mondi results year end 2015 final...packaging paper remains the largest contributor ebit...
TRANSCRIPT
Mondi GroupFull year results for the year ended 31 December 201525 February 2016
2
Agenda
HighlightsFinancial overviewOperational overviewDelivering on our strategyOutlookAppendices
3
622 574 699 767 957
15.0% 13.6% 15.3% 17.2%20.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2011 2012 2013 2014 2015ROCE
● Excellent results achieved
○ Underlying operating profit up 25%○ Underlying earnings up 25%○ ROCE of 20.5%
● Significant profit improvement across all business units
● Capital projects delivering growth
○ €50 million incremental contribution to underlying operating profit in 2015 from completed investments
○ Strong capital investment pipeline
● €94 million in acquisitions to enhance product offering in Consumer Packaging
● Recommended full year dividend of 52 euro cents per share, up 24% on prior year68.1 69.2 95.0 107.3 133.7
2011 2012 2013 2014 2015
CAGR 18.4%
Underlying earnings per share
Highlights
Strong results on all key metrics
Underlying operating profit and ROCE
€ million
Euro cents per share
4
Agenda
HighlightsFinancial overviewOperational overviewDelivering on our strategyOutlookAppendices
5
Operating financial highlights
€ million 2014 2015%
changeH2
2014H1
2015H2
2015Group Revenue 6,402 6,819 7% 3,254 3,459 3,360
Underlying EBITDA 1,126 1,325 18% 573 671 654
% Margin 17.6% 19.4% 17.6% 19.4% 19.5%
Underlying operating profit 767 957 25% 390 490 467
% Margin 12.0% 14.0% 12.0% 14.2% 13.9%
Group ROCE 17.2% 20.5% 17.2% 19.0% 20.5%
25% increase in operating profit and ROCE of 20.5%
6
Currency effects
0
Underlying operating profit development
Price, volume and input costs driving profitability
2014 Volume Price Variable costs
Fixed costs
Fair value gains and other
Acquisitions and
disposals
2015
76726
14295 (77)
(7)11 957
€ million
7
43%
13%12%
18%
14%
2014
€212 million
1 Excludes Corporate costs of €35 million (2014: €33 million)
Divisional operating profit contribution
40%
12%11%
21%
16%
2015
€102 million
€112 million
€148 million
€96 million
Packaging Paper remains the largest contributor
EBIT contribution by segment¹
€342m
€102m
€96m
€148m
€112m
€391m
€120m€108m
€212m
€161m
Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division
8
76744 5 20 (2) 10 2
3331 11
38 (5) 3 957
H2 H1 H2 H1H2H1 H1 H1H2 H2 H2
Divisional operating profit development
Strong contributions from all business units
2014 Packaging Paper
Fibre Packaging
Consumer Packaging
Uncoated Fine Paper
South Africa
Division
Corporate 2015
€ million
H1
9
Financial review
€ million 2014 2015%
changeH2
2014H1
2015H2
2015
Underlying operating profit 767 957 25% 390 490 467
Net underlying finance costs (97) (105) (8%) (47) (59) (46)
Net profit from associates 1 1 - - - 1
Underlying profit before tax 671 853 27% 343 431 422
Tax before special items (126) (161) (28%) (64) (82) (79)
Total non-controlling interests (26) (45) (73%) (11) (21) (24)
Underlying earnings 519 647 25% 268 328 319
Special items (after tax and non-controlling interests) (48) (47) 2% (32) (36) (11)
Reported profit after tax and non-controlling interests 471 600 27% 236 292 308
Basic earnings per share (euro cents) 97.4 124.0 27% 48.8 60.3 63.7
Underlying earnings per share (euro cents) 107.3 133.7 25% 55.4 67.8 65.9
Underlying earnings per share up 25%
10
● Sharply higher Russian interest rates in H1 and one-off effects increase effective interest rate
● Net debt down despite increasing capex spend
● Strong balance sheet provides strategic flexibility
● Public credit ratings
○ Moody’s Investor Services at Baa2 (stable outlook)○ Standard & Poor’s at BBB (stable outlook) – upgraded in
May 2015
Finance costs and net debt
€ million 2014 2015%
changeNet debt 1,613 1,498 7%Average net debt 1,675 1,650 2%Net underlying finance costs 97 105 (8%)Effective interest rate (before capitalised interest) 5.4% 6.3%Committed facilities 2,134 2,002 (6%)Of which undrawn 456 598Net debt/12-month trailing EBITDA (times) 1.4 1.1
46%
19%
14%
4%2%
1% 14% EuroPolish zlotyCzech korunaRussian roubleRandPounds sterlingOther
A robust financial position
Currency split of net debt €1,498 million
11
Taxation
€ million 2014 2015%
change
Tax charge 126 161 (28%)
Cash tax paid 106 160 (51%)
Effective tax rate 19% 19%
● Effective tax rate reflects underlying profit mix of Group plus
○ Benefits of tax incentives related to our capital investments in Slovakia, Poland and Russia
○ Recognition of deferred tax assets on tax losses
● Expect tax rate to move towards 22% over next three years
○ Based on current geographic profit mix, prevailing tax rates and
○ In the absence of further investment related tax incentives
Stable tax rate
12
Net debt at 31 Dec 2015
Cash flow effects - movement in net debt
Significant cash generation
1,4986338209
595
253
6
1,613 (1,279)
€ million
Net debt at 31 Dec 2014
Cash generated from operations
Currency effects (including
derivatives)
Tax and financing costs
paid
Capex investment
Dividends paid to equity holders
Acquisitions and disposals
Other
13
8.25 8.90 9.55 13.23 14.38
17.75 19.1026.45
28.77
37.62
2.6
2.5
2.6 2.6 2.6
1.5
1.7
1.9
2.1
2.3
2.5
2.7
0
10
20
30
40
50
60
2011 2012 2013 2014 2015Interim dividend Final dividend Dividend cover (times)
● Mondi’s dividend policy aims to offer shareholders long term dividend growth within a target dividend cover range of two to three times underlying earnings on average over the 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 to 37.62 euro cents per share
● Full year dividend of 52 euro cents per share, up 24% on prior year
Dividends
Compound annual growth rate in dividend over past 5 years of 19%
Dividends declared
Euro cents per share
14
Agenda
HighlightsFinancial overviewOperational overviewDelivering on our strategyOutlookAppendices
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division
15
300 236 308 342 391
24.5%
17.8%21.7% 23.7% 25.5%
14.6% 12.0% 14.9% 16.7% 18.1%
2011 2012 2013 2014 2015ROCE Underlying operating profit margin
● Another strong performance, ROCE of 25.5% and underlying profit up 14% on prior year
● Supported by
○ Higher selling prices in Containerboard○ Benefits of completed capital investments
- Higher sales volumes of kraft paper and pulp- Lower energy costs
○ Positive currency effects○ Strong cost control through cost savings initiatives and
lower average wood, chemicals and energy costs
0.70 0.80 0.90 1.00 1.10 1.20 1.30
2011 2012 2013 2014 2015VCB RCB Kraft paper Market pulp
Volumes indexed to 2011
Packaging Paper
Underlying operating profit, margin and ROCE
€ million
Production volumes
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division
16
200
300
400
500
600
700
800
2011 2012 2013 2014 2015
€/tonne
Source: FOEX Indexes Ltd
Virgin containerboard (VCB)● European demand growth of 4.7% in 2015
● Average 2015 European benchmark selling prices○ Kraftliner brown up 4.4%○ White-top kraftliner marginally up
● Recent downward pressure on prices due to European capacity increases and competition from emerging markets enjoying weaker currencies○ Average decline in unbleached kraftliner prices of around
€20-€25/tonne in early 2016○ White-top kraftliner down €10-€15/tonne
Recycled containerboard (RCB)● European demand growth of 3.9% in 2015
● Average 2015 European benchmark selling prices up 0.9%
● Net capacity additions of ±800 ktpa in 2016, expected to be matched by demand growth
Packaging Paper | industry fundamentals
Selling prices
White-top kraftlinerRCBVCB
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division
17
37.23.3 2.0-3.0
● Overall containerboard capacity expected to grow in line with demand
● In VCB grades, announced capacity increase likely to be compensated by grade substitution and/or reduction in net imports
○ Net imports of 0.6 million tonnes estimated in 2015○ US kraftliner can be sold domestically at €100-€140/t higher than in Southern Europe
Incremental containerboard supply expected to be absorbed by demand in the medium term
Source: RISI and Mondi estimatesPackaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division
2016E-2018E demand and capacity growth estimates in Europe (in mt)
+2-3%CAGR +1-2% +2-3%
Containerboard VCB RCB
7.5 0.6 0.2-0.4
Demand growth
Net capacity additions
2015 Capacity
Demand growth
Net capacity additions
2015 Capacity
29.7 2.7 1.8-2.6
Demand growth
Net capacity additions
2015 Capacity
18
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
2011 2012 2013 2014 2015
Source: Mondi
Sack kraft paper● European demand moderately weaker
● Softness in export markets
○ Slowdown in construction activity in south east Asia○ Political instability in Middle East and North Africa
● Average selling prices down 5-6% in early 2016
Speciality kraft paper● Good demand growth
● Higher average selling prices in 2015
● Selling prices remain stable in early 2016
Packaging Paper | industry fundamentals
Sack kraft paper - Europe
Selling prices
Price indexed to 2011
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division
19
74 93 86 102 120
11.3%13.9%
11.8%13.4% 13.9%
4.6%5.9% 5.1% 5.5% 5.9%
2011 2012 2013 2014 2015ROCE Underlying operating profit margin
Corrugated Packaging● 3.3% higher like-for-like sales volumes, good growth in Poland
and Czech Republic
● Good cost control and benefits of restructuring in 2014
● Turkey impacted by weaker Turkish lira, political instability and domestic inflation
● Capital investments contributed to improved performance
Industrial Bags ● Sales volumes up 11%○ US acquisition○ Market share growth in MENA and Europe
● Higher average selling prices
● Benefits from stronger USD, product innovation, commercial excellence projects and productivity improvements
Extrusion Coatings● Gains from improved product portfolio
0.700.800.901.001.101.201.30
2011 2012 2013 2014 2015
Volumes indexed to 2011
Fibre Packaging
Industrial bags Extrusion coatingsCorrugated packaging
Underlying operating profit, margin and ROCE
Production volumes
€ million
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division
20
32 37 79 96 108
11.6%
9.0% 8.7%10.4%
10.7%
5.1% 4.8%5.6%
7.0% 7.4%
2011 2012¹ 2013 2014 2015ROCE Underlying operating profit margin
1 Excludes €14 million one-off costs relating to Nordenia acquisition
● Underlying operating profit up 13% on prior year
● Margins supported by
○ Strong volume growth in higher value-added segments○ Commercial excellence initiatives
- Improved sales infrastructure- Material usage and efficiency- Improving productivity- Streamlining innovation process
● Good progress in repositioning business
○ Exposure to lower value-added products reduced- Closure of Spanish and Italian operations- Sale of Malaysian and German plants
○ Ramp-up of Chinese plant and 2014 Polish acquisition○ Acquisitions of Ascania (Germany) and KSP (South
Korea and Thailand)- Increase exposure to high-growth, high value-added
segments
Consumer Packaging
Underlying operating profit, margin and ROCE
€ million
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division
21
205 186 164 148 212
16.7% 16.7% 16.0% 16.1%25.6%
14.3% 13.1% 12.3% 11.9%17.2%
2011 2012 2013 2014 2015ROCE Underlying operating profit margin
● Strong performance with ROCE of 25.6% and 43% increase in underlying operating profit
● Selling price increases in Europe and Russia
● Sales volumes up 1.7%
● Good cost control through commercial excellence initiatives
○ Lower wood, energy and chemical costs
● Higher euro pulp costs (up 26%) impact Neusiedleroperations
● Full realisation of benefits from new recovery boiler at the Ružomberok mill – providing energy efficiencies and increased pulp production
0.90
0.95
1.00
1.05
2011 2012 2013 2014 2015
Uncoated Fine Paper
Underlying operating profit, margin and ROCE
Production volumes – Uncoated fine paper
€ million
Volumes indexed to 2011
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division
22
400
450
500
550
600
650
700
750
800
850
900
2011 2012 2013 2014 2015A4 B-copy Pulp (BHKP)
€/tonne
Source: FOEX Indexes Ltd
Demand● Europe stable
● Decline in CIS of approximately 4%
Supply● Significant capacity rationalisation through closures and
conversions - ±720 ktpa over 2015/2016
Prices● Average benchmark pricing in Europe down 0.7% on prior
year, but up 1.9% in second half
● Price increase in Europe of up to 4% implemented –effective February 2016
● Price increases in Russia announced for implementation during Q1 2016
Uncoated Fine Paper | industry fundamentals
Pulp and A4 B-copy prices
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division
23
63 69 93 112 161
8.7% 9.6%16.0%
21.9%
30.1%
9.8% 9.8%14.9%
18.8%24.7%
2011 2012 2013 2014 2015ROCE Underlying operating profit margin
Comparatives for 2011 have not been restated to include 100% of Mondi Shanduka Newsprint in South Africa Division and consequently reflect a 58% portion
● Strong performance, underlying profit up 44% and ROCE of 30.1%
● Benefited from
○ Higher average selling prices in pulp and white-top kraftliner
○ Good cost control- Focus on improving productivity, driving efficiencies and
reducing waste
○ Significant currency gains on export volumes
● Sales volumes marginally lower, impacted by extended Richards Bay shut
● Productivity improved by 90% over last three years
0.80
0.90
1.00
1.10
1.20
2011 2012 2013 2014 2015Uncoated fine paper White-top kraftliner Market pulp
South Africa Division
Underlying operating profit, margin and ROCE
Production volumes
€ million
Volumes indexed to 2011
Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division
24
Agenda
HighlightsFinancial overviewOperational overviewDelivering on our strategyOutlookAppendices
25
6%19% 20% 21%
23%17%
15% 16% 18% 19%33%
32% 34% 34%36%
41%31% 29% 26% 21%
2011 2012 2013 2014 2015Consumer packaging Fibre based packaging Upstream packagingUncoated fine paper Other
Development of Capital Employed per business as a % of total ● Capital expenditure in packaging business between 2011-2015 represents 75% of total Group expenditure over period
● €1.4 billion spent on packaging acquisitions over the last 5 years
○ Świecie minorities and power plant (Containerboard)○ 2 Duropack plants (Corrugated)○ Industrial bags and kraft paper business of Graphic
Packaging in the US and industrial bags business Intercell (Kraft Paper and Industrial Bags)
○ Nordenia, Kutno, Ascania and KSP (Consumer packaging)
● Organic growth in our consumer exposed packaging businesses exceeds GDP growth
Consistent, clear strategic focus – growing our packaging business
2011 2012 2013 2014 2015
26
2010 2015Packaging
Paper
● Cost reductions driven by
○ Capital investment programme- In excess of €650 million invested over past 5 years in major
projects delivering cost and volume benefits
○ Rationalisation of high-cost capacity – 4 mills closed or sold
○ Ongoing focus on operational efficiency- Exceeded target of 2% reduction in cash cost base per
annum, offsetting inflationary pressures
○ Currency benefits due to emerging market currency weakness mainly in Uncoated Fine Paper and South Africa Division
Continuing to strengthen our cost leadership position by investing in our low-cost, high-quality asset base
2010 2015Uncoated Fine
Paper
2010 2015South Africa
Division
Cost per tonne produced (€/t)
-6% -22% -16%
Structural improvements in cost base driving profit growth
27
263 294 405 562 595
78%86%
113%
159% 164%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
2011 2012 2013 2014 2015Capex as a % of depreciation, amortisation and impairments
Capital expenditure ● €770 million committed to major projects over 2013-2016
○ Completed major capital investments already contributing meaningfully- Delivered incremental operating profit of around €100 million
over past two years- Incremental operating profit of around €60 million expected
in 2016
● Approved new 300 ktpa kraft top white machine at Ružomberok mill in Slovakia: €310 million
○ Subject to tax incentives and permitting
● Strong pipeline of projects under consideration
○ Centred around our high-quality, low-cost packaging paper assets in central Europe
● Capital expenditure expected to be in the range of €400-€450 million per annum over next two years
Growth options | Organic capital investments
€ million
28
New €310 million, 300 ktpa kraft top white machine investment
Ružomberok mill, Slovakia
Project description ● 300,000 tonne per annum kraft top white machine● Debottlenecking pulp mill – increasing capacity by 100,000 tonnes per annum
Benefits ● Unique product offering o targeted at fast growing white-top testliner and white-top kraftliner end useso virgin top layer provides higher brightness, printability and stability while recycled layer provides
a cost advantage for customer o based on Mondi´s proven concept of unbleached kraft top liner grades
● Improves pulp production costs and the mill’s energy balance further benefiting Ružomberok’s overall cost position
ROCE % In excess of Group’s 13% hurdle rate for new investments within 3 years of start-up
Expected Start-up Mid 2019
Conditions ● Tax incentives● Necessary permitting
29
App
rove
dU
nder
con
side
ratio
n
• €310 million 300 ktpa kraft top white machine at Ružomberok mill
• Replacement of the recovery boiler at Štĕti mill
• Installation of a 90 ktpa kraft paper machine at one of our central European operations
• Other
€121m
• €60m Frantschach recovery boiler
• €16m Syktyvkar bark boiler
• €13m Stambolijski steam turbine and economiser
• €32m Richards Bay steam turbine
Major project pipeline delivering strongly
€100 million incremental operating profit delivered from major projects in 2014/2015€60 million incremental operating profit benefit expected in 2016
2013 2014 2015 2016
€228m
• €70m Štĕti bleached kraft
• €128m Ružomberok recovery boiler
• €30m Syktyvkar pulp dryer
€296m
• €166m Świecie recovery boiler, turbine and biomass boiler
• €106m Packaging Paper
• €24m Fibre Packaging
€124m
• €94m Świecie phase II
• €30m South Africa Division woodyard upgrade
2017+
>€500m
30
Further integrating sustainable development into our strategy
*excluding two climate-related commitments for the period 2004-2014
Progress against our 2015 commitments:29 out of 35 commitments* achieved
Employee and contractor safety
A skilled and committed workforce
Fairness and diversity in the workplace
Sustainable fibre
Climate change
Constrained resources and environmental impacts
Biodiversity and ecosystems
Supplier conduct and responsible procurement
Relationships with communities
Solutions that create value for our customers
Securing access to sustainable fibreHighlight: 100% of owned and leased land is FSC®-certified
Contributing to our communitiesHighlight: Community engagement plans at all key operations
Minimising our contribution to climate changeHighlight: 103% electrical self-sufficiency across our pulp and paper mills
Operating in a world of constrained resourcesHighlight: 25% of managed land set aside for conservation
Focusing on safety & health and securing talentHighlight: Industry-leading safety performance
Increasing the eco-efficiency of our productsHighlight: 22% reduction of waste to landfill
Looking ahead to 2020:16 commitments across 10 action areas
31
Agenda
HighlightsFinancial overviewOperational overviewDelivering on our strategyOutlookAppendices
32
Outlook
Our outlook for the business remains positive. While we are currently seeing some softness in certain of our packaging paper grades, we are also seeing firmer prices in the European uncoated fine paper markets following recent industry capacity rationalisation. In addition, lower energy and related input costs, the generally positive impact of weaker emerging market currencies and the incremental contribution from recently completed major capital projects are expected to benefit the Group's performance in the near term.
Underpinned by the Group's robust business model, centred around our high-quality, low-cost asset base, clear strategic focus and culture of continuous improvement, we remain confident of continuing to deliver an industry-leading performance.
33
Q&A
34
Agenda
HighlightsFinancial overviewOperational overviewDelivering on our strategyOutlookAppendices
35
Mondi at a glance
1 Segment revenues, before elimination of inter-segment revenues
2015Revenue1
Products
ROCE 25.5% 13.9% 10.7% 25.6% 30.1%
30%
€2,156m
29%8%
23%
10%
€2,031m €1,469m €1,233m €652m
South Africa
29%
27% 19%
16%9%
Packaging Paper Fibre Packaging Uncoated Fine PaperConsumer Packaging
36
Strong global presence
20%
10%
8%7%
4%
40%
11%Emerging Europe
Asia & Australia
Russia
South Africa
Other
Western Europe
North America
31%
10%
10%
1%
38%
10% Emerging Europe
Russia
South Africa
Other
Western Europe
North America
Sales by location of production €6,819 million
Emerging Markets
Mature Markets
48%
24%
18%10%
Consumer related packaging
Industrial packaging
Uncoated fine paper
Other
Product mix
Packaging38%
10%9%3%
34%
6% Emerging Europe
South Africa
Russia
Other
Western Europe
North America
Operating net segment assets by geography €5,219 million
Emerging Markets
Mature Markets
Sales by location of customer €6,819 million
37
Our clear strategic focus is on growth in packaging
Our strategic value drivers
Paper Mills
Converting Operations
Pulp Mills
We are passionate about performancedriving productivity and efficiency / margin improvement
UpstreamDownstream
We invest in our high-quality, low-cost assetskeeping us competitive and giving us sustainable cost advantages We work with our customers
to find innovative solutionsgrowing our product range and
geographic reach
Upstream Downstream
• Our passion for performance is important across all our businesses and we consistently focus on driving productivity, improving efficienciesand reducing costs
• Our value drivers of investing in our high-quality, low cost assets and working with our customers to find innovative solutions apply to all ouroperations, although the priorities differ across the value chain
38
Growing in line with our strategy
A strong financial position allows us to pursue growth options through capital investment and/or M&A
Free Cash Flow
priorities
As appropriate
Maintain our strong and stable financial position and investment grade credit metrics
Support payment of dividends to our shareholders
Evaluate growth opportunities through M&A and/or increased shareholder distributions
Grow through selective capital investment opportunities
39
Continuing to deliver on our strategy
2015 DevelopmentsWe are passionate about performance
We invest in our high-quality, low-cost
assets
We work with our customers to find
innovative solutions
Packaging Paper
• Completion of first phase of Świecie Green (Poland) • Completion of various strategic capital projects mainly at
our kraft paper operations
• Sale of Raubling (Germany) and closure of Lohja (Finland) • Evaluating significant new packaging investments in
integrated mills in central Europe
Fibre Packaging
• Investment in various Corrugated Packaging operations • Closure of 2 US bags plants and Sendenhorst (Germany)
Consumer Packaging
• Acquisition of Ascania (Germany) • Acquisition of KSP (South Korea and Thailand) • Sale of Ipoh (Malaysia) and Osterburken (Germany) • Closure of Iberica (Spain) and Silicart (Italy)
40
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2011 2012 2013 2014 2015
Pulp Paper Wood Paper for recycling Energy Chemicals Plastics Other variable costs
Comparatives for 2011 have not been restated to include 100% of Mondi Shanduka Newsprint in South Africa Division and consequently reflect a 58% portion
Input costs
Variable costs
€ million
41
22.1%22.7%
23.1%22.8% 23.0%
14.0%
16.0%
18.0%
20.0%
22.0%
24.0%
0
500
1 000
1 500
2 000
2 500
2011 2012 2013 2014 2015Depreciation, amortisation and impairments Other net operating expensesPersonnel costs Maintenance and other indirect expensesFixed costs excluding depreciation, amortisation and impairments as a % of revenue
Comparatives for 2011 have not been restated to include 100% of Mondi Shanduka Newsprint in South Africa Division and consequently reflect a 58% portion
Fixed costs
Fixed costs composition
€ million
42
Special items
Operating special items – €57 million charge● Packaging Paper○ Closure of speciality kraft paper mill in Finland (€14 million)
● Fibre Packaging ○ Restructuring following the acquisition of the bags business from Graphic Packaging (€10 million)○ Closure of plants in Germany and France in Industrial Bags (€11 million)
● Consumer Packaging○ Closure of a plant in Spain (€14 million)
● Write off of receivable and provision for settlement of a legal case relating to the 2012 Nordenia acquisition (€8 million)
43
575 764 711 811 79410.0%
11.9%11.0%
12.3%11.6%
2011 2012¹ 2013 2014¹ 2015Working capital as a % of revenue
12%
1 Working capital as a % of revenue is based on annualised revenue from acquisitions
● Working capital as a percentage of revenue marginally below revised target range of 12%-14% at year end
● Target range increased to reflect increased contribution from more working capital intensive downstream businesses
(68)(83)
(27)
(87)
9
2011 2012 2013 2014 2015
Working capital
Working capital cash flows
Working capital management
€ million
€ million
14%
44
100% 56% 100% 11% 77% 100%
44% 100% 23% 100%
58% 11%
8%12% 12%
Whi
te-to
p kr
aftli
ner
Unb
leac
hed
kraf
tline
r
NS
SC
flut
ing
Rec
ycle
d flu
ting
Unb
leac
hed
sack
kra
ft pa
per
UFP
²
BH
KP
(pul
p)³
1 Delivered to Frankfurt except where noted | 2 Includes specialities | 3 Delivered to Rotterdam Source: RISI and Mondi estimates
Our integrated low-cost operations
3.8
0.3 0.5 0.7
0.2
1.40.2
0.5
0.0
1.0
2.0
3.0
4.0
Pulp Virgincontainerboard
Recycledcontainerboard
Kraft paper
Consumed internally Sold externally
Integrated value chain – total production
Million tonnes
Emerging market asset base leads to low cost positions across the Group’s main grades
Q4
Cost quartile¹
Q3
Q2
Q1
45
Five-year cumulative free cash flow
1 Excludes dividend in specie of €205 million
3.7
(2.1)
(0.8)
0.3
Change in net debtSpent on acquisitionsDistributed to shareholdersInvested in asset baseFree cash flow generated
(1.4)
Received from disposals and adjustments
1
€ billion
(0.3)
46
Cash flow (reconciling to movement in net debt)
1 On a cash and debt free basis
€ million 2014 2015%
changeUnderlying EBITDA 1,126 1,325 18%
Working capital movements (87) 9Other operating cash flow items (6) (55)Cash generated from operations 1,033 1,279 24%
Dividends from financial investments and associates 2 -Taxes paid (106) (160) (51%)
Net cash inflow from operating activities 929 1,119 20%
Capital expenditure, excluding intangible assets (562) (595) (6%)
Investment in intangibles and forestry assets (45) (50) (11%)
Acquisitions¹ (104) (94)Disposals - 56Financing costs (125) (93) 26%
Dividends paid to shareholders (193) (209) (8%)
Other investing and financing activities 94 (19)Net decrease/(increase) in net debt (6) 115
47
Statement of financial position
€ million 2014 2015
Property, plant and equipment 3,432 3,554
Goodwill 545 590
Working capital 811 794
Other assets 434 422
Other liabilities (715) (675)
Net assets excluding net debt 4,507 4,685
Equity 2,628 2,905
Non-controlling interests in equity 266 282
Net debt 1,613 1,498
Capital employed 4,507 4,685
48
Production volumes
2014 2015%
changeEurope & International
Containerboard '000 tonnes 2,160 2,138 (1%)
Kraft paper '000 tonnes 1,130 1,162 3%
Softwood pulp '000 tonnes 2,085 2,108 1%
Corrugated board and boxes million m2 1,343 1,350 1%
Industrial bags million units 4,446 4,925 11%
Extrusion coatings million m2 1,401 1,389 (1%)
Consumer packaging¹ million m2 6,501 6,594 1%
Uncoated fine paper '000 tonnes 1,361 1,379 1%
Hardwood pulp '000 tonnes 1,127 1,161 3%
Newsprint '000 tonnes 202 197 (2%)
South Africa Division
Containerboard '000 tonnes 253 247 (2%)
Uncoated fine paper '000 tonnes 258 240 (7%)
Hardwood pulp '000 tonnes 649 619 (5%)
Newsprint '000 tonnes 117 113 (3%)
Softwood pulp '000 tonnes 139 138 (1%)
1 2014 figure restated
49
Exchange rates
2014 2015%
changeClosing rates against the euroSouth African rand 14.04 16.95 21%
Czech koruna 27.74 27.02 (3%)
Polish zloty 4.27 4.26 -
Pounds sterling 0.78 0.73 (6%)
Russian rouble 72.34 80.67 12%
Turkish lira 2.83 3.18 12%
US dollar 1.21 1.09 (10%)
Average rates for the year against the euroSouth African rand 14.42 14.17 (2%)
Czech koruna 27.53 27.28 (1%)
Polish zloty 4.18 4.18 -
Pounds sterling 0.81 0.73 (10%)
Russian rouble 50.73 68.04 34%
Turkish lira 2.91 3.02 4%
US dollar 1.33 1.11 (17%)
50
Exchange rate development vs EUR
0.600.700.800.901.001.101.201.301.40
0.650.700.750.800.850.90
Aug2013
Dec2013
Apr2014
Aug2014
Dec2014
Apr2015
Aug2015
Dec2015
GBP (LHS) USD (RHS)
24.5025.0025.5026.0026.5027.0027.5028.00
2.002.503.003.504.004.505.00
Aug2013
Dec2013
Apr2014
Aug2014
Dec2014
Apr2015
Aug2015
Dec2015
PLN (LHS) TRY (LHS) CZK (RHS)
Emerging markets
8.010.012.014.016.018.0
Aug2013
Dec2013
Apr2014
Aug2014
Dec2014
Apr2015
Aug2015
Dec2015
ZAR vs EUR ZAR vs USD
South African rand
30.040.050.060.070.080.090.0
Aug2013
Dec2013
Apr2014
Aug2014
Dec2014
Apr2015
Aug2015
Dec2015
RUB
Russian rouble
Mature markets
51
Mondi: Forward-looking statements disclaimer
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.