| Wed 5 Aug 2009, 8:00 | | MND/MNP - Mondi - Half-Yearly Report For The Six Months Ended 30 June 2009 |
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MND MNP
MND MNP
MND/MNP - Mondi - Half-Yearly Report For The Six Months Ended 30 June 2009
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
LSE share code: MNDI
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.
5 August 2009
HALF-YEARLY REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2009
Financial summary 1
EUR million, except for percentages
and per Six months Six months Half-year
share measures June 2009 June 2008 change
%
Group revenue 2,614 3,263 -20
EBITDA 308 456 -32
Underlying operating profit 138 263 -48
Underlying profit before tax 81 210 -61
Reported (loss)/profit before tax (1) 171 -100
Basic (loss)/earnings per share
(EUR cents per share) (7.1) 17.1 -142
Underlying earnings per share (EUR
cents per share) 8.3 24.8 -67
Headline (loss)/earnings per share
(EUR cents per share) (0.8) 18.3 -104
Interim dividend per share (EUR
cents per share) 2.5 7.7 -68
Cash inflow from operations 392 310 26
Net debt 1,661 1,655 0
Group ROCE 7.4% 11.1% -33
Key points
- Cash inflow from operations up 26% at EUR392 million
- A strong performance from the European uncoated fine paper business
- Successful execution of a number of restructuring initiatives
- Well on track to deliver full-year cost savings target of EUR180 million -
EUR109 million to date
- Demonstrated excellent financial discipline with net debt at EUR1.66 billion
(EUR29 million reduction since 31 December 2008)
- Over EUR1 billion of undrawn committed facilities as at end of June
- Major projects in Poland and Russia are on schedule and within budgeted
capital cost
- Interim dividend of 2.5 euro cents per share
David Hathorn, Mondi Group chief executive, said:
"This is a resilient performance in the face of a very challenging trading
environment, supported by the strong performance of our European uncoated fine
paper business.
Particularly pleasing is the strong cashflow generation, evidenced by the fact
that we achieved a reduction in net debt for the period despite funding a
further circa EUR179 million investment in our two major projects in Poland and
Russia. Similarly, we continue to make good progress in improving efficiencies
and reducing costs, in part by exiting higher-cost operations that we believe
will not prosper through the economic cycle.
The benefits of the actions taken to restructure the cost base are expected to
continue to flow through in the second half. Order inflows in most of our key
product areas have improved following a weak start to the year, albeit they
remain well down on the prior year. However, the full impact of the price
declines in our main products over the course of the first half is now being
felt. This is likely to provide further challenges in the near term. While
prices appear to be bottoming following some industry rationalisation, the
impact of new capacity expected to come on to the market in the second half is
uncertain.
We believe the decisive actions taken to reduce capacity, lower the overall
cost base and optimise cash flows, coupled with our high-quality, low-cost
asset base leave us well positioned to benefit when market conditions improve."
1 See glossary of financial terms
Contact details
Mondi Group
David Hathorn +27 (0)11 994 5418
Andrew King +27 (0)11 994 5415
Lora Rossler +27 (0)31 451 2040 / +27 (0)83 627 0292
Financial Dynamics
Sophie Kernon +44 20 7269 7225
Louise Brugman +27 (0)11 214 2415 / +27 (0)83 504 1186
Conference call dial-in and audio cast details
Please see below details of our dial-in conference call and audio cast that
will be held at 10 00 (UK) and 11 00 (SA).
The conference call dial-in numbers are:
South Africa 0800 200 648 (toll-free)
UK 0800 917 7042 (toll-free)
Europe & Other 0800 246 78 700 (toll-free)
An online audio cast facility will be available via:
www.mondigroup.com/HYResults09
Password: HYResults09. The presentation will be available online via the above
website address before the audio cast commences. Questions can be submitted via
the dial-in conference call or by e-mail via the audio cast.
Should you have any issues on the day with accessing the dial-in conference
call, please call +27 (0)11 535 3600.
Should you have any issues on the day with accessing the audio cast, please
e-mail mondi@kraftwerk.co.at and you will be contacted immediately.
An audio recording of the presentation will be available on Mondi`s website
during the afternoon of 5 August 2009.
Editors` notes
Mondi is an international paper and packaging group and in 2008 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, 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
33,400 employees in 2008.
Forward-looking statements
This document includes forward-looking statements. All statements other than
statements of historical facts included herein, including, without limitation,
those regarding Mondi`s financial position, business strategy, plans and
objectives of management for future operations, are forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of Mondi, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding Mondi`s present and future business strategies
and the environment in which Mondi will operate in the future. Among the
important factors that could cause Mondi`s actual results, performance or
achievements to differ materially from those in the forward-looking statements
include, but are not limited to, those discussed under Principal risks and
uncertainties, below. These forward-looking statements speak only as of the
date on which they are made. Mondi expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statement contained herein to reflect any change in Mondi`s expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based.
Group performance overview
The Group`s underlying operating profit was 48% down on the comparable period
in the prior year, reflecting a continuation of the difficult trading
conditions brought on by the general economic slowdown. Order inflows for the
Group`s major products have recovered from the lows reached in the December to
January period, albeit they remain well down on the prior year. Prices have,
however, declined during the period.
While the European businesses were the first to be impacted by the economic
slowdown, with a sharp fall in profitability in the fourth quarter of 2008, the
profitability of the South African operations only began to decline during the
current period on the back of softer volumes and reduced export prices.
The Group continues to make good progress on the various initiatives taken in
response to the downturn, including delivering on the EUR180 million cost
reduction programme announced at the 2008 full-year results in February (EUR109
million delivered year-to-date), exiting various higher-cost operations,
focusing on working capital management and reducing capital expenditure. These
efforts build on Mondi`s competitive advantages, and ensure the Group remains
well positioned to benefit when market conditions improve.
The Group remains in a sound financial position, with net debt at the end of
June 2009 of EUR1.66 billion, a decrease of around EUR29 million on the
position at the end of December 2008. Taking into consideration a further circa
EUR179 million spent on the two major capital projects in Poland and Russia in
the period, this outcome is testament to the strong focus on cash flow
optimisation. At the end of June 2009, the Group had just over EUR1 billion of
undrawn committed debt facilities.
Europe & International Division
Six months Six months Half-year change %
EUR million June 2009 June 2008
Segment revenue 2,063 2,742 -25
- of which inter-segment
revenue 53 81 -35
EBITDA 238 364 -35
Underlying operating profit 108 215 -50
Uncoated Fine Paper 71 69 +3
Corrugated 1 37 -97
Bags & Specialities 36 109 -67
Capital expenditure1 272 260 +5
Net segment assets 3,620 4,166 -13
Return on capital employed
(%)2 7.3% 12.0% -39
1 Capital expenditure is cash payments and excludes business combinations
2 Return on capital employed (%) is calculated based on the trailing 12 months
data
Underlying operating profit of EUR108 million was 50% lower than the comparable
period last year, although the trend was up on a very weak fourth quarter of
2008, driven by better performances from Bags & Specialities and Uncoated Fine
Paper. To balance weak demand across all businesses, around 163,000 tonnes of
market-related downtime was taken in the first half, representing around 8% of
capacity in the period. Encouragingly, market-related downtime taken in the
second quarter of 2009 was significantly below that of the first quarter
(44,000 tonnes versus 119,000 tonnes), reflecting a steady pickup in order
inflows from the lows reached over the turn of the year. Disappointingly,
selling prices declined in all major grades, under pressure from the slowdown
in demand coupled with insufficient supply-side response. There has been some
offset from decreasing input costs, including wood, recovered paper, chemicals
and other variable costs, although many of these are now showing signs of
stabilising. Some input costs have increased since the beginning of the year,
notably recovered paper. The restructuring actions the Group has taken in
exiting higher cost-capacity are helping to offset the revenue pressures while
also contributing to a more balanced market.
Underlying operating profit in the Uncoated Fine Paper Business was up EUR2
million on the comparable period at EUR71 million and up around EUR14 million
on the second half of 2008. This represents a very strong result in the current
economic environment and reinforces the strength of the Group`s low-cost asset
base and favourable market positioning. While order inflows for European
producers as a whole are down around 11% versus the comparable period, the
Group has been significantly less impacted due to its greater exposure to the
cut-size product segment and, geographically, to emerging Europe, both market
segments that have proved more resilient to the economic downturn. In Russia,
where management estimates that overall demand is down by similar levels to
that seen in Europe, as a domestic producer the business has been able to
maintain volumes at the expense of importers. Results from the Russian
operation were particularly strong, with marginally improved domestic selling
prices supported by good cost control. Combined with decreasing pulp input costs
at the non-integrated facilities and cost-reduction initiatives across the
business, this more than offset the impact of lower European selling prices
(office paper down 4% since the year end).
In the Corrugated Business trading remains extremely challenging. The business
delivered a marginal underlying operating profit, significantly down on the
EUR37 million achieved in the comparable period. Weak demand coupled with
insufficient supply-side response put pressure on containerboard prices.
Average recycled containerboard prices were down around 36% on the comparable
period. At the end of June 2009 prices were down around 27% on those in
December 2008. Similarly, virgin containerboard prices are down around 20%
since the beginning of the year, driven downwards by the increased substitution
threat caused by lower recycled containerboard prices. Results from our
important Polish operations continued to be impacted by the relatively strong
Polish zloty as the business delivered into forward currency contracts taken
out under the Group`s rolling six month currency hedging programme. Under this
programme the weakening of the Polish zloty seen at the end of 2008 and into
early 2009 only started to benefit the business late in the second quarter.
Converted box prices have been impacted by the reduction in paper prices.
In the Bags & Specialities Business underlying operating profit was sharply
down on a strong comparable period a year ago. Pleasingly, the trend in
underlying operating profit is up on a very weak fourth quarter of 2008 on
better volumes, strong cost control and a good performance from the consumer
flexibles segment. However, the business continued to be affected by weak year-
on-year demand in kraft paper and industrial bags, impacting both volumes and
pricing. Significant market-related downtime of around 86,000 tonnes was taken
in the period to balance inventories, although encouragingly this was
predominantly in the first quarter as the market stabilised following the lows
reached over the December 2008-January 2009 period, when destocking appeared to
be at its height. The previously announced mothballing of the Dynas PM5 kraft
paper machine has been delayed until the end of the year due to stronger than
anticipated seasonal demand. Mothballing of the Stambolijski kraft paper mill
became effective in May. The expected effect of these actions will be to reduce
the Group`s fixed cost base and ensure the business is well positioned to face
the challenges of a lower demand environment. Profitability in the Specialities
Business unit has improved since the second half of 2008 driven by resilient
demand, lower plastic resin input costs and stable pricing.
South Africa Division
Six months Six months Half-year change %
EUR million June 2009 June 2008
Segment revenue 249 274 -9
- of which inter-segment
revenue 113 174 -35
EBITDA 48 67 -28
Underlying operating profit 28 45 -38
Uncoated Fine Paper 13 30 -57
Containerboard 15 15 0
Capital expenditure1 13 23 -43
Net segment assets 868 789 10
Return on capital employed
(%)2 13.5% 10.6% 27
1 Capital expenditure is cash payments and excludes business combinations
2 Return on capital employed (%) is calculated based on the trailing 12 months
data
First half underlying operating profit in the South Africa Division was 38%
below the comparable period last year, impacted by lower pulp, woodchip and
uncoated fine paper export prices together with lower woodchip and uncoated
fine paper volumes. Significant market-related downtime in uncoated fine paper
production of 62,000 tonnes was taken in the period to balance inventories.
This in turn led to an increase in sales of market pulp as the Richards Bay
pulp mill continued to run at full capacity. The domestic prices for uncoated
fine paper cut-size continue to hold up, although there are signs of softening
volumes. Similarly, open market pulp prices appear to be increasing, albeit off
low levels (30% lower than last year). In response to the continued difficult
trading conditions, in particular the weak export sales margins on uncoated
fine paper due to a combination of the strong local currency and softening
export prices, the proposed mothballing of the 120,000 tonnes per annum PM32 at
Merebank in the second half was announced. This is expected to result in
annualised cash cost savings of around EUR7 million while not significantly
affecting production volumes from current levels.
In April 2009 agreement was reached on the settlement of a further seven land
claims in South Africa. Structured around the initial Mondi land claims model
as a sale and leaseback agreement, Mondi retains ownership of the forests while
meeting the needs of the land restitution process in South Africa.
A recent wage dispute that led to industry-wide strike action affecting all
South African mills was settled on 29 July 2009. All sites have since returned
to normal operations, with no significant impact to Group profitability.
Mondi Packaging South Africa (MPSA)
Six months Six months Half-year change %
EUR million June 2009 June 2008
Segment revenue 227 223 2
- of which inter-segment
revenue 13 14 -7
EBITDA 23 27 -15
Underlying operating profit 11 14 -21
Capital expenditure1 6 25 -76
Net segment assets 342 308 11
Return on capital employed
(%)2 7.3% 11.1% -34
1 Capital expenditure is cash payments and excludes business combinations
2 Return on capital employed (%) is calculated based on the trailing 12 months
data
Underlying operating profit is EUR3 million below the comparable period last
year as lower sales volumes and increasing input costs are only partially
offset by higher selling prices and additional cost savings. Sales volumes are
down across all business units although revenues are above the comparable
period as businesses benefited from the price increases implemented in the
fourth quarter of last year. The softening volumes are starting to lead to
pressure for price reductions. Market related downtime of 33,000 tonnes was
taken in the period to balance inventories.
Merchant and Newsprint
Six months Six months Half-year change %
EUR million June 2009 June 2008
Segment revenue 254 293 -13
- of which inter-segment
revenue - - 0
EBITDA 16 18 -11
Underlying operating profit 8 10 -20
Capital expenditure1 2 5 -60
Net segment assets 218 248 -13
Return on capital employed
(%)2 2.9% 15.0% -81
1 Capital expenditure is cash payments and excludes business combinations
2 Return on capital employed (%) is calculated based on the trailing 12 months
data
To date Europapier is performing well below the comparable period in the prior
year due to lower sales volumes and prices, exacerbated by the weakening of
certain of the emerging European currencies in which it trades. Mondi Shanduka
Newsprint continues to hold up well, although there is some evidence of
softening demand and pricing pressures in its domestic market. Aylesford
Newsprint has benefited from improved pricing on its annual contract business
(up around 20% in sterling terms), although demand weakness from significantly
reduced advertising spend and rising input costs remain a concern.
Restructuring
The restructuring actions previously announced in response to the economic
downturn are on schedule. We have completed the divestment of the four
remaining corrugated converting operations in France for total proceeds of
approximately EUR51 million, thereby completing our withdrawal from this
market.
Restructuring and impairment costs recorded as special items in the first half
of 2009 amounted to EUR79 million. The restructuring of the Turkish corrugated
business, the coatings business in Finland and the UK, and the consumer
flexibles business in Austria are well under way. Furthermore, we have
completed the closure of a corrugated plant in the UK and will complete the
closure of four bag-converting plants across Europe by the end of the third
quarter. As mentioned, the mothballing of the Stambolijski mill is now
complete, while the process to mothball the Dynas PM5 paper machine has been
delayed to the end of the year. The sale of the Italian recycled containerboard
plant Cartonstrong (100,000 tonnes per annum capacity) and related sheet feeder
was completed at the end of July.
After the period end we announced the proposed mothballing of the 120,000
tonnes per annum PM32 paper machine at Merebank as well as the reorganisation
of its newsprint and paper production operations.
These closures will have seen Mondi exit around 700,000 tonnes of higher-cost
paper capacity in Europe (around 16% of the Group`s European paper production
capacity) and around 8% (120,000 tonnes) of its South African paper production
capacity in 2008/2009.
The above measures are expected to have the effect of adjusting the Group`s
production capacity in light of the changing demand environment, lowering its
overall cost base and streamlining its asset portfolio to focus on those
businesses that we believe provide Mondi with sustainable competitive advantage
in its respective markets.
Major projects
We have made good progress in the development of our two major projects in
Poland and Russia, which will serve to further secure the Group`s position as a
cost leader in its chosen markets. The construction of the new 470,000-tonne
recycled containerboard machine and related box plant at Swiecie in Poland, at
a total cost of EUR350 million, is progressing well. Mondi remains on track for
completion in the second half of 2009 within the budgeted cost. We anticipate
that this machine will have the lowest operating cost of its type, with up to
around 50% of its offtake secured by physical integration with the surrounding
box plant network. The project to modernise the Russian mill at a total cost of
EUR525 million is also making good progress and remains on track for completion
within the budgeted cost in 2010. The key objectives of the project are to
lower the Group`s cost base in Russia, improve efficiency, increase energy
production and revenue by selling surplus energy to the grid as well as
providing limited extra capacity (both pulp and paper) for the domestic market.
As such, the market risk on the project is relatively limited.
The previously announced initiatives to curtail capital expenditure outside of
the two major projects (new capital expenditure approvals limited to 40% of
depreciation) are ongoing with benefits in cash flows already evident.
Input costs and currency
There has been easing of key input costs, notably wood, recovered paper, pulp
and chemicals since the comparable period in the prior year. However, some key
input costs have already risen since the beginning of this year. Recovered
paper, while down around 60% on average since the comparable period last year,
has risen around 40% since the start of the year. Importantly, 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 the
weaker markets. Mondi remains on track to achieve the cost savings target set
for the year of EUR180 million. EUR109 million of cost savings were delivered
in the first half.
The weakening of the major eastern European currencies witnessed towards the
end of 2008 and into early 2009, notably the Polish zloty and Czech koruna,
will have a positive impact on the results of our eastern European production
base, although the effect is delayed due to the Group`s rolling six-month
currency hedging programme. Conversely, the recent strengthening of the South
African rand is putting pressure on margins on export sales from the South
Africa Division.
FINANCIAL REVIEW
Special items (refer to note 5 of the condensed financial statements)
In aggregate, pre tax special items amounted to a charge of EUR82 million.
An operating special item charge of EUR79 million was recognised, principally
comprising:
- asset impairment costs of EUR36 million;
- closure and restructuring costs of EUR40 million; and
- charges related to arrangements put in place for senior executives following
the demerger from Anglo American plc in July 2007 of EUR3 million.
The asset impairments relate primarily to the write-down of the PM32 paper
machine at Merebank and converting operations in the Corrugated and Bags &
Specialities business units that have been restructured or closed. Other costs
related to the mothballing of PM32 will be recognised mainly in the second half
of this year.
Costs related to the mothballing of the Stambolijski mill and the closure or
restructuring of the various converting operations represent the bulk of the
EUR40 million closure and restructuring charge.
A non-operating special item charge of EUR3 million was recognised, which
mainly comprises the net profit on the sale of four corrugated operations in
France (EUR5 million profit) and the impairment of the assets in corrugated
operations held for sale (circa EUR8 million charge).
Finance costs
Net finance charges of EUR58 million were EUR3 million higher than the
comparable period due mainly to higher average interest rates as the proportion
of debt denominated in higher-yielding currencies increased.
Taxation
The effective tax rate before special items of 34% is significantly higher than
the prior period (29%) due primarily to an increase in non-recognised assessed
losses as a consequence of the decline in profitability. There is only minor tax
relief on special items.
Minority interests
Minority interests for the period were EUR11 million lower than the comparable
period, as earnings were down at the significant operations where there are
non-controlling interests, particularly at Swiecie in Poland within the Europe
& International Division.
Cash flow and borrowings
EBITDA of EUR308 million in the period was 32%, or EUR148 million, lower than
2008, reflecting the more difficult trading environment. Cash inflows from
operations of EUR392 million were EUR82 million up on the comparable period,
mainly due to working capital inflows of EUR99 million versus an outflow of
EUR126 million in the comparable period.
Capital expenditure of EUR116 million (excluding spend on the two major
strategic projects of EUR179 million) was lower than depreciation of EUR170
million, reflecting the decision taken in the fourth quarter of 2008 to limit
2009 capital expenditure approvals to below 40% of depreciation. The remaining
expenditure on the two major projects is estimated at EUR332 million. While
phasing of the capital expenditure outflows on the projects has been adjusted
such that more than originally planned will be spent in 2010 with some flow
through to 2011, the bulk will still be spent in 2009.
Treasury and borrowings
Net debt of EUR1,661 million at 30 June 2009 was EUR29 million lower than 31
December 2008 and EUR6 million higher than 30 June 2008. Gearing as at 30 June
2009 was 37.9% and the net debt to trailing 12 months EBITDA ratio was 2.5.
Group liquidity is provided through various committed debt facilities totalling
EUR2.8 billion, of which, circa EUR1 billion is currently undrawn. The
principal debt facility is a EUR1.55 billion, syndicated revolving credit
facility maturing in June 2012. Despite the unfavourable banking environment
the Group has been successful in maintaining the quantum of committed debt
facilities available to it since the prior year end through securing an
additional R500 million (EUR46 million) of committed 3 year amortising term
loan facilities and successfully rolling over most of the smaller facilities
maturing in the period.
The average maturity of the committed debt facilities is 2.9 years (3.4 years
at December 2008). Drawn facilities maturing over the next 12 months amount to
EUR343 million, the majority of which are expected to be renewed; however, to
the extent they are not renewed they can be financed out of existing undrawn
committed facilities (in excess of EUR1 billion at 30 June 2009).
Reclassification of Mondi plc shares
During the period we announced after a constructive dialogue with the South
African Reserve Bank and Treasury that the Minister of Finance had decided to
reclassify the secondary listing of Mondi plc ordinary shares on the JSE
Limited as domestic assets in the hands of South African investors. It is
pleasing to note the subsequent significant narrowing of the price differential
that had existed between the Mondi plc and Mondi Limited ordinary shares.
Related party transactions
Related party transactions are disclosed in note 17 of the condensed financial
statements.
PRINCIPAL RISKS AND UNCERTAINTIES
It is in the nature of our business that Mondi is exposed to risks and
uncertainties that may have an impact on future performance and financial
results, as well as upon our ability to meet certain social and environmental
objectives. The Group believes that it has effective systems and controls in
place to manage the key risks identified below. The key risks identified have
not changed significantly from those discussed on pages 22 and 23 of the 2008
annual report.
Mondi operates in a highly competitive environment
The markets for paper and packaging products are highly competitive. Similarly,
prices of Mondi`s key paper grades have experienced substantial fluctuations in
the past. However, Mondi is flexible and responsive to changing market and
operating conditions and the Group`s geographic and product diversification
provides some measure of protection. Uncertain future trading conditions may
have an impact on the carrying value of goodwill and tangible assets and may
result in further restructuring activities.
Input costs are subject to significant fluctuations
Materials, energy and consumables used by Mondi include significant amounts of
wood, pulp, recovered paper, packaging papers and chemicals. Increases in the
costs of any of these raw materials, or any difficulties in procuring wood in
certain countries, could have an adverse effect on Mondi`s business,
operational performance or financial condition. However, Mondi`s focus on
operational performance and relatively high level of integration and access to
its own fibre in Russia and South Africa act to mitigate these risks. It is
also anticipated that the recent successful settlements of land claims in South
Africa will provide a framework for settling future forestry land claims with
Mondi.
Significant capital investments, including acquisitions carry project risk
Mondi is in the process of completing two significant capital investments to
expand and upgrade existing facilities in Poland and Russia. These projects
carry risks and Mondi has put in place dedicated teams to ensure delivery of
the projects on time and within budget.
Going concern
The current economic conditions will impact short-term demand growth for our
products, as well as place pressure on both customers and suppliers who may
face liquidity issues, and could have an adverse impact on Mondi`s business.
Furthermore, the lack of credit availability could impact the Group`s ability
to effectively execute its strategy. However, Mondi`s geographic spread,
product diversity and large customer base mitigate these risks. The proactive
initiatives by management in rationalising the business through cost-cutting,
asset closures and divestitures have improved the Group`s cost position in its
chosen markets. Strong working capital management has resulted in a significant
net cash inflow from working capital over the period, while capital expenditure
programmes have been reduced.
The Group meets its funding requirements through a number of loan facilities,
the principal one being a EUR1.55 billion, 5 five-year syndicated revolving
credit facility expiring in June 2012. The availability of these facilities is
dependent upon the Group meeting certain financing covenants, most
significantly an EBITDA to net debt ratio of 3.5. At the period end this ratio
was 2.5. Mondi had in excess of EUR1 billion of committed debt facilities as at
30 June 2009 with an average maturity of 2.9 years.
The Group`s forecasts and projections, taking account of reasonable possible
changes in trading performance, show that the Group should be able to operate
within the level of its current facility and the related covenants.
As a consequence, the directors believe that the Group is well placed to manage
its business risks successfully, despite the current uncertain economic
outlook.
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the
Half-yearly report and accounts.
DIVIDEND
An interim dividend of 2.5 euro cents per share will be paid on 15 September
2009 to those shareholders on the register of Mondi plc on 28 August 2009.
An equivalent interim dividend will be paid in South African rand on 15
September 2009 to shareholders on the register of Mondi Limited on 28 August
2009.
CURRENT YEAR OUTLOOK
The benefits of the actions taken to restructure the cost base are expected to
continue to flow through in the second half. Order inflows in most of our key
product areas have improved following a weak start to the year, albeit they
remain well down on the prior year. However, the full impact of the price
declines in our main products over the course of the first half is now being
felt. This is likely to provide further challenges in the near term. While
prices appear to be bottoming following some industry rationalisation, the
impact of new capacity expected to come onto the market in the second half is
uncertain.
We believe the decisive actions taken to reduce capacity, lower the overall
cost base and optimise cash flows, coupled with our high-quality, low-cost
asset base leave us well positioned to benefit when market conditions improve.
Directors` responsibility statement
The directors confirm that to the best of their knowledge:
The condensed set of combined and consolidated financial statements has been
prepared in accordance with IAS 34, `Interim Financial Reporting`;
The Half-yearly report includes a fair review of the important events during
the six months ended 30 June 2009 and a description of the principal risks and
uncertainties for the remaining six months of the year ending 31 December 2009;
There have been no changes in the Group`s related party relationships from
those reported in the Group`s annual financial statements for the year ended 31
December 2008; and
The Half-yearly report includes a fair review of the Group`s related party
transactions.
By order of the Boards,
David Hathorn Andrew King
Director Director
4 August 2009
Independent review report to the members of Mondi Limited
Introduction
We have reviewed the accompanying condensed combined and consolidated statement
of financial position of Mondi Limited as at 30 June 2009 and the related
condensed combined and consolidated statements of income, comprehensive income,
changes in equity and cash flows for the six-month period then ended, and a
summary of significant accounting policies and other explanatory notes. The
company`s directors are responsible for the preparation and fair presentation
of this interim financial information in accordance with the international
accounting standard applicable to interim financial reporting and in the manner
required by the Companies Act of South Africa. Our responsibility is to express
a conclusion on this interim financial information based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, `Review of Interim Financial Information Performed by the
Independent Auditor of the Entity`. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying interim financial information does not present
fairly, in all material respects, the financial position of Mondi Limited as at
30 June 2009, and of its financial performance and its cash flows for the
six-month period then ended in accordance with the International Accounting
Standard applicable to interim financial reporting (IAS34) and in the manner
required by the Companies Act of South Africa.
B Nosworthy
Partner
Sandton
4 August 2009
Deloitte & Touche
Registered Auditors
Buildings 1 and 2, Deloitte Place, The Woodlands
Woodlands Drive, Woodmead, Sandton
National Executive: G G Gelink Chief Executive A E Swiegers Chief Operating
Officer G M Pinnock Audit DL Kennedy Tax and Legal and Risk Advisory L Geeringh
Consulting L Bam Corporate Finance CR Beukman Finance T J Brown Clients &
Markets N T Mtoba Chairman of the Board CR Qually Deputy Chairman of the Board.
A full list of partners and directors is available on request.
Independent review report to the members of Mondi plc
We have been engaged by the company to review the condensed set of financial
statements in the Half-yearly report for the six months ended 30 June 2009,
which comprises the condensed combined and consolidated income statement, the
condensed combined and consolidated statement of comprehensive income, the
condensed combined and consolidated statement of financial position, the
condensed combined and consolidated statement of cash flows, the condensed
combined and consolidated statement of changes in equity and related notes 1 to
19. We have read the other information contained in the Half-yearly report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to them in an independent review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company, for our
review work, for this report or for the conclusions we have formed.
Directors` responsibilities
The Half-yearly report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Half-yearly report
in accordance with the Disclosure and Transparency Rules of the United
Kingdom`s Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial statements
included in this Half-yearly report has been prepared in accordance with
International Accounting Standard 34, `Interim Financial Reporting` as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the Half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity` issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-yearly
report for the six months ended 30 June 2009 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom``s Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditors
London
4 August 2009
Note: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no control
procedures can provide absolute assurance in this area.
Condensed combined and consolidated income statement
for the six months ended 30 June 2009
(Reviewed)
Six
months
ended 30
June
2009
Before Special After
special items special
EUR million Notes items (note 5) items
Group revenue 4 2,614 - 2,614
Materials, energy and -
consumables used (1,387) - (1,387)
Variable selling expenses (225) - (225)
Gross margin 1,002 - 1,002
Maintenance and other indirect
expenses (111) - (111)
Personnel costs (430) (11) (441)
Other net operating expenses (153) (32) (185)
Depreciation, amortisation and
impairments (170) (36) (206)
Operating profit/(loss) 4 138 (79) 59
Net profit/(loss) on disposals 5 - 5 5
Impairment of assets held for sale 5 - (8) (8)
Net income from associates 1 - 1
Total profit/(loss) from
operations and associates 139 (82) 57
Investment income 13 - 13
Interest expense (71) - (71)
Net finance costs 6 (58) - (58)
Profit/(loss) before tax 81 (82) (1)
Taxation (charge)/credit 7 (27) 4 (23)
Profit/(loss) from continuing
operations 54 (78) (24)
Attributable to:
Minority interests 12 - 12
Equity holders of the parent companies 42 (78) (36)
Earnings per share ("EPS") for
(loss)/profit attributable to
equity holders of the parent
companies
Basic EPS (EUR cents) 8 (7.1)
Diluted EPS (EUR cents) 8 (7.1)
Basic underlying EPS (EUR cents) 8 8.3
Diluted underlying EPS (EUR cents) 8 8.1
Basic headline EPS (EUR cents) 8 (0.8)
Diluted headline EPS (EUR cents) 8 (0.8)
(Reviewed)
Six
months
ended 30
June
2008
Before Special After
special items special
EUR million items (note 5) items
Group revenue 3,263 - 3,263
Materials, energy and -
consumables used (1,729) - (1,729)
Variable selling expenses (281) - (281)
Gross margin 1,253 - 1,253
Maintenance and other indirect
expenses (143) - (143)
Personnel costs (470) (17) (487)
Other net operating expenses (184) (16) (200)
Depreciation, amortisation and
impairments (193) (3) (196)
Operating profit/(loss) 263 (36) 227
Net profit/(loss) on disposals - (3) (3)
Impairment of assets held for sale - - -
Net income from associates 2 - 2
Total profit/(loss) from
operations and associates 265 (39) 226
Investment income 19 - 19
Interest expense (74) - (74)
Net finance costs (55) - (55)
Profit/(loss) before tax 210 (39) 171
Taxation (charge)/credit (61) - (61)
Profit/(loss) from continuing operations 149 (39) 110
Attributable to:
Minority interests 23 - 23
Equity holders of the parent companies 126 (39) 87
Earnings per share ("EPS") for
(loss)/profit attributable to
equity holders of the parent companies
Basic EPS (EUR cents) 17.1
Diluted EPS (EUR cents) 16.9
Basic underlying EPS (EUR cents) 24.8
Diluted underlying EPS (EUR cents) 24.4
Basic headline EPS (EUR cents) 18.3
Diluted headline EPS (EUR cents) 18.0
(Audited)
Year
ended 31
December
2008
Before Special After
special items special
EUR million items (note 5) items
Group revenue 6,345 - 6,345
Materials, energy and -
consumables used (3,384) - (3,384)
Variable selling expenses (542) - (542)
Gross margin 2,419 - 2,419
Maintenance and other indirect expenses (300) - (300)
Personnel costs (926) (41) (967)
Other net operating expenses (379) (24) (403)
Depreciation, amortisation and impairments (373) (293) (666)
Operating profit/(loss) 441 (358) 83
Net profit/(loss) on disposals - (27) (27)
Impairment of assets held for sale - (2) (2)
Net income from associates 2 - 2
Total profit/(loss) from
operations and associates 443 (387) 56
Investment income 15 - 15
Interest expense (174) - (174)
Net finance costs (159) - (159)
Profit/(loss) before tax 284 (387) (103)
Taxation (charge)/credit (82) 4 (78)
Profit/(loss) from continuing operations 202 (383) (181)
Attributable to:
Minority interests 30 - 30
Equity holders of the parent companies 172 (383) (211)
Earnings per share ("EPS") for
(loss)/profit attributable to
equity holders of the parent companies
Basic EPS (EUR cents) (41.6)
Diluted EPS (EUR cents) (41.6)
Basic underlying EPS (EUR cents) 33.9
Diluted underlying EPS (EUR cents) 33.4
Basic headline EPS (EUR cents) 20.3
Diluted headline EPS (EUR cents) 20.0
There were no discontinued operations in any of the periods presented.
Condensed combined and consolidated statement of comprehensive income
for the six months ended 30 June 2009
(Reviewed) (Reviewed) (Audited)
As at 30 June As at 30 June As at 31
EUR million 2009 2008 December 2008
(Loss)/profit for the
financial period/year (24) 110 (181)
Other comprehensive income:
Fair value gains/(losses)
on cash flow hedges 14 8 (61)
Actuarial gains/(losses)
and surplus restriction
on post-retirement
benefit schemes 1 2 (17)
Fair value losses on
available for sale
investments - - (1)
Exchange gains/(losses)
on translation of foreign
operations 72 (64) (246)
Share of other comprehensive
income of associates 1 (1) (1)
Taxation relating to
components of other
comprehensive income (1) (2) 17
Other comprehensive
income for the financial
period/year, net of tax 87 (57) (309)
Total comprehensive
income for the financial
period/year 63 53 (490)
Attributable to:
Minority interests 14 45 23
Equity holders of the
parent companies 49 8 (513)
Condensed combined and consolidated statement of financial position
as at 30 June 2009
(Reviewed)
As at 30 June
EUR million Notes 2009
Intangible assets 321
Property, plant and equipment 3,769
Forestry assets 268
Investments in associates 8
Financial asset investments 24
Deferred tax assets 43
Retirement benefits surplus -
Derivative financial instruments -
Total non-current assets 4,433
Inventories 611
Trade and other receivables 1,075
Current tax assets 23
Cash and cash equivalents 10 171
Derivative financial instruments 15
Total current assets 1,895
Assets held for sale 22
Total assets 6,350
Short-term borrowings 10 (435)
Trade and other payables (1,013)
Current tax liabilities (46)
Provisions (47)
Derivative financial instruments (40)
Total current liabilities (1,581)
Medium and long-term borrowings 10 (1,397)
Retirement benefits obligation (184)
Deferred tax liabilities (329)
Provisions (48)
Other non-current liabilities (14)
Derivative financial instruments (47)
Total non-current liabilities (2,019)
Liabilities directly associated with assets
classified as held for sale (3)
Total liabilities (3,603)
Net assets 2,747
Equity
Ordinary share capital 114
Share premium 532
Retained earnings and other reserves 1,707
Total equity attributable to equity holders of the
parent companies 2,353
Minority interests in equity 394
Total equity 2,747
(Reviewed) (Audited)
As at 30 June As at 31
EUR million 2008 December 2008
Intangible assets 524 323
Property, plant and equipment 3,750 3,611
Forestry assets 206 214
Investments in associates 7 5
Financial asset investments 25 19
Deferred tax assets 39 36
Retirement benefits surplus 15 -
Derivative financial instruments 5 -
Total non-current assets 4,571 4,208
Inventories 759 684
Trade and other receivables 1,349 1,104
Current tax assets 24 32
Cash and cash equivalents 152 155
Derivative financial instruments 19 73
Total current assets 2,303 2,048
Assets held for sale - 5
Total assets 6,874 6,261
Short-term borrowings (406) (378)
Trade and other payables (1,095) (1,035)
Current tax liabilities (87) (53)
Provisions (14) (25)
Derivative financial instruments (14) (38)
Total current liabilities (1,616) (1,529)
Medium and long-term borrowings (1,401) (1,467)
Retirement benefits obligation (190) (182)
Deferred tax liabilities (313) (292)
Provisions (46) (39)
Other non-current liabilities (16) (14)
Derivative financial instruments - (39)
Total non-current liabilities (1,966) (2,033)
Liabilities directly associated with assets
classified as held for sale - (3)
Total liabilities (3,582) (3,565)
Net assets 3,292 2,696
Equity
Ordinary share capital 114 114
Share premium 532 532
Retained earnings and other reserves 2,239 1,677
Total equity attributable to equity holders
of the parent companies 2,885 2,323
Minority interests in equity 407 373
Total equity 3,292 2,696
Condensed combined and consolidated statement of cash flows
for the six months ended 30 June 2009
(Reviewed)
Six months
ended 30 June
EUR million Notes 2009
Cash inflows from operations 12 392
Dividends from associates -
Income tax paid (18)
Net cash inflows generated from operating activities 374
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and cash
equivalents (2)
Proceeds from disposal of subsidiaries, net of cash
and cash
equivalents 47
Purchases of property, plant and equipment 11 (293)
Proceeds from the disposal of property, plant and
equipment 7
Investment in forestry assets (20)
Purchases of financial asset investments -
Purchase of intangible assets (2)
Proceeds from the sale of financial asset
investments -
Loan (advances to)/repayments from related parties (1)
Interest received 4
Other investing activities -
Net cash used in investing activities (260)
Cash flows from financing activities
Repayment of short-term borrowings 10 (81)
(Repayment of)/Proceeds from medium and long-term
borrowings 10 (6)
Interest paid (93)
Dividends paid to minority interests -
Dividends paid to equity holders 9 (26)
Purchase of treasury shares (1)
Injection by minorities 10
Net realised gain on cash and asset management swaps 84
Other financing activities (1)
Net cash (used in)/generated from financing
activities (114)
Net increase/(decrease) in cash and cash equivalents -
Cash and cash equivalents at start of financial
period/year1 10 75
Cash movement in the financial period/year 10 -
Cash acquired through business combinations 10 -
Reclassifications 10 -
Effects of changes in foreign exchange rates 10 4
Cash and cash equivalents at end of financial
period/year1 79
(Reviewed)
Six months (Audited)
ended 30 June Year ended 31
EUR million 2008 December 2008
Cash inflows from operations 310 795
Dividends from associates - 2
Income tax paid (27) (71)
Net cash inflows generated from operating
activities 283 726
Cash flows from investing activities
Acquisition of subsidiaries, net of cash
and cash equivalents (35) (49)
Proceeds from disposal of subsidiaries, net
of cash and cash
equivalents 2 17
Purchases of property, plant and equipment (313) (693)
Proceeds from the disposal of property,
plant and equipment 7 29
Investment in forestry assets (22) (43)
Purchases of financial asset investments - (2)
Purchase of intangible assets (4) (7)
Proceeds from the sale of financial asset
investments 2 1
Loan (advances to)/repayments from related
parties (2) 1
Interest received 9 28
Other investing activities 1 8
Net cash used in investing activities (355) (710)
Cash flows from financing activities
Repayment of short-term borrowings (143) (214)
(Repayment of)/Proceeds from medium and
long-term borrowings 285 543
Interest paid (69) (169)
Dividends paid to minority interests (9) (20)
Dividends paid to equity holders (80) (118)
Purchase of treasury shares (15) (15)
Injection by minorities - -
Net realised gain on cash and asset
management swaps 12 4
Other financing activities 1 (3)
Net cash (used in)/generated from financing
activities (18) 8
Net increase/(decrease) in cash and cash
equivalents (90) 24
Cash and cash equivalents at start of
financial period/year1 59 59
Cash movement in the financial period/year (90) 24
Cash acquired through business combinations - 3
Reclassifications - (2)
Effects of changes in foreign exchange rates 1 (9)
Cash and cash equivalents at end of
financial period/year1 (30) 75
Note:
1 `Cash and cash equivalents` includes overdrafts.
Condensed combined and consolidated statement of changes in equity
for the six months ended 30 June 2009
Share capital
Mondi Limited
Mondi Limited share Mondi plc
EUR million share capital premium share capital
At 1 January 2008 11 532 103
Dividends paid - - -
Total comprehensive
income for the financial
period/year - - -
Issue of shares under
employee share
schemes - - -
Purchase of treasury
shares2 - - -
Share options
exercised - Anglo
American share
scheme - - -
Adjustments to minority
share in the net asset
values of business
acquisitions - - -
Other - - -
At 30 June 2008 11 532 103
Dividends paid - - -
Total comprehensive
income for the financial
period/year - - -
Issue of shares under
employee share
schemes - - -
Disposal of business - - -
Minority share dilution - - -
Adjustments to minority
share in the net asset
values of business
acquisitions - - -
Minorities bought out - - -
Other - - -
At 31 December 2008 11 532 103
Dividends paid - - -
Total comprehensive
income for the financial
period/year - - -
Issue of shares under
employee share
schemes - - -
Purchase of treasury
shares2 - - -
Reclassification - - -
Minorities buy in - - -
Minorities bought out - - -
Other - - -
At 30 June 2009 11 532 103
Combined
share capital
and share Retained Other
EUR million premium earnings reserves 1
At 1 January 2008 646 2,154 163
Dividends paid - (80) -
Total comprehensive
income for the financial
period/year - 87 (79)
Issue of shares under
employee share
schemes - 1 (1)
Purchase of treasury
shares2 - (15) -
Share options
exercised - Anglo
American share
scheme - (3) -
Adjustments to minority
share in the net asset
values of business
acquisitions - - -
Other - - 12
At 30 June 2008 646 2,144 95
Dividends paid - (38) -
Total comprehensive
income for the financial
period/year - (298) (223)
Issue of shares under
employee share
schemes - 6 (6)
Disposal of business - (1) -
Minority share dilution - (4) -
Adjustments to minority
share in the net asset
values of business
acquisitions - - -
Minorities bought out - - -
Other - - 2
At 31 December 2008 646 1,809 (132)
Dividends paid - (26) -
Total comprehensive
income for the financial
period/year - (36) 85
Issue of shares under
employee share
schemes - 2 (2)
Purchase of treasury
shares2 - (1) -
Reclassification - (14) 14
Minorities buy in - - -
Minorities bought out - - -
Other - - 8
At 30 June 2009 646 1,734 (27)
Minority Total
EUR million Total interests equity
At 1 January 2008 2,963 373 3,336
Dividends paid (80) (9) (89)
Total comprehensive
income for the financial
period/year 8 45 53
Issue of shares under
employee share
schemes - - -
Purchase of treasury
shares2 (15) - (15)
Share options
exercised - Anglo
American share
scheme (3) - (3)
Adjustments to minority
share in the net asset
values of business
acquisitions - (2) (2)
Other 12 - 12
At 30 June 2008 2,885 407 3,292
Dividends paid (38) (11) (49)
Total comprehensive
income for the financial
period/year (521) (22) (543)
Issue of shares under
employee share
schemes - - -
Disposal of business (1) - (1)
Minority share dilution (4) 4 -
Adjustments to minority
share in the net asset
values of business
acquisitions - (1) (1)
Minorities bought out - (3) (3)
Other 2 (1) 1
At 31 December 2008 2,323 373 2,696
Dividends paid (26) - (26)
Total comprehensive
income for the financial
period/year 49 14 63
Issue of shares under
employee share
schemes - - -
Purchase of treasury
shares2 (1) - (1)
Reclassification - - -
Minorities buy in - 10 10
Minorities bought out - (3) (3)
Other 8 - 8
At 30 June 2009 2,353 394 2,747
Notes:
1 Other reserves include the share-based payments, cumulative translation
adjustment, available-for-sale, cash flow hedge, post-retirement benefit
obligation, merger and other sundry reserves.
2 The treasury shares purchased represents the cost of shares in Mondi plc and
Mondi Limited purchased in the market and held by the Mondi Employee Share
Trust and the Mondi Incentive Schemes Trust, respectively, to satisfy options
under the Group`s share options schemes. The number of ordinary shares held by
the Mondi Employee Share Trust and the Mondi Incentive Schemes Trust at 30 June
2009 was 7,113,962 and 259,334 shares respectively (at 30 June 2008: 8,417,103
and nil respectively, at 31 December 2008: 7,943,115 and 115,000 respectively)
at an average price of GBP4.03 and R33.24 per share, respectively (at 30 June
2008: GBP4.07 and Rnil per share respectively, at 31 December 2008: GBP3.95 and
R47.51 per share, respectively).
Notes to the condensed combined and consolidated financial
information
1 Basis of preparation
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 International Financial
Reporting Standards (IFRSs).
The condensed combined and consolidated Half-yearly financial information for
the six months ended 30 June 2009 has been prepared in accordance with IAS
34,`Interim Financial Reporting`. It should be read in conjunction with the
Group`s annual financial statements for the year ended 31 December 2008, which
have been prepared in accordance with all applicable IFRSs. There are no
differences for the Group in applying IFRSs as issued by the International
Accounting Standards Board and as endorsed by the European Union (EU).
Consequently, the Group`s annual financial statements for the year ended 31
December 2008 are also compliant with IFRSs as endorsed by the EU. The
financial statements have been prepared on a going concern basis. This is
discussed in the Group performance overview under the heading `Going concern`.
The information for the year ended 31 December 2008 does not constitute
statutory accounts as defined by section 240 of the Companies Act 1985 of the
United Kingdom. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditors` report was not qualified
and did not contain statements under Section 237(2) or (3) of the Companies Act
1985.
2 Accounting policies
The same accounting policies, methods of computation and presentation have been
followed in the preparation of the condensed combined and consolidated
financial statements as were applied in the preparation of the Group`s annual
financial statements for the year ended 31 December 2008. In addition the Group
has implemented the revised IAS 1 `Presentation of Financial Statements` and
IFRS 8 `Operating Segments` for its interim reporting. Both standards became
effective on 1 January 2009.
The impacts of the changes to IAS 1 are of a presentation and disclosure nature
only, with the most significant changes being:
The replacement of the `statement of recognised income and expense` with a
`statement of comprehensive income` which discloses information on a gross
rather than a net basis and also reconciles the profit or loss for the period
to the total comprehensive income for the period.
The presentation of a complete statement of changes in equity as a primary
statement rather than a note to the financial statements.
There is no impact on the financial results disclosed.
IFRS 8 results in additional disclosure of segmental information, but the
reportable segments remain unchanged.
3 Seasonality
The seasonality of the Group`s operations does not impact significantly on the
condensed combined and consolidated financial statements.
4 Operating segments
Identification of the Group`s externally reportable operating segments
The Group`s externally reportable segments reflect the internal reporting
structure of the Group, which is the basis on which resource allocation
decisions are made by management in the attainment of strategic objectives. The
Group operates under two primary geographic regions reflecting its South
African activities and assets, and its international, principally European,
activities and assets. These broad geographic regions are further split by
product segments reflecting the management of the Group. In addition the Group
manages Mondi Packaging South Africa and the Merchant and Newsprint businesses
separately and therefore these have been presented as separate segments.
Operating segment revenues
Internal and external segment revenues are presented, and reconciled to Group
revenue, as follows:
(Reviewed)
Six months
ended 30 June
2009
Segment Internal External
revenue revenue revenue
EUR million
Europe & International
Uncoated Fine Paper 680 (62) 618
Corrugated 527 (16) 511
Bags & Specialities 893 (12) 881
Intra-segment elimination (37) 37 -
Total Europe & International 2,063 (53) 2,010
South Africa
Uncoated Fine Paper 197 (64) 133
Containerboard 66 (63) 3
Intra-segment elimination (14) 14 -
Total South Africa 249 (113) 136
Mondi Packaging South Africa 227 (13) 214
Merchant and Newsprint 254 - 254
Corporate and other businesses - - -
Segments total 2,793 (179) 2,614
Inter-segment elimination (179) 179 -
Group total 2,614 - 2,614
(Reviewed)
Six months
ended 30
June 2008
Segment Internal External
revenue revenue revenue
EUR million
Europe & International
Uncoated Fine Paper 846 (92) 754
Corrugated 830 (34) 796
Bags & Specialities 1,121 (10) 1,111
Intra-segment elimination (55) 55 -
Total Europe & International 2,742 (81) 2,661
South Africa
Uncoated Fine Paper 221 (122) 99
Containerboard 63 (62) 1
Intra-segment elimination (10) 10 -
Total South Africa 274 (174) 100
Mondi Packaging South Africa 223 (14) 209
Merchant and Newsprint 293 - 293
Corporate and other businesses - - -
Segments total 3,532 (269) 3,263
Inter-segment elimination (269) 269 -
Group total 3,263 - 3,263
(Audited)
Year
ended 31
December
2008
Segment Internal External
revenue revenue revenue
EUR million
Europe & International
Uncoated Fine Paper 1,565 (174) 1,391
Corrugated 1,555 (58) 1,497
Bags & Specialities 2,138 (22) 2,116
Intra-segment elimination (99) 99 -
Total Europe & International
5,159 (155) 5,004
South Africa
Uncoated Fine Paper 474 (174) 300
Containerboard 134 (132) 2
Intra-segment elimination (21) 21 -
Total South Africa 587 (285) 302
Mondi Packaging South Africa 474 (27) 447
Merchant and Newsprint 593 (1) 592
Corporate and other businesses - - -
Segments total 6,813 (468) 6,345
Inter-segment elimination (468) 468 -
Group total 6,345 - 6,345
4 Operating segments (continued)
Operating segment operating profit
Segment operating profits are presented, and reconciled to Group profit/(loss)
before tax, as follows:
Segment
operating
profit before
special
items1
(Reviewed) (Reviewed) (Audited)
Year ended
31
Six months Six months December
ended 30 ended 30
EUR million June 2009 June 2008 2008
Europe & International
Uncoated Fine Paper 71 69 126
Corrugated 1 37 49
Bags & Specialities 36 109 159
Total Europe & International 108 215 334
South Africa
Uncoated Fine Paper 13 30 75
Containerboard 15 15 36
Total South Africa 28 45 111
Mondi Packaging South Africa 11 14 28
Merchant and Newsprint 8 10 7
Corporate and other businesses (17) (21) (39)
Segments total 138 263 441
Net profit/(loss) on disposals
(see note 5) - - -
Impairment of assets held for
sale (see note 5) - - -
Net income from associates 1 2 2
Net finance costs (see note 6) (58) (55) (159)
Group profit/(loss) before tax
and discontinued
operations 81 210 284
Segment
operating
profit/(loss)
after special
items1/2
(Reviewed) (Reviewed) (Audited)
Year ended
31
Six months Six months December
ended 30 ended 30
EUR million June 2009 June 2008 2008
Europe & International
Uncoated Fine Paper 71 42 98
Corrugated (10) 35 (62)
Bags & Specialities (13) 103 (58)
Total Europe & International 48 180 (22)
South Africa
Uncoated Fine Paper (6) 30 75
Containerboard 15 15 36
Total South Africa 9 45 111
Mondi Packaging South Africa 11 14 28
Merchant and Newsprint 8 10 7
Corporate and other businesses (17) (22) (41)
Segments total 59 227 83
Net profit/(loss) on disposals
(see note 5) 5 (3) (27)
Impairment of assets held for
sale (see note 5) (8) - (2)
Net income from associates 1 2 2
Net finance costs (see note 6) (58) (55) (159)
Group profit/(loss) before tax
and discontinued
operations (1) 171 (103)
Notes:
1 Management reviews underlying segment operating profit on a regular basis as
part of the resource allocation decision making process and the ongoing
assessment of segment performance. Accordingly, segment underlying operating
profits are presented here. Segment profits stated after operating special
items are also presented since the Group believes that this provides useful
additional information for the user of the Group`s condensed combined and
consolidated financial statements.
2 Special items are disclosed per operating segment in note 5.
Balance sheet
Segment assets, liabilities and net assets are presented, and reconciled to
their respective Group totals, as follows:
(Reviewed)
As at 30
June 2009
Segment Segment Net segment
assets1 liabilities 2 assets
EUR million
Europe & International
Uncoated Fine Paper 1,640 (174) 1,466
Corrugated 1,044 (207) 837
Bags & Specialities 1,585 (268) 1,317
Intra-segment elimination (25) 25 -
Total Europe & International 4,244 (624) 3,620
South Africa
Uncoated Fine Paper 834 (100) 734
Containerboard 152 (18) 134
Intra-segment elimination (3) 3 -
Total South Africa 983 (115) 868
Mondi Packaging South Africa 438 (96) 342
Merchant and Newsprint 290 (72) 218
Corporate and other
businesses 7 (1) 6
Inter-segment elimination (97) 97 -
Segments total 3 5,865 (811) 5,054
Unallocated:
Investment in associates 8 - 8
Deferred tax assets/(liabilities) 43 (329) (286)
Other non-operating
assets/(liabilities)4 239 (631) (392)
Group trading capital employed 6,155 (1,771) 4,384
Financial asset investments 24 - 24
Net debt5 171 (1,832) (1,661)
Group net assets 6,350 (3,603) 2,747
(Reviewed)
As at 30
June 2008
Net
Segment Segment segment
assets 1 liabilities 2 assets
EUR million
Europe & International
Uncoated Fine Paper 1,605 (200) 1,405
Corrugated 1,356 (247) 1,109
Bags & Specialities 1,965 (313) 1,652
Intra-segment elimination (30) 30 -
Total Europe & International 4,896 (730) 4,166
South Africa
Uncoated Fine Paper 765 (99) 666
Containerboard 138 (15) 123
Intra-segment elimination (2) 2 -
Total South Africa 901 (112) 789
Mondi Packaging South Africa 385 (77) 308
Merchant and Newsprint 330 (82) 248
Corporate and other
businesses 5 (2) 3
Inter-segment elimination (110) 110 -
Segments total 3 6,407 (893) 5,514
Unallocated:
Investment in associates 7 - 7
Deferred tax assets/(liabilities) 39 (313) (274)
Other non-operating
assets/(liabilities)4 244 (569) (325)
Group trading capital employed 6,697 (1,775) 4,922
Financial asset investments 25 - 25
Net debt5 152 (1,807) (1,655)
Group net assets 6,874 (3,582) 3,292
(Audited)
As at 31
December
2008
Net
Segment Segment segment
assets 1 liabilities 2 assets
EUR million
Europe & International
Uncoated Fine Paper 1,589 (177) 1,412
Corrugated 1,171 (241) 930
Bags & Specialities 1,632 (315) 1,317
Intra-segment elimination (76) 76 -
Total Europe & International 4,316 (657) 3,659
South Africa
Uncoated Fine Paper 720 (80) 640
Containerboard 139 (19) 120
Intra-segment elimination (2) 2 -
Total South Africa 857 (97) 760
Mondi Packaging South Africa 371 (70) 301
Merchant and Newsprint 283 (87) 196
Corporate and other
businesses 13 (3) 10
Inter-segment elimination (101) 101 -
Segments total 3 5,739 (813) 4,926
Unallocated:
Investment in associates 5 - 5
Deferred tax assets/(liabilities) 36 (292) (256)
Other non-operating
assets/(liabilities)4 307 (615) (308)
Group trading capital employed 6,087 (1,720) 4,367
Financial asset investments 19 - 19
Net debt5 155 (1,845) (1,690)
Group net assets 6,261 (3,565) 2,696
Notes:
1 Segment assets are operating assets and consist of property, plant and
equipment, intangible assets, forestry assets, retirement benefits surplus,
inventories and operating receivables.
2 Segment liabilities are operating liabilities and consist of non-interest
bearing current liabilities, provisions and provisions for post-retirement
benefits.
3 Management reviews net segment assets on a regular basis as part of the
resource allocation decision making process and the ongoing assessment of
segment performance. Accordingly, net segment assets are presented here,
together with segment assets, as required by IFRS 8. Segment liabilities are
also presented since the Group believes that this provides useful additional
information to the user of the Group`s condensed combined and consolidated
financial statements.
4 Other non-operating assets consist of derivative assets, current income tax
receivables, other non-operating receivables, assets held for sale. Other
non-operating liabilities consist of derivative liabilities, non-operating
provisions, current income tax liabilities, other non-operating liabilities and
liabilities directly associated with assets held for sale.
5 Overdrafts are included in borrowings.
An analysis of the Group`s external revenues attributed to the countries, where
material, and the continents in which external customers are located, is
presented as follows:
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
30 June 30 June
2009 2008 31 December 2008
EUR million
Revenues
South Africa 291 284 616
Rest of Africa 103 133 251
Western Europe 1,185 1,552 2,932
Emerging Europe 526 688 1,326
Russia 188 224 430
North America 79 97 183
South America 9 15 31
Asia and
Australia 233 270 576
Group total 2,614 3,263 6,345
An analysis of the Group`s external revenues attributed to the countries, where
material, and the continents from which revenues are derived, is presented as
follows:
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
30 June 30 June
EUR million 2009 2008 31 December 2008
Revenues
South Africa 467 470 1,015
Rest of Africa 5 6 15
Western Europe 1,071 1,475 2,772
Emerging Europe 687 895 1,691
Russia 251 282 569
North America 54 58 120
Asia and
Australia 79 77 163
Group total 2,614 3,263 6,345
An analysis of the Group`s segment assets, liabilities and net assets
attributed to the countries, where material, and the continents in which assets
and liabilities are located, is presented as follows:
(Reviewed)
As at 30 June 2009
Segment Segment Net segment
assets liabilities assets
EUR million
South Africa 1,388 (189) 1,199
Rest of Africa 14 (4) 10
Western Europe total 1,814 (359) 1,455
Emerging Europe total 1,707 (179) 1,528
Russia 736 (41) 695
North America 78 (9) 69
South America - - -
Asia and Australia 128 (30) 98
Group total 5,865 (811) 5,054
(Reviewed)
As at 30 June 2008
Net
Segment Segment segment
assets liabilities assets
EUR million
South Africa 1,266 (141) 1,125
Rest of Africa 12 (4) 8
Western Europe total 2,204 (374) 1,830
Emerging Europe total 2,132 (282) 1,850
Russia 576 (40) 536
North America 97 (12) 85
South America - - -
Asia and Australia 120 (40) 80
Group total 6,407 (893) 5,514
(Audited)
As at 31 December 2008
Net
Segment Segment segment
assets liabilities assets
EUR million
South Africa 1,195 (152) 1,043
Rest of Africa 11 (1) 10
Western Europe total 1,993 (392) 1,601
Emerging Europe total 1,700 (190) 1,510
Russia 618 (33) 585
North America 86 (11) 75
South America - - -
Asia and Australia 136 (34) 102
Group total 5,739 (813) 4,926
5 Special items
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended 31
EUR million 30 June 2009 30 June 2008 December 2008
Operating special items
Asset impairments
Uncoated Fine Paper
(Europe &
International) - - (1)
Corrugated (Europe
& International) (3) - (28)
Bags & Specialities
(Europe &
International) (14) - (70)
Uncoated Fine Paper
(South Africa) (19) - -
Total asset
impairments (36) - (99)
Restructuring and
closure costs
Restructuring and
closure costs
excluding related
personnel costs
Uncoated Fine Paper
(Europe &
International) - (18) (15)
Corrugated (Europe
& International) (3) - (1)
Bags & Specialities
(Europe &
International) (26) (3) (8)
Personnel costs
relating to
restructuring
Uncoated Fine Paper
(Europe &
International) - (8) (8)
Corrugated (Europe
& International) (3) - (6)
Bags & Specialities
(Europe &
International) (8) (2) (18)
Total restructuring
and closure costs (40) (31) (56)
Goodwill impairments
Corrugated (Europe
& International) - - (74)
Bags & Specialities
(Europe &
International) - - (120)
Total goodwill
impairments - - (194)
Demerger
arrangements
Uncoated Fine Paper
(Europe &
International) - (1) (4)
Corrugated (Europe
& International) (2) (2) (2)
Bags & Specialities
(Europe &
International) (1) (1) (1)
Corporate and other
businesses - (1) (2)
Total demerger
arrangements (3) (5) (9)
Total operating
special items (79) (36) (358)
Profit/(loss) on
disposals
Corrugated (Europe
& International) 5 (3) (11)
Bags & Specialities
(Europe &
International) - - (16)
Net profit/(loss)
on disposal 5 (3) (27)
Asset impairment of
assets held for
sale
Corrugated (Europe
& International) (8) - (2)
Total non-operating
special items (3) (3) (29)
Total special items
before tax and
minority interests (82) (39) (387)
Taxation 4 - 4
Total special items
attributable to
equity holders (78) (39) (383)
Operating special items
The sharp decline in demand experienced in a number of markets, together with
the recognition that we are in a prolonged global economic downturn has
resulted in management taking a number of actions.
Uncoated Fine Paper (South Africa)
In response to the continued difficult trading conditions, in particular the
weak export sales margins on uncoated fine paper due to a combination of the
strong local currency and softening export prices, the proposed mothballing of
the 12,000 tonnes per annum PM32 paper machine at Merebank has been announced
resulting in an impairment of EUR19 million.
Corrugated
Given the continued difficult trading conditions in the Corrugated Packaging
sector Mondi responded by closing, or restructuring, certain high cost
operations. This has resulted in closure costs of EUR6 million and asset
impairment costs of EUR3 million.
Bags & Specialities
Significant market related down time has been taken due to overcapacity created
by a significant slowdown in demand. Various restructuring initiatives have
been implemented in response to the lower demand environment. As a result the
Group has incurred restructuring and closure costs of EUR34 million, and asset
impairment costs of EUR14 million.
Demerger arrangements
Equity settled demerger arrangements for senior management have also resulted
in additional share based payments of EUR3 million.
Non-operating special items
The Group disposed of its interest in four corrugated operations in France for
a consideration of EUR51 million at a profit of EUR5 million. The Group has
impaired the EUR8 million assets of the Cartonstrong corrugated plant in Italy
that is reflected as held for sale in the balance sheet.
6 Net finance costs
(Reviewed) (Reviewed) (Audited)
Six months Six months
ended 30 June ended 30 June Year ended 31
December 2008
2009 2008
EUR million
Investment income
Interest and other
financial income 5 8 24
Expected return on
defined benefit
arrangements 8 10 20
Foreign currency
(losses)/gains1 (2) 1 (28)
Impairment
reversal/(charge) of
financial assets
(excluding trade
receivables) 2 - (1)
Total investment income 13 19 15
Financing costs
Interest on bank loans,
overdrafts and finance
leases 2 (90) (67) (170)
Interest on defined
benefit arrangements (12) (13) (28)
Total interest expense (102) (80) (198)
Less: interest capitalised 31 6 24
Total financing costs (71) (74) (174)
Net finance costs (58) (55) (159)
Notes:
1 Net of fair value movements attributable to forward foreign exchange
contracts.
2 Net of fair value movements attributable to interest rate swap contracts.
7 Taxation charge
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
30 June 30 June 31 December
EUR million 2009 2008 2008
United Kingdom
taxation - - (5)
Overseas taxation 23 55 64
Current tax
(including tax on
special items) 23 55 59
Deferred taxation - 6 19
Total tax charge 23 61 78
The Group`s estimated effective annual rate of taxation before special items
for the six months ended 30 June 2009 is 34% (six months ended 30 June 2008:
29%).
IAS 1 requires income from associates to be presented net of tax on the face of
the condensed combined and consolidated income statement. The Group`s share of
its associates` tax charge is therefore not presented within the Group`s total
tax charge.The associates` tax charge included within `Net income from
associates` for the six months ended 30 June 2009 is EUR0.5 million (six months
ended 30 June 2008: EUR0.5 million, year ended 31 December 2008: EUR1 million).
8 Earnings per share
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended 31
EUR million 30 June 2009 30 June 2008 December 2008
(Loss)/profit for
the financial
period/year
attributable to
equity holders
Basic EPS (7.1) 17.1 (41.6)
Diluted EPS (7.1) 3 16.9 (41.6) 3
Underlying earnings
for the financial
period/year 1
Basic EPS 8.3 24.8 33.9
Diluted EPS 8.1 24.4 33.4
Headline
(loss)/earnings for
the financial
period/year 2
Basic EPS (0.8) 18.3 20.3
Diluted EPS (0.8) 18.0 20.0
Notes:
1 The Boards believe 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 Listings
Requirements. Headline earnings has been calculated in accordance with
Circular8/2007, `Headline Earnings`, as issued by the South African Institute
of Chartered Accountants. Please see the reconciliation presented below.
3 Diluted EPS is consistent with Basic EPS as the impact of potential ordinary
shares is anti-dilutive.
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
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended 31
30 June 2009 30 June 2008 December 2008
EUR million
(Loss)/profit for
the financial
period/year
attributable to
equity holders (36) 87 (211)
Special items:
operating 79 36 358
Net (profit)/loss
on disposals (5) 3 27
Impairment of
assets held for
sale 8 - 2
Related tax (4) - (4)
Underlying earnings
for the financial
period/year 42 126 172
Profit on disposal
of tangible fixed
assets (4) - (6)
Special items:
demerger
arrangements (3) (5) (9)
Special items:
restructuring and
closure cost (40) (28) (56)
Related tax 1 - 2
Headline
(loss)/earnings for
the financial
period/year (4) 93 103
8 Earnings per share (continued)
Number of shares
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
30 June 30 June 31 December
EUR million 2009 2008 2008
Basic number of
ordinary shares outstanding 1 507 508 507
Effect of dilutive
potential ordinary shares 2 12 8 8
Diluted number of ordinary
shares outstanding 519 516 515
Notes:
1 The basic number of ordinary shares outstanding represents the weighted
average number in issue for Mondi Limited and Mondi plc 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, net of treasury shares, on the assumption of
conversion of all potentially dilutive ordinary shares.
9 Dividends
Dividends paid to the equity holders of Mondi Limited and Mondi plc are
presented on a combined basis.
(Reviewed) (Reviewed) (Audited)
Six months Six months Year ended
ended 30 ended 30 31 December
EUR million June 2009 June 2008 2008
Amounts recognised as
distributions to equity holders
Final and interim dividends paid 26 80 38
Amounts proposed as distributions
to equity holders1
Proposed interim and final
dividends 13 40 26
Full year dividend paid and
proposed 64
(Reviewed) (Reviewed) (Audited)
Six months Six months Year ended
ended 30 ended 30 31 December
EUR cents per share June 2009 June 2008 2008
Amounts recognised as
distributions to equity holders
Final and interim dividend paid 5.0 15.7 7.7
Amounts proposed as distributions
to equity holders
Interim and final dividends 2.5 7.7 5.0
Full year dividend paid and
proposed 12.7
The interim dividend for the year ending 31 December 2009 of 2.5 euro cents per
ordinary share will be paid on 15 September 2009 to Mondi Limited and Mondi plc
ordinary shareholders on the relevant registers on 28 August 2009. The dividend
will be paid from distributable reserves of Mondi Limited and of Mondi plc, as
presented in the respective company annual financial statements for the year
ended 31 December 2008.
9 Dividends (continued)
The interim dividend for the year ending 31 December 2009 will be paid in
accordance with the following time table:
Mondi Limited Mondi plc
Last date to trade shares
cum-dividend
JSE Limited 21 August 2009 21 August 2009
London Stock Exchange Not applicable 25 August 2009
Shares commence trading
ex-dividend
JSE Limited 24 August 2009 24 August 2009
London Stock Exchange Not applicable 26 August 2009
Record date
JSE Limited 28 August 2009 28 August 2009
London Stock Exchange Not applicable 28 August 2009
Last date for Dividend
Reinvestment Plan (DRIP)
elections by Central
Securities Depository Participants 2 September 2009 2 September 2009
Last date for DRIP elections to
UK Registrar and South African
Transfer
Secretaries by shareholders of
Mondi Limited and Mondi plc 3 September 2009 3 September 2009
Payment date
South African Register 15 September 2009 15 September 2009
UK Register Not applicable 15 September 2009
Depositary Interest holders
(dematerialised DIs) 18 September 2009 Not applicable
Holders within the Equiniti
Corporate Nominee 22 September 2009 Not applicable
DRIP purchase settlement dates 22 September 2009 18 September 2009 1
Currency conversion dates
ZAR/euro 5 August 2009 5 August 2009
Euro/sterling Not applicable 7 September 2009
Note:
1 22 September 2009 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 24 August 2009 and 30
August 2009, both dates inclusive, nor may transfers between the UK and South
African registers of Mondi plc take place between 19 August 2009 and 31 August
2009, both dates inclusive.
10 Net debt
The Group`s net debt position, excluding disposal groups is as follows:
Cash and
cash Debt due Debt due
equivalents within one after one Total net
EUR million 1 year2 year debt
Balance at 1 January
2008 59 (332) (1,234) (1,507)
Cash flow (90) 143 (285) (232)
Business combinations - (3) (5) (8)
Disposal of
businesses - 4 16 20
Reclassifications - (42) 42 -
Currency movements 1 6 65 72
Closing balance at
30 June 2008 (30) (224) (1,401) (1,655)
Cash flow 114 71 (258) (73)
Business combinations 3 - (32) (29)
Disposal of
businesses - 1 4 5
Reclassifications (2) (173) 173 (2)
Currency movements (10) 27 47 64
Closing balance at
31 December 2008 75 (298) (1,467) (1,690)
Cash flow - 81 6 87
Business combinations - - 2 2
Disposal of
businesses - 8 - 8
Reclassifications - (112) 112 -
Currency movements 4 (22) (50) (68)
Closing balance at
30 June 2009 79 (343) (1,397) (1,661)
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 30
June 2009, short-term borrowings on the condensed combined and consolidated
balance sheet of EUR435 million (at 30 June 2008: EUR406 million, at 31
December 2008: EUR378 million) include EUR92 million of overdrafts (at 30 June
2008: EUR182 million, at 31 December 2008: EUR80 million).
The following table shows the amounts available to draw down on the Group`s
committed loan facilities.
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
EUR million 30 June 2009 30 June 2008 31 December 2008
Expiry date
In one year or
less 178 154 167
In more than one
year 895 934 895
Total credit
available 1,073 1,088 1,062
11 Capital expenditure cash payments
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
EUR million 30 June 2009 30 June 2008 31 December 2008
Europe &
International
Uncoated Fine
Paper 122 130 266
Corrugated 108 83 199
Bags &
Specialities 42 47 136
Sub-total 272 260 601
South Africa
Uncoated Fine
Paper 12 4 37
Containerboard 1 19 7
Sub-total 13 23 44
Mondi Packaging
South Africa 6 25 38
Merchant and
Newsprint 2 5 10
Total1 293 313 693
Note:
1 Excludes business combinations, interest capitalised and the purchase of
intangible assets.
12 Earnings before interest, tax, depreciation and amortisation (EBITDA) A
reconciliation of cash inflows from operations to EBITDA is presented as
follows:
(Reviewed) (Reviewed) (Audited)
Six months Six months Year ended
ended 30 ended 30 31 December
June 2009 June 2008 2008
EUR million
Cash inflows from operations 392 310 795
Share option expense (4) (6) (9)
Fair value gains on forestry
assets 15 24 46
Cost of felling (26) (22) (43)
Decrease in provisions and post
employment benefits 9 11 21
(Decrease)/increase in inventories (81) 11 (26)
(Decrease)/increase in operating
receivables (19) 87 (106)
Decrease in operating payables 1 28 105
Profit on disposal of assets 4 - 6
Add back cash effect of operating
special items 18 - 19
Other adjustments (1) 13 6
EBITDA1 308 456 814
Note:
1 EBITDA is operating profit before special items, depreciation and
amortisation.
EBITDA by business segment is presented as follows:
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
EUR million 30 June 2009 30 June 2008 31 December 2008
Europe &
International
Uncoated Fine
Paper 117 122 221
Corrugated 32 78 131
Bags &
Specialities 89 164 271
Sub-total 238 364 623
South Africa
Uncoated Fine
Paper 29 48 109
Containerboard 19 19 43
Sub-total 48 67 152
Mondi Packaging
South Africa 23 27 52
Merchant and
Newsprint 16 18 24
Corporate and
other businesses (17) (20) (37)
EBITDA 308 456 814
EBITDA is stated before special items and is reconciled to `Total profit from
operations and associates` as follows:
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended
30 June 30 June 31 December
EUR million 2009 2008 2008
Total profit from
operations and
associates 57 226 56
Operating special
items (excluding
associates) 79 36 358
Net (profit)/loss on
disposals (excluding
associates) (5) 3 27
Impairment of assets
held for sale 8 - 2
Depreciation and
amortisation 170 193 373
Share of associates`
net income (1) (2) (2)
EBITDA 308 456 814
13 Business combinations
There are no material business combinations for the six months ended 30 June
2009.
14 Write-down of inventories to net realisable value
The write-downs of inventories to net realisable value, recognised as an
expense for the six months ended 30 June 2009, total EUR11 million (2008: EUR9
million). The aggregate reversal of previous write-downs, recognised as a
reduction in the amount of inventories expensed for the six months ended 30
June 2009, total EUR2 million (2008: EUR1 million).
15 Retirement benefits
There were no significant curtailments, settlements, or other significant
one-time events relating to the Group`s defined benefit schemes,
post-retirement medical plans or statutory retirement obligations during the
six months ended 30 June 2009.
Material schemes
The Group`s material defined benefit scheme and post-retirement medical plan
liabilities were re-assessed for the half-year ended 30 June 2009. The net
change in assumptions from those applied as at 31 December 2008 resulted in an
immaterial impact on the present value of the liabilities. The assets backing
the defined benefit scheme liabilities were updated to reflect their market
values as at 30 June 2009. Any difference between the expected return on assets
and the actual return on assets has been recognised as an actuarial experience
movement within equity.
Remaining Group defined benefit schemes and unfunded statutory obligations
The remaining Group defined benefit schemes and unfunded statutory retirement
obligations are calculated on a year-to-date basis. The calculations performed
make use of the actuarial and financial assumptions published in the Group`s
annual financial statements for the year ended 31 December 2008. Although
certain of these assumptions require adjustment to reflect market fluctuations
during the half-year ended 30 June 2009, the net effect of applying these
adjustments would have been immaterial.
16 Capital commitments
(Reviewed) (Reviewed) (Audited)
As at As at As at
EUR million 30 June 2009 30 June 2008 31 December 2008
Contracted for but not
provided 258 421 405
Approved, not yet
contracted for 136 436 219
17 Related party transactions
The Group has a related party relationship with its associates and joint
ventures. 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.
Joint
EUR million Ventures Associates
Six months ended/as at 30 June 2009
Sales to related parties 5 -
Purchases from related parties - (13)
Loans to related parties 15 -
Receivables due from related parties 7 -
Payables due to related parties - (2)
Six months ended/as at 30 June 2008
Sales to related parties 5 -
Purchases from related parties - (18)
Loans to related parties 13 -
Receivables due from related parties 5 -
Year ended/as at 31 December 2008
Sales to related parties 11 -
Purchases from related parties (1) (32)
Loans to related parties 10 -
Receivables due from related parties 7 1
Cyril Ramaphosa, joint chairman of Mondi, has a 29.82% (at 30 June 2008:
39.96%, at 31 December 2008: 32.7%) 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, Shanduka Coal (Pty) Limited and Mondi
Packaging South Africa (Pty) Limited. Fees of EUR178,285 (six months ended 30
June 2008: EUR166,000, year ended 31 December 2008: EUR340,000) and EURnil (six
months ended 30 June 2008: EUR303,000, year ended 31 December 2008: EUR392,000)
were paid to Shanduka Advisors (Pty) Limited and Shanduka Resources (Pty)
Limited respectively for management services provided to the Group during the
six months ended 30 June 2009. Shanduka Packaging (Pty) Limited and Shanduka
Newsprint (Pty) Limited have also provided a shareholder`s loan to the Group.
The balance outstanding at 30 June 2009 was EUR15.5 million (at 30 June 2008:
EUR14 million, at 31 December 2008: EUR12.9 million) and EUR8.5 million (at 30
June 2008: EUR7 million, at 31 December 2008: EUR7.1 million), respectively. In
the normal course of business, and on an arm`s length basis, the Group
purchased supplies from Kangra Coal (Pty) Limited totaling EUR4.2 million (six
months ended 30 June 2008: EUR6 million, year ended 31 December 2008: EUR12
million) and from Shanduka Coal (Pty) Limited totaling EUR0.5 million (six
months ended 30 June 2008: EURnil, year ended 31 December 2008: EURnil) during
the period. EUR0.5 million (at 30 June 2008: EUR1 million, at 31 December 2008:
EUR1 million) remains outstanding on these purchases at 30 June 2009.
Dividends received from associates for the six months ended 30 June 2009
totalling EUR0.4 million (six months ended 30 June 2008: EURnil, year ended 31
December 2008: EUR2 million), as disclosed in the condensed combined and
consolidated cash flow statement.
18 Asset values per share
Asset values per share are disclosed in accordance with the JSE Listings
Requirements. Net asset value per share is defined as net assets divided by the
combined number of shares in issue as at the reporting balance sheet date, less
treasury shares held as at the same date. 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 the reporting balance sheet date, less treasury shares
held as at the same date.
(Reviewed) (Reviewed) (Audited)
As at As at As at
30 June 2009 30 June 2008 31 December 2008
Net asset value per
share (EUR) 5.42 6.51 5.34
Tangible net asset value
per share (EUR) 4.79 5.47 4.70
19 Events occurring after 30 June 2009
With the exception of the proposed interim dividend for 2009, as disclosed in
note 9, there have been no material reportable events since 30 June 2009.
Production statistics
Six months ended 30
June 2009
Europe & International
Containerboard Tonnes 836,456
Kraft paper Tonnes 383,373
Corrugated board and boxes MmSquared
924
Bag converting m units 1,655
Coating and release liners MmSquared
1,258
Uncoated fine paper Tonnes 709,433
Newsprint Tonnes 99,390
Total hardwood pulp Tonnes 513,666
Total softwood pulp Tonnes 756,960
External hardwood pulp Tonnes 17,098
External softwood pulp Tonnes 98,880
South Africa
Containerboard Tonnes 120,989
Uncoated fine paper Tonnes 179,325
Wood chips Bone dry tonnes 197,436
Total hardwood pulp Tonnes 305,763
Total softwood pulp Tonnes 55,394
External hardwood pulp Tonnes 101,287
Mondi Packaging South Africa
Packaging papers Tonnes 139,170
Corrugated board and boxes MmSquared
177
Total hardwood pulp Tonnes 37,583
Total softwood pulp Tonnes 22,057
Newsprint Joint Ventures
(attributable share)
Newsprint Tonnes 158,483
Aylesford Tonnes 96,262
Shanduka Tonnes 62,221
Total softwood pulp Shanduka Tonnes 36,450
Six months ended 30
June 2008
Europe & International
Containerboard Tonnes 965,319
Kraft paper Tonnes 461,754
Corrugated board and boxes MmSquared
1,143
Bag converting m units 1,902
Coating and release liners MmSquared
1,414
Uncoated fine paper Tonnes 754,364
Newsprint Tonnes 97,821
Total hardwood pulp Tonnes 607,356
Total softwood pulp Tonnes 970,356
External hardwood pulp Tonnes 38,171
External softwood pulp Tonnes 105,299
South Africa
Containerboard Tonnes 117,449
Uncoated fine paper Tonnes 229,938
Wood chips Bone dry tonnes 364,247
Total hardwood pulp Tonnes 264,003
Total softwood pulp Tonnes 50,321
External hardwood pulp Tonnes 13,214
Mondi Packaging South Africa
Packaging papers Tonnes 146,179
Corrugated board and boxes MmSquared
183
Total hardwood pulp Tonnes 40,147
Total softwood pulp Tonnes 34,090
Newsprint Joint Ventures
(attributable share)
Newsprint Tonnes 163,753
Aylesford Tonnes 99,639
Shanduka Tonnes 64,114
Total softwood pulp Shanduka Tonnes 40,816
Year ended 31
December 2008
Europe & International
Containerboard Tonnes 1,926,829
Kraft paper Tonnes 814,187
Corrugated board and boxes MmSquared
2,104
Bag converting m units 3,536
Coating and release liners MmSquared
2,667
Uncoated fine paper Tonnes 1,452,058
Newsprint Tonnes 192,921
Total hardwood pulp Tonnes 1,012,470
Total softwood pulp Tonnes 1,620,155
External hardwood pulp Tonnes 126,479
External softwood pulp Tonnes 200,676
South Africa
Containerboard Tonnes 251,944
Uncoated fine paper Tonnes 416,509
Wood chips Bone dry tonnes 780,932
Total hardwood pulp Tonnes 595,449
Total softwood pulp Tonnes 106,390
External hardwood pulp Tonnes 139,235
Mondi Packaging South Africa
Packaging papers Tonnes 388,199
Corrugated board and boxes MmSquared
381
Total hardwood pulp Tonnes 82,554
Total softwood pulp Tonnes 43,090
Newsprint Joint Ventures (attributable
share)
Newsprint Tonnes 331,929
Aylesford Tonnes 200,540
Shanduka Tonnes 131,389
Total softwood pulp Shanduka Tonnes 86,464
Exchange rates Six months Six months Year ended
ended 30 June ended 30 June 31 December
2009 2008 2008
Closing rates against the
euro
South African rand 10.89 12.34 13.07
Pounds sterling 0.85 0.79 0.95
Polish zloty 4.45 3.35 4.15
Russian rouble 43.88 36.95 41.28
US dollar 1.41 1.58 1.39
Czech koruna 25.88 23.89 26.87
Average rates for the
period against the euro
South African rand 12.25 11.73 12.06
Pounds sterling 0.89 0.78 0.80
Polish zloty 4.47 3.49 3.52
Russian rouble 44.08 36.61 36.45
US dollar 1.33 1.53 1.47
Czech koruna 27.13 25.21 24.97
Glossary of financial terms
EBITDA Operating profit of subsidiaries and
joint ventures before special items,
depreciation, and amortisation.
EBITDA interest cover EBITDA divided by net debt finance charges
(before special financing items).
Gearing The ratio of net debt to total capital
employed.
Group revenue Total turnover of subsidiaries and
proportionate share of joint venture
turnover.
Headline earnings JSE listing measure, calculated in
accordance with Circular 8/2007, `Headline
Earnings`, as issued by the South African
Institute of Chartered Accountants.
Net debt A non-GAAP measure, comprising short
and medium-term borrowings and bank
overdrafts less cash and cash equivalents
and current financial asset investments.
Net segment assets Net segment assets are segment assets,
consisting of property, plant and
equipment, intangibles, forestry assets,
retirement benefit surplus, inventories
and operating receivables less segment
liabilities consisting of non-interest-
bearing current liabilities, restoration
and decommissioning provisions and
provisions for post-retirement benefits.
Operating margin Underlying operating profit divided by
Group revenue.
Reported (loss)/profit before tax Reported (loss)/profit before tax but
after special items
Return on capital employed (ROCE) This is trailing twelve month underlying
operating profit, including share of
associates` net earnings, divided by
trailing twelve month average trading
capital employed and for segments has been
extracted from management reports.
Capital employed is adjusted for impairments
in the year and spend on the two strategic
projects in Poland and Russia, which are not
yet in production.
Shareholders` funds Share capital, share premium, retained
profits and other reserves attributable to
equity holders of the parent companies.
Special items Those non-recurring financial items which
the Group believes should be separately
disclosed on the face of the combined and
consolidated income statement to assist in
understanding the underlying financial
performance achieved by the Group and its
businesses.
Total equity Shareholders` funds and minority interests
in equity.
Trading capital employed Net segment assets plus investment in
associates, deferred tax, and other non-
operating assets and liabilities excluding
financial investments.
Underlying earnings Net profit after tax before special items
attributable to equity holders of the
Group.
Underlying operating profit Operating profit of subsidiaries and joint
ventures before special items.
Underlying profit before tax Reported profit before tax and special
items.
Sponsor: UBS South Africa (Pty) Ltd
Date: 05/08/2009 08:00:07 Produced by the JSE SENS Department.
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