| Wed 5 Aug 2009, 9:23 | | MND/MNP - Mondi - Half-Yearly Report For The Six M |
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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)
