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Mondi Group: Trading update 12 May 2016
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: Trading update 12 May 2016
This trading update provides an overview of our financial performance and financial
position since the year ended 31 December 2015, based on management
information up to 31 March 2016 and estimated results for April 2016. These results
have not been audited or reviewed by Mondi’s external auditors.
Reviewed results for the half-year ending 30 June 2016 will be published on or
around 4 August 2016.
Except as discussed in this update, there have been no significant events or
transactions impacting either the financial performance or financial position of the
Group since 31 December 2015 up to the date of this statement.
Group performance overview
Underlying operating profit for the first quarter of 2016 of EUR269 million was 14%
above the comparable prior year period (EUR236 million). Strong contributions from
Consumer Packaging, Uncoated Fine Paper and the South Africa Division more than
offset the impact of lower selling prices in certain Packaging Paper segments and
margin pressure in Fibre Packaging. Underlying operating profit was up 9% on the
fourth quarter of 2015 (EUR246 million).
On a like-for-like basis, sales volumes were in line with the comparable prior year
period, with lower volumes in the industrial bags segment offset by good growth in
Consumer Packaging.
Selling prices for the Group’s main paper grades were, on average, up on the
comparable prior year period, with strong gains in Uncoated Fine Paper, and more
modest gains in the South Africa Division and containerboard, partly offset by lower
kraft paper prices.
Wood and chemical input costs were at similar levels to the comparable prior year
period while paper for recycling costs were up 15%, but broadly unchanged from the
fourth quarter of 2015. Energy costs were lower, driven by generally lower raw
material input costs and the benefits from the green energy investments at Swiecie,
Poland, completed in the second half of 2015.
Currency movements had a net negative impact versus the comparable prior year
period, with the benefits of weaker emerging market currencies in our export oriented
businesses more than offset by the impact of the weaker rouble on our domestically
focused uncoated fine paper operations in Russia.
There were no significant planned maintenance shuts during the first quarter. In the
comparable prior year period the impact of maintenance shuts on operating profit
was estimated at around EUR17 million. Based on prevailing market prices, we
continue to estimate that the impact of planned maintenance shuts on operating
profit for 2016 will be around EUR70 million, of which around EUR25 million will be
incurred in the first half of the year (EUR35 million in the first half of 2015).
Divisional overview
In Packaging Paper, selling prices for the containerboard grades were marginally up
on average over the comparable prior year period but down on the prior quarter.
While demand remains solid, increased supply from new capacity in Europe and
competition from importers benefiting from weak emerging market currencies
resulted in lower selling prices for unbleached kraftliner. Average benchmark
European kraftliner prices were down 3.4% on the previous quarter, and at similar
levels to the comparable prior year period. Benchmark selling prices for white-top
kraftliner were marginally down on the previous quarter, while recycled
containerboard prices were down 1.8% on the previous quarter, but 5.2% above the
comparable prior year period. Given sustained good demand and a strong order
position, we have announced a price increase of EUR40/tonne for all kraftliner and
kraft-top liner grades from 6 June 2016.
Sales volumes for sack kraft paper remained at similar levels to the comparable prior
year period. As previously indicated, demand softness in a number of export markets
and seasonal weakness in European markets towards the end of the prior year lead
to average selling prices for sack kraft paper produced in Europe declining by 5-6%
in the early part of 2016. Demand has since improved in the important export
markets of south east Asia and the Middle East and pricing remains stable.
In Fibre Packaging, continued strong cost management, the benefits of
restructuring and rationalisation activities and contributions from capital investments
provided some offset to negative currency effects and lower sales volumes in
Industrial Bags, which has been impacted by capacity rationalisation and challenging
market conditions in the US.
On 26 April 2016, the acquisition of SIMET S.A., a corrugated plant in Poland, was
completed. The plant will be upgraded to a high-efficiency box plant, improving our
customer offering and supporting the strong growth in the region.
The Consumer Packaging business continued to make good progress. Good
volume growth, coupled with incremental improvements in fixed costs and the
benefits from acquisitions completed at the end of 2015 contributed to the improved
performance.
Uncoated Fine Paper performed strongly with higher average selling prices and
stable volumes versus the comparable prior year period offsetting the negative
impact of the weaker rouble. European prices have stabilised following the increases
seen in the second half of 2015, with the benefits of industry capacity rationalisation
in the prior year offset by subdued demand in the first quarter. Average benchmark
selling prices in Europe were up 2.8% on the comparable prior year period and in
line with prices in the fourth quarter of 2015.
The South Africa Division benefited from higher average selling prices for
uncoated fine paper, pulp and white-top kraftliner, currency gains and higher fair
value gains on forestry than the comparable prior year period. Pulp prices have
shown some softness from the highs seen in the prior year, with the average US
dollar benchmark price down 5% on the previous quarter. In 2015, the Richards Bay
maintenance shut took place in the first quarter of the year, while in 2016 the shut is
planned for the final quarter.
Capital investment projects
Good progress is being made on our previously announced major capital investment
projects at our high-quality, low-cost operations in central Europe and South Africa.
These projects remain on schedule and on budget.
Capital expenditure for the year is expected to remain in line with previous guidance
of between EUR400 million and EUR450 million.
Cash flow and financing activities
On 14 April 2016 we issued a 1.5% EUR500 million Eurobond with an 8 year term
under our European Medium Term Note Programme, thereby extending the Group’s
maturity profile and ensuring ample liquidity.
Strong cash generation from operating activities more than offset the cash outflows
related to our capital expenditure programme and financing activities, resulting in a
reduction in net debt during the quarter.
Finance charges were lower than those of the previous quarter and the comparable
prior year period, mainly due to lower average net debt levels and mix effects.
There have been no other significant changes in the Group’s borrowing facilities
since 31 December 2015.
Outlook
As anticipated, we have seen some price weakness in certain of our packaging
paper grades. However, demand for these products remains strong and we believe
the fundamentals remain robust. Furthermore, we continue to benefit from higher
uncoated fine paper prices, lower energy and related input costs and the incremental
contributions from our recently completed capital investment projects, together with
the stability afforded by our downstream converting businesses.
Our outlook remains positive and we are confident of delivering in line with our
expectations.
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
Roger Newby +44 20 3727 1385
Conference call dial-in details
Please see below details of our dial-in conference call that will be held on 12 May 2016 at
7:30 (UK) and 8:30 (SA).
The conference call dial-in numbers are:
South Africa 0800 200 648 (toll-free)
UK 0808 162 4061 (toll-free)
Europe & Other +800 246 78 700 (toll-free) or +27 10 201 6800
Should you have any issues on the day with accessing the dial-in conference call, please
call +27 11 535 3600.
A replay facility will be available until 31 May 2016. Dial in: +27 (0)11 305 2030,
Pin no: 48973#
Editors’ notes
We are Mondi: In touch every day
At Mondi, our products protect and preserve the things that matter.
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, end consumers and
industrial end uses - touching the lives of millions of people every day. In 2015, Mondi had
revenues of EUR6.8 billion and a return on capital employed of 20.5%.
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 and is 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.
Sponsor in South Africa: UBS South Africa (Pty) Ltd
Date: 12/05/2016 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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