Mondi PLC

Management Reports • Oct 16, 2014

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MONDI PLC - Interim Management Statement

PR Newswire

London, October 15

Mondi Limited(Incorporated in the Republic of South Africa)(Registration number: 1967/013038/06)JSE share code: MND ISIN: ZAE000156550Mondi plc(Incorporated in England and Wales)(Registered number: 6209386)JSE share code: MNP ISIN: GB00B1CRLC47LSE share code: MNDIAs part of the dual listed company structure, Mondi Limited and Mondi plc(together 'Mondi Group') notify both the JSE Limited and the London StockExchange of matters required to be disclosed under the Listings Requirements ofthe JSE Limited and/or the Disclosure and Transparency and Listing Rules of theUnited Kingdom Listing Authority.Mondi Group: Interim Management Statement 16 October 2014This interim management statement provides an update on the financialperformance and financial position of the Group since the half year ended 30June 2014, based on management accounts up to 30 September 2014 and estimatedresults for October 2014. These results have not been audited or reviewed byMondi's external auditors.Audited results for the year ending 31 December 2014 will be published on oraround 24 February 2015.Except as discussed in this interim management statement, there have been nosignificant events or transactions impacting either the financial performanceor financial position of Mondi Group since 30 June 2014 up to the date of thisstatement.Group Performance OverviewThird quarter underlying operating profit of EUR174 million was in line withmanagement's expectations, comparable to the prior year period and 10% belowthat of the previous quarter.Like-for-like sales volumes were broadly in line with the comparable prior yearperiod.Previously announced price increases were successfully implemented in a numberof the Group's key Packaging Paper markets, with increases implemented forunbleached kraft paper from the beginning of the third quarter, recycledcontainerboard from August and unbleached kraftliner from September.Wood costs were lower on average than the previous quarter whilst paper forrecycling costs were at similar levels. The business continued to benefit fromits investments in energy related capital expenditure and lower Europeannatural gas prices.During the quarter, the major annual maintenance shuts scheduled for theGroup's uncoated fine paper and containerboard facilities were completedaccording to plan. The major kraft paper maintenance shuts are scheduled forthe fourth quarter. The impact on third quarter underlying operating profitfrom these shuts is estimated at around EUR30 million. Based on prevailingmarket prices, the fourth quarter impact will be around EUR15 million to EUR20million.The South Africa Division benefited from the stronger US dollar on its exportsales whilst the weaker Russian rouble had a negative impact on the moredomestically focused Russian businesses. The recent strengthening of the USdollar relative to the euro should support European pricing in packaging gradesand 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 segmentsDuring the quarter, the Group refined its organisational structure, which hasresulted in several changes within the Group's segmental reporting. The mostsignificant 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 thisstatement. The reorganisation had no impact on the overall Group result.Divisional OverviewThe Packaging Paper business saw selling price increases across a number of keygrades. Unbleached kraft paper price increases of between EUR30/tonne and EUR40/tonne were implemented from July. Price increases for unbleached kraftlinerand recycled containerboard of between EUR30/tonne and EUR40/tonne wereachieved in steps during August and September. Prices for white-top kraftlinerand speciality kraft paper were stable.During the quarter, the Group announced the intention to close one of the twospeciality kraft paper machines at its Lohja mill in Finland with capacity of30,000 tonnes per annum. Closure and restructuring costs amounting to EUR6million were recognised as a special item.Fibre Packaging continued to perform well, with good year-on-year margindevelopment in both Corrugated Packaging and Industrial Bags. Increasing paperinput costs in the Corrugated Packaging segment and seasonally weaker demand inIndustrial Bags are expected to put some pressure on margins in the fourthquarter.During the quarter the sub-scale Moderbrugg corrugated packaging plant inAustria was sold.The integration of the recently acquired Graphic Packaging industrial bagsbusiness in the US is progressing according to plan. Various restructuringactivities have been announced, including the closure of a plant inPhiladelphia. The closure and restructuring costs, which will be reflected as aspecial 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 thisbusiness. A relocation of the head office activities of the business unit wasimplemented and costs amounting to EUR12 million reflected as a special item.The Uncoated Fine Paper business was impacted by the seasonally weaker thirdquarter and the impact of planned maintenance shuts. Further weakening of theRussian rouble impacted the profitability of the business, although priceincreases achieved during the quarter in Russia partly offset this. The normalseasonal pick-up in demand following the European summer has been marginallyweaker than anticipated with some price softness evident in key European marketsegments.Lower export pulp sales prices and fair value gains on forestry assets resultedin lower profitability in the South Africa Division compared to the previousquarter. The weakness of the rand against the US dollar provided some offset.Capital investment projectsThe Group continues to make good progress on its major capital projects. TheEUR128 million recovery boiler project at the Group's Ruzomberok mill andEUR30 million pulp dryer at the Syktyvkar mill are currently in commissioningphase.Financial positionOn 15 July 2014, as previously announced, the Group redeemed the 9.75%EUR280 million Eurobond, assumed as part of the Nordenia acquisition. The noteswere redeemed utilising proceeds from existing borrowing facilities.Net debt of EUR1,811 million at the end of the quarter was EUR60 million up onthe half-year, impacted by a number of factors including the 31 Julyacquisition of the Printpack Inc. consumer packaging plant in Poland forUSD23 million announced at the half-year, increased capital expenditure,payment of the interim dividend, interest on the 2020 EUR500 million Eurobondand currency effects.OutlookRecent price increases in a number of the Packaging Paper grades and continuedstrong operating performance across the Group should provide solid support forthe Group to continue to deliver in line with management expectations.Looking further forward, much depends on macroeconomic developments in theGroup's core European markets. However, with the Group's low cost operatingmodel in upstream businesses, to be further enhanced by the various capitalprojects nearing completion, and the benefits of strong vertical integration,management remains confident of continuing to deliver industry leadingperformance.Operating segments(restated)Six months ended 30 June 2014 Europe & International South Africa Corporate Intersegment Segments Division & other elimination total€ million, unless Uncoatedotherwise stated Packaging Fibre Consumer Fine Paper Packaging Packaging PaperSegment revenue 1,022 868 685 646 284 - (357) 3,148Internal revenue (282) (20) (3) (4) (48) - 357 -External revenue 740 848 682 642 236 - - 3,148EBITDA 216 78 69 127 78 (15) - 553Depreciation, (49) (30) (30) (47) (20) - - (176)amortisation andimpairmentsUnderlying 167 48 39 80 58 (15) - 377operating profit/(loss)Special items - (7) 4 - - (13) - (16)Operating segment 1,975 1,075 1,140 1,301 728 6 (177) 6,048assetsOperating net 1,621 814 979 1,113 608 7 - 5,142segment assetsAdditions to 135 27 33 50 29 23 - 297non-currentnon-financialassetsCapital expenditure 116 30 35 59 9 - - 249cash paymentsOperating margin 16.3 5.5 5.7 12.4 20.4 - - 12.0(%)Return on capital 22.5 12.3 8.3 15.6 20.5 - - 16.0employed (%)Six months ended 30 June 2013 Europe & International South Africa Corporate Intersegment Segments Division & other elimination total€ million, unless Uncoatedotherwise stated Packaging Fibre Consumer Fine Paper Packaging Packaging PaperSegment revenue 1,078 856 721 711 325 - (349) 3,342Internal revenue (265) (23) (2) (3) (56) - 349 -External revenue 813 833 719 708 269 - - 3,342EBITDA 202 75 74 150 67 (14) - 554Depreciation, (48) (31) (32) (53) (23) (1) - (188)amortisation andimpairmentsUnderlying 154 44 42 97 44 (15) - 366operating profit/(loss)Special items - - (13) (50) (18) - - (81)Operating segment 1,859 1,069 1,160 1,328 810 7 (129) 6,104assetsOperating net 1,498 839 993 1,144 687 7 - 5,168segment assetsAdditions to 59 22 27 32 34 - - 174non-currentnon-financialassetsCapital expenditure 56 31 27 36 14 - - 164cash paymentsOperating margin 14.3 5.1 6.0 13.6 13.5 - - 11.0(%)Return on capital 20.0 13.4 7.3 17.2 12.8 - - 14.8employed (%)Year ended 31 December 2013 Europe & International South Africa Corporate Intersegment Segments Division & other elimination total€ million, unless Uncoatedotherwise stated Packaging Fibre Consumer Fine Paper Packaging Packaging PaperSegment revenue 2,073 1,690 1,414 1,335 624 - (660) 6,476Internal revenue (506) (43) (4) (6) (101) - 660 -External revenue 1,567 1,647 1,410 1,329 523 - - 6,476EBITDA 408 146 143 266 135 (30) - 1,068Depreciation, (100) (60) (64) (102) (42) (1) - (369)amortisation andimpairmentsUnderlying 308 86 79 164 93 (31) - 699operating profit/(loss)Special items - (3) (13) (60) (11) - - (87)Operating segment 1,905 1,001 1,121 1,270 731 2 (140) 5,890assetsOperating net 1,543 771 964 1,099 622 1 - 5,000segment assetsAdditions to 165 66 65 85 93 - - 474non-currentnon-financialassetsCapital expenditure 141 71 61 80 52 - - 405cash paymentsOperating margin 14.9 5.1 5.6 12.3 14.9 - - 10.8(%)Return on capital 21.7 11.8 8.7 16.0 16.0 - - 15.3employed (%)Year ended 31 December 2012 Europe & International South Africa Corporate Intersegment Segments Division & other elimination total€ million, unless Uncoatedotherwise stated Packaging Fibre Consumer Fine Paper Packaging Packaging PaperSegment revenue 1,970 1,583 765 1,415 702 - (645) 5,790Internal revenue (470) (50) (4) (13) (108) - 645 -External revenue 1,500 1,533 761 1,402 594 - - 5,790EBITDA 334 151 57 292 125 (32) - 927Depreciation, (98) (58) (34) (106) (56) (1) - (353)amortisation andimpairmentsUnderlying 236 93 23 186 69 (33) - 574operating profit/(loss)Special items - (16) (11) - 6 (70) - (91)Operating segment 1,896 1,065 1,156 1,410 975 5 (150) 6,357assetsOperating net 1,523 821 985 1,215 821 1 - 5,366segment assetsAdditions to 256 129 631 58 94 - - 1,168non-currentnon-financialassetsCapital expenditure 95 62 36 58 43 - - 294cash paymentsOperating margin 12.0 5.9 3.0 13.1 9.8 - - 9.9(%)Return on capital 17.8 13.9 5.6 16.7 9.6 - - 13.7employed (%)Contact details:Mondi GroupDavid Hathorn +27 11 994 5418Andrew King +27 11 994 5415Lora Rossler +27 83 627 0292FTI ConsultingRichard Mountain +44 7909 684 466Sue I Ong +44 20 3727 1340Editors' notesMondi is an international packaging and paper Group, employing around 26,000people in production facilities across 31 countries. In 2013, Mondi hadrevenues of EUR6.5 billion and a ROCE of 15.3%. The Group's key operations arelocated 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 paperinto corrugated packaging, industrial bags, extrusion coatings and releaseliner. 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 JSELimited for Mondi Limited under the ticker code MND and a premium listing onthe London Stock Exchange for Mondi plc, under the ticker code MNDI. TheGroup's performance, and the responsible approach it takes to good businesspractice, has been recognised by its inclusion in the FTSE4Good Global,European and UK Index Series (since 2008) and the JSE's Socially ResponsibleInvestment (SRI) Index since 2007.

Sponsor in South Africa: UBS South Africa Pty Ltd