mondi results ye 2013 final...comparatives for 2009, 2010 and 2011 have not been restated to include...

Mondi GroupFull year results for the year ended 31 December 2013

28 February 2014

2

Agenda

HighlightsFinancial overviewOperational overviewDelivering on our strategyOutlookAppendices

3

294 458 622 574 699

7.6%

12.3%15.0%

13.6%15.3%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2009 2010 2011 2012 2013ROCE %

€ million

Highlights

Comparatives for 2009, 2010 and 2011 have not been restated to include 100% of Mondi Shanduka Newsprint in South Africa Division and consequently reflect a 58% portion.

Financial Record financial results on all key measures ROCE of 15.3% Up 170 basis points Last 3 year average of 14.6%, well in excess of

through-the-cycle hurdle rate of 13% Significant de-leveraging post 2012 acquisitions Net debt/EBITDA ratio down from 2.0 in 2012

to 1.5 in 2013 Dividend per share, 29% up on prior year

Operational Successful integration of acquisitions made

toward the end of the prior year €23 million synergies delivered

Significant capital expenditure projects on time and within budget 4 major energy related projects delivered in

2013 – total investment of €120 million Strong operational performance at all key

operations

18.7 40.6 68.1 69.2 95.0

2009 2010 2011 2012 2013

CAGR 50%

Earnings per share€ cents per share

Underlying operating profit

4

Agenda


5

Operating financial highlights

€ million 2012 2013%

changeH2

2012H1

2013H2

2013

Group Revenue 5,790 6,476 12% 2,971 3,342 3,134

Underlying EBITDA 927 1,068 15% 490 554 514

% Margin 16.0% 16.5% 16.5% 16.6% 16.4%

Underlying operating profit 574 699 22% 302 366 333

% Margin 9.9% 10.8% 10.2% 11.0% 10.6%

Group ROCE 13.6% 15.3% 13.6% 14.8% 15.3%

6

574 21

156

11

56699

Underlying operating profit development

€ million

(23)(18)

(78)

2012 Volume Price Variable costs

Fixed costs

Currency effects

Acquisitions and

disposals

Fair value gains on forestry assets

2013

7

104

47

10

100

29

123

54

9

91

40

148

4839

102

44

150

4535

70

49

0

20

40

60

80

100

120

140

160

Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper South Africa Division

H1 2012 H2 2012 H1 2013 H2 2013

Divisional underlying operating profit – half year splits

€ million

8

Financial review

€ million 2012 2013%

changeH2

2012H1

2013H2

2013

Underlying operating profit 574 699 22% 302 366 333

Net finance costs (110) (115) (5%) (55) (57) (58)

Net (loss)/income from associates (5) 2 (4) 1 1

Underlying profit before tax 459 586 28% 243 310 276

Tax before special items (90) (98) (9%) (47) (56) (42)

Total non-controlling interests (35) (28) 20% (11) (15) (13)

Underlying earnings 334 460 38% 185 239 221

Special items (after tax and non-controlling interests) (92) (74) 20% (96) (68) (6)

Reported profit after tax and non-controlling interests 242 386 60% 89 171 215

Underlying earnings per share (€ cents) 69.2 95.0 37% 38.3 49.4 45.6

Basic earnings per share (€ cents) 50.1 79.8 59% 18.4 35.3 44.5

9

Finance costs

€ million 2012 2013%

change

Closing net debt 1,872 1,621 13%

Average net debt 1,278 1,792 (40%)

Finance costs 95 104 (9%)

Net interest on defined benefit arrangements 15 11 27%

Net finance costs 110 115 (5%)

Effective interest rate (before capitalised interest) 7.5% 5.9%

Finance costs up on higher average net debtOffset by lower effective interest rate Higher proportion of debt in euro

Cash net interest paid of €124 million (2012: €92 million)

10

Taxation and non-controlling interests Benefiting from Profit mix Investment incentives, notably Poland

Taxation

€ million 2012 2013%

change

Underlying tax charge 90 98 (9%)

Effective tax rate 20% 17%

Non-controlling interests

€ million 2012 2013%

changeProfit attributable to non-controlling interests 35 28 20%

• Ružomberok 20 27 (35%)

• Other 15 1

% of net underlying profit 9.5% 5.7%

Lower charge due to Acquisition of Świecie minorities in April

and May 2012 Partly offset by higher profits at

Ružomberok

11

Special items

Operating special items – €94 million loss, including

Uncoated Fine Paper (€60 million loss)

Restructuring activities and asset impairment in Neusiedler (Austria) and assets written off in Syktyvkar (Russia)

South Africa Division (€18 million loss)

Closure of one newsprint machine and related restructuring

Consumer Packaging (€13 million loss)

Closure of Lindlar operation in Germany, volumes redirected to other operations

Non-operating special items – €7 million gain

South Africa Division (€7 million gain)

Profit on disposal of land

Cash e f fec t o f €20 mi l l i on

12

1,872

27126

124

405 41 60

1381,621

Cash flow effects – movement in net debt

(50)(59)

(1,063)

€ million

Net debt at 31

December 2012

Cash generated

by operations

Movement in working

capital

Incometax paid

Financing costs paid

Capex investment

Investment in forestry

assets

Dividends paid to non-

controlling interests

Dividends paid to equity

holders

Currency movements

Other Net debt at 31

December 2013

13

Working capital¹

1 Comparatives for 2009, 2010 and 2011 have not been restated to include 100% of Mondi Shanduka Newsprint in South Africa Division and consequently reflect a 58% portion.2 Working capital as a % of revenue is based on annualised Nordenia revenue.

Working capital within target range of 10-12% despite change in business mix following Nordenia acquisition

Reduction in ratio reflects tight working capital control

527 557 575 764 711

10.0% 9.9% 10.0%

11.9%11.0%

2009 2010 2011 2012² 2013Working capital as a % of revenue

248

(121)(68) (83) (27)

2009 2010 2011 2012 2013

Working capital cash flowsWorking capital management

12%

10%

€ million € million

14

Capital expenditure¹

1 Comparatives for 2009, 2010 and 2011 have not been restated to include 100% of Mondi Shanduka Newsprint in South Africa Division and consequently reflect a 58% portion.2 Capital expenditure as a % of depreciation & amortisation is calculated using capital expenditure including intangibles.

Increase in capital expenditure as major project spend ramps up

€140 million of major energy related projects successfully completed in 2012 and 2013

Capital expenditure expected to average ±€500 million per annum in 2014/2015

517 394 263 294 405

149%

117%

78% 86%

113%

2009 2010 2011 2012 2013

Capital expenditure as a % of depreciation & amortisation²

2009 2010 2011 2012 2013Packaging Paper Fibre PackagingConsumer Packaging Uncoated Fine PaperSouth Africa Division

Capital expenditure Capital expenditure by business segment€ million € million

15

52%

14%

9%5%

20% EuroRussian roublePolish zlotySouth African randOther

Debt facilities

Strong de-leveraging following acquisitions in late 2012

Benefits of carrying debt in higher yielding emerging market currencies due to devaluation Cumulative translation adjustment in 2013 of

€59 million Public credit ratings reaffirmed Standard & Poor’s at BBB- Moody’s Investor Services at Baa3

€ million 2012 2013%

changeNet debt 1,872 1,621 13%

Committed facilities 2,606 2,487

Of which undrawn 762 792 4%

Gearing (Net debt / Trading capital employed) 40% 36%

Net debt / 12 month trailing EBITDA (times) 2.0 1.5

Currency split of net debt €1,621 million

16

2.50 3.508.25 8.90 9.557.00

16.50

17.75 19.1026.45

2.0 2.0

2.6 2.5 2.6

-

0.5

1.0

1.5

2.0

2.5

3.0

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012 2013

€ cents per share

Interim dividend Final dividend Dividend cover

Dividends

Full year dividend of 36 euro cents per share

Increase of 29%, covered 2.6 times by earnings

Dividends declared

17

Agenda


Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division

18

25 178 295 227 298 3.0%

17.0%

24.4%

17.9%21.9%

2.1%

10.2%

14.7%12.0%

14.9%

2009 2010 2011 2012 2013ROCE % Underlying operating profit margin %

Packaging Paper Strong performance with ROCE of 21.9%

Pricing mixed

Strong recovery in recycled containerboard

Virgin containerboard up in H1, before some weakness in H2

Kraft paper generally stable, although some price erosion in Q4

Volume growth in all key grades

Benefited from lower input costs, particularly paper for recycling

Logistics synergies realised from 2012 Corrugated plants acquisition 0.90

1.00

1.10

1.20

1.30

2009 2010 2011 2012 2013VCB RCB Kraft paper

Volumes indexed to 2009

Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Division

Underlying operating profit, margin and ROCE€ million

Production volumes

19

0.400.600.801.001.201.401.60

2009 2010 2011 2012 2013

Packaging Paper | industry fundamentals

Source: FOEX Indexes Ltd

Virgin containerboard Downward pressure on Kraftliner prices in H2

2013 and early 2014 on product substitution and increased supply from grade conversion Year end benchmark prices 2% lower than

average levels for 2013 Kraftliner price premium now in lower half of

historic trading range – supportive of pricing Supply side remains constrained Improving demand in Q1 2014 Price increase discussions underway on

unbleached Kraftliner grades

Recycled containerboard Average benchmark prices up 4% on 2012

and year end 7% higher than 2013 average Good demand growth 2014 net capacity additions expected to be in

line with demand growth507090

110130150170190

2007 2008 2009 2010 2011 2012 2013 2014

€/tonne

Average


Selling prices

White-top Kraftliner RCB

Price indexed to 2009

Kraftliner – RCB

VCB

Price differential

20

0.400.500.600.700.800.901.001.101.201.301.40

2009 2010 2011 2012 2013

Packaging Paper | industry fundamentals

Source: Mondi

Kraft paper Price erosion in late 2013/early 2014 from

increased competition in key export markets and seasonal demand weakness in Europe

Closing price 7% down on 2013 average

Overseas markets remain main driver for unbleached sack kraft

Demand in Europe remains stable

Recent pick-up in orders

Sack kraft price increase discussions

Some capacity expansion in growing speciality segment


Sack kraft


Selling prices

21

63 52 86 101 93

8.5%7.5%

11.0%12.5%

10.8%

4.0%3.0%

4.6% 5.4% 4.7%


Fibre Packaging

Corrugated packaging Price increases achieved but paper input

price increases put pressure on margins Benefited from 2012 acquisitions and

volume growth in key markets

Industrial bags Growth in key overseas markets offset

marginal volume declines in Europe Strong cost management and benefiting

from restructuring activities

Coatings Sustained weakness in industrial and

automotive sectors impacting volumes and prices

Under pressure from new competitor capacity in Europe

0.60

0.80

1.00

1.20

1.40

2009 2010 2011 2012 2013



€ million

Industrial bags CoatingsCorrugated packaging

Underlying operating profit, margin and ROCE

Production volumes

22

17 22 25 33 74

10.2%

13.5%15.0%

10.8%

9.1%

5.4%6.3% 6.7% 6.6% 6.4%

2009 2010 2011 2012¹ 2013

ROCE % Underlying operating profit margin %

Consumer Packaging

1 Excludes €14 million one-off costs relating to Nordenia acquisition.

Like-for-like underlying operating profit in line with prior year

Net synergy gains of €16 million

Offset by

One-off synergy implementation costs of €5 million

Challenging trading conditions in European films business

Higher fixed costs (excluding synergy effects) on new product launches and plant start-up

Closure of Lindlar plant and transfer of volumes completed


€ million


23

146 179 205 191 172

14.5%16.9% 16.7% 16.7% 16.2%

10.8% 11.8%14.3% 13.0% 12.4%


Uncoated Fine Paper Strong operating performance with ROCE

of 16.2% Sales volumes down 1.5%, reflecting

mainly effects of Neusiedler restructuring Average selling prices weaker in H2 on

continuing weak demand and new capacity Input costs increased Higher wood costs in Ružomberok and

pulp costs at Neusiedler partly offset by lower wood costs in Russia– Own wood costs in Russia down more

than 10%

Strong cost management resulted in a net reduction in fixed costs

H2 results impacted by annual maintenance shuts0.88

0.92

0.96

1.00

1.04

2009 2010 2011 2012 2013



Underlying operating profit, margin and ROCE€ million

Production volumes – Uncoated fine paper

24

0.80

1.00

1.20

1.40

1.60

1.80

2009 2010 2011 2012 2013

A4 B-copy Pulp (BHKP)

Uncoated Fine Paper | industry fundamentals

Source: FOEX Indexes Ltd

Demand Structural decline continuing in western

Europe – down approximately 3% in 2013 Structural demand growth still expected in

Russia, albeit impacted by current cyclical weakness

Supply New capacity in Russia and France now in

production No further net capacity expansions

expected



Pulp and A4 B-copy prices

25

38 71 63 69 93 4.6%

8.4% 8.7%9.6%

16.0%

7.0%

10.8%9.8% 9.8%

14.9%


€ million

South Africa Division


Strong performance, with ROCE of 16.0%

Domestic sales volumes increased

Pricing

Domestic price increases achieved

Higher average export pulp and white-top containerboard prices

Gains from weaker rand

€23 million lower fair value gain on forestry assets

Closure of 1 newsprint machine in Merebank and related restructuring

H2 2013 impacted by annual maintenance shut at Richards Bay0.40

0.70

1.00

1.30

1.60

1.90

2009 2010 2011 2012 2013Uncoated fine paper Containerboard Market pulp


Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Africa Division


Production volumes

26

Agenda


27

50%

20%

20%

10%

Consumer related packaging Industrial packagingUncoated fine paper Other

Performance drivers Focused on markets enjoying growth

Geographic exposure – around 50% of sales into higher growth emerging markets

Product mix – over two-thirds of sales in packaging, typically enjoying structural growth

Well invested asset base in regions enjoying low operating cost structures

81% of upstream pulp and paper asset base in low-cost emerging markets

Decentralised operating model with relentless focus on performance

51%49%

Emerging markets Mature markets

Revenue by destination 2013

Product mix 2013

28

69%

22%

9%

Packaging UFP Other²

Actively growing packaging business

1 Excludes investment in forestry assets. 2 Other includes forestry assets, corporate, market pulp and Mondi Shanduka Newsprint.

Clear strategy to grow packaging business

Cumulative capital expenditure in packaging business during 2011-2013 represents 69% of total Group expenditure over period

Additional €1.2 billion spent on packaging acquisitions (including Świecie minorities and power plant, 2 Duropack plants and Nordenia)

Today packaging represents more than two thirds of Mondi’s capital employed

Cumulative 2011-2013 capital expenditure¹

56%67% 70%

0%

20%

40%

60%

80%

100%

2011 2012 2013Packaging UFP Other²

Development of % capital employed

29

Capital expenditure timeline

Project start-up

Total Capex

€m

2013 2014 2015 2016

H1 H2 H1 H2 H1 H2 H1

Syktyvkar bark boiler

Frantschach recovery boiler

Stambolijski steam turbine and economiser

Richards bay steam turbine

Štĕti bleached kraft (155,000 tonnes) 70

Syktyvkar pulp dryer (100,000 tonnes) 30

Ružomberok recovery boiler 128

Świecie recovery boiler, turbine and biomass boiler

166

120

Over €500 mi l l i on a l loca ted to ma jo r s t ra teg ic cap i ta l p ro jec ts

30

Agenda


31

OutlookWe start the year with pricing in most paper grades below 2013 average levels Much depends on extent of European macroeconomic recovery Encouraging development in order books in early part of year Price increase discussions in certain virgin packaging grades

Recent emerging market currency weakness beneficial to cost base

Confident of strong contribution from capital projects

Strong cash generation creates valuable optionality

Confident of continuing to deliver industry leading performance

32

Agenda


33

Our strategic pillars

Achieve leading market positions

Maintain our high-quality,

low-cost asset base

Grow through customer focused

development

Continuous focus on performance

We develop and maintain leading positions in our core packaging and uncoated fine paper markets. This brings us cost benefits and allows us to better serve our customers. Our focus on higher-growth emerging markets contributes to our sustained profitability.

We constantly invest in improving our operations, focusing on those assets which enjoy inherent cost advantages. This ensures we maintain a high-quality, low-cost asset base that keeps us competitive, and gives us sustainable cost advantages. Through our high levels of vertical integration we can create synergies along the entire value chain.

We help our customers succeed by working closely with them and listening to them. We develop smarter, more cost-effective processes and work to find inventive, innovative, advanced solutions that meet their needs. We follow our customers into high-growth emerging markets, where together we can offer cutting edge products that deliver exceptional value.

We are passionate about performance, making things work efficiently, effectively and profitably. Through our business excellence programmes and rigorous asset management, we are continually improving productivity and finding new ways to reduce costs.

Our hurd le ra te o f re tu rn th rough- the-cyc le i s 13%

34

Delivering against free cash flow priorities

Free Cash Flow

priorities

Maintain investment grade credit metricsNet debt/EBITDA is 1.5 times, down from 2.0 times at end 2012Investment grade credit ratings reaffirmed

Support dividendsFull year dividend – increase of 29%Dividend cover of 2.6 times

M&A and/or increased shareholder distributions Future growth focused on faster growing packaging segmentsContinue to assess opportunities that are value enhancing to the Group

As appropriate

Selective capital investment opportunitiesStrategic capital investment projects completed and balance remain on time and within budget

35


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2009 2010 2011 2012 2013

Pulp Paper Wood Paper for recycling Energy Chemicals Plastics Other variable costs

Input costs

€ million

Variable costs

36


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2009 2010 2011 2012 2013

Fixed costs

Personnel costsDepreciation and amortisationMaintenance and other indirect costs Other net operating expenses

Fixed costs excl. depreciation as a % of turnover

€ million

26.1%

23.4%

22.1%22.7% 23.1%

Fixed costs composition

37

1 Delivered to Frankfurt except where noted2 Excludes kraftliner substitutes 3 Includes specialties4 Delivered to RotterdamSource: RISI and Mondi estimates

100% 76% 100% 83% 14% 35% 100%

17%24% 24% 38% 100%

25% 13%

37%12% 14%

White topkraftliner

Unbleachedkraftliner²

NSSC fluting Recycled fluting Unbleachedsack kraft paper

UFP³ BHKP (pulp)

Percentage of Mondi's capacity in overall cost curve in Q3 2013

Emerging market asset base leads to low cost positions across the Group’s main grades

Q4

Q3

Q2

Q1

4

Cost quartile¹

38

0.70.5

0.2

Production Consumption Net long position

Millionsof tonnes

3.1 3.3

(0.2)

0.7 0.4

0.3

Production Consumption Net long/(short)position

Millionsof tonnes

Integrated value chain 2013

1 ±400 kt of kraftliner substitutes included in virgin containerboard, previously included in recycled containerboard.

1.00.6 0.4


Millionsof tonnes

1.4

0.3

1.1

0.30.3


Millionsof tonnes

Kraft PaperPulp

Virgin Containerboard¹ Recycled Containerboard¹

MSADE&I

MSADE&I

E&I

E&I

39

Cash flow

€ million 2012 2013%

changeUnderlying EBITDA 927 1,068 15%Working capital movements (83) (27) 67%Other operating cash flow items 5 (5)Cash generated from operations 849 1,036 22%Dividends from financial investments and associates 2 1Taxes paid (109) (126) (16%)Net cash inflow from operating activities 742 911 23%Capital expenditure, excl. intangible assets (294) (405) (38%)Investment in intangibles and forestry assets (60) (53) 12%Acquisitions (841) -Non-controlling interests bought out (298) (4)Investment in associates (43) -Financing costs (92) (124) (35%)Dividends paid (157) (198) (26%)Other investing and financing activities (11) 47Net (decrease)/increase in net debt (1,054) 174

40

Statement of financial position€ million 2012 2013Intangible assets 695 675Property, plant and equipment 3,709 3,428Forestry assets 311 233Other non-current assets 42 38Total non-current assets 4,757 4,374Inventories 783 746Trade and other receivables 1,010 954Other current assets 73 166Total current assets 1,866 1,866Total assets 6,623 6,240Short-term borrowings (281) (181)Trade and other payables (1,029) (989)Other current liabilities (137) (126)Total current liabilities (1,447) (1,296)Medium and long-term borrowings (1,648) (1,571)Net retirement benefits liability (253) (211)Deferred tax liabilities (344) (264)Other non-current liabilities (58) (52)Total non-current liabilities (2,303) (2,098)Total liabilities (3,750) (3,394)Net assets 2,873 2,846Retained earnings and other reserves 2,030 2,049Total attributable to shareholders 2,572 2,591Non-controlling interests in equity 301 255Total equity 2,873 2,846

41

Production volumes

2012 2013%

changeEurope & International

Containerboard Tonnes 2,079,005 2,138,714 3%Kraft paper Tonnes 980,637 1,010,885 3%Total softwood pulp Tonnes 1,978,583 2,007,959 1%Corrugated board and boxes M m2 1,213 1,344 11%Industrial bags M units 3,829 3,997 4%Coatings and release liners M m2 3,352 3,348 -Consumer packaging Tonnes 121,127 283,161 >100%Uncoated fine paper Tonnes 1,417,709 1,381,141 (3%)Newsprint Tonnes 201,278 207,228 3%Total hardwood pulp Tonnes 1,059,140 1,087,615 3%

South Africa

Containerboard Tonnes 263,468 254,714 (3%)Uncoated fine paper Tonnes 257,747 258,751 -Total hardwood pulp Tonnes 658,368 645,611 (2%)Total softwood pulp Tonnes 215,828 166,101 (23%)Newsprint Tonnes 198,024 145,498 (27%)

42

Exchange rates

2012 2013%

changeClosing rates against the euroSouth African rand 11.17 14.57 (30%)Czech koruna 25.15 27.43 (9%)Polish zloty 4.07 4.15 (2%)Pounds sterling 0.82 0.83 (1%)Russian rouble 40.33 45.32 (12%)Turkish lira 2.36 2.96 (25%)US dollar 1.32 1.38 (5%)

Average rates for the period against the euroSouth African rand 10.55 12.83 (22%) Czech koruna 25.14 25.99 (3%) Polish zloty 4.18 4.20 -Pounds sterling 0.81 0.85 (5%)Russian rouble 39.91 42.32 (6%)Turkish lira 2.31 2.53 (10%)US dollar 1.29 1.33 (3%)

mondi results ye 2013 final...comparatives for 2009, 2010 and 2011 have not been restated to include...

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