UBS basic materials conference. June 2010

Transcription

1 UBS basic materials conference June 2010

2 Group overview and strategy Financial results Summary Appendices Presenter James Paterson Group Treasurer Page 2

3 Mondi at a glance 2009 Sales (1) UFP South Africa MPSA Newsprint and merchant 1.4B 1.8B 1.0B 0.5B 0.5B 0.5B 24% Bags & Specialities Corrugated 8% 9% 9% 32% 18% 2009 EBIT % 10.8% 4.5% 2.3% 6.7% 7.2% 2.1% Products Positions in relevant markets No. 1 in Office Paper and UFP in emerging Europe (2) No. 2 in Office Paper and UFP in Europe (2) Europe South Africa Europe/SA No. 1 in Kraft Paper No. 1 Containerboard in Europe (2) in emerging Europe; No. 1 in Bag No. 2 Virgin Converting in containerboard Europe (3) (2) No. 1 in Commercial release liner in Europe in Europe No. 1 Corrugated Packaging in emerging Europe (2) No. 1 in Office Paper and UFP in SA (4) No. 2 in Kraftliner in SA (4) No. 1 Corrugated No. 1 in Newsprint Packaging in SA (3) in South Africa (2) No. 3 in Rigid Plastics in SA No. 1 in Cartonboard in SA (1) Segment revenues, including inter-segment revenues. EBIT % is before special items. (2) Based on production capacity. (3) Based on sales. (4) Based on capacity. Sources: RISI, Pöyry Forest Industry Consulting, Freedonia, BMI Foodpack, PAMSA, Mondi Page 3

4 Three key pillars to our strategy Leading market positions Build on leading positions in packaging and uncoated fine paper (UFP), particularly in emerging markets High quality, low cost asset base Maintain position as lowest cost producer in our markets: Selectively investing in production capacity in lower cost regions Exploiting benefits of upstream integration (including forestry) Focus on performance Focus on continuous productivity improvement and cost reduction, delivered through business excellence programmes and rigorous asset management Proven strategy and consistent focus Page 4

5 Significant exposure to good growth emerging markets supported by strong asset base Leading market positions Revenue by destination Revenue by origin Leading market positions 47% 53% 42% 58% High exposure to good growth geographies Emerging markets Mature markets Virgin based production Net operating assets 19% 81% 25% 75% Emerging markets Mature markets Competitive cost base and superior revenue growth Source: Mondi Page 5

6 Emerging market asset base leads to low cost positions across the group s main grades Leading market positions High quality, low cost asset base low cost asset base Percentage of Mondi's capacity in overall cost curve at Feb 2010 Grade 1 st Quartile 2 nd Quartile 3 rd Quartile 4 th Quartile Unbleached Sack Paper 24% 4% 53% 19% NSSC Fluting 100% Unbleached Kraftliner 34% 66% - - White Top Kraftliner 100% BHKP (Pulp) 2-100% - - Recycled fluting 77% 15% - 8% UFP (Universal cut-size) 33% 33% 12% 22% 3 1 Note: Delivered to Frankfurt 2 Note: Delivered to Rotterdam 3 Note: High margin specialty mill Source: Pöyry High quality, low cost, well invested asset base Source: Pöyry Forest Industry Consulting Page 6

7 Integrated value chain Leading market positions High quality, low cost asset base low cost asset base Millions of tonnes (0.5) (1.0) Pulp (0.4) Production Consumption Net long/(short) position E&I SAD Other Millions of tonnes Virgin Containerboard Production Consumption Net long position E&I SAD Upstream production cost advantages Millions of tonnes Kraft Paper Production Consumption Net long position Millions of tonnes Recycled Containerboard Production Consumption Net long position E&I MPSA Source: Mondi. Exploiting benefits of upstream integration Page 7

8 million Profitability improvements Leading market positions High quality, low cost asset base Focus on performance Comprehensive business excellence programmes Cost savings and % of prior year cash cost base Cost structure COST SAVINGS MILLION YTD 3.1% 2.4% 5.4% Other Maintenance Personnel Energy Material inputs Significantly exceeded 180 million target in % of savings address fixed costs Personnel costs 17% Maintenance 5% Other net operating expenses 6% Variable selling expenses 10% Depreciation and amortisation 7% Other variable costs 18% Wood, pulp and fibre 29% Fixed costs excluding depreciation only marginally up relative to revenue at 26% (2008: 25%) Energy 8% Source: Mondi Successful focus on cost base Page 8

9 Major mills modernisation programme Leading market positions High quality, low cost asset base Focus on performance Comprehensive business excellence programmes Expansionary capital spend 2004 to % 7% 25% 29% South Africa Emerging Europe, incl Russia Rest of world (mainly Western Europe) 2009 Net operating assets Emerging markets Mature markets 20% Coming to the end of 10 year programme of modernising its asset base Almost 3 billion spent on expansionary projects Most large operations now well invested more than 2 billion spent on major mills Followed acquisitions in emerging Europe through turn of the century and underpins long term emerging market strategy Investment has been in low cost high growth markets Creating a major upside in cyclical upturn Rigorous asset allocation management 75% 305m expansionary project at 80% Swiecie completed in m expansion project in Russia due to complete in H No further major investment planned Page 9

10 Rigorous asset management Leading market positions High quality, low cost asset base Focus on performance Comprehensive Business Excellence programmes Rigorous asset allocation management 5 Closures and Divestitures to date Closure/moth-balled 5 7 Divestiture Percentage of Mondi' RCB Capacity in overall cost curve 1 1 st Quartile 2 nd Quartile 3 rd Quartile sale of European paper merchant, Europapier 4 4 th Quartile Without closure 11% 17% 63% 8% With closures 77% 15% - 8% ~950,000 tonnes annual capacity of high cost paper removed in just over two years Europe & International ~700,000 tonnes South Africa ~250,000 tonnes 14% reduction of Group capacity 21 converting sites rationalised since 2008 ~355,000 tonnes downtime taken in 2009 Only ~92,000 tonnes in the second half 1) European production sites Cutting back to low cost, high quality, well invested asset base Page 10

11 Corrugated restructuring European Recycled Fluting Supply Delivered costs to Frankfurt Corrugated Business EU footprint EUR/t Before: After: (CEE focus) New Mondi PM7 Weighted av. cost Post restructuring and CEE Light Weighted av. cost Pre restructuring and investment in CEE Light ,000 2,000 3,000 - Cumulative 4,000 capacity, 5, ,000 t/a - 7,000 8,000 9,000 10,000 RCB mill VCB mill Box plant sheet/speciality plant Closure/sale of 12 corrugated plants and 4 mills between 2008 to 2010 Average cost position after restructuring actions and CEE light improved from third to first quartile Full year production ~1.9 million tonnes (mt); ~0.8mt = Virgin; ~1,1mt = Recycled ~0.9mt consumed by corrugated box plants Net long ~1,0mt containerboard Improved cost position, refined geographic footprint Page 11

12 Group overview and strategy Financial results Summary Appendices Page 12

13 Trading highlights from May IMS Continued improvement in European trading environment Volumes continue to recover in most areas upward selling price momentum in key grades ongoing positive impact from restructured cost base In part, mitigated by commodity input cost pressures South Africa Division better than very weak previous quarter, but market fundamentals remain challenging Improved pulp export selling prices and local UFP price increases But Rand strength, exacerbating export weakness Withdrawing from European UFP markets, to focus on domestic and African markets After restructuring, net seller of around 280ktpa of pulp and around 250ktpa UFP Page 13

14 Group overview and strategy Financial results Summary Appendices Page 14

15 Summary 2009 characterised by a resilient performance in challenging conditions Focus on cash and costs helped offset revenue pressures and provided substantial cash inflow from operations Restructuring initiatives enhancing the Group s overall cost competitiveness and consolidating a leading cost position in our chosen markets Major projects sustainably lowering our cost base 2010 to April reflects further improvement in trading environment evident Order inflows strong across key grades Selling prices continue to improve However, costs increasing And demand in certain products may include restocking Strategy leaves Mondi well placed to benefit from these improving trading conditions Leading market positions in chosen emerging markets High-quality, expanding low-cost asset base Focus on performance, taking decisive actions to reduce costs and exit higher-cost capacity Strong financial position Well positioned with low-cost, high-quality, well-invested core Page 15

16 Group overview and strategy Financial results Summary Appendices Page 16

17 Mondi s operating sites Mondi employs 30,000 people with production facilities in 31 countries Page 17

18 Superior access to low cost wood Leading market positions High quality, low cost asset base low cost asset base Upstream production cost advantages Superior access to wood Average Hardwood and Softwood costs ( /m 3, Q4 2009) Russian wood regenerates naturally; South African wood is farmed, maturing in 8 years Russian and South African costs are largely under our own control Therefore, future wood costs largely depend on efficiency of our own operations Source: Pöyry Forest Industry Consulting Sustainable supply of low cost wood Page 18

19 Millions Sharp focus on working capital Leading market positions High quality, low cost asset base Focus on performance Comprehensive business excellence programmes 1,200 1,100 1, Working capital management 20% 14.6% 15.5% 18% 12.9% 16% 11.9% 14% 10.0% 12% 10% 8% 6% 4% 2% 0% 2007 H H Working capital % revenue 248 million working capital cash inflow in 2009 Lower working capital levels despite Euro weakness versus SA Rand Stock levels managed through voluntary downtime Management incentivised on working capital targets 372 million inflow from working capital over past 3 years Page 19

20 2009 Key financial highlights Group Revenue 6,345m H2 3,082m H1 3,263m 5,257m H2 2,643m H1 2,614m Underlying operating profit 441m 7.0% H2 178m 5.8% H1 263m 8.1% 294m 5.6% H2 156m 5.9% H1 138m 5.3% Substantial cash inflow from operations of 867 million, 9% above prior period Earnings down versus 2008 EBITDA 1 down 21% at 645 million Underlying operating profit 2 down 33% at 294 million Underlying EPS 3 down 45% at 18.7 euro cents Group ROCE 4 of 7.6% Strong cash management with net debt at 1.52 billion ( 173 million lower than 2008 year end) 300 million spent on major capital projects Benefit from 248 million of working capital inflows Delivered cost savings of 251 million, representing 5.4% of 2008 cash cost base Final dividend of 7.0 euro cents per ordinary share proposed Solid performance considering broader economic backdrop 1 EBITDA is operating profit of subsidiaries and joint ventures before special items, depreciation and amortisation. 2 Underlying operating profit is operating profit of subsidiaries and joint ventures before special items. 3 The Group has presented underlying earnings per share to exclude the impact of special items. 4 Group return on capital employed (ROCE) is an annualised measure based on underlying operating profit plus share of associates net earnings divided by average trading capital employed before impairments and adjusted for major capital projects not yet commissioned. Page 20

21 Segment financials m Segmental revenue 4,000 3,500 3,000 2,500 2,000 1,500 1, m Segmental EBIT EBIT % 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% HY HY HY HY (50) HY HY HY HY % 0.0% Uncoated Fine Paper Bags & Specialities MPSA Corrugated South Africa division Merchant & Newsprint Uncoated Fine Paper Bags & Specialities MPSA Corporate & Other Corrugated South Africa division Merchant & Newsprint % of sales Page 21

22 Adequate debt facilities available Millions H H H Net debt 1,690 1,661 1,517 Committed facilities 2,752 2,838 2,542 Of which undrawn 1,062 1, Gearing (Net debt / Trading capital employed) 39% 38% 35% Trading capital employed 4,368 4,384 4,356 Net Debt / 12 month EBITDA (times) million reduction in net debt achieved in 2009, despite major expansionary projects April 2010 maturity profile of committed facilities ( m) In April 2010 successfully launched a 500 million, 7-year Eurobond, which was utilised to settle existing debt Since bond issue around 400 million left drawn on main 1.55 billion syndicated revolver facility maturing June 2012 the average maturity of Group debt has increased to 4 years More than 175 million EBITDA headroom under Net debt / EBITDA bank covenant (3.5x) Corporate credit ratings received of Baa3 from Moody's Investor Service and BB from Standard & Poor's, both with a stable outlook Strong liquidity position 1 yr 2 yrs 3 yrs 4 yrs 5 yrs > 5 yrs As at 30 April 2010 Page 22

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