| Thu 28 Feb 2008, 9:00 | | MNP / MND - Mondi - Preliminary Results for the Ye |
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MND MNP
MND MNP
MNP / MND - Mondi - Preliminary Results for the Year ended 31 December 2007
and dividend declaration
Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND ISIN: ZAE000097051
Mondi plc
(Incorporated in England and Wales)
(Registration number: 6209386)
JSE share code: MNP ISIN: GB00B1CRLC47
Preliminary Results for the Year ended 31 December 2007
Financial Summary
EUR million, except for % and per share
measures 2007 2006 Change %
Group revenue 6,269 5,751 +9
EBITDA 1 870 726 +20
Underlying operating profit 2 502 377 +33
Underlying profit before tax 3 405 305 +33
Reported profit before tax 382 223 +71
Basic earnings per share (EUR cents) 4 45.4 15.2 +199
Underlying earnings per share (EUR cents) 4,5 46.9 27.0 +74
Headline earnings per share (EUR cents) 4,5 39.5 28.2 +40
Total dividend per share (EUR cents) 23.0 n/a n/a
Cash inflow from operations 957 657 +46
Net debt 1,507 1,479 +2
Group ROCE 6 10.6% 8.1% +31
Highlights:
- Delivered a substantial improvement in financial performance with underlying
operating profit up 33%, underlying earnings per share up 74% and return on
capital employed up by 2.5 percentage points to 10.6%
- Cash inflow from operations up EUR300 million at EUR957 million benefiting
from improved trading and working capital management
- Achieved productivity records at the majority of Mondi`s paper mills and
delivered cost savings of EUR167 million
- Further rationalised and restructured the business including the planned
closure of 140,000 tonnes of uncoated fine paper capacity at Hungarian mill
- Approved and commenced expansion and modernisation projects in Russia and
Poland
- Successful listing of the Mondi Group on the JSE and LSE on 3 July 2007
completing the demerger from Anglo American plc
- Proposed maiden final dividend of 15.7 euro cents per share to give a total
dividend of 23.0 euro cents per share with respect to 2007
David Hathorn, Mondi Group Chief Executive, said:
"Mondi recorded substantial improvements in underlying operating profit, up
33%, underlying earnings per share up 74% and cash flow up 46%. This reflected
improved performances across all business areas as increased pricing, focus on
operational efficiency and the benefits of restructuring actions all
contributed to the financial outcome.
"We believe that Mondi`s leading positions in the emerging markets provide
both cost and growth advantages. Furthermore our focused strategy, obsession
with driving down costs and willingness to react quickly to market conditions
leaves us very well placed to respond to changing economic circumstances.
Therefore, despite the uncertainty surrounding the prospects for the global
economy, we are confident of making further progress in 2008."
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 Underlying profit before tax is reported profit before tax before special
items.
4 The calculation of basic earnings, underlying earnings and headline earnings
per share has been based on the actual number of shares issued on admission to
the Johannesburg and London stock exchanges of 514,137,127 shares adjusted by
weighted average impact of treasury shares held.
5 The Group has presented underlying earnings per share to exclude the impact
of special items, and headline earnings per share in accordance with circular
8/2007 "Headline Earnings" as issued by the South African Insitute of Chartered
Accountants.
6 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.
Contact details:
Mondi Group
David Hathorn +27 (0) 11 994 5418
Paul Hollingworth +27 (0) 11 994 5418
Lisa Attenborough +44 (0) 7 872 672669
From 3 March, please call:
Paul Hollingworth +44 (0) 1932 82 6326
Financial Dynamics
Richard Mountain +44 (0)20 7269 7121 / +44 (0)7909 684 466
Louise Brugman +27 11 214 2415 / +27 83 504 1186
Dial-in audio cast facility will be available via:
South Africa 011 535 3600 or
0800 200 648 (toll-free)
UK 0800 917 7042 (toll-free)
Europe & Other + 41 916 105 600 or
+ 800 246 78 700 (toll-free)
Online audio cast facility will be available via:
http://www.corpcam.com/MondiPrelims2007
password: results
The presentation will be available on line via the above website address one
hour before the audio cast commences at 11am SA time (0900am UK time).
Questions can be submitted either via the dial-in conference call or by email
via the audio cast.
Should you have any issues on the day with accessing the dial-in conference,
please call +27 11 305 2000. Should you have any issues on the day with
accessing the audio cast, please call + 27 12 665 2025.
Editors` notes:
Mondi is an international paper and packaging group and in 2007 had revenues of
EUR6.3 billion. Its key operations and interests are in western Europe,
emerging Europe, Russia and South Africa.
The Group is principally involved in the manufacture of packaging paper and
converted packaging products; uncoated fine paper; and speciality products and
processes, including coating, release liner and consumer flexibles.
Mondi is fully integrated across the paper and packaging process, the growing
of wood and manufacture of pulp (including recycled materials) and paper to
the converting of packaging papers into corrugated packaging and industrial
bags.
Mondi has production operations across 35 countries and had an average of
35,000 employees in 2007.
MONDI`S STRATEGIC ADVANTAGE
Our ability to deliver value for our shareholders is driven by our focus on
performance and in particular our significant exposure to emerging markets,
which enables us to deliver above average growth from a low cost asset base.
Our low cost position is supported by our high level of vertical integration,
being self sufficient in wood, our primary raw material, in two of the lowest
cost timber regions of the world.
Mondi has a clear mission to be the best performing paper and packaging group
in the world. Our strategy to achieve this is simple and has four key drivers:
Leading market positions
We are building on our leading market positions in packaging and uncoated fine
paper (UFP), particularly in emerging markets which offer sustained
above-average growth potential.
High quality, low cost asset base
We aim to be the lowest cost producer in our industry, by selectively investing
in production capacity in lower cost regions and by exploiting the benefits of
upstream integration (including forestry) across our operations. As at 31
December 2007, 65% of Mondi`s asset base was located in emerging markets.
Focus on performance
Continuous productivity improvement and cost-reduction are institutionalised
disciplines at Mondi, deliver ed through a range of business excellence
programmes and rigorous asset management.
Growth
We will continue to target value-enhancing growth through a combination of
organic expansion and acquisitions.
GROUP RESULTS OVERVIEW
In the half year report in August we announced a strong first set of results
with a substantial recovery in operating profit. This recovery continued into
the second half, despite continued pressure from trade flows on the back of the
weakness of the US dollar and high input costs, reflecting the generally
positive trends in our key business segments.
Mondi recorded substantial improvements in sales, up 9%, underlying operating
profit, up 33% and cash inflow from operations, up 46%. Underlying profit of
EUR502 million was up EUR125 million and reflected better performances across
all the main business areas as increased pricing, focus on operational
efficiency and the benefits of restructuring actions all contributed to the
financial outcome. Group operating margins of 8.0% were up 1.4 percentage
points on the prior year (2006: 6.6%) as a result of an improved pricing
environment and the benefits of operational efficiencies, in particular EUR167
million of cost-savings. These positive developments were partially offset by
significant increases in raw materials, particularly the costs of wood, pulp,
recycled fibre and chemicals.
Cash inflow from operations was up EUR300 million at EUR957 million benefitting
from an improved trading result and working capital management. It is
particularly pleasing that average return on capital employed, a key measure of
performance for Mondi, increased from 8.1% to 10.6%, which reflects both
improved profitability and tighter management of our capital employed. While
this improvement is clearly a step in the right direction, current returns
remain unsatisfactory and significant additional cost reductions and further
productivity improvements have been targeted. Furthermore, we remain very
focused on supply-side discipline as an important component of ensuring ongoing
price stability and improvement.
Underlying earnings per share were 46.9 euro cents per share, up 74% on 2006.
The Group is proposing to pay a final dividend of 15.7 euro cents per share
giving a total dividend of 23.0 euro cents per share for the year.
DIVISIONAL OVERVIEW
Mondi Packaging`s underlying operating profit increased by EUR86 million, or
38%, reflecting price increases achieved across all major paper grades,
improved operating performance in the converting operations and achievement of
cost savings of EUR81 million. This improved result was delivered despite EUR17
million in restructuring costs (2006: EUR17 million) incurred as part of the
ongoing rationalisation of our downstream converting assets. Mondi Business
Paper`s underlying operating profit increased by EUR48 million, or 46%,
principally due to a significant turnaround in the South African operations as
well as an improved result from our Russian operations. The result also
benefited from modest increases in paper pricing together with cost reductions
throughout the business of EUR82 million. The improved South African
performance was achieved through a restructuring of the business and a better
operating performance from the PM31 paper machine in Merebank. These
improvements were partially offset by EUR10 million in restructuring costs,
mainly incurred to reduce divisional overheads. Mondi Packaging South Africa`s
underlying operating profit of EUR35 million was up 8% in local currency,
although the reported figure was flat year on year due to translation into
euros at a significantly weaker rand exchange rate. The increase in local
currency was mainly due to good demand and volume growth following a strong
agricultural season in South Africa. Our merchant and newsprint businesses
(profits up EUR11 million, or 38%) benefited from improved pricing and demand
and in the UK from lower energy costs. Corporate costs were EUR20 million
higher, reflecting the cost of Mondi as a listed Group and the creation of
Mondi`s stand alone corporate structure following the demerger from Anglo
American plc.
COST SAVINGS, PRODUCTIVITY AND RIGOROUS ASSET MANAGEMENT
One of our key strengths is our rigorous control of costs at all levels of the
business. Over the past three years we have delivered cumulative cost
reductions of approximately 10% of total cash costs. In 2007 alone we achieved
cost reductions of 3.1% or EUR167 million and this process continues through a
series of ongoing cost-reduction programmes and profit improvement initiatives.
A key to improving profitability is productivity which has improved
substantially. For example, over the last ten years the Group`s bag converting
operations have delivered an 8% compound annual growth in units per employee.
In Poland our Swiecie paper mill has increased output per employee by 24%
compound per annum over the last ten years. In Russia, our Syktyvkar paper mill
has lifted productivity by 13% compound per annum since 2002. Furthermore, in
Slovakia, since the beginning of the decade our Ruzomberok paper mill has
increased productivity by 20% compound per annum.
Where sites do not meet our strict performance criteria they are closed or
divested. For example, in the past six years we have closed two testliner mills
(in the UK and Switzerland), reducing our capacity by 11%. A further 11% of
corrugated packaging capacity has been taken out since 2004. In all, we have
closed four paper machines and 35 packaging converting plants and disposed of a
further 30 converting plants since 2001. These actions not only contribute to
an improvement in Mondi`s overall cost base and asset quality but have also
contributed to supply-side reductions, leading to an improved supply/demand
balance in our respective grades, with resultant margin improvements.
ORGANISATIONAL STREAMLINING
The ongoing focus on performance requires periodic reviews of our
organisational structure. Soon after the demerger we therefore took the
opportunity to conduct such a review, with the aim of further eliminating
duplication, simplifying our processes and aligning our business model across
the Mondi Group. From 1 January 2008, in place of the former Mondi Packaging
and Mondi Business Paper business units, we now operate as two divisions:
Europe & International and South Africa.
The Europe & International division comprises our packaging and UFP activities
outside South Africa and is headed by Peter Oswald, formerly chief executive
officer of Mondi Packaging, who joined the boards of Mondi Limited and Mondi
plc at the beginning of this year. The South Africa division comprises our
existing South African forestry operation and the plants at Merebank and
Richards Bay, and is headed by Ron Traill, formerly managing director of the
Steti mill in the Czech Republic.
Gunther Hassler, the former CEO of Mondi Business Paper, decided to leave Mondi
towards the end of the year to pursue other opportunities. On behalf of the
board and senior management we would like to thank Gunther for the contribution
he has made to Mondi during his 20 years with the Group.
The reporting lines for Mondi Packaging South Africa, Mondi Shanduka Newsprint,
Aylesford Newsprint and Europapier remain unchanged.
Following the reorganisation we have made good progress in simplifying our
processes, eliminating duplication and reducing overheads, and we expect to see
the benefits beginning to flow through in the current year.
OPERATIONAL RESTRUCTURING AND RATIONALISATION
In view of the current Uncoated Fine Paper (UFP) market dynamics, which have
seen sustained high pulp prices and a weak US dollar with resultant trade flows
impacting European operating rates, we have decided to decrease Mondi`s
European UFP operating capacity and further reduce costs by simplifying our
European UFP operations, principally through cutting divisional overheads and
reducing mill headcount. As part of this programme it is planned to shut down
the paper machine at Mondi`s unintegrated Hungarian mill at Szolnok, during the
second quarter of 2008. This mill has a capacity of 140,000 tonnes, employs
approximately 275 people and made an operating loss in 2007. The closure is
subject to negotiations with employee representatives and we will seek
alternative uses for the site.
The total estimated pre-tax restructuring charge for this closure and related
actions is estimated at EUR88 million (of which EUR57 million is an impairment
and EUR31 million is a cash cost). This will be booked as a special item in the
income statement (EUR57 million in the 2007 accounts and the balance in 2008).
The costs of further rationalisation of divisional overheads and mill headcount
reduction will be charged to underlying operating profits as a restructuring
charge as and when incurred, as part of Mondi`s normal process of continuous
cost reduction.
GROWTH
Mondi is committed to generating value enhancing growth, both organically and
through acquisition, primarily by expanding its asset and sales bases in
emerging markets. We continue to investigate opportunities to extend our
position in low cost locations for pulp and paper production, whilst divesting
non-core assets and further rationalising our plant network. In deciding upon
capital allocation, we focus on our ability to secure a sustained low cost
position, thus ensuring that we deliver a return in excess of our cost of
capital over the cycle.
In Poland, we are investing EUR350 million in a new lightweight recycled
containerboard machine and new box plant at our Swiecie mill. Annual demand
growth for converted packaging in Central and Eastern Europe is estimated to be
running at around 8% and there is a substantial deficit in lightweight
containerboard supply which we aim to fill. In Russia, we are investing EUR525
million in modernising and expanding our low cost mill at Syktyvkar. This mill
has proven to be a great success since we assumed control in 2002. The
wood-handling facilities will be modernised and expanded and the fibre lines
will be upgraded. On completion it is estimated that the two chipping lines and
debarking unit will be the largest in the world by capacity. In addition, a new
recovery boiler will be installed, substantially increasing our energy supply
with surplus energy being sold to the grid. The resultant increased pulp
production will enable us to increase paper output on a fully integrated basis,
with both the paper and containerboard machines being rebuilt. This investment
will enable Mondi to benefit from the strong growth in demand for
containerboard and UFP in Russia, as well as substantially reducing our
production costs.
In addition to organic investment, the acquisition of assets in growing markets
with the potential for improved returns is central to our strategy. Over the
last seven years we have acquired and integrated numerous businesses, improving
their efficiency, leveraging synergies with our existing operations,
transferring `know -how` from elsewhere in the Group and improving the product
mix.
Our most recent major acquisition has been in the key market of Turkey, where
we have completed the purchase of a majority stake in Tire Kutsan, the
country`s leading corrugated packaging company. This expands our European
footprint and, coupled with our existing presence, gives us immediate market
leadership in corrugated packaging in emerging Europe, including Turkey.
We are confident that this combination of growth and a rigorous attention to
business excellence will enable us to meet our key financial objective for the
Group of a 13% return on capital employed across the cycle.
OPERATIONAL REVIEW
Mondi Packaging
EUR million 2007 2006 Change %
Segment revenue 3,590 3,167 +13.4
- of which inter-segment revenue 43 46 -6.5
EBITDA 503 412 +22.1
Underlying operating profit 312 226 +38.1
Corrugated 158 120 +31.7
Bags 127 97 +30.9
Flexibles 27 9 +200.0
Capital expenditure 7 215 267 -19.5
Net segment assets 2,772 2,494 +11.1
Return on capital employed (%) 8 13.2% 10.2% +29.4
7 Capital expenditure is cash payments and excludes business combinations.
8 Extracted from management reports
Mondi Packaging had an excellent year, due to an improved trading environment
and the benefit of EUR81 million of cost-savings which helped offset increased
input cost pressures. Packaging paper volumes were up 3.4% and return on
capital employed rose by 3.0 percentage points to 13.2%. 10 out of 14 mills
achieved productivity records and the Swiecie mill successfully completed the
major rebuild of PM1, improving efficiencies and volumes. These improvements
were partly offset by increased external wood and recycled paper costs, which
were up on average 20% and 50% respectively on 2006, as well as the
restructuring costs of EUR17 million already referred to.
Within the corrugated business, the positive containerboard price trends and
demand growth seen in 2006 were maintained in 2007. On average kraftliner
prices were up around 10% year on year, with white top kraftliner marginally
up, although, some levelling off in prices is now being seen. Corrugated box
prices increased by around 10% on average, reflecting the passing-on of
containerboard price increases; However, corrugated box profit margins remain
at an unsatisfactory level, particularly in western Europe, and further box
price increases are required. The increase in profits was supported by the
restructuring of the downstream corrugated packaging operations.
The bags business recorded improved average kraft paper prices, up by around
12%, and paper volumes up 5%, benefiting from the acquisition of Stambolijski
in Bulgaria in the second half of 2006. The downstream converting operations
also saw an improvement in demand in the first half, mainly from the
construction industry. We continued to drive productivity through the
rationalisation of our plant network with two plan t closures towards the end
of the year.
Improvement in the flexibles businesses was mainly driven by efficiency
enhancements and also includes the benefit from acquisitions made in the second
half of 2006. Selling prices trended upwards, but lagged input cost increases
which adversely impacted margins. We further rationalised our plant network
with the closure of a coating plant in Norway towards the end of the year.
During the year, the 40% associate equity stake in Bischof + Klein GmbH was
disposed of for EUR54 million, resulting in a profit on sale of EUR19 million.
In addition, to avoid a mandatory offer for the minority interests in Mondi
Packaging Paper Swiecie S.A. following Mondi`s demerger from Anglo American
plc, a 5.3% stake in Swiecie was disposed of for EUR66 million, resulting in a
profit on sale of EUR57 million. Mondi`s ownership following the disposal is
66%.
The Group completed the acquisition of a 53.6% stake in Tire Kutsan, the
Turkish corrugated packaging company, on 3 September 20 07. The debt-free
enterprise value of Tire Kutsan is EUR190 million. This business has been
consolidated at 63.4% given the Group`s commitment to acquire a further 9.8%
within one month of the third anniversary of the completion of the transaction.
The Group completed the acquisition of 100% of the Austrian-based Unterland
flexible packaging business on 31 August 2007, which provides access to
substrate technology which complements our flexibles offering.
The debt-free enterprise value of Unterland was EUR70 million. Both are
exciting additions to Mondi and strengthen our packaging operations in two of
its key segments, with the acquisition of Tire Kutsan representing our first
major step into the high-growth Turkish market.
As reported previously, Mondi is investing EUR350 million in a 470,000 tonne
lightweight recycled containerboard machine and new 250 million m2 per annum
corrugated box plant at the Swiecie mill in Poland, to exploit the growing
shortage of containerboard in the region and leverage off Swiecie`s low - cost
position. The level of available fiscal support (mainly in the form of a
favourable tax regime) from the Polish authorities has now been agreed.
Commissioning is expected in mid to late 2009 and EUR19 million of capital
expenditure was incurred during 2007.
Mondi Business Paper
EUR million 2007 2006 Change %
Segment revenue 1,898 1,889 +0.5
- of which inter-segment revenue 185 163 +13.5
EBITDA 289 237 +21.9
Underlying operating profit 152 104 +46.2
Capital expenditure 119 156 -23.7
Net segment assets 2,098 2,212 -5.2
Return on capital employed (%) 8.0% 5.3% +50.9
The increase in underlying operating profit was largely driven by a significant
improvement in the South African operations, coupled with an improved
performance in Russia and modest improvement in pricing. Cost savings of EUR82
million helped to partly offset input cost pressures. The operational
difficulties experienced in the first half of 2006, following the 2005 rebuild
of PM31 in Merebank, have been addressed with the alteration to the headbox
completed in October 2007. The restructuring of the South African operations
has also been completed to further improve efficiencies.
UFP production (from continuing operations) was 2.1% higher than 2006, with
good performances at our South African, Slovakian and Russian mills partially
offset by production downtime taken in the second half which reduced output by
circa 75,000 tonnes. Total pulp production was up 4%, with the Richards Bay
pulp mill operating at improved rates following the major upgrade in 2005,
including record production in the fourth quarter.
UFP prices improved by around 7% on average year on year but are still well
below mid -cycle levels. Whilst margins have grown, they are not at acceptable
levels, particularly given higher pulp input costs at the non-integrated mills
and higher purchased wood costs. The overall fibre cost increase was, however,
largely mitigated by our own low -cost wood resources in South Africa and
Russia.
Fire damage in South Africa affected 10,789 hectares of forested areas (circa
5% of forested area under management), with a net impact of around EUR5 million
on the Group`s results. Furthermore, EUR10 million was incurred in
restructuring costs at the divisional level in order to simplify the operation
and ensure that we are the lowest-cost producer in this sector. These effects,
coupled with fibre input cost pressures, were partly offset by cost-savings
which contributed EUR82 million during the year.
As commented on earlier, the Group has decided to decrease its European
operating capacity and further reduce costs by simplifying its European UFP
operations. As a result, Mondi is planning to close its non -integrated
Hungarian mill at Szolnok in the second quarter of 2008, removing 140,000
tonnes of UFP from the market. This, coupled with European industry closures
totalling 410,000 tonnes announced and implemented in 2007, should lead to a
further improvement in operating rates.
In order to benefit from strong growth in Russian demand, in both
containerboard and UFP, and to improve operating efficiencies, Mondi is now
committed to the EUR525 million modernisation and expansion of the Syktyvkar
mill. The necessary operating permits have been obtained with completion
expected by mid to end 2010. EUR21 million of capital expenditure was incurred
on this project in 2007.
Mondi Packaging South Africa
EUR million 2007 2006 Change %
Segment revenue 419 360 +16.4
- of which inter-segment revenue 28 25 +12.0
EBITDA 53 46 +15.2
Underlying operating profit 35 35 -
Capital expenditure 47 27 +74.1
Net segment assets 335 187 +79.1
Return on capital employed (%) 13.8% 17.4% -20.7%
Demand was good across all business segments, largely due to an increase in
local consumption and a good agricultural season. The reported underlying
operating profit masks the improvement in local currency terms which was up 8%
and is impacted by translation at a weaker rand rate. The acquisition of Lenco,
a mainly rigid plastics business in South Africa, was completed on 4 July 2007
and included in the results is a EUR1.5 million charge for the amortisation of
intangibles as a result of the acquisition.
The EUR12 million Springs mill optimisation project was commissioned in August
2007 and the EUR25 million Felixton optimisation project, due for commissioning
in March 2008, is progressing well. When complete, this will enable Felixton to
produce lighter-weight paper and increase fluting production by 50,000 tonnes.
Merchant and Newsprint businesses
EUR million 2007 2006 Change %
Segment revenue 591 539 +9.6
- of which inter-segment revenue 1 1 -
EBITDA 60 48 +25.0
Underlying operating profit 40 29 +37.9
Capital expenditure 18 9 +100.0
Net segment assets 248 251 -1.2
Return on capital employed (%) 17.3% 12.5% +38.4
Europapier, the Group`s merchanting business, saw improved pricing and volumes,
due to strong demand in its key eastern European markets.
Aylesford Newsprint in the UK benefited from marginally improved prices and
lower energy input costs as well as a one -off benefit (of which Mondi`s share
was EUR4 million) from a change in the pension plan arrangements to an average
salary scheme.
Mondi Shanduka Newsprint`s underlying profit was higher in local currency and
benefited from continued strong local demand. However, the result was
marginally lower in euros on translation as a result of the weaker rand.
Corporate and other businesses
Net corporate costs of EUR37 million were EUR19 million higher than 2006 due to
Mondi establishing itself as an independent listed group, with certain
functions previously performed by Anglo American plc now provided within the
Mondi Group. Operating profits from other non-core businesses, mostly in South
Africa, were EUR1 million lower than 2006 following the disposal of certain of
these businesses during 2006.
FINANCIAL REVIEW
Special items (see note 5)
In aggregate, pre-tax special items amounted to a loss of EUR23 million (EUR8
million after tax), made up of the following items:
- An operating special item charge of EUR77 million before tax, principally
comprising: impairments associated with the closure of the Szolnok mill in
Hungary and related actions in the European UFP operations (EUR57 million);
accelerated share scheme charges relating to the demerger from Anglo American
plc (EUR8 million); and charges relating to retention arrangements put in place
for senior executives following the demerger (EUR9 million).
- Net profit on disposals of EUR 83 million before tax, including: the sale
of
Bischof + Klein GmbH (EUR19 million profit); the sale of a 5.3% stake in Mondi
Packaging Paper Swiecie S.A. (EUR57 million profit); the sale of various
corrugated converting operations (EUR8 million profit) held for sale at the end
of 2006, which were divested as part of a restructuring programme to improve
the corrugated results; and the disposal of certain non-core businesses in
South Africa (loss EUR1 million). These have been separately identified given
their materiality.
- Financing special item of EUR29 million before tax: as part of the demerger
from Anglo American plc, certain long-term loans in South Africa were closed
out at a cost of EUR29 million, representing largely the interest foregone on
the settlement of the loans. Given the materiality of this amount, the boards
believe that it is more appropriate to disclose this separately on the income
statement.
Finance costs
Net finance costs of EUR99 million, before special financing items, were EUR22
million higher than 2006 (EUR77 million), due to higher average net debt
coupled with higher interest rates, particularly in South Africa and a movement
in foreign exchange from a gain of EUR13 million in 2006 to a charge of EUR2
million in 2007. EUR4 million of net debt finance charges were capitalised
during the period on key capital projects (2006: EUR2 million).
Taxation
The effective tax rate of 29.0% (before special items) was 8.3 percentage
points lower than in 2006 due to a lower level of adjustments. The reported tax
rate after special items of 26.7% is 15.4 percentage points lower than 2006 due
to the tax effects of the special items.
Minority interests
Minority interests in the income statement were EUR4 million lower than the
prior year, mainly because the 2006 results for Swiecie and Ruzomberok included
a very high level of income from sales of green energy and CO2 emission
credits.
Cash Flow
EBITDA of EUR870 million in the year was 20%, or EUR 144 million, higher than
2006, reflecting the improved trading environment. Cash inflows from operations
of EUR957 million were EUR300 million up on the comparable period, benefiting
from improved trading and tighter control of working capital. Cash inflow from
working capital of EUR97 million was achieved despite a 9% increase in sales.
Capital expenditure in the year of EUR406 million was broadly in line with
depreciation of EUR363 million (excluding spend in the year on the two key
capital projects of EUR40 million). Capital expenditure is expected to increase
significantly in 2008 and 2009 due to the EUR350 million investment in the
lightweight recycled containerboard and box plant at the Swiecie plant in
Poland and the EUR525 million modernisation and expansion of the Syktyvkar mill
in Russia.
Spending on acquisitions completed during the year totalled EUR193 million,
mainly relating to the purchase of a majority stake in Tire Kutsan (EUR78
million), 100% of Unterland (EUR34 million) and 100% of Lenco (EUR71 million).
The proceeds from disposals completed during the year of EUR166 million mainly
relate to: the sale of 5.3% of Mondi Packaging Paper Swiecie SA (EUR66
million), the sale of our 40% associate interest in Bischof + Klein GmbH (EUR54
mill ion); disposal of the Mondi Packaging converting assets held for sale at
the end of 2006; and the sale of certain non-core assets in South Africa.
Balance sheet and returns on invested capital
Trading capital employed for the period was EUR4,818 million, EUR81 million
higher than 2006 mainly due to acquisitions. 65% of the Group`s trading capital
is employed in emerging markets, positioning the Group well in terms of growth
and operating cost.
Return on capital employed improved from 8.1% to 10.6% as a result of improved
profitability and tightened control of capital employed, particularly working
capital. This improved return, whilst just above our weighted average cost of
capital, is still below our target across the cycle of 13%.
Net debt of EUR1,507 million was EUR28 million higher than 2006, with the
positive net cash inflow from operations offset by outflows from acquisitions
and payments to Anglo American plc upon finalisation of the demerger. Gearing
as at 31 December 2007 was 45.2%, with an EBIT DA interest cover of 9.6 times.
Treasury and borrowings
The Group`s treasury function operates within clearly-defined board-approved
policies and limits. The treasury function follows controlled reporting
procedures and is subject to regular internal and external reviews.
The Group`s policy with regard to reducing interest rate risk is to keep
between 60% and 100% of net debt at fixed rates of interest on a rolling basis.
At year end, 63% of the Group`s net debt was at fixed rates of interest.
Group liquidity is provided through a range of committed debt facilities in
excess of the Group`s short- term needs. The principal debt facilities are: a
EUR1.55 billion syndicated revolving credit facility, which is a five-year
multi-currency revolving credit facility with interest charged at a market
related rate linked to LIBOR; and a R2.0 billion three-year amortising term
loan with interest charged at a market related rate linked to JIBAR. In total
at 31 December 2007 the Group had EUR2.7 billion of committed facilities of
which EUR1.2 billion was undrawn at the balance sheet date. The average
maturity of the committed debt facilities is 3.5 years.
DIVIDEND
Mondi is well financed with healthy operating cash flows and a strong balance
sheet. Against this background our dividend policy reflects our strategy of
disciplined and value-creating investment for growth, which will in turn offer
shareholders long-term dividend growth.
Accordingly, the boards of Mondi Limited and Mondi plc have recommended a final
dividend of 15.7 euro cents per share, payable on 21 May 2008 to shareholders
on the register at 25 April 2008. An equivalent final dividend will be paid in
South African rand on the same terms.
Taken together with the interim dividend of 7.3 euro cents paid on 17 September
2007, this represents a total dividend of 23.0 euro cents, paid in the
approximate proportions two-thirds (final) and one-third (interim), consistent
with the policy we indicated at the time of the demerger.
OUTLOOK
We believe that Mondi`s leading positions in the emerging markets provide both
cost and growth advantages. Furthermore our focused strategy, obsession with
driving down costs and willingness to react quickly to market conditions leaves
us very well placed to respond to changing economic circumstances. Therefore,
despite the uncertainty surrounding the prospects for the global economy, we
are confident of making further progress in 2008.
Combined and consolidated income statement
For the year ended 31 December 2007
2007
Before Special After
special items special
items (note 5) items
EUR million Note
Group revenue 3 6,269 - 6,269
Materials, energy and consumables
used (3,265) - (3,265)
Variable selling expenses (558) - (558)
Gross margin 2,446 - 2,446
Maintenance and other indirect
expenses (289) - (289)
Personnel costs (906) (17) (923)
Other net operating expenses (381) - (381)
Depreciation and amortisation (368) (60) (428)
Operating profit/(loss) from
subsidiaries
and joint ventures 3 502 (77) 425
Net profit/(loss) on disposals 5 - 83 83
Net income from associates 2 - 2
Total profit/(loss) from
operations and
associates 504 6 510
Investment income 44 - 44
Interest expense (143) (29) (172)
Net finance costs 6 (99) (29) (128)
Profit/(loss) before tax 405 (23) 382
Taxation charge 7 (117) 15 (102)
Profit/(loss) from continuing
operations 4 288 (8) 280
Attributable to:
Minority interests 47 - 47
Equity holders 241 (8) 233
Pro forma earnings per share
("EPS") for
profit attributable to equity
holders
Basic EPS (EUR cents) 9 45.4
Diluted EPS (EUR cents) 9 45.1
Basic underlying EPS (EUR cents) 9 46.9
Diluted underlying EPS (EUR cents) 9 46.7
Basic headline EPS (EUR cents) 9 39.5
Diluted headline EPS (EUR cents) 9 39.3
2006
Before Special After
special items special
items (note 5) items
EUR million
Group revenue 5,751 - 5,751
Materials, energy and consumables used (2,960) - (2,960)
Variable selling expenses (558) - (558)
Gross margin 2,233 - 2,233
Maintenance and other indirect expenses (287) - (287)
Personnel costs (874) - (874)
Other net operating expenses (346) - (346)
Depreciation and amortisation (349) (78) (427)
Operating profit/(loss) from subsidiaries
and joint ventures 377 (78) 299
Net profit/(loss) on disposals - (4) (4)
Net income from associates 5 - 5
Total profit/(loss) from operations and
associates 382 (82) 300
Investment income 70 - 70
Interest expense (147) - (147)
Net finance costs (77) - (77)
Profit/(loss) before tax 305 (82) 223
Taxation charge (115) 21 (94)
Profit/(loss) from continuing operations 190 (61) 129
Attributable to:
Minority interests 51 - 51
Equity holders 139 (61) 78
Pro forma earnings per share ("EPS") for
profit attributable to equity holders
Basic EPS (EUR cents) 15.2
Diluted EPS (EUR cents) 15.2
Basic underlying EPS (EUR cents) 27.0
Diluted underlying EPS (EUR cents) 27.0
Basic headline EPS (EUR cents) 28.2
Diluted headline EPS (EUR cents) 28.2
There were no discontinued operations in either of the years presented.
Combined and consolidated balance sheet
As at 31 December 2007
EUR million Note 2007 2006
Intangible assets 520 381
Property, plant and equipment 3,731 3,659
Forestry assets 224 221
Investments in associates 6 7
Financial asset investments 25 39
Deferred tax assets 32 35
Retirement benefits surplus 11 7
Total non-current assets 4,549 4,349
Inventories 7 60 656
Trade and other receivables 1,304 1,268
Current tax assets 52 34
Cash and cash equivalents 180 415
Derivative financial instruments 17 11
Total current assets 2,313 2,384
Assets held for sale - 106
Total assets 6,862 6,839
Short-term borrowings (453) (1,238)
Trade and other payables (1,150) (935)
Current tax liabilities (81) (71)
Provisions (14) (8)
Derivative financial instruments (3) (2)
Total current liabilities (1,701) (2,254)
Medium and long-term borrowings (1,234) (656)
Retirement benefits obligation (200) (220)
Deferred tax liabilities (322) (317)
Provisions (50) (40)
Other non-current liabilities (17) (16)
Derivative financial instruments (2) -
Total non-current liabilities (1,825) (1,249)
Liabilities directly associated with assets
classified as held for sale - (39)
Total liabilities (3,526) (3,542)
Net assets 3 3,336 3,297
Equity
Anglo American plc investment in the Group 10 - 1,899
Ordinary share capital 10/12 114 -
Share premium 10/12 532 -
Retained earnings and other reserves 10 2,317 1,067
Total attributable to equity holders 2,963 2,966
Minority interest in equity 373 331
3,336 3,297
Combined and consolidated cash flow statement
For the year ended 31 December 2007
EUR million Note 2007 2006
Cash inflows from operations 15a 957 657
Dividends from associates 1 1
Dividends from available for sale investments - 1
Income tax paid (93) (71)
Net cash inflows generated from operating
activities 865 588
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and cash
equivalents 13 (193) (113)
Investment in associates - (2)
Proceeds from disposal of subsidiaries, net of
cash and cash equivalents 14 112 34
Proceeds from disposal of associates 14 54 -
Purchases of property, plant and equipment 15f (406) (460)
Proceeds from the disposal of property, plant and
equipment 17 16
Investment in forestry assets (41) (50)
Purchases of financial asset investments (2) (1)
Purchase of intangible assets (4) (6)
Proceeds from the sale of financial asset
investments 2 3
Loan repayments from related parties 15 9
Interest received 18 51
Other investing activities (6) (5)
Net cash used in investing activities (434) (524)
Cash flows from financing activities
Repayment of short-term borrowings 15c (945) (355)
Proceeds from medium and long -term borrowings 15c 564 70
Interest paid (139) (130)
Dividends paid to minority interests (47) (38)
Dividends paid to equity holders 8 (38) -
Dividends paid to Anglo American plc group
companies (202) (75)
Increase in Anglo American plc invested capital 120 289
Purchases of treasury shares (33) -
Other financing activities 3 5
Net cash used in financing activities (717) (234)
Net decrease in cash and cash equivalents (286) (170)
Cash and cash equivalents at start of year(1) 358 574
Cash movements in the year 15c (286) (170)
Reclassifications 15c (3) (3)
Effects of changes in foreign exchange rates 15c (10) (43)
Cash and cash equivalents at end of year (1) 15b 59 358
Note:
(1) `Cash and cash equivalents` includes overdrafts and cash flows from
disposal groups and is reconciled to the balance sheet in note 15b.
Combined and consolidated statement of recognised income
and expense
For the year ended 31 December 2007
EUR million 2007 2006
Fair value (losses)/gains accreted on cash flow hedges, net
of amounts recycled to the combined
and consolidated income statement (3) 5
Actuarial gains on post-retirement benefit schemes 12 24
Fair value losses on available for sale investments (1) -
Exchange gains on demerger 9 -
Exchange losses on translation of foreign operations (71) (137)
Other movements (1) 1
Total expense recognised directly in equity(1) (55) (107)
Profit for the year 280 129
Total recognised income and expense for the year 225 22
Attributable to:
Minority interests 56 65
Equity holders of the parent companies 169 (43)
Note:
(1) Net of related tax.
Notes to the combined and consolidated financial statements
1 Basis of preparation
The financial information included in this preliminary announcement has been
prepared in accordance with the measurement and recognition criteria of
International Financial Reporting Standards ("IFRSs") issued by the
International Accounting Standards Board ("IASB") and has been prepared in
accordance with IAS34, `Interim Financial Reporting`. There are no differences
for the Group in applying IFRS as issued by the IASB and the European Union
("EU") and therefore the Group also complies with IFRSs as endorsed by the EU.
Dual listed structure
The Group has two separate legal parent entities, Mondi Limited and Mondi plc,
which operate under a dual listed company ("DLC") structure. The substance of
the DLC structure is such that Mondi Limited, and its subsidiaries, and Mondi
plc, and its subsidiaries, operate together as a single economic entity
through a sharing agreement, with neither parent entity assuming a dominant
role. Accordingly, Mondi Limited and Mondi plc are reported on a combined
and consolidated basis as a single reporting entity under IFRSs.
Pre-demerger
During the period up to 2 July 2007 and the prior year presented (together, the
"pre- demerger period"), the Group did not form a separate legal group. "The
Anglo American plc investment in the Group" is therefore presented for the pre
-demerger period, representing the aggregated share capital, share premium and
reserve balances of the Group`s constituent entities, together with debtor and
creditor balances held in respect of the Anglo American plc group and deemed to
be equity funding in nature. Any interest accruing on such balances is
classified as a dividend in specie and recorded separately through reserves,
not through the combined and consolidated income statement.
The financial information set out does not constitute the Group`s statutory
accounts for the year ended 31 December 2007 but is derived from those
accounts. Statutory accounts for 2007 will be delivered to the Registrar of
Companies following the Group`s annual general meeting on 7 May 2008. The
auditors have reported on those accounts; their reports were unqualified and
did not contain statements under s237 (2) or (3) of the UK Companies Act 1985.
Copies of the unqualified auditors` reports are available for inspection at the
Mondi Limited and Mondi plc registered offices.
2 Accounting policies
The same accounting policies, presentation and measurement principles have been
followed in the combined and consolidated financial statements as applied in
the Group`s audited financial information for the year ended 31 December 2006,
included within Part VIII: "Financial information", of the Prospectus dated 1
June 2007 applied in the demerger from Anglo American plc, with the exception
of the early adoption of IFRIC14, `IAS19 - The Limit on a Defined Benefit
asset, Minimum funding Requirements and their Interaction`.
3 Segmental information
Based on the risks and returns of the Mondi Group, the Board considers the
primary reporting format is by business segment and the secondary reporting
format is by geographical segment.
Primary reporting format - by business segment
2007
Inter-
segment
Segment Group
EUR million revenue revenue (1) revenue
Subsidiaries and joint ventures
Mondi Packaging
Corrugated Business 1,644 (83) 1,56 1
Bag Business 1,265 (36) 1,229
Flexibles Business 786 (29) 757
Mondi Packaging inter-group sales (105) 105 -
Total Mondi Packaging 3,590 (43) 3,547
Mondi Business Paper 1,898 (185) 1,713
Mondi Packaging South Africa 419 (28) 391
Merchant and Newsprint businesses 591 (1) 590
Corporate and other businesses 28 - 28
Elimination of inter-segment revenue (257) 257 -
Total 6,269 - 6,269
2006
Inter-
segment
Segment Group
EUR million revenue revenue (1) revenue
Subsidiaries and joint ventures
Mondi Packaging
Corrugated Business 1,497 (86) 1,411
Bag Business 1,162 (31) 1,131
Flexibles Business 607 (28) 579
Mondi Packaging inter-group sales (99) 99 -
Total Mondi Packaging 3,167 (46) 3,121
Mondi Business Paper 1,889 (163) 1,726
Mondi Packaging South Africa 360 (25) 335
Merchant and Newsprint businesses 539 (1) 538
Corporate and other businesses 31 - 31
Elimination of inter-segment revenue (235) 235 -
Total 5,751 - 5,751
Segment operating profit
before special items (2)
2007 2006
EUR million
Subsidiaries and joint ventures
Mondi Packaging
Corrugated Business 158 120
Bag Business 127 97
Flexibles Business 27 9
Total Mondi Packaging 312 226
Mondi Business Paper 152 104
Mondi Packaging South Africa 35 35
Merchant and Newsprint businesses 40 29
Corporate and other businesses (37) (17)
Total 502 377
Segment operating profit
after special items
2007 2006
EUR million
Subsidiaries and joint ventures
Mondi Packaging
Corrugated Business 153 71
Bag Business 126 89
Flexibles Business 27 4
Total Mondi Packaging 306 164
Mondi Business Paper 84 88
Mondi Packaging South Africa 35 35
Merchant and Newsprint businesses 40 29
Corporate and other businesses (40) (17)
Total 425 299
Note:
(1) Inter-segment transactions are conducted on an arm`s length basis.
(2) Segment result is defined as being segment revenue less segment expense;
that is operating profit and fair value gains/(losses) that have been recycled
to the combined and consolidated income statement on cash flow hedges of
operating transactions. There are no material inter-segment transfers or
transactions that would affect the segment result.
The segment result before special items, as shown above, is reconciled to
"Profit from continuing operations" in the Group`s combined and consolidated
income statement as follows:
EUR million 2007 2006
Operating profit before special items and associates` net
income 502 377
Operating special items (see note 5)
Subsidiaries and joint ventures: (77) (78)
Mondi Packaging (6) (62)
Mondi Business Paper (68) (16)
Corporate and other businesses (3) -
Operating profit after special items and before associates`
net income 425 299
Net profit/(loss) on disposal of subsidiaries and associates 83 (4)
Net income from associates 2 5
Total profit from operations and associates 510 300
Net finance costs (128) (77)
Profit before tax 382 223
Taxation charge (102) (94)
Group profit from continuing operations 280 129
Primary segment disclosures for segment assets, liabilities and capital
expenditure are as follows:
Segment assets (1) Segment liabilities (2)
EUR million 2007 2006 2007 2006
Mondi Packaging
Corrugated Business 1,485 1,263 (259) (233)
Bag Business 1,304 1,265 (200) (175)
Flexibles Business 539 432 (97) (58)
Total Mondi Packaging 3,328 2,960 (556) (466)
Mondi Business Paper 2,293 2,465 (195) (253)
Mondi Packaging South
Africa 420 239 (85) (52)
Merchant and Newsprint
businesses 336 316 (88) (65)
Corporate and other
businesses 1 34 (2) (7)
Total 6,378 6,014 (926) (843)
Unallocated:
Investment in associates 6 7 - -
Deferred tax
assets/(liabilities) 32 35 (322) (317)
Other non-operating
assets/(liabilities) (4) 241 329 (591) (488)
Trading capital employed 6,657 6,385 (1,839) (1,6 48)
Financial asset
investments 25 39 - -
Net debt(5) 180 415 (1,687) (1,894)
Net assets 6,862 6,839 (3,526) (3,542)
Net segment assets Capital expenditure (3)
EUR million 2007 2006 2007 2006
Mondi Packaging
Corrugated Business 1,226 1,030 264 125
Bag Business 1,104 1,090 83 157
Flexibles Business 442 374 86 86
Total Mondi Packaging 2,772 2,494 433 368
Mondi Business Paper 2,098 2,212 124 154
Mondi Packaging South
Africa 335 187 156 27
Merchant and Newsprint
businesses 248 251 18 8
Corporate and other
businesses (1) 27 5 1
Total 5,452 5,171 736 558
Unallocated:
Investment in associates 6 7
Deferred tax
assets/(liabilities) (290) (282)
Other non-operating
assets/(liabilities) (4) (350) (159)
Trading capital employed 4,818 4,737
Financial asset
investments 25 39
Net debt(5) (1,507) (1,479)
Net assets 3,336 3,297
Notes:
(1) Segment assets are operating assets and at 31 December 2007 consist of
property, plant and equipment of EUR3,731 million (2006: EUR3,659 million),
intangible assets of EUR520 million (2006: EUR381 million), forestry assets of
EUR224 million (2006: EUR221 million), retirement benefits surplus of
EUR11 million (2006: EUR7 million), inventories of EUR760 million (2006:
EUR656 million) and operating receivables of EUR1,132 million (2006:
EUR1,090 million).
(2) Segment liabilities are operating liabilities and at 31 December 2007
consist of non-interest bearing current liabilities of EUR711 million (2006:
EUR607 million), restoration and decommissioning provisions of EUR15 million
(2006: EUR16 million) and provisions for post-retirement benefits of
EUR200 million (2006: EUR220 million).
(3) Capital expenditure reflects cash payments and accruals in respect of
additions to property, plant and equipment and intangible assets of
EUR429 million (2006: EUR462 million) and includes additions resulting from
acquisitions through business combinations of EUR3 07 million (2006:
EUR96 million).
(4) Other non -operating assets consist of derivative assets of EUR17 million
(2006: EUR11 million), current income tax receivables of EUR52 million (2006:
EUR34 million), other non -operating receivables of EUR173 million (2006:
EUR178 million) and assets held for sale of EURnil (2006: EUR106 million).
Other non-operating liabilities consist of derivative liabilities of
EUR5 million (2006: EUR2 million), non-operating provisions of
EUR49 million (2006: EUR32 million), current income tax liabilities of
EUR81 million (2006: EUR71 million), other non -operating liabilities of
EUR456 million (2006: EUR344 million) and liabilities directly associated
with assets held for sale of EURnil (2006: EUR39 million).
(5) Overdrafts of EUR121 million (2006: EUR57 million) are included in
borrowings.
Primary segment disclosures for depreciation, amortisation and impairments are
as follows:
Depreciation and amortisation Impairments (1)
EUR million 2007 2006 2007 2006
Mondi Packaging
Corrugated Business 84 86 - 49
Bag Business 80 77 - 8
Flexibles Business 27 23 - 5
Total Mondi Packaging 191 186 - 62
Mondi Business Paper 137 133 61 19
Mondi Packaging South Africa 18 11 - -
Merchant and Newsprint businesses 20 19 - -
Corporate and other businesses 2 - - -
368 349 61 81
There are no significant non-cash operating expenses, other than depreciation
and amortisation and impairments, as shown above, and share based payments.
Secondary reporting format - by geographical segment
The Group`s geographical analysis of revenue, allocated based on the country in
which the customer is located, is presented as follows.
Revenue
EUR million 2007 2006
Subsidiaries and joint ventures
South Africa 618 592
Rest of Africa 213 186
Western Europe 3,162 2,932
Eastern Europe 1,148 902
Russia 421 407
North America 194 215
South America 29 26
Asia and Australia 484 491
Total 6,269 5,751
Additional disclosure of secondary segmental information of revenue by origin
is presented as follows:
Revenue
EUR million 2007 2006
Subsidiaries and joint ventures
South Africa 995 982
Rest of Africa 12 14
Western Europe 2,840 2,582
Eastern Europe 1,615 1,417
Russia 546 482
North America 121 121
Asia and Australia 140 153
Total 6,269 5,751
The Group`s geographical analysis of segment assets, liabilities and capital
expenditure, allocated based on where assets and liabilities are located, is
presented as follows:
Segment assets Segment liabilities
EUR million 2007 2006 2007 2006
Subsidiaries and joint
ventures
South Africa 1,444 1,472 (139) (203)
Rest of Africa 19 15 (5) (7)
Western Europe 2,376 2,231 (546) (357)
Eastern Europe 1,855 1,633 (144) (181)
Russia 446 436 (27) (34)
North America 112 121 (20) (23)
Asia and Australia 126 106 (45) (38)
Total 6,378 6,014 (926) (843)
Net segment assets Capital expenditure
EUR million 2007 2006 2007 2006
Subsidiaries and joint
ventures
South Africa 1,305 1,269 186 106
Rest of Africa 14 8 1 3
Western Europe 1,830 1,874 208 226
Eastern Europe 1,711 1,452 263 154
Russia 419 402 65 42
North America 92 98 3 24
Asia and Australia 81 68 10 3
Total 5,452 5,171 736 558
4 Profit from continuing operations
EUR million 2007 2006
Profit for the year has been arrived at after
charging/(crediting):
Depreciation of property, plant and equipment 363 345
Amortisation of intangible assets 5 4
Rentals under operating leases 31 25
Research and development expenditure 9 7
Restructuring/closure costs (excluding special items) 28 18
Operating special items (see note 5) 77 78
Net foreign currency losses/(gains) 4 (1)
Green energy sales and disposal of emissions credits (42) (50)
Fair value gains on forestry assets (32) (37)
Felling costs 51 58
5 Special items
EUR million 2007 2006
Subsidiaries and joint ventures
Operating special items
Mondi Packaging asset impairments - (62)
Mondi Business Paper asset impairments (61) (19)
Mondi Business Paper negative goodwill - 3
Mondi Packaging South Africa negative goodwill 1 -
Retention arrangements (9) -
Accelerated charge on Anglo American plc share-based award
schemes (8) -
Total operating special items (77) (78)
Profi/(loss) on disposal
Disposal of partial interest in Mondi Packaging Paper Swiecie
S.A. 57 -
Disposal of Bischof + Klein GmbH 19 -
Sale of other businesses 7 (4)
Net profit/(loss) on disposal 83 (4)
Financing cost (29) -
Total non-operating special items 54 (4)
Total special items before tax and minority interests (23) (82)
Taxation 15 21
Total special items attributable to equity holders (8) (61)
Year ended 31 December 2007
Operating special items
In view of the current Uncoated Fine Paper ("UFP") market dynamics, which have
seen sustained high pulp prices and a weak US dollar, with resultant trade
flows impacting European operating rates, management has decided to decrease
the Group`s European UFP operating capacity and to further reduce costs by
simplifying the Group`s European UFP operations. The resultant impairments
total EUR57 million. An impairment of the carbonless plant in South Africa of
EUR4 million, resulting from a decline in the market for carbonless paper, has
also been recognised. The fair value exit charge on Anglo American plc share
award and share option schemes, resulting from the demerger with Anglo American
plc, total EUR8 million. Equity-settled retention arrangements for senior
management have also resulted in an additional share-based payments charge of
EUR9 million. It is expected that a further EUR15 million will be incurred by
the Group in respect of senior management retention arrangements over the period
ending 3 July 2009.
Non-operating special items
The Group disposed of 5.3% of its interest in Mondi Packaging Paper Swiecie
S.A., a subsidiary in which the Group retains control, on 15 May 2007 for
consideration of EUR66 million and a profit of EUR57 million. The Group also
sold its entire interest in Bischof + Klein GmbH, formerly an associate entity
of the Group, on 22 February 2007 for consideration of EUR54 million and a
profit of EUR19 million. Corrugated converting operational assets held for sale
as at 31 December 2006 were disposed of in January 2007. The profit on disposal
of these operations was EUR7 million. A one-off finance cost of EUR29 million
resulted from a financing arrangement closed out in South Africa as part of the
demerger from Anglo American plc.
6 Net finance costs
Finance costs and foreign exchange gains/(losses) are presented net of
effective cash flow hedges for respective interest bearing and foreign currency
borrowings.
EUR million 2007 2006
Investment income
Interest income
Bank deposits, loan receivables and other 22 30
Available for sale investments 1 1
Past due receivables 1 1
Total interest income 24 32
Expected return on defined benefit arrangements 22 18
Foreign currency (losses)/gains (2) 13
Dividend income on available for sale investments - 1
Impairment of financial assets (excluding trade receivables) - (2)
Gains recycled from equity on disposal of available for
sale investments - 2
Other financial income - 6
Total investment income 44 70
Financing costs
Interest expense
Interest on bank overdrafts and loans (119) (119)
Interest on obligations under finance leases (1) (2)
Interest on defined benefit arrangements (28) (30)
Total interest expense (148) (151)
Other
Net gains on held for trading interest rate swaps 2 2
Net (losses)/gains arising on derivatives in a designated
fair value hedge accounting
relationship (1) 2
Net losses arising on adjustments to hedged items
designated in a fair value hedge accounting
relationship - (2)
Total other 1 2
Less: interest capitalised 4 2
Total financing costs prior to special items (143) (147)
Special items financing cost (see note 5) (29) -
Total financing costs after special items (172) (147)
Net finance costs (128) (77)
The weighted average interest rate applicable to interest on general borrowings
capitalised for the year ended 31 December 2007 is 8.41% (2006: 8.24%).
7 Tax on profit on ordinary activities
Analysis of charge for the year from continuing operations
EUR million 2007 2006
UK corporation tax at 30% (1) (7)
Overseas taxation 89 119
Current tax (excluding tax on special items) 88 112
Deferred taxation (excluding tax on special items) 29 3
Total tax charge before special items 117 115
Current tax on special items (1) -
Deferred tax on special items (14) (21)
Total tax credit on special items (15) (21)
Total tax charge 102 94
The Group`s effective tax rate for the year ended 31 December 2007, which
includes taxation on net income from associates, is 27% (2006: 42%). The
effective rate of taxation before special items for the year ended 31 December
2007, which includes taxation on net income from associates, is 29% (2006:
38%).
8 Dividends
Dividend payments
An interim dividend for the year ended 31 December 2007 of 71.73637 Rand cents
or 7.3 euro cents per share was paid on 17 September 2007 to all Mondi Limited
and Mondi plc ordinary shareholders on the relevant registers on 31 August
2007.
A proposed final dividend for the year ended 31 December 2007 of 15.7 euro
cents per share will be paid on 21 May 2008 to all Mondi Limited and Mondi plc
ordinary shareholders on the relevant registers on 25 April 2008.
The final dividend is subject to the approval of the members of Mondi Limited
and Mondi plc at the respective annual general meetings scheduled for 7 May
2008.
Dividend timetable
The proposed final dividend for the year ended 31 December 2007 will be paid in
accordance with the following timetable:
Mondi Limited Mondi plc
Currency conversion date
ZAR/euro 28 February 2008 28 February 2008
Last date to trade shares cum
-dividend
JSE Limited 18 April 2008 18 April 2008
LSE Not applicable 22 April 2008
Shares commence trading ex -dividend
JSE Limited 21 April 2008 21 April 2008
LSE Not applicable 23 April 2008
Record date
JSE Limited 25 April 2008 25 April 2008
LSE Not applicable 25 April 2008
Last date for Dividend Reinvestment
Plan (DRIP) elections by Central 6 May 2008 6 May 2008
Securities Depositary Participants
Last date for DRIP elections to UK
Registrar and South African 7 May 2008 7 May 2008
Transfer Secretaries by shareholders
of Mondi Limited and Mondi plc
Currency conversion date
Euro/sterling Not applicable 12 May 2008
Payment Date
South African Register 21 May 2008 21 May 2008
UK Register Not applicable 21 May 20 08
Depositary Interest Holders
(dematerialised DIs) 27 May 2008 Not applicable
Holders within the Lloyds TSB
Registrars Corporate Nominee* 29 May 2008 Not applicable
DRIP purchase settlement date 28 May 2008 27 May 2008**
* Will become Equiniti Corporate Nominee Limited on 3 March 2008
**28 May 2008 for Mondi plc South African branch register shareholders
Share certificates on the South African registers of Mondi Limited and Mondi
plc may not be dematerialised or rematerialised between 21 April 2008 and 28
April 2008, both dates inclusive, nor may transfers between the UK and South
African registers of Mondi plc take place between 16 April 2008 and 28 April
2008, both dates inclusive.
9 Pro forma earnings per share (EPS)
The Group was not a stand-alone entity prior to the demerger date. The number
of ordinary shares issued on Admission has therefore been retrospectively
applied to the comparative periods, so that a meaningful comparison can be
made.
EUR cents per share 2007 2006
Profit for the financial year attributable to equity holders
Basic EPS 45.4 15.2
Diluted EPS 45.1 15.2
Underlying earnings for the financial year (1)
Basic EPS 46.9 27.0
Diluted EPS 46.7 27.0
Headline earnings for the financial year (2)
Basic EPS 39.5 28.2
Diluted EPS 39.3 28.2
Note:
(1) The Board believes that underlying EPS provides a useful additional non
-GAAP measure of the Group`s underlying performance. Underlying EPS excludes
the impact of special items.
(2) The presentation of Headline EPS is mandated under the JSE Listing
Requirements. Headline earnings has been calculated in accordance with Circular
8/2007, `Headline Earnings`, as issued by the South African Institute of
Chartered Accountants. Please see the reconciliation presented below.
The calculation of basic and diluted EPS, basic and diluted underlying EPS, and
basic and diluted headline EPS is based on the following data.
Earnings
EUR million 2007 2006
Profit for the financial year attributable to equity holders 233 78
Special items: operating 77 78
Special items: financing costs 29 -
Net (profit)/loss on disposals (83) 4
Related tax (15) (21)
Underlying earnings 241 139
Special items: financing costs (29) -
Special items: retention arrangements (9) -
Special items: accelerated charges on exiting Anglo American
plc share option schemes (8)
Loss on disposal of tangible fixed assets 1 8
Related tax 7 (2)
Headline earnings 203 145
Number of shares
Million 2007 2006
Basic number of ordinary shares outstanding (1) 513 514
Effect of dilutive potential ordinary shares (2) 4 -
Diluted number of ordinary shares outstanding 517 514
Note:
(1) The basic number of ordinary shares outstanding represent the weighted
average number in issue for Mondi Limited and Mondi plc pro-rated for the year,
as adjusted for the weighted average number of treasury shares held during the
year.
(2) Diluted EPS is calculated by adjusting the weighted average number of
ordinary shares in issue on the assumption of conversion of all potentially
dilutive ordinary shares.
10 Reconciliation of movement in combined and consolidated equity
2007
Share capital
Anglo Mondi
investment Limited
in Mondi Mondi Limited share Mondi plc
EUR million Group share capital premium share capital
At 1 January - as restated (3) 1,899 - - -
Anglo American plc
contribution 120 - - -
Dividend in specie (2) 32 - - -
Dividends paid to Anglo
American plc - - - -
Retained profit pre-
demerger - - - -
Termination of Anglo
American plc equity interest (2,051) 3 540 -
Dividend in specie to Anglo
American plc shareholders - - - 2,938
Share issue expenses - - - -
Share capital reduction - - - (2,864)
Dividend in specie to Mondi
plc shareholders - - - -
Issue of special convertible
shares - 8 (8) 29
Interim dividend - - - -
Purchase of treasury shares - - - -
Post-demerger retained
profit - - - -
Share-based payments
transfer - - - -
Other - - - -
At 31 December - 11 532 103
Share capital
Combined Total
share capital equity
and share Retained Other attributable to
EUR million premium earnings reserves (1) equity holders
At 1 January - as restated (3) 1,899 1,100 (33) 2,966
Anglo American plc
contribution 120 - - 120
Dividend in specie (2) 32 (32) - -
Dividends paid to Anglo
American plc - (202) - (202)
Retained profit pre-
demerger - 164 - 164
Termination of Anglo
American plc equity interest (1,508) (832) 2,411 71
Dividend in specie to Anglo
American plc shareholders 2,938 - (2,938) -
Share issue expenses - (74) - (74)
Share capital reduction (2,864) 2,864 - -
Dividend in specie to Mondi
plc shareholders - (794) 794 -
Issue of special convertible
shares 29 (29) - -
Interim dividend - (38) - (38)
Purchase of treasury shares - (33) - (33)
Post-demerger retained
profit - 68 - 68
Share-based payments
transfer - (8) - (8)
Other - - (71) (71)
At 31 December 646 2,154 163 2,963
Note:
(1) Other reserves are further analysed below.
(2) The dividend in specie represents interest accrued to Anglo American plc
during the period ending 3 July 2007 on a loan instrument classified as equity
under IAS 32, `Financial Instruments: Presentation`. On demerger from Anglo
American plc, the Group`s obligation under this loan instrument ceased
(3) The Group`s adoption of IFRIC 14 has resulted in the retrospective
reduction of the surplus available from the Mondi Pension Fund in South Africa.
2006 Share capital
Mondi
Anglo Limited
investment in Mondi Limited share Mondi plc
EUR million Mondi Group share capital premium share capital
At 1 January 1,542 - - -
Anglo American plc
contribution 289 - - -
Dividend in specie (2) 68 - - -
Costs paid by Anglo
American plc - - - -
Dividends paid to Anglo
American plc group
companies - - - -
Profit for the year - - - -
Share based payments
transfer - - - -
Other - - - -
At 31 December 1,899 - - -
2006 Share capital
Combined Total
share capital equity
and share Retained Other attributable to
EUR million premium earnings reserves (1) equity holders
At 1 January - 1,143 96 2,781
Anglo American plc
contribution - - - 289
Dividend in specie (2) - (68) - -
Costs paid by Anglo
American plc - 12 - 12
Dividends paid to Anglo
American plc group
companies - (75) - (75)
Profit for the year - 78 - 78
Share based payments
transfer - 10 - 10
Other - - (129) (129)
At 31 December - 1,100 (33) 2,966
Note:
(1) Other reserves are further analysed below.
(2) The dividend in specie represents interest accrued to Anglo American plc in
respect on a loan instrument classified as equity under IAS 32, `Financial
Instruments: Presentation`.
2007 Other reserves
Cumulative
Share-based translation
payment adjustment Available for Cash flow
EUR million reserve reserve sale reserve hedge reserve
At 1 January 12 (17) 1 7
Termination of Anglo
American plc equity
interest - 9 - -
Dividend in specie to
Anglo American plc - - - -
shareholders
Dividend in specie to
Mondi plc shareholders - - - -
Purchase of Anglo
American plc shares (19) - - -
Anglo American plc
share schemes` charge 10 - - -
Exiting Anglo American
Share schemes (3)
Mondi share schemes`
charge 13 - - -
Actuarial and surplus
restriction movements - - - -
Fair value losses
accreted - - (1) (20)
Fair value losses
recycled to the income
statement - - - 17
Currency translation
adjustment - (80) - -
At 31 December 13 (88) - 4
2007 Other reserves
Defined
benefit
obligation Merger Other
EUR million reserve reserve reserves Total
At 1 January (34) - (2) (33)
Termination of Anglo
American plc equity
interest - 2,403 (1) 2,411
Dividend in specie to
Anglo American plc - (2,938) - (2,938)
shareholders
Dividend in specie to
Mondi plc shareholders - 794 - 794
Purchase of Anglo
American plc shares - - - (19)
Anglo American plc
share schemes` charge - - - 10
Exiting Anglo American
Share schemes (3)
Mondi share schemes`
charge - - - 13
Actuarial and surplus
restriction movements 12 - - 12
Fair value losses
accreted - - - (21)
Fair value losses
recycled to the income
statement - - - 17
Currency translation
adjustment - - - (80)
At 31 December (22) 259 (3) 163
2006 Other reserves
Cumulative
Share-based translation
payment adjustment Available for Cash flow
EUR million reserve reserve sale reserve hedge reserve
At 1 January 17 134 1 2
IFRIC 14 adjustment (1) - - - -
Actuarial and surplus
restriction movements - - - -
Fair value gains
accreted - - - 19
Fair value gains
recycled to the income
statement - - - (14)
Share options
converted (1) - - -
Share-based payments 6 - - -
Share options
exercised (10) - - -
Acquisition of business - - - -
Other - - - -
Currency translation
adjustment - (151) - -
At 31 December 12 (17) 1 7
2006 Other reserves
Defined
benefit
obligation Merger
EUR million reserve reserve Other reserves Total
At 1 January (58) - - 96
IFRIC 14 adjustment (1) (20) - - (20)
Actuarial and surplus
restriction movements 44 - - 44
Fair value gains
accreted - - - 19
Fair value gains
recycled to the income
statement - - - (14)
Share options
converted - - - (1)
Share-based payments - - - 6
Share options
exercised - - - (10)
Acquisition of business - - (3) (3)
Other - - 1 1
Currency translation
adjustment - - - (151)
At 31 December (34) - (2) (33)
Note:
(1) The Group`s adoption of IFRIC 14 has resulted in the retrospective
reduction of the surplus available from the Mondi Pension Fund in South Africa.
Demerger impact on equity
On 2 July 2007, the execution of the final demerger transaction resulted in the
Mondi companies successfully demerging from Anglo American plc and becoming,
collectively, a stand- alone legal Group. The Group has a dual listed structure
and the shares of both Mondi Limited and Mondi plc, the ultimate holding
companies for the African and the non-African assets respectively, were
admitted to the JSE Limited ("JSE") and the London Stock Exchange ("LSE") on 3
July 2007.
The sharing agreement between Mondi Limited and Mondi plc ensures that the two
respective sets of shareholders can be regarded as having the interests of a
single economic group. Accordingly, the Group presents combined and
consolidated equity, which represents the combined interests in the Group`s
equity of both sets of shareholders.
Anglo American plc
Prior to the demerger, Anglo American plc injected capital of EUR120 million
into the Mondi Group an d took receipt of a final dividend of EUR202 million,
cystallising a net return of capital of EUR82 million. Interest of EUR32
million on a loan instrument deemed to be equity in nature was also capitalised
using retained earnings attributable to Anglo American plc.
On 2 July 2007, the Anglo American plc investment in the Mondi Group (EUR2,051
million) was terminated by way of a dividend in specie of the whole interest in
the Mondi Group to Mondi plc`s newly created shareholders (see below). In
addition, the legacy profits attributable to Anglo American plc, excluding
Mondi Limited reserves of EUR198 million, at the date of the demerger (EUR832
million) were written off to the demerger reserve.
Mondi plc
On 2 July 2007, Mondi plc issued its own equity instruments to the owners of
Anglo American plc, on a pro rata basis of one ordinary share of Mondi plc for
every one Anglo American plc ordinary share held, in exchange for a 100%
ownership interest in Mondi Investments Limited (formerly Anglo Mondi
Investments Limited or "AMIL"), a holding entity for the entire Mondi Group.
The fair value of the equity instruments issued of EUR2,938 million equalled
the fair value of the underlying net assets of Mondi Investments Limited.
Prior to the listing of Mondi plc`s shares on the LSE, the nominal share
capital raised on the inward transfer of AMIL was reduced and transferred to
retained earnings (EUR2,864 million) net of share issue costs (EUR74 million)
and the issue of special convertible shares (EUR29 million). The dividend in
specie represents the transfer of Mondi Limited to its own, newly -created,
external shareholders. The share capital reduction, legally sanctioned by the
UK High Court on 2 July 2007, was therefore used to create opening
distributable reserves of Mondi plc (EUR1,968 million).
Mondi Limited
Mondi Limited`s historical equity has been combined and consolidated with the
equity attributable to Mondi plc. A one-off currency translation adjustment
resulted from the retranslation of Mondi Limited`s equity as at 2 July 2007.
11 Asset values per share
Asset values per share are disclosed in accordance with the JSE Listing
Requirements. Net asset value per share is defined as net assets divided by the
combined number of shares in issue as at 31 December 2007 (retrospectively
applied to the net assets of the combined and consolidated comparative balance
sheet), less treasury shares held. Tangible net asset value per share is defined
as the net assets less intangible assets divided by the combined number of
shares in issue as at 31 December 2007 (retrospectively applied to the tangible
assets of the combined and consolidated comparative balance sheet), less
treasury shares held.
EUR million 2007 2006
Net asset value per share (EUR) 6.56 6.41
Tangible net asset value per share (EUR) 5.54 5.67
12 Share capital and share premium
2007 (1) Authorised
Number of
shares R million
Mondi Limited R0.20 ordinary shares 250,000,000 50
Authorised
Number of
shares EUR million
Mondi plc EUR0.20 ordinary shares 3,177,608,605 636
Number of Called up, allotted and
2007 (1) shares fully paid/EUR million
Share
Share capital premium Total
Mondi Limited R0.20
ordinary shares
issued on the JSE 146,896,322 3 532 535
Mondi plc (2) EUR0.20
ordinary shares
issued on the LSE 367,240,805 74 - 74
Total ordinary shares
in issue 514,137,127 77 532 609
Mondi Limited R0.20
special converting
shares (3) 367,240,805 8 - 8
Mondi plc EUR0.20
special converting
shares issued on the 146,896,322 29 29
JSE (3) -
Total special
converting shares 514,137,127 37 - 37
Total shares 1,028,274,254 114 532 646
Note:
(1) No comparatives have been presented because the Group`s shares were issued
on Admission to the JSE and LSE on 3 July 2007. Prior to this date the Group
was owned by Anglo American plc. Presentation of this ownership interest can be
found in note 10.
(2) Mondi plc also issued 50,000 5% cumulative GBP1 preference shares. The
Group classfies these preference shares as a liability, and not as equity
instruments, since they contractually obligate the Group to make cumulative
dividend payments to the holders. The dividend payments are treated as a
finance cost rather than distributions.
(3) The special converting shares are held on trust and do not carry dividend
rights. The special converting shares provide a mechanism for equality of
treatment on termination for both Mondi Limited and Mondi plc ordinary equity
holders.
13 Business combinations
To 31 December 2007
Principal acquisitions made during the year to 31 December 2007, accounted for
under the acquisition method, were:
Name of entity acquired Nature of entity acquired Date of acquisition
Lenco Rigid plastics manufacturer 4 July 2007
Unterland Flexible Packaging Plastic films manufacturer 31 August 2007
Tire Kutsan Containerboard and
corrugated packaging 3 September
manufacturer 2007
Percentage
Name of entity acquired Nature of entity acquired acquired
Lenco Rigid plastics manufacturer 100.0
Unterland Flexible Packaging Plastic films manufacturer 100.0
Tire Kutsan Containerboard and
corrugated packaging
manufacturer 63.4
Details of the aggregate net assets acquired, as adjusted from book to fair
value, and the attributable goodwill are presented as follows:
EUR million Total
Net assets acquired:
Intangible assets 24
Property, plant and equipment 164
Financial asset investments 3
Deferred tax assets 2
Inventories 58
Trade and other receivables 93
Cash and cash equivalents 7
Short-term borrowings (42)
Other current liabilities (61)
Long-term borrowings (108)
Deferred tax liabilities (9)
Provisions (2)
Contingent liabilities (1) (5)
Retirement benefits obligation (11)
Equity minority interest (21)
Net assets acquired 92
Goodwill arising on acquisition (2) 118
Total cost of acquisition 210
Satisfied by:
Cash acquired net of overdrafts (3)
Debt consideration (3) (14)
Net cash paid 193
Notes:
(1) Acquired contingent liabilities relate to financial guarantees that have
been issued by an acquiree entity to third parties prior to the acquisition
date.
(2) The total capitalised goodwill is stated net of negative goodwill arising
on an immaterial acquisition, which was expensed to the combined and
consolidated income statement in the year ended 31 December 2007.
(3) The purchase price attributable to a 9.83% ownership interest in Tire
Kutsan is due by 3 October 2010. The obligation carries interest at a market
rate until discharged.
14 Disposal of subsidiaries and associates
EUR million 2007 2006
Net assets disposed:
Property, plant and equipment 2 8
Inventories 7 3
Trade and other receivables 7 5
Assets classified as held for sale (1) 106 47
Cash and cash equivalents 4 -
Short-term borrowings (1) (1)
Trade and other payables (4) (3)
Retirement benefit obligation (2) (1)
Deferred tax liabilities (1) -
Provision (1) (1)
Liabilities classified as held for sale (1) (39) (12)
Minority interests 9 (6)
Total net assets disposed 87 39
Profit/(loss) on disposal 83 (5)
Disposal proceeds 170 34
Net cash disposed (4) -
Net cash inflow from disposal of subsidiaries during the year 112 34
Net cash inflow from disposal of associates during the year 54 -
166 34
Note:
(1) Disposal of assets and liabilities previously classified as held for sale.
The carrying value includes all movements since the date of reclassification up
to the date of disposal.
15 Consolidated cash flow analysis
(a) Reconciliation of profit before tax to cash inflows from operations
EUR million 2007 2006
Profit before tax 382 223
Depreciation and amortisation 368 349
Share option expense 6 6
Non-cash effect of special items of subsidiaries and joint
ventures 23 82
Net finance costs 99 77
Net income from associates (2) (5)
Decrease in provisions and post-employment benefits (14) (39)
Increase in inventories (69) (14)
Decrease/(increase) in operating receivables 25 (48)
Increase/(decrease) in operating payables 141 (20)
Fair value gains on forestry assets (32) (37)
Cost of felling 51 58
Loss on disposal of fixed assets 1 8
Fair value gains on disposal of fixed asset investments - (6)
Purchase of Anglo American plc shares (19) -
Other adjustments (3) 23
Cash inflows from operations 957 657
(b) Cash and cash equivalents
EUR million 2007 2006
Cash and cash equivalents per balance sheet 180 415
Bank overdrafts (121) (57)
Net cash and cash equivalents per cash flow statement 59 358
(c) Movement in net debt
The Group`s net debt position, excluding disposal groups is as follows:
Cash and Debt due Debt due
cash within one after one
equivalents (1) year (2) year
Balance at 1 January 2006 574 (1,490) (710)
Cash flow (170) 355 (70)
Business combinations - (42) (8)
Disposal of businesses - - 1
Transfer to disposal groups - (78) 78
Reclassifications (3) - 3
Currency movements (43) 74 50
Closing balance at 31 December
2006 358 (1,181) (656)
Cash flow (286) 945 (564)
Business combinations - (38) (122)
Disposal of businesses - 1 -
Reclassifications (3) (82) 85
Currency movements (10) 23 23
Closing balance at 31 December
2007 59 (332) (1,234)
Loans to
related Total net
parties debt
Balance at 1 January 2006 14 (1,612)
Cash flow (14) 101
Business combinations - (50)
Disposal of businesses - 1
Transfer to disposal groups - -
Reclassifications - -
Currency movements - 81
Closing balance at 31 December 2006 - (1,479)
Cash flow - 95
Business combinations - (160)
Disposal of businesses - 1
Reclassifications - -
Currency movements - 36
Closing balance at 31 December 2007 - (1,507)
Notes:
(1) The Group operates in certain countries (principally South Africa) where
the existence of exchange controls may restrict the use of certain cash
balances. These restrictions are not expected to have any material effect on
the Group`s ability to meet its ongoing obligations.
(2) Excludes overdrafts, which are included as cash and cash equivalents.
At 31 December 2007, short -term borrowings on the combined and consolidated
balance sheet of EUR453 million (2006: EUR 1,238 million) include EUR121
million of overdrafts (2006: EUR57 million).
The Group`s net debt position as at 31 December 2006 excludes balances
classified as held for sale.
Debt due Debt due
within one after one
EUR million year year
Current
Cash and financial
cash Carrying Carrying asset Total net
equivalents value value investments funds
Disposal groups 3 - (4) - (1)
(d) Reconciliation of cash inflows from operations to EBITDA for the years
ended 31 December
EUR million 2007 2006
Cash inflows from operations 957 657
Share option expense (6) (6)
Fair value gains on forestry assets 32 37
Cost of felling (51) (58)
Decrease in provisions and post employment benefits 14 39
Increase in inventories 69 14
(Decrease)/increase in operating receivables (25) 48
(Increase)/decrease in operating payables (141) 20
Purchase of Anglo American plc shares 19 -
Other adjustments 2 (25)
EBITDA (1) 870 726
Note:
(1) EBITDA is operating profit before special items plus depreciation and
amortisation in subsidiaries and joint ventures.
(e) EBITDA by business segment
EUR million 2007 2006
By business segment
Mondi Packaging
Corrugated Business 242 206
Bag Business 207 174
Flexibles Business 54 32
Total Mondi Packaging 503 412
Mondi Business Paper 289 237
Mondi Packaging South Africa 53 46
Merchant and Newsprint businesses 60 48
Corporate and other businesses (35) (17)
EBITDA 870 726
EBITDA is stated before special items and is reconciled to "Total profit from
operations and associates" as follows:
EUR million 2007 2006
Total profit from operations and associates 510 300
Special items (excluding associates) 77 78
Net (profit)/loss on disposals (excluding associates) (83) 4
Depreciation and amortisation: subsidiaries and joint ventures 368 349
Share of associates` net income (2) (5)
EBITDA 870 726
(f) Capital expenditure cash payments (1)
EUR million 2007 2006
By business segment
Mondi Packaging
Corrugated Business 113 125
Bag Business 74 118
Flexibles Business 28 24
Total Mondi Packaging 215 267
Mondi Business Paper 119 156
Mondi Packaging South Africa 47 27
Merchant and Newsprint businesses 18 9
Corporate and other businesses 7 1
Capital expenditure 406 460
Note:
(1) Excludes business combinations.
16 Related party transactions
The Group has a related party relationship with its associates and joint
ventures and, up to the date of demerger, with certain Anglo American plc group
companies. Transactions between Mondi Limited, Mondi plc and their respective
subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
The Group and its subsidiaries, in the ordinary course of business, enter into
various sale, purchase and service transactions with joint ventures and
associates and others in which the Group has a material interest. These
transactions are under terms that are no less favourable than those arranged
with third parties. These transactions, in total, are not considered to be
significant.
Anglo
American plc Joint
group Ventures Associates
EUR million
2007
Sales to related parties - 8 8
Purchases from related parties - (2) (1)
Net finance costs (22) - -
Dividends paid to related parties (202) - -
Dividends in specie (32) - -
Loans to related parties - 13 -
Receivables due from related
parties - 5 -
2006
Sales to related parties - 10 -
Purchases from related parties - (2) -
Net finance costs (31) - -
Dividends (paid)/received to/from
related parties (75) - 1
Dividends in specie (68) - -
Loans to related parties - 35 -
Receivables due from related
parties 4 3 1
Payables due to related parties (2) - -
Cash held by related parties 286 - -
Total borrowings from related
parties (942) - -
Mr Ramaphosa, joint chairman of Mondi, has a 39.96% stake in Shanduka Group
(Pty) Limited, an entity that has controlling interests in Shanduka Advisors
(Pty) Limited, Shanduka Resources (Pty) Limited, Shanduka Packaging (Pty)
Limited and Shanduka Newsprint (Pty) Limited and participating interests in
Mondi Shanduka Newsprint (Pty) Limited, Kangra Coal (Pty) Limited, Rennies
Distribution Services (Pty) Limited and Mondi Packaging South Africa (Pty)
Limited. Fees of EUR379,000 and EUR681,000 were paid to Shanduka Advisors (Pty)
Limited and Shanduka Resources (Pty) Limited respectively for management
services provided to the Group during the year ended 31 December 2007. Shanduka
Packaging (Pty) Limited and Shanduka Newsprint (Pty) Limited has also provided
a shareholder`s loan to the Group. The balance outstanding at 31 December 2007
was EUR16.8 million and EUR9.2 million, respectively. In the normal course of
business, and on an arm`s length basis, the Group purchased supplies from
Kangra Coal (Pty) Limited totalling EUR13 million and made use of transport and
warehousing services provide d by Rennies Distribution Services (Pty) Limited
totalling EUR13 million during the period. EUR1 million remains outstanding on
these purchases at 31 December
2007. Comparatives have not been disclosed because Mr Ramaphosa became a
related party on his appointment as joint chairman on 16 May 2007.
17 Capital commitments
EUR million 2007 2006
Contracted for but not provided 74 37
Approved, not yet contracted for (1) 824 73
Note:
(1) The significant increase at 31 December 2007 versus 31 December 2006
relates to the development of the new lightweight recycled containerboard
machine and new box plant at the Swiecie mill in Poland, and the modernisation
and expansion of the Syktyvkar mill in Russia
18 Contingent liabilities and contingent assets
Disclosable contingent liabilities comprise aggregate amounts at 31 December
2007 of EUR16 million (2006: EUR34 million) in respect of loans and guarantees
given to banks and other third parties. Acquired contingent liabilities of EUR5
million (2006: EURnil) have been recorded on the Group`s combined and
consolidated balance sheet.
There are a number of legal or potential claims against the Group. Provision is
made for all liabilities that are expected to materialise.
There were no significant disclosable contingent assets at 31 December 2007 or
31 December 2006.
Production statistics
Year Ended Year Ended
31 December 31 December
2007 2006
Mondi Packaging
Containerboard tonnes 2,101,363 2,044,391
Kraft paper tonnes 891,3 85 850,271
Corrugated board and boxes m m2 2,088 2,103
Industrial bags m units 3,642 3,606
Coating and release liners m m2 2,971 2,360
Pulp - external tonnes 179,059 180,166
Mondi Business Paper
Uncoated fine paper tonnes 1,987,574 2,012,295
News print tonnes 192,329 187,100
Pulp - external tonnes 125,679 114,099
Wood chips bone dry tonnes 690,447 886,612
Mondi Packaging South Africa
Packaging papers tonnes 368,574 369,300
Corrugated board and boxes m m2 367 328
Newsprint Joint Ventures
Newsprint (attributable
share) tonnes 314,847 320,876
Aylesford (attributable
share) tonnes 185,990 196,864
Shanduka (attributable
share) tonnes 128,857 124,012
Exchange rates
Year Ended Year Ended
31 December 31 December
2007 2006
Closing rates against the euro
South African rand 10.03 9.22
Pounds sterling 0.73 0.67
Polish zloty 3.59 3.84
Russian rouble 35.99 34.68
Slovakian koruna 33.58 34.56
US dollar 1.47 1.32
Czech koruna 26.63 27.50
Average rates for the period against the euro
South African rand 9.66 8.51
Pounds sterling 0.68 0.68
Polish zloty 3.78 3.90
Russian rouble 35.02 34.14
Slovakian koruna 33.77 37.25
US dollar 1.37 1.26
Czech koruna 27.76 28.37
28 February 2008
Sponsor: UBS Warburg
Date: 28/02/2008 09:00:05 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
