Mondi Plc · LSE:MNDI
Mondi — FY2015 Earnings Presentation
52 slides from Mondi's earnings presentation, Feb 25, 2016
Slide 1: Full year results for the year ended 31 December 2015
Mondi Group Full year results for the year ended 31 December 2015 25 February 2016
Slide 2: Agenda
Agenda Highlights Financial overview Operational overview Delivering on our strategy Outlook Appendices 2
Slide 3: Highlights
Highlights Underlying operating profit and ROCE ● Excellent results achieved € million 20.5% 25.0% ○ Underlying operating profit up 25% 17.2% ○ Underlying earnings up 25% 20.0% 15.0% 15.3% 13.6% 15.0% 10.0% ○ ROCE of 20.5% 622 574 699 767 957 5.0% ● Significant profit improvement across all business
Slide 4: Agenda
Agenda Highlights Financial overview Operational overview Delivering on our strategy Outlook Appendices 4
Slide 5: Operating financial highlights
Operating financial highlights % H2 H1 H2 € million 2014 2015 change 2014 2015 2015 Group 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%
Slide 6: Underlying operating profit development
Underlying operating profit development € million 95 (77) 0 11 (7) 957 142 26 767 2014 Volume Price Variable Fixed Currency Acquisitions Fair value 2015 costs costs effects and gains and other disposals Price, volume and input costs driving profitability 6
Slide 7: Divisional operating profit contribution
Divisional operating profit contribution EBIT contribution by segment¹ 2014 2015 14% 16% €112m €11 €161m 2 milli on 40% 43% 18% €391m €342m €14 €148m €212 million 21% 8 milli €212m on 12% €96 €96m milli 11% 13% €102 12% on €108m €120m million €102m Packaging Paper Fibre Packaging Consumer Packaging
Slide 8: Divisional operating profit development
Divisional operating profit development € million 38 (5) 3 957 31 11 33 20 (2) 10 2 44 5 767 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2014 Packaging Fibre Consumer Uncoated South Corporate 2015 Paper Packaging Packaging Fine Paper Africa Division Strong contributions from all business units 8
Slide 9: Financial review
Financial review % H2 H1 H2 € million 2014 2015 change 2014 2015 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 (
Slide 10: Finance costs and net debt
Finance costs and net debt % ● Sharply higher Russian interest rates in H1 and one-off € million 2014 2015 change effects increase effective interest rate Net debt 1,613 1,498 7% Average net debt 1,675 1,650 2% ● Net debt down despite increasing capex spend Net underlying finance costs 97 105 (8%) ●
Slide 11: Taxation
Taxation ● Effective tax rate reflects underlying profit mix of Group plus % € million 2014 2015 change ○ Benefits of tax incentives related to our capital investments in Slovakia, Poland and Russia Tax charge 126 161 (28%) ○ Recognition of deferred tax assets on tax losses Cash tax paid 106 160 (51
Slide 12: Cash flow effects - movement in net debt
Cash flow effects - movement in net debt € million 1,613 (1,279) 63 1,498 38 209 595 253 6 Net debt at Cash generated Currency effects Tax and Capex Dividends paid Acquisitions and Other Net debt at 31 Dec 2014 from operations (including financing costs investment to equity holders disposals 31 Dec
Slide 13: Dividends
Dividends Dividends declared ● Mondi’s dividend policy aims to offer shareholders long Euro cents per share term dividend growth within a target dividend cover range 60 2.6 of two to three times underlying earnings on average over 2.6 2.7 2.6 2.6 the cycle 50 2.5 ● Given the Group’s strong financial
Slide 14: Agenda
Agenda Highlights Financial overview Operational overview Delivering on our strategy Outlook Appendices 14 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division
Slide 15: Packaging Paper
Packaging Paper Underlying operating profit, margin and ROCE ● Another strong performance, ROCE of 25.5% and € million 25.5% underlying profit up 14% on prior year 24.5% 23.7% 21.7% 17.8% ● Supported by 14.6% 14.9% 16.7% 18.1% ○ Higher selling prices in Containerboard 12.0% 300 236 308 342 391 ○ Ben
Slide 16: Packaging Paper | industry fundamentals
Packaging Paper | industry fundamentals Selling prices Virgin containerboard (VCB) €/tonne ● European demand growth of 4.7% in 2015 800 ● Average 2015 European benchmark selling prices 700 ○ Kraftliner brown up 4.4% ○ White-top kraftliner marginally up 600 ● Recent downward pressure on prices due to
Slide 17: Incremental containerboard supply expected to be absorbed by demand in the medium term
Incremental containerboard supply expected to be absorbed by demand in the medium term 2016E-2018E demand and capacity growth estimates in Europe (in mt) Containerboard VCB RCB CAGR +2-3% +1-2% +2-3% 3.3 2.0-3.0 0.6 0.2-0.4 37.2 7.5 29.7 2.7 1.8-2.6 2015 Net capacity Demand 2015 Net capacity Demand
Slide 18: Packaging Paper | industry fundamentals
Packaging Paper | industry fundamentals Selling prices Sack kraft paper Price indexed to 2011 ● European demand moderately weaker 1.15 1.10 ● Softness in export markets 1.05 ○ Slowdown in construction activity in south east Asia ○ Political instability in Middle East and North Africa 1.00 ● Average
Slide 19: Fibre Packaging
Fibre Packaging Underlying operating profit, margin and ROCE Corrugated Packaging € million 13.9% 13.4% 13.9% ● 3.3% higher like-for-like sales volumes, good growth in Poland 11.3% 11.8% and Czech Republic 5.9% 5.5% 5.9% ● Good cost control and benefits of restructuring in 2014 5.1% 4.6% ● Turkey im
Slide 20: Consumer Packaging
Consumer Packaging Underlying operating profit, margin and ROCE ● Underlying operating profit up 13% on prior year € million ● Margins supported by 11.6% ○ Strong volume growth in higher value-added segments 10.7% ○ Commercial excellence initiatives 10.4% 9.0% 8.7% - Improved sales infrastructure 7.
Slide 21: Uncoated Fine Paper
Uncoated Fine Paper Underlying operating profit, margin and ROCE ● Strong performance with ROCE of 25.6% and 43% € million 25.6% increase in underlying operating profit 16.7% 16.7% 16.0% 16.1% ● Selling price increases in Europe and Russia 14.3% 17.2% 13.1% 12.3% 11.9% ● Sales volumes up 1.7% 205 18
Slide 22: Uncoated Fine Paper | industry fundamentals
Uncoated Fine Paper | industry fundamentals Pulp and A4 B-copy prices Demand €/tonne ● Europe stable 900 850 ● Decline in CIS of approximately 4% 800 Supply 750 700 ● Significant capacity rationalisation through closures and 650 conversions - ±720 ktpa over 2015/2016 600 Prices 550 500 ● Average ben
Slide 23: South Africa Division
South Africa Division Underlying operating profit, margin and ROCE ● Strong performance, underlying profit up 44% and ROCE € million 30.1% of 30.1% 21.9% 16.0% ● Benefited from 24.7% 8.7% 9.6% 18.8% ○ Higher average selling prices in pulp and white-top 14.9% 9.8% 9.8% kraftliner 63 69 93 112 161 201
Slide 24: Agenda
Agenda Highlights Financial overview Operational overview Delivering on our strategy Outlook Appendices 24
Slide 25: Consistent, clear strategic focus – growing our packaging business
Consistent, clear strategic focus – growing our packaging business 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 21% 31% 29% 26% ● €1.4 billion spent on packaging acquis
Slide 26: Strengthening our cost leadership position by investing in low-cost assets
Continuing to strengthen our cost leadership position by investing in our low-cost, high-quality asset base Cost per tonne produced (€/t) ● Cost reductions driven by ○ Capital investment programme - In excess of €650 million invested over past 5 years in major -6% -22% -16% projects delivering cost
Slide 27: Growth options | Organic capital investments
Growth options | Organic capital investments Capital expenditure ● €770 million committed to major projects over 2013-2016 € million ○ Completed major capital investments already 164% contributing meaningfully 180% 159% - Delivered incremental operating profit of around €100 million 160% 140% over p
Slide 28: New €310 million, 300 ktpa kraft top white machine investment
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 wh
Slide 29: Major project pipeline delivering strongly
Major project pipeline delivering strongly 2013 2014 2015 2016 2017+ • €60m Frantschach • €70m Štĕti bleached • €166m Świecie • €94m Świecie phase II • €310 million Approved recovery boiler kraft recovery boiler, turbine 300 ktpa kraft top • €30m South Africa and biomass boiler white machine at • €1
Slide 30: Further integrating sustainable development into our strategy
Further integrating sustainable development into our strategy Progress against our 2015 commitments: Looking ahead to 2020: 29 out of 35 commitments* achieved 16 commitments across 10 action areas Securing access to sustainable fibre Highlight: 100% of owned and leased land is FSC®-certified Employe
Slide 31: Agenda
Agenda Highlights Financial overview Operational overview Delivering on our strategy Outlook Appendices 31
Slide 32: Outlook
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
Slide 33: Q&A
Q&A 33
Slide 34: Agenda
Agenda Highlights Financial overview Operational overview Delivering on our strategy Outlook Appendices 34
Slide 35: Mondi at a glance
Mondi at a glance Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa €2,156m €2,031m €1,469m €1,233m €652m 10% 9% 2015 30% 23% 29% 16% Revenue1 27% 8%19% 29% ROCE 25.5% 13.9% 10.7% 25.6% 30.1% Products 1 Segment revenues, before elimination of inter-segment revenues
Slide 36: Strong global presence
Strong global presence Sales by location of customer €6,819 million Sales by location of production €6,819 million Emerging Europe 11% 10% Emerging Europe 20% Asia & Australia Russia 31% Russia Emerging Markets South Africa 10% South Africa 38% Other 40% Other 8% 10% Western Europe Western Europe Ma
Slide 37: Our strategic value drivers
Our strategic value drivers Our clear strategic focus is on growth in packaging We invest in our high-quality, low-cost assets keeping us competitive and giving us sustainable cost advantages We work with our customers to find innovative solutions Downstream growing our product range and Upstream ge
Slide 38: Growing in line with our strategy
Growing in line with our strategy Maintain our strong and stable financial position and investment grade credit metrics Grow through selective capital Free Cash investment opportunities Flow priorities Support payment of dividends to our shareholders Evaluate growth opportunities through M&A and/or
Slide 39: Continuing to deliver on our strategy
Continuing to deliver on our strategy We invest in our We work with our We are passionate high-quality, low-cost customers to find 2015 Developments about performance assets innovative solutions Packaging • Completion of first phase of Świecie Green (Poland) Paper • Completion of various strateg
Slide 40: Input costs
Input costs Variable costs € million 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 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 Di
Slide 41: Fixed costs
Fixed costs Fixed costs composition € million 2 500 24.0% 23.1% 23.0% 22.7% 22.8% 2 000 22.1% 22.0% 1 500 20.0% 1 000 18.0% 500 16.0% 0 14.0% 2011 2012 2013 2014 2015 Depreciation, amortisation and impairments Other net operating expenses Personnel costs Maintenance and other indirect expenses Fixed
Slide 42: Special items
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 Fran
Slide 43: Working capital
Working capital Working capital management ● Working capital as a percentage of revenue marginally € million 14% below revised target range of 12%-14% at year end 12% ● Target range increased to reflect increased contribution 11.9% 12.3% 11.6% from more working capital intensive downstream 10.0% 11.
Slide 44: Our integrated low-cost operations
Our integrated low-cost operations Emerging market asset base leads to low cost positions Integrated value chain – total production across the Group’s main grades Cost quartile¹ Million tonnes Q4 12% 8% 12% 4.0 0.2 Q3 58% 11% 3.0 Q2 44% 100% 23% 100% 2.0 3.8 Q1 100% 56% 100% 11% 77% 100% 1.0 BHKP (p
Slide 45: Five-year cumulative free cash flow
Five-year cumulative free cash flow € billion (2.1) 3.7 (0.8) (1.4) (0.3) 0.3 Free cash flow Invested in asset base Distributed to shareholders1 Spent on acquisitions Received from disposals Change in net debt generated and adjustments 1 Excludes dividend in specie of €205 million 45
Slide 46: Cash flow (reconciling to movement in net debt)
Cash flow (reconciling to movement in net debt) % € million 2014 2015 change Underlying EBITDA 1,126 1,325 18% Working capital movements (87) 9 Other operating cash flow items (6) (55) Cash generated from operations 1,033 1,279 24% Dividends from financial investments and associates 2 - Taxes paid (
Slide 47: Statement of financial position
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
Slide 48: Production volumes
Production volumes % 2014 2015 change Europe & 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 coatin
Slide 49: Exchange rates
Exchange rates % 2014 2015 change Closing rates against the euro South 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 aga
Slide 50: Exchange rate development vs EUR
Exchange rate development vs EUR Mature markets Emerging markets 0.90 1.40 5.00 28.00 1.30 4.50 27.50 0.85 1.20 4.00 27.00 0.80 1.10 26.50 1.00 3.50 0.75 0.90 26.00 0.80 3.00 25.50 0.70 2.50 0.70 25.00 0.65 0.60 2.00 24.50 Aug Dec Apr Aug Dec Apr Aug Dec Aug Dec Apr Aug Dec Apr Aug Dec 2013 2013 201
Slide 51: Mondi: Forward-looking statements disclaimer
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, expe
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