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MONDI PLC - Interim Management Statement

Release Date: 16/10/2014 08:00
Code(s): MNP MND     PDF:  
Wrap Text
Interim Management Statement

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.

Mondi Group: Interim Management Statement 16 October 2014

This interim management statement provides an update on the financial performance and financial
position of the Group since the half year ended 30 June 2014, based on management accounts up
to 30 September 2014 and estimated results for October 2014. These results have not been
audited or reviewed by Mondi’s external auditors.

Audited results for the year ending 31 December 2014 will be published on or around 24 February
2015.

Except as discussed in this interim management statement, there have been no significant events
or transactions impacting either the financial performance or financial position of Mondi Group
since 30 June 2014 up to the date of this statement.

Group Performance Overview

Third quarter underlying operating profit of EUR174 million was in line with management’s
expectations, comparable to the prior year period and 10% below that of the previous quarter.

Like-for-like sales volumes were broadly in line with the comparable prior year period.

Previously announced price increases were successfully implemented in a number of the Group’s
key Packaging Paper markets, with increases implemented for unbleached kraft paper from the
beginning of the third quarter, recycled containerboard from August and unbleached kraftliner from
September.

Wood costs were lower on average than the previous quarter whilst paper for recycling costs were
at similar levels. The business continued to benefit from its investments in energy related capital
expenditure and lower European natural gas prices.

During the quarter, the major annual maintenance shuts scheduled for the Group’s uncoated fine
paper and containerboard facilities were completed according to plan. The major kraft paper
maintenance shuts are scheduled for the fourth quarter. The impact on third quarter underlying
operating profit from these shuts is estimated at around EUR30 million. Based on prevailing
market prices, the fourth quarter impact will be around EUR15 million to EUR20 million.
The South Africa Division benefited from the stronger US dollar on its export sales whilst the
weaker Russian rouble had a negative impact on the more domestically focused Russian
businesses. The recent strengthening of the US dollar relative to the euro should support
European pricing in packaging grades and provide a net benefit to the Group’s export businesses.

The Group continues to monitor the developments in Russia and the Ukraine, however these have
had minimal direct impact on operations to date.

Reorganisation of business segments

During the quarter, the Group refined its organisational structure, which has resulted in several
changes within the Group’s segmental reporting. The most significant of these changes were the:

-   transfer of the release liner business from Fibre Packaging to Consumer Packaging to take
    advantage of identified synergies in customer relations, innovation and the global footprint of
    these businesses; and
-   transfer of the 40,000 tonne per annum kraft paper machine at the Ruzomberok mill from
    Uncoated Fine Paper to Packaging Paper.

The restated segmental information is included as an appendix to this statement. The
reorganisation had no impact on the overall Group result.

Divisional Overview

The Packaging Paper business saw selling price increases across a number of key grades.
Unbleached kraft paper price increases of between EUR30/tonne and EUR40/tonne were
implemented from July. Price increases for unbleached kraftliner and recycled containerboard of
between EUR30/tonne and EUR40/tonne were achieved in steps during August and September.
Prices for white-top kraftliner and speciality kraft paper were stable.

During the quarter, the Group announced the intention to close one of the two speciality kraft
paper machines at its Lohja mill in Finland with capacity of 30,000 tonnes per annum. Closure
and restructuring costs amounting to EUR6 million were recognised as a special item.

Fibre Packaging continued to perform well, with good year-on-year margin development in both
Corrugated Packaging and Industrial Bags. Increasing paper input costs in the Corrugated
Packaging segment and seasonally weaker demand in Industrial Bags are expected to put some
pressure on margins in the fourth quarter.

During the quarter the sub-scale Moderbrugg corrugated packaging plant in Austria was sold.

The integration of the recently acquired Graphic Packaging industrial bags business in the US is
progressing according to plan. Various restructuring activities have been announced, including
the closure of a plant in Philadelphia. The closure and restructuring costs, which will be reflected
as a special item, are estimated at EUR13 million.

Profitability in Consumer Packaging improved from the previous quarter, although the weak
trading conditions in Europe continued to impact this business. A relocation of the head office
activities of the business unit was implemented and costs amounting to EUR12 million reflected as
a special item.
The Uncoated Fine Paper business was impacted by the seasonally weaker third quarter and the
impact of planned maintenance shuts. Further weakening of the Russian rouble impacted the
profitability of the business, although price increases achieved during the quarter in Russia partly
offset this. The normal seasonal pick-up in demand following the European summer has been
marginally weaker than anticipated with some price softness evident in key European market
segments.

Lower export pulp sales prices and fair value gains on forestry assets resulted in lower profitability
in the South Africa Division compared to the previous quarter. The weakness of the rand
against the US dollar provided some offset.

Capital investment projects

The Group continues to make good progress on its major capital projects. The EUR128 million
recovery boiler project at the Group’s Ruzomberok mill and EUR30 million pulp dryer at the
Syktyvkar mill are currently in commissioning phase.

Financial position

On 15 July 2014, as previously announced, the Group redeemed the 9.75% EUR280 million
Eurobond, assumed as part of the Nordenia acquisition. The notes were redeemed utilising
proceeds from existing borrowing facilities.

Net debt of EUR1,811 million at the end of the quarter was EUR60 million up on the half-year,
impacted by a number of factors including the 31 July acquisition of the Printpack Inc. consumer
packaging plant in Poland for USD23 million announced at the half-year, increased capital
expenditure, payment of the interim dividend, interest on the 2020 EUR500 million Eurobond and
currency effects.

Outlook

Recent price increases in a number of the Packaging Paper grades and continued strong
operating performance across the Group should provide solid support for the Group to continue to
deliver in line with management expectations.

Looking further forward, much depends on macroeconomic developments in the Group’s core
European markets. However, with the Group’s low cost operating model in upstream businesses,
to be further enhanced by the various capital projects nearing completion, and the benefits of
strong vertical integration, management remains confident of continuing to deliver industry leading
performance.
Operating segments (restated)
Six months ended 30 June 2014
                                                                                           South Africa   Corporate & Intersegment
                                                 Europe & International                        Division         other    elimination Segments total

                                     Packaging       Fibre    Consumer         Uncoated
€ million, unless otherwise stated       Paper   Packaging    Packaging       Fine Paper

Segment revenue                         1,022         868           685            646            284               -         (357)         3,148
Internal revenue                        (282)         (20)           (3)            (4)           (48)              -           357             -

External revenue                          740          848          682            642            236               -              -        3,148


EBITDA                                    216           78            69           127              78           (15)              -          553
Depreciation, amortisation and
impairments                              (49)         (30)          (30)           (47)           (20)              -              -        (176)
Underlying operating
profit/(loss)                             167           48            39             80             58           (15)              -          377
Special items                                -          (7)            4              -              -           (13)              -          (16)
Operating segment assets                1,975       1,075         1,140          1,301            728               6         (177)         6,048
Operating net segment assets            1,621          814          979          1,113            608               7              -        5,142
Additions to non-current non-
financial assets                          135           27            33             50             29            23               -          297
Capital expenditure cash
payments                                  116           30            35             59              9              -              -          249
Operating margin (%)                     16.3          5.5           5.7           12.4          20.4               -              -         12.0
Return on capital employed (%)           22.5         12.3           8.3           15.6          20.5               -              -         16.0

Six months ended 30 June 2013
                                                                                           South Africa   Corporate & Intersegment
                                                 Europe & International                        Division         other    elimination Segments total

                                     Packaging       Fibre    Consumer         Uncoated
€ million, unless otherwise stated       Paper   Packaging    Packaging       Fine Paper

Segment revenue                         1,078         856           721            711            325               -         (349)         3,342
Internal revenue                        (265)         (23)           (2)            (3)           (56)              -           349             -

External revenue                          813          833          719            708            269               -              -        3,342


EBITDA                                    202           75            74           150              67           (14)              -          554
Depreciation, amortisation and
impairments                              (48)         (31)          (32)           (53)           (23)            (1)              -        (188)
Underlying operating
profit/(loss)                             154           44            42             97             44           (15)              -          366
Special items                                -            -         (13)           (50)           (18)              -              -          (81)
Operating segment assets                1,859       1,069         1,160          1,328            810               7         (129)         6,104
Operating net segment assets            1,498          839          993          1,144            687               7              -        5,168
Additions to non-current non-
financial assets                           59           22            27             32             34              -              -          174
Capital expenditure cash
payments                                   56           31            27             36             14              -              -          164
Operating margin (%)                     14.3          5.1           6.0           13.6          13.5               -              -         11.0
Return on capital employed (%)           20.0         13.4           7.3           17.2          12.8               -              -         14.8

Year ended 31 December 2013

                                                                                        South Africa   Corporate & Intersegment
                                                 Europe & International                     Division         other    elimination Segments total

                                     Packaging       Fibre    Consumer      Uncoated
€ million, unless otherwise stated       Paper   Packaging    Packaging    Fine Paper

Segment revenue                         2,073       1,690         1,414       1,335            624               -         (660)         6,476
Internal revenue                        (506)         (43)           (4)         (6)         (101)               -           660             -

External revenue                        1,567       1,647         1,410       1,329            523               -              -        6,476


EBITDA                                    408          146          143         266            135            (30)              -        1,068
Depreciation, amortisation and
impairments                             (100)         (60)          (64)       (102)           (42)            (1)              -        (369)
Underlying operating
profit/(loss)                             308           86            79        164              93           (31)              -          699
Special items                                -          (3)         (13)        (60)           (11)              -              -          (87)
Operating segment assets                1,905       1,001         1,121       1,270            731               2         (140)         5,890
Operating net segment assets            1,543          771          964       1,099            622               1              -        5,000
Additions to non-current non-
financial assets                          165           66            65          85             93              -              -          474
Capital expenditure cash
payments                                  141           71            61          80             52              -              -          405
Operating margin (%)                     14.9          5.1           5.6        12.3          14.9               -              -         10.8
Return on capital employed (%)           21.7         11.8           8.7        16.0          16.0               -              -         15.3

Year ended 31 December 2012

                                                                                        South Africa   Corporate & Intersegment
                                                 Europe & International                     Division         other    elimination Segments total

                                     Packaging       Fibre    Consumer      Uncoated
€ million, unless otherwise stated       Paper   Packaging    Packaging    Fine Paper

Segment revenue                         1,970       1,583           765       1,415            702               -         (645)         5,790
Internal revenue                        (470)         (50)           (4)        (13)         (108)               -           645             -

External revenue                        1,500       1,533           761       1,402            594               -              -        5,790


EBITDA                                    334          151            57        292            125            (32)              -          927
Depreciation, amortisation and
impairments                              (98)         (58)          (34)       (106)           (56)            (1)              -        (353)
Underlying operating
profit/(loss)                             236           93            23        186              69           (33)              -          574
Special items                                -        (16)          (11)            -             6           (70)              -          (91)
Operating segment assets                1,896       1,065         1,156       1,410            975               5         (150)         6,357
Operating net segment assets            1,523          821          985       1,215            821               1              -        5,366
Additions to non-current non-
financial assets                          256          129          631           58             94              -              -        1,168
Capital expenditure cash
payments                                   95           62            36          58             43              -              -          294
Operating margin (%)                     12.0          5.9           3.0        13.1            9.8              -              -           9.9
Return on capital employed (%)           17.8         13.9           5.6        16.7            9.6              -              -         13.7
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                                    +44 7909 684 466
Sue I Ong                                           +44 20 3727 1340

Editors’ notes

Mondi is an international packaging and paper Group, employing around 26,000 people in production
facilities across 31 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.

16 October 2014


Sponsor in South Africa: UBS South Africa Pty Ltd

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