIP purchase settlement dates 30 May 2014 27 May 2014**
Currency conversion date
ZAR/euro 28 February 2014 28 February 2014
Euro/sterling Not applicable 6 May 2014
*5 May 2014 for Mondi plc South African branch register shareholders
**30 May 2014 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 17 April 2014 and 28 April 2014, both dates inclusive, nor may transfers between the
UK and South African registers of Mondi plc take place between 16 April 2014 and 28 April 2014, both dates
inclusive.
Information relating to the dividend tax to be withheld from Mondi Limited shareholders and Mondi plc
shareholders on the South African branch register will be announced separately, together with the ZAR/euro
exchange rate to be applied, on or shortly after 28 February 2014.
10 Forestry assets
(Restated)
EUR million 2013 2012
At 31 December 2011, as previously reported 297
Effect of restatement 12
At 1 January (restated) 311 309
Capitalised expenditure 39 42
Acquisition of assets 2 9
Fair value gains 17 40
Disposal of assets (9) (3)
Felling costs (55) (66)
Currency movements (72) (20)
At 31 December 233 311
The fair value of forestry assets is a level 3 measure in terms of the fair value measurement hierarchy and this
category is consistent with prior years. The fair value of forestry assets is calculated on the basis of future
expected net cash flows arising on the Group's owned forestry assets, discounted using a discount rate
relevant in the local country, based on a pre tax real yield on long-term bonds over the last five years. All fair
value gains originate from South Africa.
11 Borrowings
(Restated)
2013 2012
EUR million Current Non-current Total Current Non-current Total
Secured
Bank loans and overdrafts 4 2 6 5 3 8
Obligations under finance leases 1 6 7 2 9 11
Total secured 5 8 13 7 12 19
Unsecured
Bank loans and overdrafts 156 216 372 253 251 504
Bonds - 1,289 1,289 - 1,310 1,310
Bonds - 1,340 1,340 - 1,357 1,357
Call option derivative - (51) (51) - (47) (47)
Other loans 20 58 78 21 75 96
Total unsecured 176 1,563 1,739 274 1,636 1,910
Total borrowings 181 1,571 1,752 281 1,648 1,929
Financing facilities
Group liquidity is provided through a range of committed debt facilities. The principal loan arrangements in
place include the following:
EUR750 million Syndicated Revolving Credit Facility (RCF)
The RCF is a five year multi-currency revolving credit facility which was signed on 14 April 2011. Interest is
charged on the balance outstanding at market-related rates linked to EURIBOR/LIBOR.
EUR500 million 2017 Eurobond
Mondi Finance plc launched a seven year publicly traded bond, guaranteed by Mondi plc, in March 2010. The
EUR500 million bond, which matures on 3 April 2017, was issued at a discount of EUR5.63 million and pays a
fixed coupon of 5.75% per annum. The bond contains a coupon step-up clause whereby the coupon will be
increased by 1.25% per annum if Mondi fails to maintain at least one investment grade credit rating from
either Moody's Investors Service or Standard & Poor's. Mondi currently has investment grade credit ratings
from both Moody's Investors Service (Baa3, outlook stable) and Standard & Poor's (BBB-, outlook stable).
EUR500 million 2020 Eurobond
In September 2012 Mondi Finance plc launched an eight year publicly traded bond, guaranteed by Mondi plc.
The EUR500 million bond, which matures on 28 September 2020, was issued at a discount of EUR0.1 million
and pays a fixed coupon of 3.375% per annum. The bond contains the same 1.25% per annum coupon step-
up clause as the EUR500 million 2017 Eurobond.
EUR280 million Eurobond
As part of the acquisition of Nordenia in 2012 Mondi assumed Nordenia's EUR280 million Eurobond, paying a
coupon of 9.75% per annum and maturing on 15 July 2017. The bond was recognised at its fair value of
EUR324 million at date of acquisition. The value of the bond includes the fair value of an option to call the
bond early at the following redemption rates:
% Redemption rate
Redemption date
15 July 2014 104.875
15 July 2015 102.438
15 July 2016 and thereafter 100.000
The option is valued at EUR51 million at 31 December 2013 (2012: EUR47 million).
EUR160 million Export Credit Agency Facility (ECAF)
The ECAF is used to part finance expansionary capital expenditure in Russia. The facility has an amortising
repayment until 2020 and interest is charged on the balance outstanding at a market-related rate linked to
EURIBOR.
PLN 474 million European Investment Bank Facility (EIBF1)
The EIBF1 is used to part finance expansionary capital expenditure at Mondi Swiecie in Poland. The facility
has an amortising repayment until 2017 and interest is charged at a market-related rate linked to WIBOR
(Warsaw Interbank Offered Rate).
EUR100 million European Investment Bank Facility (EIBF2)
The EIBF2 facility was fully drawn on 28 June 2013 and is used to part finance expansionary capital
expenditure in Russia. The facility amortises over 12 years with a two year grace period and interest is
charged on the balance outstanding at a market-related rate linked to EURIBOR.
RUB 1.6 billion European Bank for Reconstruction and Development Facility (EBRDF)
The EBRDF is used to part finance expansionary capital expenditure in Russia. The facility has an amortising
repayment until 2019 and interest is charged on the balance outstanding at a market-related rate linked to
MOSPRIME (Moscow Prime Offered Rate).
In addition to the facilities above, the Group has a revolving committed bank facility amounting to ZAR500
million in South Africa. This facility is repayable on its maturity date of 11 June 2014 and bears interest at one
month JIBAR plus a margin. On 31 October 2013 the Group repaid and cancelled a ZAR700 million revolving
loan that was outstanding at 31 December 2012.
The Group's borrowings as at 31 December are analysed by nature and underlying currency as follows:
Non-interest
Floating rate Fixed rate bearing Total carrying
2013/EUR million borrowings borrowings borrowings value Fair value
Euro 208 1,299 - 1,507 1,591
South African rand 79 - 6 85 85
Polish zloty 64 - - 64 64
Russian rouble 30 - - 30 30
Turkish lira 33 - - 33 33
Other currencies 25 2 6 33 33
Carrying value 439 1,301 12 1,752
Fair value 439 1,385 12 1,836
Non-interest
Floating rate Fixed rate bearing Total carrying
2012/EUR million (restated) borrowings borrowings borrowings value Fair value
Euro 126 1,322 - 1,448 1,559
South African rand 180 - 8 188 188
Pounds sterling 116 - - 116 116
Polish zloty 84 - - 84 84
Russian rouble 41 - - 41 41
Turkish lira 29 - - 29 29
Other currencies 22 1 - 23 23
Carrying value 598 1,323 8 1,929
Fair value 598 1,434 8 2,040
In addition to the above, the Group swaps euro debt into other currencies through the foreign exchange
market. The currencies swapped into/(out of) and the amounts as at 31 December were as follows:
EUR million 2013 2012
Long-dated contracts with tenures of more than 12 months
Russian rouble 27 59
Short-dated contracts with tenures of less than 12 months
Russian rouble 179 127
Czech koruna 81 51
US dollar 80 62
Pounds sterling 62 (59)
Swedish krona 34 13
Polish zloty 94 128
Other 57 29
Total swapped 614 410
The fair values of the EUR500 million 2017 Eurobond, EUR500 million 2020 Eurobond and EUR280 million
Eurobond are estimated with reference to the last price quoted in the secondary market. All other financial
liabilities are estimated by discounting the future contractual cash flows at the current market interest rate that
is available to the Group for similar financial instruments.
12 Retirement benefits
All assumptions related to the Group's defined benefit schemes and post-retirement medical plan liabilities
were re-assessed individually for the year ended 31 December 2013.
The net retirement benefit liability decreased by EUR42 million mainly due to changes in assumptions and an
exchange rate impact of EUR22 million. The assets backing the defined benefit scheme liabilities reflect their
market values as at 31 December 2013. Any movements in the assumptions have been recognised as a
remeasurement in the condensed combined and consolidated statement of comprehensive income.
13 Consolidated cash flow analysis
(a) Reconciliation of profit before tax to cash generated from operations
(Restated)
EUR million 2013 2012
Profit before tax 499 368
Depreciation and amortisation 365 349
Impairment of tangible and intangible assets (not included in special items) 4 4
Share-based payments 11 10
Non-cash effect of special items 60 91
Net finance costs 115 110
Net (profit)/loss from associates (2) 5
Decrease in provisions and net retirement benefits (25) (22)
Increase in inventories (7) (16)
Increase in operating receivables (14) (38)
Decrease in operating payables (6) (29)
Fair value gains on forestry assets (17) (40)
Felling costs 55 66
Profit on disposal of tangible and intangible assets (2) (4)
Other adjustments - (5)
Cash generated from operations 1,036 849
(b) Cash and cash equivalents
(Restated)
EUR million 2013 2012
Cash and cash equivalents per combined and consolidated statement of financial position 130 56
Bank overdrafts included in short-term borrowings (66) (93)
Net cash and cash equivalents per combined and consolidated statement of cash flows 64 (37)
The fair value of cash and cash equivalents approximate the carrying values presented.
(c) Movement in net debt (restated)
The Group's net debt position is as follows:
Cash and Debt due Debt due Current
cash within one after one financial asset Total net
EUR million equivalents(1) year year investments debt
At 31 December 2011, as previously reported 117 (212) (737) 1 (831)
Effect of restatement 2 18 (9) - 11
At 1 January 2012 (restated) 119 (194) (746) 1 (820)
Cash flow (160) 114 (548) - (594)
Business combinations - (67) (393) - (460)
Movement in unamortised loan costs - - 3 - 3
Reclassification - (46) 46 - -
Currency movements 4 5 (10) - (1)
At 31 December 2012 (restated) (37) (188) (1,648) 1 (1,872)
Cash flow 87 77 10 - 174
Movement in unamortised loan costs - - 18 - 18
Reclassification - (34) 34 - -
Currency movements 14 30 15 - 59
At 31 December 2013 64 (115) (1,571) 1 (1,621)
Note:
(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.
The following table shows the amounts available to draw down on the Group's committed loan facilities:
EUR million 2013 2012
Expiry date
In one year or less 42 27
In more than one year 750 735
Total credit available 792 762
14 Capital commitments
(Restated)
EUR million 2013 2012
Contracted for but not provided 366 129
Approved, not yet contracted for 625 589
These capital commitments relate to the following categories of non-current non-financial assets:
(Restated)
EUR million 2013 2012
Intangible assets 4 9
Property, plant and equipment 987 709
Total capital commitments 991 718
The expected maturity of these capital commitments is:
(Restated)
EUR million 2013 2012
Within one year 544 445
One to two years 392 263
Two to five years 55 10
Total capital commitments 991 718
Capital commitments are based on capital projects approved to date and the budget approved by the Boards.
Major capital projects still require further approval before they commence. These capital commitments are
expected to be financed from existing cash resources and borrowing facilities.
15 Contingent liabilities
Contingent liabilities comprise aggregate amounts as at 31 December 2013 of EUR25 million (2012: EUR15
million) in respect of loans and guarantees given to banks and other third parties. No acquired contingent
liabilities have been recorded in the Group's combined and consolidated statement of financial position for
both years presented.
16 Financial instruments' fair value disclosures
Financial instruments that are measured in the combined and consolidated statement of financial position at
fair value or where the fair value of financial instruments have been disclosed in notes to the combined and
consolidated financial statements require disclosure of fair value measurements by level based on the
following fair value measurement hierarchy:
- level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
- level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and
- level 3 – inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs).
The fair values of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) are determined using standard valuation techniques. These valuation techniques maximise the
use of observable market data where available and rely as little as possible on Group specific estimates.
The significant inputs required to fair value all of the Group's financial instruments are either quoted prices or
are observable. The Group only holds level 1 and 2 financial instruments and therefore does not hold any
financial instruments categorised as level 3 financial instruments. There have also been no transfers of
assets or liabilities between levels of the fair value hierarchy during the year.
Specific valuation methodologies used to value financial instruments include:
- the fair values of interest rate swaps and foreign exchange contracts are calculated as the present
value of expected future cash flows based on observable yield curves and exchange rates;
- the Group's commodity price derivatives are fair valued by independent third parties, who in turn
calculate the fair values as the present value of expected future cash flows based on observable
market data; and
- other techniques, including discounted cash flow analysis, are used to determine the fair values of
other financial instruments.
The only assets or liabilities measured at fair value on level 3 of the fair value measurement hierarchy
represent forestry assets. Refer to note 10 for more details on fair value measurement.
Except as detailed in the following table, the directors consider that the carrying values of financial assets and
financial liabilities recorded at amortised cost in the combined and consolidated financial statements are
approximately equal to their fair values.
Carrying amount Fair value
(Restated) (Restated)
EUR million 2013 2012 2013 2012
Financial liabilities
Borrowings 1,752 1,929 1,836 2,040
17 Related party transactions
The Group and its subsidiaries, in the ordinary course of business, enter into various sale, purchase and
service transactions with equity accounted investees 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.
The Group has a related party relationship with its equity accounted investees. 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.
With effect from 3 May 2013, Cyril Ramaphosa ceased to be a director of Mondi Limited and Mondi plc. As a
result, all transactions with the Shanduka Group Proprietary Limited, in which Mr Ramaphosa held a 29.6%
interest, and its subsidiaries are no longer classified as related party transactions from that date.
Other than the paragraph above, there have been no significant changes to the related parties as disclosed in
note 39 of the Group's annual financial statements for the year ended 31 December 2012.
18 Events occurring after 31 December 2013
With the exception of the proposed final dividend for 2013, included in note 9, there have been no material
reportable events since 31 December 2013.
Production statistics
(Restated)
2013 2012
Europe & International
Containerboard Tonnes 2,138,714 2,079,005
Kraft paper Tonnes 1,010,885 980,637
Softwood pulp Tonnes 2,007,959 1,978,583
Internal consumption Tonnes 1,859,597 1,825,916
External Tonnes 148,362 152,667
Corrugated board and boxes Mm2 1,344 1,213
Industrial bags M units 3,997 3,829
Coating and release liners Mm2 3,348 3,352
Consumer packaging(1) Tonnes 283,161 121,127
Uncoated fine paper Tonnes 1,381,141 1,417,709
Newsprint Tonnes 207,228 201,278
Hardwood pulp Tonnes 1,087,615 1,059,140
Internal consumption Tonnes 1,013,790 972,883
External Tonnes 73,825 86,257
South Africa Division
Containerboard Tonnes 254,714 263,468
Uncoated fine paper Tonnes 258,751 257,747
Hardwood pulp Tonnes 645,611 658,368
Internal consumption Tonnes 331,928 337,596
External Tonnes 313,683 320,772
Softwood pulp(2) – internal
consumption Tonnes 166,101 215,828
Newsprint(2) Tonnes 145,498 198,024
Notes:
(1) Includes Nordenia from October 2012.
(2) Restated to include 100% of the Mondi Shanduka Newsprint production.
Exchange rates
2013 2012
Closing rates against the euro
South African rand 14.57 11.17
Czech koruna 27.43 25.15
Polish zloty 4.15 4.07
Pounds sterling 0.83 0.82
Russian rouble 45.32 40.33
Turkish lira 2.96 2.36
US dollar 1.38 1.32
Average rates for the period against the euro
South African rand 12.83 10.55
Czech koruna 25.99 25.14
Polish zloty 4.20 4.18
Pounds sterling 0.85 0.81
Russian rouble 42.32 39.91
Turkish lira 2.53 2.31
US dollar 1.33 1.29
28 February 2014
Sponsor in South Africa: UBS South Africa Proprietary Limited
Date: 28/02/2014 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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