Mondi Świecie
Maciej Kunda
Investor and Analyst site visit, Syktyvkar and Świecie2 – 4 November 2010
PAGE 1Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Agenda
Overview – Poland and Mondi Świecie SA
Strategic focus and performance
ECO 7 – success story
Mill tour & safety rules briefing
PAGE 2Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Poland
Area: 312 685 km2
Population: 38.5 million
Main industries: coal, textile, chemical, machinery, iron and steel sectors
Forest land: 28% Germany
Poland
Slovakia
CzechRepublic Ukraine
Belarus
Lithuania
Świecie
Bydgoszcz
Poznań
Cracow
Warsaw
Mondi Świecie S.A.
PAGE 3Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Macroeconomic indicators – Poland
0
5
10
15
20
25
2002 2003 2004 2005 2006 2007 2008 2009 20100
2000
4000
6000
8000
10000
12000
GDP/Capita in EUR Real GDP ( change in %)
Unemployment Rate in % Inflation ( avg) in %
2003 2004 2005 2006 2007 2008 2009 2010 FReal GDP (change in %) 3.9 5.3 3.6 6.2 6.7 4.8 1.7 2.6
Unemployment rate (in %) 20.0 19.0 17.6 14.8 11.2 9.5 11.8 11.6
Inflation (avg in %) 0.8 3.5 2.1 1.0 2.5 4.2 3.4 2.2
PLN/EUR (avg) 4.4 4.5 4.0 3.9 3.78 3.52 4,32 3.96
GDP/Capita (in EUR) 5 000 5 367 6 379 7 148 8 184 9 476 7 850 9 560
Direct foreign investment in EUR m
16674
10970
80009000
11000
2007 2008 2009 2010 2011
PolandThe only European country with a GDP (real) growth in 2009 = +1.7 %.
PAGE 4Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Mondi in Poland
PolandPowerhouse in Central Europe
Mondi Packaging Solec
Mondi ŚwiecieConsumer Bags & Films (1)
Corrugated Packaging (5)
Industrial Bags (2)
Containerboard (1)
Mondi Bags Mielec
Mondi Packaging Dorohusk
Mondi Packaging Bystrzyca
Mondi Packaging Szczecin
Mondi Packaging Warszawa
Operations (10)
Testliner: 600 000 tonnes
Containerboard capacity
2 350 employees
Employees
Kraft Paper (1)
Kraftliner, SC Fluting: 760 000 tonnes
Coatings Sales OfficeUncoated Fine Paper Sales Office
PAGE 5Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
1967 Dissolving Pulp Plant
1970 – 1976 Start Up of 5 PMs
1972 Kraft Pulp Plant
1976 NSCC Plant
1991 Transformation into Joined Stock Company
1992 Restructuring
1997 Privatisation Mondi 60%
1997 – 2003 New strategy implementation
2008 – 2009 ECO7 Start Up 1 September 2009
1960
2010
Over 40 year history
PAGE 6Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
2 x Continuous digesters
Kraft pulp340 kt
Semichemical pulp plant
NSSC pulp115 kt
Recovered paperpreparation plant PM 1-5
380 kt
Recovered paperpreparation plant PM 7
550 kt (design)
Evaporation plant Caustic plant
Recovery boiler
Chemical recovery department
Wood handling system
Pine Birch
Operation certified ISO 9001, ISO 14001, OHSAS 18001 and FSC
125 kt145 kt 210 kt 210 kt180 kt
4.4 mTestliner
WB FlutingKraftliner
5.3 mLight weight
KraftlinerSackpaper
4.4 mKraftliner
150 – 330 g/m2
5.3 mLight weight
Kraftliner90 – 140 g/m2
4.4 mSC fluting
PM 3PM 1 PM 2 PM 5PM 4
Overview – structure of the mill (2009*)
PM 7
470 kt(design)
7.8 mTestliner
WB Fluting75 – 140 g/m2
Power
plant
*Production figures, rounded to the closest full 5kt; PM7 figures are not production but design.
PAGE 7Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
P&G, Pizza Hut,Kimberly-Clark● Fruits ● Vegetables ● Meat ● Flowers ● Heavy duty
packaging ● Chemicals
Lafarge, Bayer● Cement ● Premixes ● Feed
IKEA, P&G, Kimberly-Clark● Merchant ● Chemicals ● Beverages ● Furnitures
Henkel, Pizza Hut, Nestle, Tesco, Carrefour
S.C. Fluting
Higher gsm● Fruits, vegetables,
meat ● Heavy duty
packaging ● Chemicals● Electronics
Lower gsm● Cosmetics,
medicines● Internet sales
Pizza boxes● Industrial● Coating
Sack Kraft paper
Market segmentation by end-use application
KLB
Testliner
WB Fluting
KrafTop
PAGE 8Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Strategic focus and performance
PAGE 10Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Transformation of the company
CelulozaŚwiecie
MPPŚwiecie
CapacityUtilization
Value CreationHigh Performance
Performance
Time
Goal
Past
Goal
Now
Process Change
Operational, Financial, HR, Sales,Quality, Environmental,
Safety
PAGE 11Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Operational Excellence● Continuous improvement approach● High assets utilization rate (efficiency)● Knowledge Management● Waste reduction● Low working capital● High productivity, low overheads
Cutting Edge Products● Building brand awareness● Incremental product
development● Highest quality and
functionality
Mondi Diamond
Sustainable Development● Health and safety● Protection of
environment● Sustainable forestry● Social responsibility
People Development● Individual development &
Training plans● Talent management &
succession planning● Leadership Model● Employer brand
Customer Focus● Flawless service● Delivery accuracy● Market and customer intelligence● CRM
PAGE 12Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Sustainable development – safety
Number of Lost Time Injuries 1997-2010(including Contractors)
* Excluding contractors
43*
1997
37*
1998
31*
1999
18*
2000
21*
2001
9
2002 2003 2004 2005 2006
ZerO Tolerance Target ZerOO T T O
35
21 1 12
2007 2008 2009
1
2010
PAGE 13Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
H2O
Continuous reduction of CO2
emissions
Reduction of water and energy consumption
Mondi Świecie uses over 40% of all recycled fibre collected in Poland
FSC certification for both recycled and virgin fibre based products
Sustainable development – environment
Mondi’s paper products mean minimum environmental impact –
All papers produced in Świecie have FSC certification
FSC Recycled
PAGE 14Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Sustainable development – recognition
PREMIUM BRAND/ Warsaw Stock Exchange by Forbes /
October 2009, Mondi Świecie S.A. was granted the title of the Highest Reputation Company listed on Warsaw Stock Exchange.
RESPECT INDEX/ Warsaw Stock Exchange by Deloitte /
November 2009, Mondi Świecie S.A. was included “Respect Index”, reflecting the highest standard of Corporate Social Responsibility between companies listed on Warsaw Stock Exchange (only best 16 companies included in the index).
PAGE 15Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Proactive investment strategy –major capital projects 2000 - 2009
Market Development Focus
Promises kept - delivered more
ProactiveInvestmentStrategy
Early action against foreseen trends, developments and changes in business environment (markets, customer needs, changes in operational environment).
2001 Paper Machine #5 Rebuild € 45 m
2003 Paper Machine #3 Rebuild € 9 m
2007 Paper Machine #1 Rebuild € 30 m
Project Targets / Achievements
Focus: Increase of production of lightweight kraftliner grades
Effective production of high quality LW KLB Production increase +50 000 t / +90 000 t
Focus: Ability to produce 2-layer medium and lightweight recycled containerboard quality
Effective production of 2 layer TL and WBFL Quality targets 100% met
Focus: Increase of production of lightweight kraftliner grades
Effective production of high quality 2 layer LW KLB
Capacity increase from 130 000 to 180 000 t
PAGE 16Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Early Action against foreseen changes in operational environment
Promises kept - delivered more
ProactiveInvestmentStrategy
Early action against foreseen trends, developments and changes in business environment (markets, customer needs, changes in operational environment).
2001 New Woodyard € 26 m
Project Targets / Achievements
Focus: Improvement of wood pulp quality; reduction of wood losses
Wood losses reduction by 70% High quality of chips and pulp produced
2004 CFB Biofuel Boiler € 45 mFocus: Energy cost savings / green energy generation / CO2 emission reduction
Effective green energy production (€ 9.5 m profit/y) Reduction of coal usage by 190 000 tpa
together with substantial reduction of emissions (400 000 tpa CO2 emission reduced)
Proactive investment strategy –major capital projects 2000 - 2009
2009 Coal boiler rebuilt to Biofuel Boiler € 30 mFocus: Energy cost savings / green energy generation / CO2 emission reduction
Effective green energy production (6 € m profit/y) Reduction of coal usage by 100 000 tpa
together with substantial reduction of emissions (220 000 tpa CO2 emission reduced)
PAGE 17Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
3381
136171223251259
307299282333
295318346362379384380386391341318346
381416428435446
488538
603631690
737760797824842845
977
1 284
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
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1990
1991
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1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
01-0
9.20
10 x
4/3
Since Mondi became the majority shareholder, Świecie’s production has almost tripled
1997Mondi becomes majority shareholder
Operational excellence – production increase
PAGE 18Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
-23
3813
4121
49 4122
3830 20 3
1326
2169
95
28
79
24 48 63 5018 1
-104
3,124
2,703
1,986
1,473 1,3791,176 1,131
1,054 969 913895 894
1.004
132191
273
409459
587652
722
823
902 941 946 973
-100
100
300
500
700
900
1100
0
500
1000
1500
2000
2500
3000
3500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Increase due to bigger production
Increase due to headcount reduction
Employees, average
Total productivity
Employees, average Total productivity in tonnes
Operational excellence – productivity increase
Year 2008 - average employment (excl. PM7)
Since Mondi became the majority shareholder, Świecie’s productivity increased by more than 7 times
PAGE 19Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Raw materials – woodpulp market Poland
Forests covers 9.3 m ha in Poland = 29.1 % of a country area
81.8 % of forests are state owned and public; State Forest Enterprise (SFE) manage 77.8 % of all forests
32.7 m m3 of wood is harvested in Poland annually in 2009, 95.4 % of it is harvested by SFE (31.2 m m3)
In 2009 Mondi Swiecie consumed ca 2.0 m m3 of wood; 16 % of total volume was imported
Sustainable forestry: harvesting is ca. 55 % of annual growth
The challenge for the future: competitive woodpulp market
Forest area [ % ]
PAGE 20Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
0
50
100
150
200
250
300
350
400
450
500
2006
2007
2008
2009
2010
F
reco
vere
d pa
per n
et e
xpor
t - p
acka
ging
gra
des
['000
tons
]
Source: Association of Polish Paper-Makers
Poland is a net exporter of recovered paper
Raw materials – recovered paper market
PAGE 21Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Optimisation of Order Lead Time via Standardisation and Make to Stock implementation
Professional technical assistance for customers in corrugated board production leveraged by superior expertise offered by highly qualified and experienced technical staff
Consulting and advisory services resulting in higher value obtained by customers (box design, optimum paper selection, assistance during converting, etc.)
Regular training seminars for customers7,0°C
45,7°C
10
20
30
40
LI01
SP01 SP02
AR01
LI02LI03
Świecie is Technical Service Competence Centre of Mondi Containerboard
Customer focus – exceptional customer and technical service
PAGE 22Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
PROVANTAGE FRESCO FLUTINGWorld class quality of S/C Fluting for fruits and vegetables Strength and Runnability
PROVANTAGE EXTRA LITE KRAFTLINERLower weight = higher strength = lower costBetter Printability
PROVANTAGE AQUA LINERKraftliner grade with sufficient resistance to water penetration to replace today’s wax coated board on the corrugators
PROVANTAGE AQUA FLUTINGS/C Fluting - partly sized with sufficient resistance to moisture penetration to replace today’s wax coated fluting on the corrugators
Cutting edge products – strength through innovation
PAGE 23Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
BUILD ANATMOSPHERE
OF TRUST
PROVIDECLEAR
EXPECTATIONS
BUILDOWNERSHIP
BUILD COMPETENCES
MEASURE PERFORMANCE
PROVIDE EFFECTIVEFEEDBACK
PROVIDE CONSEQUENCES
Coaching for performance
People development – fundamental activity
Mondi Leadership Model
Target – Team – Individual
Management by Objectives linked to bonus system (all employees)
Individual development plans for all employees
Succession planning
Innovation system active – 131 ideas realised in 2009 = € 2.2 m
June 2009 Mondi Świecie SA was ranked among laureates of the prestigious ”Leader in Human Resources Management” competition organized by the Institute of Labor and Social Studies
ECO 7 – success story
PAGE 25Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Strategic Target: Strengthening of Mondi’s position in Central European market, especially in fast growing segment of lightweight recycled grades while utilizing competitive advantage given by integration with Mondi’s 5 Corrugating Plants in Poland and large scale paper machine.
Proactive investment strategy –CEE light Mondi’s strategic project 2009
CEE Light (budget € 350 m ; forecast € 330 m):PM (€ 285 m forecast) Corrugating Plant (€ 45 m forecast)
Main PM 7 data:Grade: testliner and fluting 75 – 140 gsmAnnual capacity: 470 000 tSaleable trim: 7.8 mOperational speed: up to 1 600 mpm State-of-the art technology
PAGE 26Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Mondi strategic project
Strategically located – Central Eastern Europe
Setting new standards – Quality and Performance
Less is more – Less weight – Less waste – Less cost
Ready to go – Automated Warehouse: standard reels delivered within 24 hours in Poland
State-of-the-art technology – Hi-Speed, Double Layer Headbox, Gap Former
High performance – Perfect Runnability, Optimum Printability and Excellent Strength Parameters
Powerful packaging solutions – High quality solutions across containerboard and corrugated products and applications
Cost competitiveness – Competitive advantage of large scale paper machine
PAGE 27Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Project rationale – why in Świecie ?Market
Growing demand for recycled containerboard in Central and Eastern Europe
Rising trade deficit in recycled containerboard in the Region
Strong electronic and household goods industries in Poland
Integration with Mondi’s 5 Corrugating Plants in Poland
Cost competitiveness
Low cost asset base
Cost advantage in transportation to CE markets
Know-How
Strategic focus on containerboard products
Excellent track record with all large Capex projects: executed on time and within budget
Experienced staff in paper production & world class mill in terms of productivity
Employees creativity and engagement
Excellent technical service
PAGE 28Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Project scope & site layout
Source for picture : Pre-Engineering Report Poyry
+ anaerobic treatment plant
+ infrastructure and media connections
+ all required modifications to the existing equipment
New wastepaperstorage area
New RCF plant
New paper machine
Inclusion to the public road
New automatic warehouse with automated reel transport
PAGE 29Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Construction in numbers
ECO7 Facts
SHE 7 000 trained people2.4 m manhours1 LTI occurred
Buildings Volume/Length 355 500 m³ / 320 m
Reinforced Concrete 65 000 m³
Construction Steel 8 500 t
Optic, MCS, Industrument installation cables 285 km
Electric Cables 530 km
Piping 60 km
Peak Manpower on Site 1 500
Number of contractors 50
PAGE 30Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Operational highlights ECO7
1200 trucks carried the equipment to the mill. The heaviest press rolls had to be shipped.
One of the largest available cranes was used to install the precast elements of the building. The crane, with lifting capacity of 450 t, arrived at the site in 36 trucks.
The winter period was not ideal for machine construction. A tent was built to maintain the required temperature conditions for the baseplates grouting.
PAGE 31Investor and Analyst site visit, Syktyvkar and Świecie, 2 – 4 November 2010
Successful PM 7 erection• Safety: only one LTI during constructing ( 7 000 contractors trained)• Construction completed within 17 months from earth works to the paper on the reel, ranks
the project among the shortest ever achieved for new paper making lines• Capex expected € 285 m (budget € 305 m)
ECO7 project success summary
Successful start up• First paper on reel 1 September 2009 – 21 h after
stock on the wire • First saleable production achieved already on 3
September (benchmark: 1-2 weeks)• Size press and “A” quality introduced already on 4
September (benchmark: 2-4 weeks)• Actual production was ahead of start up curve
assumed in the projectPM 7 start up was amongst one of the 3 best Metsoever had, can be a benchmark for competitors