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MND\MNP - Mondi Group: 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 13 May 2015
This interim management statement provides an overview of the financial
performance and financial position of the Group since the year ended 31 December
2014, based on management accounts up to 31 March 2015 and estimated results
for April 2015. These results have not been audited or reviewed by Mondi’s external
auditors.
Reviewed results for the half-year ending 30 June 2015 will be published on or
around 6 August 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 31 December 2014 up to the date of this
statement.
Group Performance Overview
First quarter underlying operating profit of EUR236 million was 29% above the
comparable prior year period (EUR183 million), on volume growth and lower input
costs across most of the European businesses, good contributions from capital
projects and acquisitions, and higher selling prices in Russia and South Africa. The
result was 9% above the fourth quarter of 2014 (EUR216 million).
Average selling prices in Europe for all key paper grades were broadly in line with
those in the previous quarter and, with the exception of recycled containerboard,
also in line with the comparable prior year period. Average benchmark recycled
containerboard prices were around 6% lower than the first quarter of 2014.
On a like-for-like basis, sales volumes were up across most businesses on both the
comparable prior year period and the previous quarter.
The Group benefited from generally lower input costs relative to the comparable prior
year period, driven in part by currency impacts. Wood costs, paper for recycling,
resin, energy and chemicals costs were all lower than the comparable prior year
period. Inflationary pressures in a number of the emerging markets in which the
Group operates are expected to increase going forward. In addition, the recent
recovery in the oil price is expected to negatively affect the cost of energy, resin and
chemicals.
The strengthening of the US dollar versus the Euro provided a net benefit to the
Group, both through translation of dollar-denominated sales and through the support
provided to European selling prices for a number of the Group’s key paper grades.
The weaker Russian rouble in the early part of the year had a net negative impact on
the domestically focused uncoated fine paper business offset in part by the export-
oriented Russian packaging paper operations. However, during the quarter, the
rouble strengthened sharply from its lows.
During the first quarter, the scheduled maintenance shut of the Richards Bay mill in
South Africa was completed. In 2014, this shut took place in the third quarter.
Maintenance shuts are scheduled for the second quarter at the Swiecie mill in
Poland and at two of the Group’s kraft paper mills. As previously indicated, the
impact of maintenance shuts on annual operating profit in 2015 is estimated to be
around EUR80 million.
Divisional Overview
Europe & International Division
Packaging Paper performance was supported by strong contributions from projects
commissioned over the past year, a positive contribution from the US operations
acquired in the previous year, generally lower input costs and currency benefits.
Selling prices were at similar levels to the comparable prior year period and the
previous quarter.
Virgin containerboard price increases were implemented in southern Europe towards
the end of the quarter and further increases of EUR40/tonne have since been
announced across Europe. Recycled containerboard price increases have also
been announced for implementation in the second quarter.
In Kraft Paper, average selling prices during the quarter were higher than those in
the comparable prior year period and similar to the previous quarter. Price increases
for sack kraft paper have been announced in Europe for implementation in June,
although the impact is expected to be muted as a result of the high levels of
integration into Fibre Packaging.
The business benefited from the ramp-up of projects completed during the prior year,
most notably the 155,000 tonne per annum bleached kraft paper machine in Steti,
Czech Republic, and the 100,000 tonne per annum pulp dryer in Syktyvkar, Russia,
producing softwood pulp for the open market.
The Fibre Packaging business benefited from margin expansion versus the
comparable prior year period on better pricing and improved product mix due to
various commercial excellence initiatives, supported by volume growth. The
business also benefited from an improving performance from the recently acquired
US Bags business, with the turnaround progressing according to plan.
Consumer Packaging continues to show good progress with higher sales volumes
and stronger margins than the comparable prior year period. Volume growth was
supported by qualification of a number of new customer projects, together with the
successful ramp-up of the plant opened in the first quarter of 2014 in China. Margin
improvement was achieved through the ongoing focus on growth in higher margin
products, in line with the business unit’s strategy. Lower resin prices in the early part
of the year also supported margins, although the sharp increase in resin prices since
early March will negatively impact margins in the second quarter as product pricing
adjusts with the usual three month lag.
Uncoated Fine Paper benefited from higher sales volumes, higher domestic
Russian prices, and lower input costs, supported by a strong contribution from the
recently completed recovery boiler investment in Ruzomberok, Slovakia. This was
partially offset by lower average selling prices in Europe and negative currency
impacts. In Russia, price increases were successfully implemented in the early part
of the year in response to rising domestic inflationary pressures driven by the sharp
rouble devaluation. A partial reduction of these increases was implemented in April
following the subsequent revaluation of the rouble. In Europe, prices have stabilised,
with price increases of between 2% and 3% implemented from the beginning of the
second quarter.
South Africa Division
The South Africa Division benefited from higher average domestic selling prices, the
benefits of the stronger US dollar, gains from land sales, and a higher than
anticipated forestry revaluation gain versus the comparable prior year period.
Domestic demand for the Division’s key grades was lower than the previous quarter
due to seasonal effects in uncoated fine paper and the weaker industrial sector
affecting demand for pulp and containerboard.
Special items
The Group continues to review and refine its portfolio. Since 31 December 2014, the
intention to close a consumer packaging plant in Spain and a small kraft paper mill in
Finland was announced. In addition, restructuring of the recently acquired US Bags
business continued. As a result, special item charges of EUR35 million were
recognised.
Capital investment projects
Good progress is being made on the Group’s major capital investment projects, with
all projects proceeding on schedule and within budget.
Cash flow and financing activities
Cash generated by operations more than offset the cash outflows for the Group’s
capital expenditure programme.
Finance charges were higher than that of the preceding quarter and the comparable
prior year period, primarily due to higher Russian interest rates, while average net
debt levels were broadly unchanged from those of the previous quarter.
There have been no significant changes in the Group’s borrowing facilities since 31
December 2014.
On 11 May 2015, Standard & Poor’s announced that it had upgraded the Group’s
credit rating from BBB- to BBB stable outlook. This follows the upgrade from
Moody’s Investors Service to Baa2, announced in October 2014.
Summary
Much depends on the macroeconomic environment. However, given the Group’s
robust business model and clear strategic focus, management remains confident of
continuing to deliver industry leading performance and making good progress for the
year.
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
We are Mondi: In touch every day
Mondi is an international packaging and paper Group, employing around 25,000 people
across more than 30 countries. Our key operations are located in central Europe, Russia,
North America and South Africa. We offer over 100 packaging and paper products,
customised into more than 100,000 different solutions for customers and end consumers. In
2014, Mondi had revenues of EUR6.4 billion and a return on capital employed of 17.2%.
The Mondi Group is fully integrated across the packaging and paper value chain - from
managing forests and producing pulp, paper and compound plastics, to developing effective
and innovative industrial and consumer packaging solutions. Our innovative technologies
and products can be found in a variety of applications including hygiene components, stand-
up pouches, super-strong cement bags, clever retail boxes and office paper. Our key
customers are in industries such as automotive; building and construction; chemicals; food
and beverage; home and personal care; medical and pharmaceutical; packaging and paper
converting; pet care; and office and professional printing.
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.
For us, acting sustainably makes good business sense. We don’t just talk about
sustainability; we make it part of the way we work every day. We have been included in the
FTSE4Good Index Series since 2008 and the JSE's Socially Responsible Investment (SRI)
Index since 2007.
13 May 2015
Sponsor in South Africa: UBS South Africa (Pty) Ltd
Date: 13/05/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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