| Thu 6 May 2010, 12:07 | | MND/MNP - Mondi Limited/Mondi plc - Annual General |
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MND MNP
MND MNP
MND/MNP - Mondi Limited/Mondi plc - Annual General Meetings
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 notify
both the JSE Limited and the London Stock Exchange of matters required to be
disclosed under the JSE Listing Requirements and/or the Disclosure and Listing
Rules of the United Kingdom Listing Authority.
6 May 2010
MONDI LIMITED AND MONDI plc - ANNUAL GENERAL MEETINGS
ADDRESS TO SHAREHOLDERS BY THE JOINT CHAIRMEN AND CHIEF EXECUTIVE OFFICER
Cyril Ramaphosa, Joint Chairman, speaking from Johannesburg:
Good morning, ladies and gentlemen. On behalf of the boards of Mondi Limited
and Mondi plc, welcome to the third annual general meeting of the Mondi Group.
We are delighted that you have been able to join us here in Johannesburg and
there in London. Thanks once again to the marvel of technology, although we`re
on separate continents, David Williams and I, and our fellow board directors,
take great pleasure in being able to talk to you this morning, as one.
As you know, David Williams and I share the chair of Mondi Group and we would
both like to say a few words this morning about Mondi`s progress over the last
year. Your chief executive, David Hathorn, will then review the Group`s
performance and strategy in a little more detail as well as update you on the
Group`s interim management statement that we published earlier today. After
this we will be delighted, as a board, to take your questions. But first, let
me introduce you to your directors.
To my immediate left is Imogen Mkhize, an independent non-executive director.
Next to her is David Hathorn, your chief executive officer. And on his left is
Philip Laubscher, company secretary of Mondi Limited. Next to Philip is Andrew
King, your chief financial officer.
With David Williams in London, we have Colin Matthews, an independent non-
executive director and chairman of the DLC Sustainable Development Committee.
Anne Quinn, our senior independent non-executive director and chair of the DLC
Remuneration Committee. And beside her Carol Hunt, company secretary of Mondi
plc.
To David`s right, we have Peter Oswald, chief executive officer of the Europe &
International Division and, finally, John Nicholas independent director and
chairman of the DLC Audit Committee.
For the benefit of our new shareholders I should point out that, although the
dual listed company structure means that Mondi Limited in South Africa and Mondi
plc in the UK are separate corporate entities, each with its own board and
shareholders, Mondi operates as a single corporate group, managed as a single
economic enterprise. The two companies have the same board members and the same
management team. The DLC structure means that shareholders in each company fully
share in the performance of the Group as a whole.
You will not be surprised to hear me say that the challenging business
environment continued in 2009 and that difficult trading conditions persisted
for much of the year.
Mondi`s focused strategy and rigorous attention to operational efficiency
enabled us to emerge from the current economic downturn in good shape and well-
positioned to deliver attractive returns to our shareholders in the longer term.
Mondi remains a strong Group with a robust strategic and operational model. We
are a low-cost producer, fully integrated across the paper and packaging
process, adding value at every stage of the product chain, from forestry, pulp
and paper to the conversion of packaging papers into corrugated packaging and
industrial bags.
The strength of our competitive position, backed by a strong balance sheet, is
reflected in our long-term dividend policy and gives us the confidence to
declare a final dividend of 7 euro cents per share - with the equivalent paid in
South African rand. If approved, this will make a total dividend for the year
of 9.5 euro cents per share.
Before I hand over to David Williams, I would just like to highlight a few areas
in which we made particular progress last year.
Mondi employed an average of thirty one thousand people at 101 plants across 31
countries, with a particularly strong presence in central and eastern Europe,
Russia and South Africa. Often, we are the single largest employer in the area
in which we are located. This brings with it a great responsibility, which we
take very seriously. We want Mondi to be a sustainable, socially-responsible
business that makes a real and lasting contribution to every community within
which we operate.
We evaluate the economic and social impact of each of our operations on its
local community. This enables us to build tailored programmes that bring
tangible benefits to those communities. In 2009 we invested well over EUR9
million in community projects with a focus on health and education. We also made
charitable donations totaling EUR1.3 million.
Here in South Africa, we are a major supporter of the Government`s policy of
Broad-Based Black Economic Empowerment, which continues to influence many of our
employment and procurement practices. We also play an active role in helping to
reduce the prevalence of HIV/AIDS, through routine counselling and testing of
our employees.
But one of the most significant developments for us in South Africa was the
further progress we made on land restitution. The second set of land claims
involving seven communities in Kwa-Zulu Natal was successfully concluded. We
have developed a unique model, in close consultation with the South African
Ministry of Land Affairs, which provides a long-term, mutually beneficial and
sustainable solution to communities, government and the Group.
We have also taken steps to improve the working conditions in our forests
including making improvements in education and training, transport,
accommodation and the reintroduction of feeding schemes to make sure workers get
a nourishing meal every day. I am delighted that our Food for Forests programme
provides nutritious meals for about 9,500 forestry workers daily.
All of these developments and more are covered in detail in our Annual Report
and Sustainability Summary Report, additional copies of which are available
today - or you can download these from our web site.
With that, I`d like to hand over to my co-chairman, David Williams, in London.
David.
David Williams, Joint Chairman, speaking from London:
Thank you, Cyril. As Cyril said, although Mondi is a dual listed company
domiciled on two continents, it is a single group with a unified management.
This means that the boards comprise the same directors, with independent non-
executives in each, and those boards remain independent of the Executive
Committee, led by David Hathorn, which manages the Group on a day-to-day basis.
This enables your boards to impose the highest possible standards of financial
and operational control and to ensure that the key risks and performance
criteria of the business are diligently scrutinised and reviewed on your behalf.
Although Mondi is less than three years old as an independently listed group, I
am pleased to report that the boards are functioning to a very high standard.
Your directors provided clear and decisive direction in an extremely difficult
year, deploying their considerable skills and experience in support of the
executive team. The board committees were effectively led and did some
extremely good work during the year.
During 2009 there was a change of joint chairman when Sir John Parker
relinquished his roles as chairman and board member of Mondi Limited and Mondi
plc on 4 August 2009 following his appointment as chair of Anglo American plc. I
would like to extend our thanks to Sir John Parker for his contribution to Mondi
in the period leading up to its successful listing in 2007 and the first two
years as an independently listed group. We also welcomed John Nicholas as non
executive director to our Board.
We are satisfied that Mondi has in place the highest standards of governance
practice. But we do not rest on our laurels. The operation of the boards and
committees is regularly reviewed and the performances of the directors were
thoroughly evaluated in 2009, producing clear action plans for further
improvement in 2010.
As you will have read in our annual report, your directors took the opportunity
to visit as many of Mondi`s operations as possible in 2009, to see for ourselves
the working conditions of our employees and our contractors.
Safety remains at the top of your boards` agenda and we were pleased with our
progress in this area, particularly with the continuing reduction in lost time
through injury. However, we were saddened by the death of a forestry contractor
in our South African operation early in 2010. Clearly any fatality is
completely unacceptable.
We took steps immediately to identify causes and contributing factors and have
taken action to ensure that such an accident does not recur. We remain totally
committed to eliminating all injuries and achieving `zero harm` in our
operations.
Our focus on safety, of course, is only one part of our commitment to
sustainability across the Group. Every one of our sites is monitored against the
very demanding standards of our integrated sustainable development management
system and the DLC Sustainable Development Committee, under Colin Matthews`
chairmanship, receives timely and accurate data using MORIS - our Mondi
reporting and information system.
We are particularly pleased with our progress on sustainable forestry, resource
usage and emission reductions. All our forests have now been assessed for forest
stewardship council certification, with certification of the last outstanding
area in Russia set to be completed in the first half of 2010.
We have reported significant progress in reducing and optimising our resource
usage, in particular water and energy. More than half of our energy usage comes
from biomass (renewable energy sources).
Operating as we do in emerging markets where the effects of climate change are
likely to be exaggerated, we have given critical consideration both to our roles
in respect of climate change and to the impact of climate change on our Group
and our communities. During 2009 we reported a further reduction in CO2
emissions and participated in the Carbon Disclosure Project`s 2009 greenhouse
gas emission and climate change survey.
The positive role played by sustainably managed forests has been recognised in
the international climate change debate.
We had a 83% self-sufficiency rate in electricity production by the end of 2009.
Chemical emissions were further reduced across the board, with CO2 emissions
from fossil fuels down 12 per cent since 2004. You can read more about our
achievements in the sustainability section of our web site, where we report on
all these areas in full.
It is in times of economic difficulty that the commitment and talents of a
company`s management and employees are most rigorously tested. The people of
Mondi have shown resilience and commitment. I would, therefore, like to pay
tribute to the dedication and hard work of our thirty one thousand people around
the world, who have delivered an excellent performance in tough economic
conditions. The management, and in particular the chief executive and senior
leadership have been quick to react and wholehearted in their response to a
rapidly changing and uncertain global environment.
We have already proved that we can move quickly and decisively in response to
whatever the market might present us with and 2010 will be no different.
Looking further ahead, we believe the strategic advantage we have gained from
our leading market positions and high-quality low-cost asset base will ensure
that we emerge strongly from the current economic downturn and are well placed
to deliver attractive returns for our shareholders in the longer term. We will
continue to focus unwaveringly on operational efficiency, closely matching our
resources and capacity to market demand.
Now I`d like to hand back to South Africa and to your Chief Executive, David
Hathorn, who will expand on our performance in 2009 and also take you through
the highlights of our latest interim management statement, released earlier this
morning. David.
David Hathorn, Chief Executive Officer, speaking from Johannesburg:
Thank you, David. As your chairmen have said, 2009 continued to be both a
challenging and rewarding year for the Mondi Group. The impact of the global
recession on Mondi`s business was significant, with difficult trading conditions
prevailing particularly in the first half of 2009. These were first evident in
Europe in late 2008 and, following a delay of about six months, profitability in
South Africa was impacted.
European trading conditions improved as the year progressed, with the benefits
of price increases in key grades starting to take effect in the final quarter,
ensuring that Mondi`s performance for the year exceeded expectations.
Throughout this period, the Mondi Group has risen to the challenges we faced,
taking decisive actions to reduce capacity, lower the overall cost base and
optimise cash flows while still continuing to invest in our two major projects
in the lower-cost, high growth markets of Poland and Russia. As a result mondi
is now a better quality business than it was a year ago and we believe that we
are very well positioned to deliver enhanced shareholder value in the future.
The Mondi Group is pleased to have delivered financial and operating results for
the year that were ahead of expectations, with Group revenue of EUR5,257 million
and underlying operating profit of EUR294 million, although down by 17% and 33%
respectively compared to 2008, these figures still signify a very sound
performance given the difficult trading conditions.
In all, we delivered cost savings of EUR251 million, exceeding our target of
EUR180 million, we exited or mothballed 930 000 tonnes of high cost paper
capacity in just over two years and closed or sold 18 converting sites.
We exercised very tight control of working capital, producing inflows of two
hundred and forty eight million Euros and capital expenditure outside the two
major projects reduced to 63% of depreciation.
Thanks to the above actions, our balance sheet remained strong with a net debt
decline of EUR173 million to EUR1,517 million despite capital expenditure of
EUR300 million on the two major expansion projects in Poland and Russia.
We know that our shareholders are very pleased that the large price differential
that used to exist between the shares of Mondi Limited and Mondi plc on the
Johannesburg stock exchange is now a thing of the past.
As you know, earlier today we released our interim management statement. I would
like to take this opportunity to briefly summarise the main points of the
announcement.
We are trading in line with our expectations at the time of issuing the full
year results. The Group`s underlying operating profit in the first quarter 2010
was moderately above that of the fourth quarter 2009. This reflects a continued
improvement in the European trading environment, first witnessed in the fourth
quarter 2009, as well as the ongoing positive impact of the decisive actions
taken to restructure the cost base of the business during 2008 and 2009.
Results were significantly above the comparable period in the prior year.
Volumes in most areas of the business continue to recover, with first quarter
sales volumes reflecting an increase over the fourth quarter of the previous
year. Similarly, the upward momentum in selling prices in most of our key grades
seen in the fourth quarter 2009 has continued, with previously announced price
increases successfully implemented and maintained. A rising cost base due to
commodity input cost pressures has partially offset these revenue gains.
The Europe & International Division continued to perform well with underlying
operating profit for the first quarter moderately above the previous quarter
performance and well above the comparable period in the prior year.
The South Africa Division increased underlying operating profit from a very low
base in the previous quarter on the back of increased export selling prices but
remains under pressure from the strength of the rand. Results were down on the
comparable period in the prior year. Mondi Packaging South Africa`s operating
profit was down on the fourth quarter due to normal seasonal variations, but
above the comparable period in the prior year.
In line with Mondi`s strategy to strengthen its leading market position in
industrial and consumer bags in Europe, and further increase the forward
integration of kraft paper into bags, an agreement was concluded in April with
Smurfit Kappa Group (SKG) for the acquisition of its western European industrial
and consumer bag operations in France, Spain and Italy. As part of the same
transaction, Mondi sold all three of its corrugated box plants in the UK to SKG
thus concluding Mondi`s western European corrugated packaging and recycled
containerboard restructuring programme. The transaction was completed on 4 May
2010. The net funds received of EUR51 million were used to reduce the Group`s
net debt.
In early May 2010, an agreement was concluded to sell the central European paper
merchant, Europapier to the Heinzel Group for a consideration of EUR60 million
on a cash and debt free basis. The funds will be utilised to reduce Mondi`s net
debt. This disposal further enables the Group to focus on its core businesses.
The transaction is subject to approval by the relevant competition authorities.
During the period under review, Mondi successfully launched a EUR500 million, 7-
year Eurobond, further strengthening the Group`s already robust financial
position as evidenced by the long term corporate credit ratings received of Baa3
from Moody`s Investor Service and BB+ from Standard & Poor`s, both with a stable
outlook. The funds have been utilised to settle existing short and medium term
debt.
As expected, operating cash flows for the first quarter were negatively impacted
by an increase in working capital on the back of increased selling prices and
volumes, but remain strong.
The financial position of the Group at 31 March 2010 remained robust with net
assets moderately up on the back of higher working capital and exchange impacts
on translation into Euro. Following the launch of the Eurobond, the average
maturity of Group debt has increased to four years. Unutilised committed
borrowing facilities have also increased to approximately EUR1.4 billion.
The previously announced initiatives to curtail capital expenditure outside of
the major project in Russia are ongoing with benefits in cash flows clearly
evident.
The project to modernise Mondi`s mill in Syktyvkar is progressing well despite
severe weather conditions in December 2009 / January 2010. Management remains
confident of completing the project within the revised budget level of EUR545
million.
The current improvement in the trading environment is evident. Order inflows are
strong across all key grades, while selling prices continue to improve from the
lows seen in the third quarter 2009. However, costs are increasing, including
currency impacts, and demand in certain products may be benefitting from some
restocking.
The decisive actions taken to reduce costs and exit higher-cost capacity,
coupled with a high-quality, expanding low-cost asset base and strong financial
position, ensure Mondi is benefitting from these improving trading conditions.
In closing, I would like add my enormous thanks to our workforce. They have
demonstrated a resolute and focused commitment to Mondi during very difficult
times and have more than earned the Boards` gratitude.
About Mondi
Mondi is an international paper and packaging company, with production
operations across 31 countries and revenues of Euro5.3 billion in 2009. The
Group`s key operations are located in western and emerging Europe, Russia and
South Africa and employed 31,000 people on average in 2009.
Mondi is fully integrated across the paper and packaging process, from the
growing of wood and the manufacture of pulp and paper (including recycled
paper), to the conversion of packaging papers into corrugated packaging and
industrial bags.
The Group is principally involved in the manufacture of uncoated fine paper
(UFP), packaging paper and converted packaging products, as well as speciality
products.
Mondi is a dual listed company, with primary listings on the Johannesburg and
London stock exchanges under the ticker codes MND (JSE) and MNDI (LSE)
respectively. The Group has been recognised for its sustainability performance
through its inclusion in the FTSE4Good UK, Europe and Global indices in 2008 and
2009 and the JSE`s Socially Responsible Investment (SRI) Index in 2007, 2008 and
2009.
6 May 2010
Sponsor: UBS South Africa (Pty) Ltd
Date: 06/05/2010 12:00:02 Produced by the JSE SENS Department.
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