| Wed 7 May 2008, 8:16 | | MND / MNP - Mondi - Final IMS |
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MND MNP
MND MNP
MND / MNP - Mondi - Final IMS
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
As part of the dual listed company structure, Mondi Limited and Mondi plc
(together `Mondi Group`) notify both the JSE Limited and the London Stock
Exchange of matters required to be disclosed under the JSE listings
requirements and/or the Disclosure and Transparency and Listing Rules of the
United Kingdom Listing Authority.
Mondi Group: Interim Management Statement 7 May 2008
This statement provides an update on the Group`s progress since the year
ended 31 December 2007, based on estimated results up to end April 2008
(volume and selling price comments are mainly based on data to end March
2008) and precedes the announcement on 30 July 2008 of the half-yearly
results for the six months ending 30 June 2008.
Reporting Format
As previously announced, from 1 January 2008, the former Mondi Packaging and
Mondi Business Paper business units now operate as two divisions: Europe &
International and South Africa. Accordingly, we have used this new
reporting structure for commenting on trading in this Interim Management
Statement. We have also provided, as an attachment to this announcement, a
restatement of our segmental analysis for 2007 and 2006 under the new
reporting format for revenues and operating profit.
Group Overview
Since the year end the Group`s underlying operating profit has come in ahead
of the comparable period for the prior year helped by a strong performance
from the Europe & International Division and, in particular, the Bags &
Specialities business unit where good price increases were secured in kraft
paper and the related downstream converting operations.
Divisional Overview
Europe & International
In the Corrugated business unit volumes have held up but the pricing
environment has, as expected, been impacted by the weak US dollar with
kraftliner prices down 2% since the year end, albeit still at good levels.
Box prices have increased marginally since the year end but the recent
softening in testliner prices will make further price increases more
difficult to achieve in the short term.
Bags & Specialities has benefitted from continuing strong sack kraft paper
and converted bag prices (up around 5% since the year end), however
converting volumes have seen some recent softness as demand from the
construction industry, particularly in Southern Europe, begins to slow. The
Specialities business results benefit from the acquisition of Unterland in
the second half of 2007 which is trading in line with expectations.
In the Uncoated Fine Paper business unit, revenues were up despite the
closure of our Hungarian mill during the period. Selling prices are up on
average 4% against the comparable period but are relatively unchanged since
the year end. Whilst we continue to seek price increases the weak US dollar
and recent softening in demand have made progress on this front difficult
despite industry capacity closures.
South Africa Division
Results to date have been negatively impacted versus prior year by the
timing of planned maintenance shuts (Richards Bay pulp mill was closed for
two weeks during March for maintenance work) and lower export sales volumes
(mainly in woodchips) as we have taken the active decision to pursue margin
not volume in certain markets. Overall, we are confident that the measures
we are taking to improve profitability are working with PM31 at our Merebank
operation running well and the implementation of a 5% price increase in the
domestic market effective 1 May. The weaker rand is also beginning to
benefit margins in our export business.
Mondi Packaging South Africa (MPSA)
Demand and pricing remain positive. However, the improved local performance
is impacted on translation into euros at the much weaker rand rate (circa
20% down on 2007 rates). Progress on execution of major projects has been
good. The Felixton rebuild has been commissioned on time and within budget
and this will increase containerboard production by 45,000 tonnes per annum
to 155,000 tonnes per annum.
Merchant and Newsprint
Europapier and Mondi Shanduka Newsprint have had a reasonable start to the
year. However, our joint venture, Aylesford Newsprint (which accounted for
just under half the divisions 2007 result), has seen a significant
deterioration in profitability as a result of falling selling prices and
rising energy and recycled fibre input costs and it is likely that their
full year profits will be substantially below 2007 levels.
Input Costs and Currency
External fibre cost pressures have continued to ease but are up on the
comparable period given the steep increase in external fibre costs, up circa
25%, in the first half of 2007. Other input cost pressures are a concern
and the rising oil price continues to feed through into rising energy and
transport bills. Importantly, our results continue to benefit from Mondi`s
ongoing focus on cost reductions, restructuring and productivity
improvements, all of which help to mitigate the impact of cost inflation.
The further weakness of the US dollar has led to an increase in imports and
a reduction in exports for most paper grades including uncoated fine paper
and containerboard which has impacted selling prices. However, the
relatively modest levels of net export dependency of uncoated fine paper and
containerboard (circa 5% versus 20% for most coated and graphic paper
grades) has helped to limit the impact of the weak US dollar. Partially
offsetting the weakness of the US dollar has been the favourable impact of
the weakness of the South African rand which has benefitted the
profitability of export sales from that country.
Restructuring
The previously announced closure of our 140,000 tonne uncoated fine paper
mill in Hungary has been completed (production ceased on 20 March 2008).
The charge for impairment of the site was recognised in the 2007 results and
the latest estimate for the cash and other closure costs is Euro31m which
will be disclosed as a special item in the 2008 financial statements.
During the period we also completed the restructuring and simplification of
our European Uncoated Fine Paper divisional structure. We are now beginning
to see the benefits of these actions coming through.
Major Projects
The new 470,000 tonne recycled containerboard machine and related box plant
at Swiecie in Poland, at a total cost of Euro350m, is progressing well. The
main machine orders have now been placed and we remain on track for
completion in the second half of 2009. We anticipate this machine will have
the lowest operating cost of its type.
The project to modernise our Russian mill (total cost of Euro525m) is also
making good progress. All main equipment contracts have been agreed and
construction has commenced with completion scheduled by mid to late 2010.
The key value drivers of this project are to lower our cost base in Russia,
improve efficiency, increase energy production and revenue by selling
surplus energy to the grid as well as providing some extra capacity (both
pulp and paper) for the strongly growing domestic market.
Borrowings and Finance Charges
Group borrowings, as expected, have increased as the rate of capital
expenditure increases due to the commencement of the two key projects in
Poland and Russia. As at the end of March the Group had just under
Euro1.2bn of undrawn committed debt facilities (Euro1.0bn of which is
available under a Euro1.55bn facility expiring on 22 June 2012).
Interest rates in South Africa have continued to increase with the Reserve
Bank repurchase base rate now standing at 11.5%. Overall finance charges
are higher than the comparable period because for the first half of 2007
Mondi was a subsidiary of Anglo American plc and under a different capital
structure which resulted in lower finance charges.
Summary
Whilst there is some uncertainty over pricing and demand developments,
Mondi`s product mix, emerging market focus, continued push to drive down
costs and willingness to respond quickly to changing market conditions,
gives us confidence that we will make further progress in 2008.
This statement is being released on the day of our annual general meeting,
details of which can be found on our website www.mondigroup.com
End
Contact details:
Mondi Group
David Hathorn +27 11 9945418
Paul Hollingworth +44 1932 826326
Lisa Attenborough +44 1932 826380 / +44 7872 672669
Financial Dynamics
Richard Mountain +44 20 7269 7186 / +44 20 7909 684 466
Louise Brugman +27 11 214 2415 / +27 83 504 1186
A conference call will take place on 7 May 2008 at 08:30am (UK time) /
09:30am (SA time). The dial-in number is +44 (0) 1452 569 393 - call
reference - 45712285
A replay service has been booked and will be available until 13 May 2008 for
anyone not able to join the call. These details are dial in no: +44 (0) 1452
550 000, pin: 45712285
Editors` notes:
Mondi is an international paper and packaging group and in 2007 had revenues
of Euro6.3 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, from the
growing of wood and manufacture of pulp and paper (including recycled 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.
Operating segment revenues
Internal and external segment revenues are presented, and reconciled to
Group revenue, as follows:
2007 2006
Total Internal External Total Internal External
revenue revenue revenue revenue
Euro million
Europe &
International
Corrugated 1,616 (55) 1,561 1,467 (56) 1,411
Bags & 2,005 (19) 1,986 1,726 (16) 1,710
Specialities
Uncoated Fine 1,666 (177) 1,489 1,583 (164) 1,419
Paper
Intra-segment (98) 98 - (85) 85 -
elimination
Total Europe & 5,189 (153) 5,036 4,691 (151) 4,540
International
South Africa
Corrugated 125 (125) - 125 (125) -
Uncoated Fine 491 (267) 224 519 (212) 307
Paper
Intra-segment (25) 25 - (25) 25 -
elimination
Total South Africa 591 (367) 224 619 (312) 307
Merchant and 591 (1) 590 539 (1) 538
Newsprint
Mondi Packaging 419 (28) 391 360 (25) 335
South Africa
Corporate and other 28 - 28 31 - 31
businesses
Inter-segment (549) 549 - (489) 489 -
elimination
Total 6,269 - 6,269 5,751 - 5,751
Operating segment operating profit
Segment operating profits are presented, and reconciled to Group profit
before tax, as follows:
Euro million Segment operating Segment operating
profit profit
before special after special items
items
2007 2006 2007 2006
Europe & International
Corrugated 133 98 128 49
Bags & Specialities 154 106 153 93
Uncoated Fine Paper 99 89 36 73
Total Europe & International 386 293 317 215
South Africa
Corrugated 25 22 25 22
Uncoated Fine Paper 53 15 48 15
Total South Africa 78 37 73 37
Merchant and Newsprint 40 29 40 29
Mondi Packaging South Africa 35 35 35 35
Corporate and other businesses (37) (17) (40) (17)
Total 502 377 425 299
Reconciling items:
Net profit/(loss) on disposal of - - 83 (4)
subsidiaries and associates
Net income from associates 2 5 2 5
Net finance costs (99) (77) (128) (77)
Group profit before tax 405 305 382 223
Date: 07/05/2008 08:00:04 Produced by the JSE SENS Department.
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