| Tue 10 Aug 2010, 9:24 | | MND / MNP - Mondi / Mondi Plc - Half-yearly result |
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MND MNP
MND MNP
MND / MNP - Mondi / Mondi Plc - Half-yearly results for the six months ended 30
June 2010
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.
Half-yearly results for the six months ended 30 June 2010
Financial summary
EUR million Six months Six months Half-yearly
ended 30 ended 30 change %
June 2010 June 2009
Group revenue 3,033 2,614 16
EBITDA1 405 308 31
Underlying operating profit2 222 138 61
Underlying profit before tax3 176 81 117
Profit/(loss) before tax6 177 (1) n/m7
Basic earnings/(loss) per
share (EUR cents)4 21.5 (7.1) n/m7
Underlying earnings per share
(EUR cents)4 20.3 8.3 145
Headline earnings/(loss) per
share (EUR cents)4 24.8 (0.8) n/m7
Interim dividend per share
(EUR cents) 3.5 2.5 40
Cash generated from operations 269 392 (31)
Net debt 1,632 1,661 (2)
Group Return on Capital
Employed (ROCE)5 9.5% 7.4% 28
Notes:
1 EBITDA is operating profit of subsidiaries and joint ventures before special
items, depreciation and amortisation.
2 Underlying operating profit is operating profit of subsidiaries and joint
ventures before special items.
3 Underlying profit before tax is reported profit before tax before special
items.
4 The Group has presented underlying earnings per share to exclude the impact
of special items, and headline earnings per share in accordance with circular
3/2009 `Headline Earnings` as issued by the South African Institute of
Chartered Accountants.
5 Group return on capital employed (ROCE) is an annualised measure based on a
12 month trailing underlying operating profit plus share of associates net
earnings divided by average trading capital employed before impairments and
adjusted for major capital projects not yet commissioned.
6 Profit/(loss) before tax is reported after special items of EUR1 million.
7 n/m - not measureable.
Highlights
Underlying operating profit up 61%, driven by a strong performance from the
Europe & International Division
Sustained improvement in order inflows, volumes and prices across all key
paper grades
Improving performance in South Africa Division
Restructuring of European Corrugated business completed
Major capital project in Russia on schedule for completion in second half
Successful issuance of inaugural EUR500 million Eurobond, used to pay down
existing debt
Interim dividend up 40% at 3.5 euro cents per share
David Hathorn, Mondi Group chief executive, said:
"Mondi achieved a pleasing result in the period against a backdrop of improving
market conditions, supported by a particularly strong performance from the
European Uncoated Fine Paper business. The outcome bears testament to our robust
business model, which encompasses leading market positions in higher growth
emerging markets, low-cost operations and a relentless focus on performance.
Despite cost pressures, the positive pricing momentum witnessed in Europe since
the beginning of the fourth quarter of 2009 in most of the Group`s key grades
should see the business continue to deliver a strong performance in the second
half. The South Africa Division should benefit from the further management
actions taken to improve profitability, although much depends on the outlook
for the rand and export pulp prices. While the sustainability of the economic
recovery remains uncertain, we believe the Group is well positioned to continue
benefiting from the current positive trading environment."
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
Richard Mountain +44 20 7269 7186 / +44 20 7909 684 466
Chloe Webb +27 (0)11 214 2421
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 8183 (toll-free)
Europe & Other 0800 246 78 700 (toll-free)
An online audio cast facility will be available via:
www.mondigroup.com/HYResults10.
Password: HYResults10.
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 10 August 2010.
Editors` notes
Mondi is an international paper and packaging company, with production
operations across 31 countries and revenues of EUR5.3 billion in 2009. The
Group`s key operations are located in central 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 has a dual listed company structure, with a primary listing on the JSE
Limited for Mondi Limited under the ticker code MND and a premium listing on
the London stock exchange for Mondi plc, under the ticker code MNDI. 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.
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 review
The Group`s underlying operating profit of EUR222 million was 61% up on the
comparable prior year period and 42% up on the result of the second half of the
prior year.
Order inflows and sales volumes continue to improve and price increases were
achieved across all key paper grades. Furthermore, the benefits of the
significant restructuring actions and cost reduction initiatives implemented
through the economic downturn supported the strong recovery in profitability.
Ongoing profit improvement initiatives have yielded a further EUR75 million
during the first half which, at 2.9% of our cost base, continue to exceed
targets. Rising commodity input costs partially offset revenue gains.
Currency movements had a mixed impact on the Group`s results. The stronger rand
eroded export margins in South Africa whilst exports from Europe benefited from
the weaker euro against the dollar. Other emerging European currencies
strengthened against the euro in the first quarter of the year placing pressure
on the export focussed operations in Poland and the Czech Republic, although
this trend reversed in the second quarter.
Underlying earnings per share was 20.3 cents, an increase of 145% on the
comparable prior year period. An interim dividend of 3.5 euro cents, up 40% on
the prior year interim dividend, will be paid.
During the first quarter, Mondi concluded the sale of the 170,000 tonne
Frohnleiten recycled containerboard mill in Austria. During May, the Group`s
western European corrugated packaging and recycled containerboard restructuring
programme concluded with the sale of its corrugated box plants in the UK to
Smurfit Kappa. The Group also acquired Smurfit Kappa`s industrial and consumer
bag operations in Spain, France and Italy. These operations will be
restructured and some of the plants may be rationalised with our existing
plants.
The sale of the Europapier paper merchant business to the Heinzel Group
announced in early May 2010 remains subject to approval by the relevant
competition authorities.
Net debt at 30 June 2010 increased from 31 December 2009 by EUR115 million to
EUR1.63 billion. Robust EBITDA generation was offset primarily by an increase
in working capital (in line with growth in revenue), ongoing funding for the
EUR545 million Russian expansion project and foreign exchange movements. In
March 2010, the Group issued a seven year Eurobond of EUR500 million at a
coupon of 5.75%, the proceeds of which were used to settle existing short and
medium term debt and consequently increased the average maturity of the Group`s
debt.
The Group`s financial position remains robust with net assets increasing to
EUR3.1 billion on the back of higher working capital and exchange impacts on
translation into euro. The Group retains adequate borrowing facilities.
Europe & International Division
EUR million
Six months Six months Half-yearly
ended 30 ended 30 change %
June 2010 June 2009
Segment revenue 2,372 2,063 15
- of which inter-segment revenue 61 53 15
EBITDA 336 238 41
Underlying operating profit 201 108 86
Uncoated Fine Paper 98 71 38
Corrugated 48 1 n/m
Bags & Coatings 55 36 53
Capital expenditure 159 272 (42)
Net segment assets 3,822 3,620 6
ROCE (%) 12.2% 7.3% 67
Underlying operating profit of EUR201 million was 86% higher than that of the
comparable prior year period with ROCE, on a twelve month trailing basis,
increasing to 12.2%. The improved result was due to good demand across all
businesses, higher prices in all paper grades and the benefit of previously
implemented profit improvement initiatives.
Profit improvement initiatives have yielded EUR59 million to date partially
offsetting increased input costs, particularly wood, pulp and recovered paper.
The extended shut at the Syktyvkar plant in Russia as part of the final
integration of the expansion project, together with the planned maintenance
shuts at a number of the pulp and paper mills in the traditionally slower
European summer months, will impact results in the second half of the year.
Uncoated Fine Paper
The operating profit of EUR98 million was 38% up on the comparable prior year
period, giving a very strong ROCE, on a twelve month trailing basis, of 17.5%.
This excellent performance, following a strong second half in the previous
year, reflects a continued positive trading environment with both prices and
volumes increasing. This was supported by a pleasing operating performance with
all mills achieving record production volumes. The Russian operation,
Syktyvkar, performed particularly well, supported by a positive contribution
from the recently rebuilt uncoated fine paper machine.
Selling prices have increased with benchmark cut-size office paper prices
increasing by around 5% from 31 December 2009 levels. Further price increases
have been announced in the second half, supported by continued input cost
pressures particularly for the non-integrated producers, and the weakness of
the euro relative to the dollar.
With average pulp prices increasing during the period, by 24% for softwood and
32% for hardwood in US dollar terms when compared to the second half of the
previous year, the larger mills benefited from their backward integration. The
non-integrated mills, despite achieving price increases, could not entirely
offset the higher pulp prices.
The major capital project in Syktyvkar, Russia is expected to be completed and
integrated into the existing mill during an extended shut in the second half.
The impact of the shut on the second half operating profit contribution from
Syktyvkar is estimated at around EUR20 million.
Corrugated
The Corrugated business achieved a significant improvement in underlying
operating profit to EUR48 million, benefiting from the new recycled
containerboard machine at Swiecie, restructuring and cost reduction
initiatives, and improved product prices and volumes. Average increases of
around 23% compared to the second half of the prior year were seen for
benchmark recycled containerboard prices, supported by significant input cost
pressures (recovered paper prices increased by 52% in the period).
Although sales volumes increased, price increases achieved in the corrugated
box plants were not sufficient to recover the increased paper input costs.
Further box price increases are anticipated in the second half of the year.
The restructuring of the Corrugated business was concluded during the first
half with the sale of the UK box plants to Smurfit Kappa in May 2010 and the
recycled containerboard mill in Austria to the Prinzhorn Group.
The business is now well positioned to focus on its core central and south
eastern European markets, with leading market positions in the high growth
markets of Poland and Turkey. The containerboard mills in Poland, Germany and
Turkey provide the Group with a competitive paper asset base serving the
Group`s integrated converting network in these regions.
Having started up in September 2009, the 470,000 tonne recycled containerboard
machine in Swiecie, Poland is performing ahead of plan, with production of
197,000 tonnes in the first half, and full year production from this machine
expected to be around 400,000 to 410,000 tonnes including the impact of a
maintenance shut in the second half.
Bags & Coatings
The Bags & Coatings business achieved an underlying operating profit of EUR55
million, an increase of 53% on the comparable prior year period. This reflects
both improved sales volumes and increased kraft paper prices.
Significant kraft paper selling price increases of around 10% on average
compared to the second half of the prior year were achieved in the period, more
than offsetting the sharp rise in input costs, particularly wood costs. Further
selling price increases have been announced and are expected to be implemented
during the third quarter. While demand in the Group`s core European markets has
recovered from a low base, supported by some restocking, very strong demand
growth is being seen in export markets. In response, the 80,000 tonne
Stambolijski kraft paper machine was restarted in June 2010, having been
mothballed during the previous year.
Volumes remain strong in the bag converting segment, up 12% on the comparable
period in the prior year. However, more than half of the sales volume is sold
under annual fixed price contracts, leading to short-term margin pressures in
this segment as paper input costs increase. The acquisition of the Smurfit
Kappa bag plants provides the Group with stronger market positions in Spain,
France and Italy. Although these newly acquired plants are currently operating
at a loss, restructuring and potential rationalisation with our existing plants
is planned for the coming months and they are expected to contribute positively
to the Group`s performance from 2011.
Robust volume increases in Coatings, Consumer Bags & Films have resulted in a
significant increase in underlying operating profit, although Consumer Bags &
Films remains under some pressure from rising polymer prices.
South Africa Division
EUR million Six months Six months Half-yearly
ended 30 ended 30 change %
June 2010 June 2009
Segment revenue 276 249 11
- of which inter-segment revenue 107 113 (5)
EBITDA 44 48 (8)
Underlying operating profit 18 28 (36)
Uncoated Fine Paper 14 13 8
Containerboard 4 15 (73)
Capital expenditure 9 13 (31)
Net segment assets 932 868 7
ROCE (%) 3.1% 13.5% (77)
A decrease of 36% in underlying operating profit on the comparable prior year
period reflects somewhat disappointing results partially due to the strength of
the rand and consequently lower export margins. ROCE, on a twelve month
trailing basis, at 3.1%, remains well below targeted levels. The results are
however significantly better than the weak second half of 2009.
Sales prices improved across all products with pulp being the main contributor
during the period. Increasing labour and input, particularly electricity, costs
will impact results in the second half.
The decision has been taken to exit the uncoated fine paper export market due
to poor profitability and to focus on the domestic and African markets. The
mothballing of the 120,000 tonne uncoated fine paper machine and related
equipment in Merebank, along with a restructuring programme, is expected to be
concluded during the second half of the year.
This restructuring and the associated increased sales of pulp are expected to
result in an improved second half performance, notwithstanding an apparent
weakening in global pulp markets.
Mondi Packaging South Africa (MPSA)
EUR million
Six months Six months Half-yearly
ended 30 ended 30 change %
June 2010 June 2009
Segment revenue 298 227 31
- of which inter-segment revenue 16 13 23
EBITDA 33 23 43
Underlying operating profit 18 11 64
Capital expenditure 14 6 133
Net segment assets 368 342 8
ROCE (%) 12.9% 7.3% 77
MPSA achieved a 64% increase in operating profit to EUR18 million off the low
base of the comparable prior year period giving a ROCE, on a twelve month
trailing basis, of 12.9%. The improvement reflects an approximately 10%
increase in sales volumes and the benefits of significant cost savings. The
euro result was also enhanced by translation at a stronger rand exchange rate.
In local currency terms, the increase in underlying operating profit was 37%.
With its exposure to the agricultural sector, coupled with price increases
expected to take effect during the second half, the second half of the year is
expected to be stronger than the first.
Newsprint
EUR million Six months Six months Half-yearly
ended 30 ended 30 change %
June 2010 June 2009
Segment revenue 271 254 7
- of which inter-segment revenue - - -
EBITDA 8 16 (50)
Underlying operating profit 1 8 (88)
Capital expenditure 2 2 -
Net segment assets1 108 218 (50)
ROCE (%) 2.2% 2.9% (24)
Note:
1 Excluding assets of Europapier business, classified as held for sale.
The Newsprint business reflected a significant decline in underlying operating
profit to EUR1 million mainly due to a disappointing performance at Aylesford
Newsprint. Aylesford Newsprint experienced reduced sales volumes and prices and
an operating loss resulted. Sales price increases of around GBP20/tonne are
being implemented during the second half of the year, although this is not
likely to lead to a significant improvement in profitability due to ongoing
input cost pressures. Mondi Shanduka Newsprint`s underlying operating profit was
marginally lower than the comparable prior year period mainly resulting from
increasing raw material costs. The European merchant business, Europapier,
performed well, benefiting from increased selling prices and volumes. The sale
of Europapier is expected to be concluded in the second half of the year,
pending competition clearance.
Input costs and currency exposure
All fibre input costs have seen significant increases in the first half of the
year.
Procured pulp wood prices in central Europe are up significantly versus the
comparable prior year period on the back of increased demand from bio-mass
energy producers and reduced supply due to the closure of sawmilling operations
in the region.
Average pulp prices, exacerbated by supply disruptions due to the Chilean
earthquake, have increased by 24% for softwood and 32% for hardwood during the
period when compared to the second half of the prior year.
Strong Chinese demand in the first quarter drove rapid price escalations in
European recovered paper markets. The average benchmark price of recovered
paper increased by 52%, when compared to the second half of the previous year.
Mondi benefits from its structural position in South Africa and Russia due to
integration into wood supply. The Group`s integrated pulp and paper mills
reduce the impact of pulp price escalations, with the Group, on an annualised
basis, being net short of around 135,000 tonnes of pulp following the recent
restructuring announcements. Restructuring initiatives and a relentless focus
on cost reduction and productivity improvement further mitigate the impact of
input cost pressures.
Financial review
Special items
The special items, as more fully set out in the notes to the half-yearly
financial statements, include:
closure of the paper machine and related restructuring provisions in South
Africa;
reversal of previously recognised closure provisions no longer required
following the sale of the Szolnok site;
reversal of impairment and related closure provisions of the Stambolijski
mill following its start-up in June 2010;
partial impairment of underperforming kraft paper assets in Lohja and
Ruzomberok;
gain on acquisition of the industrial bags plants in western Europe which
will be subject to future restructuring;
loss on disposal of the corrugated packaging plants in the UK;
profit on sale of forestry assets in South Africa; and
write-down of assets and recognition of expected loss on disposal of the
Europapier business.
Finance costs
Net finance costs of EUR48 million were lower than those of the comparable
prior year period mainly due to exchange rate gains on foreign currency debt
and a reduction in interest rates in some locations. The higher interest rate
of the Eurobond when compared to existing short-term facilities, as well as a
reduction in interest capitalised to major projects, will increase finance
costs in the second half of the year.
Tax
A reduction in the underlying effective tax rate from 32% to 26% is realised
primarily due to the improved profitability enabling the use of previously
unrecognised tax losses carried forward; increased profitability in regions
with lower tax rates; and benefits of tax incentives granted in certain
countries in which the Group operates, notably those related to the major
Polish and Russian capital projects.
Cash flow
As expected, cash flow generated from operating activities was negatively
impacted by an increase in working capital attributable to the significantly
increased revenue. Working capital, as a percentage of annualised revenue,
moved up from 10.0% at 31 December 2009 to 10.7% at 30 June 2010. Despite this,
cash generated from operating activities amounted to EUR235 million.
Capital expenditure of EUR184 million, including EUR75 million on our major
project in Russia, was incurred. Outside of our major projects in Russia and
Poland, capital expenditure remains at 51% of depreciation reflecting a
continued conservative approach to investment.
Treasury and borrowings
Net debt at 30 June 2010 was EUR1.6 billion, an increase of EUR115 million from
the prior year end. Excluding the impact of exchange rate movements, net debt
was largely unchanged from the year end position, despite the ongoing major
capital expenditure project in Russia and the investment in working capital.
The net debt to trailing 12 month EBITDA ratio was 2.2 times and the headroom
in the Group`s syndicated EUR1.55 billion facility increased to EUR1.2 billion.
During March, Mondi successfully launched a EUR500 million, seven 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. Following the launch of the Eurobond, a large proportion of the
Group`s debt, 78%, is at fixed rates of interest for varying terms.
Interest rates have remained largely unchanged in the period under review.
The average maturity of committed debt facilities is 3.1 years (compared to 2.2
years at the end of the previous year) and drawn committed debt facilities
maturing over the next 12 months amount to EUR83 million.
Dividend
A dividend of 3.5 euro cents per share has been declared by the directors and
will be paid on 14 September 2010 to those shareholders on the register of
Mondi plc on 27 August 2010. An equivalent South African rand interim dividend
will be paid on 14 September 2010 to shareholders on the register of Mondi
Limited on 27 August 2010.
Outlook
Despite cost pressures, the positive pricing momentum witnessed in Europe since
the beginning of the fourth quarter of 2009 in most of the Group`s key grades
should see the business continue to deliver a strong performance in the second
half. The South Africa Division should benefit from the further management
actions taken to improve profitability, although much depends on the outlook
for the rand and export pulp prices. While the sustainability of the economic
recovery remains uncertain, we believe the Group is well positioned to continue
benefiting from the current positive trading environment.
Supplementary information
Going concern
An improvement in trading conditions is evident although some risks remain in
specific locations and business segments. This is mitigated by Mondi`s
geographical spread, product diversity and large customer base.
Through ongoing initiatives of cost management, prudent capital investment,
stringent working capital targets and restructuring and rationalisation of
assets where appropriate, Mondi has a leading cost position in its chosen
markets.
The Group maintains adequate undrawn borrowing facilities (EUR1.4 billion at 30
June 2010) and the average maturity of its debt is approximately three years,
thus providing sufficient short and medium term liquidity.
The Group`s forecasts, taking into account reasonably possible changes in
trading performance, show that Mondi will be able to operate well within the
levels of its current facilities and related covenants.
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, the going concern basis continues to be
adopted in preparing financial reports.
Principal risks and uncertainties
It is in the nature of its business that Mondi is exposed to risks and
uncertainties that may have an impact on future performance and financial
results, as well as on its 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 remain
consistent with those presented on pages 31 and 32 of the 2009 annual report.
Mondi operates in a highly competitive environment
The paper and packaging markets are highly competitive. Mondi is flexible and
responsive to changing market and operating conditions and the geographical and
product diversification provides some measure of protection. Uncertain trading
conditions may impact the carrying value of goodwill and tangible assets and
may necessitate further restructuring.
Input costs are subject to significant fluctuations
Significant fluctuations in raw material costs, particularly wood, pulp and
recovered paper, have been experienced during the first half of the year. The
Group`s relatively high level of integration and access to its own fibre in
Russia and South Africa, coupled with the focus on operational performance,
serve to mitigate these risks.
Significant capital investments including acquisitions carry project risk
The capital investment programme in Russia is largely completed and indications
are that the project will be completed during the second half of 2010. The
acquisition of the industrial bag operations in Spain, France and Italy will
require some restructuring in order to generate the required returns.
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 International Financial Reporting Standards and in
particular with International Accounting Standard 34, `Interim Financial
Reporting`;
the half-yearly report includes a fair review of the important events during
the six months ended 30 June 2010 and a description of the principal risks and
uncertainties for the remaining six months of the year ending 31 December 2010;
and
there have been no significant individual related party transactions during
the first six months of the financial year and nor have there been any
significant changes in the Group`s related party relationships from those
reported in the Group`s annual financial statements for the year ended 31
December 2009.
David Hathorn Andrew King
Director Director
9 August 2010
Independent review report to the members of Mondi Limited
Introduction
We have reviewed the Group`s condensed combined and consolidated financial
statements for the six months ended 30 June 2010 which comprise 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 and the condensed combined and consolidated
statement of changes in equity, the summary of significant accounting policies
and other explanatory notes. Management is responsible for the preparation and
presentation of these condensed combined and consolidated financial statements
in accordance with International Accounting Standards on Interim Financial
Reporting (IAS 34) and the Companies Act of South Africa. Our responsibility is
to express a conclusion on these Group condensed combined and consolidated
financial statements 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 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 Group`s interim condensed combined and consolidated financial
statements is not prepared, in all material respects, in accordance with
International Accounting Standards on Interim Financial Reporting (IAS 34) and
the Companies Act of South Africa.
Bronwyn Kilpatrick
Partner
Sandton
9 August 2010
Deloitte & Touche
Registered Auditors
Buildings 1 and 2, Deloitte Place, The Woodlands
Woodlands Drive, Woodmead, Sandton
Republic of South Africa
National Executive G G Gelink Chief Executive A E Swiegers Chief Operating
Officer G M Pinnock Audit DL Kennedy Tax, 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
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 combined and
consolidated financial statements in the half-yearly financial report for the
six months ended 30 June 2010 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 financial
statements.
This report is made solely to the Company 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. 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.
Respective responsibilities of directors and auditors
The half-yearly financial 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 financial 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 financial report based on our
review.
Scope of the review of the condensed financial statements
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 inquiries, 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 financial
report for the six months ended 30 June 2010 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, United Kingdom
9 August 2010
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 2010
(Reviewed)
Six months ended 30 June 2010
Before Special After
special items special
Notes items (note 6) items
EUR million
Group revenue 4 3,033 - 3,033
Materials, energy and consumables (1,624) - (1,624)
used
Variable selling expenses (277) - (277)
Gross margin 1,132 - 1,132
Maintenance and other indirect (132) - (132)
expenses
Personnel costs (458) (2) (460)
Other net operating expenses (137) 56 (81)
Depreciation, amortisation and (183) (18) (201)
impairments
Operating profit/(loss) 4/5 222 36 258
Net (loss)/profit on disposals 6 - (22) (22)
Impairment of assets held for sale 6 - (13) (13)
Net income from associates 2 - 2
Total profit/(loss) from operations 224 1 225
and associates
Investment income 16 - 16
Foreign currency gains/(losses) 11 - 11
Interest expense 7 (75) - (75)
Net finance costs (48) - (48)
Profit/(loss) before tax 176 1 177
Tax (charge)/credit 8 (46) 4 (42)
Profit/(loss) from continuing 130 5 135
operations
Attributable to:
Non-controlling interests 27 (1) 26
Equity holders of the parent 103 6 109
companies
(Reviewed)
Six months ended 30 June 2009
Before Special After
special items special
items (note 6) items
EUR million
Group revenue 2,614 - 2,614
Materials, energy and consumables (1,387) - (1,387)
used
Variable selling expenses (225) - (225)
Gross margin 1,002 - 1,002
Maintenance and other indirect (111) - (111)
expenses
Personnel costs (430) (11) (441)
Other net operating expenses (153) (32) (185)
Depreciation, amortisation and (170) (36) (206)
impairments
Operating profit/(loss) 138 (79) 59
Net (loss)/profit on disposals - 5 5
Impairment of assets held for sale - (8) (8)
Net income from associates 1 - 1
Total profit/(loss) from operations 139 (82) 57
and associates
Investment income 15 - 15
Foreign currency gains/(losses) (2) - (2)
Interest expense (71) - (71)
Net finance costs (58) - (58)
Profit/(loss) before tax 81 (82) (1)
Tax (charge)/credit (27) 4 (23)
Profit/(loss) from continuing 54 (78) (24)
operations
Attributable to:
Non-controlling interests 12 - 12
Equity holders of the parent 42 (78) (36)
companies
(Audited)
Year ended 31 December 2009
Before Special After
special items special
items (note 6) items
EUR million
Group revenue 5,257 - 5,257
Materials, energy and consumables (2,768) - (2,768)
used
Variable selling expenses (472) - (472)
Gross margin 2,017 - 2,017
Maintenance and other indirect (241) - (241)
expenses
Personnel costs (838) (24) (862)
Other net operating expenses (293) (14) (307)
Depreciation, amortisation and (351) (90) (441)
impairments
Operating profit/(loss) 294 (128) 166
Net (loss)/profit on disposals - 3 3
Impairment of assets held for sale - (8) (8)
Net income from associates 2 - 2
Total profit/(loss) from operations 296 (133) 163
and associates
Investment income 27 - 27
Foreign currency gains/(losses) (1) - (1)
Interest expense (140) - (140)
Net finance costs (114) - (114)
Profit/(loss) before tax 182 (133) 49
Tax (charge)/credit (58) 6 (52)
Profit/(loss) from continuing 124 (127) (3)
operations
Attributable to:
Non-controlling interests 29 1 30
Equity holders of the parent 95 (128) (33)
companies
Earnings per share (EPS) for profit
/(loss) attributable to equity holders
of the parent companies
Basic EPS (EUR cents) 9 21.5 (7.1) (6.5)
Diluted EPS (EUR cents) 9 21.2 (7.1) (6.5)
Basic underlying EPS (EUR cents) 9 20.3 8.3 18.7
Diluted underlying EPS (EUR cents) 9 20.0 8.1 18.2
Basic headline EPS (EUR cents) 9 24.8 (0.8) 11.4
Diluted headline EPS(EUR cents) 9 24.5 (0.8) 11.1
Condensed combined and consolidated statement of comprehensive
income for the six months ended 30 June 2010
(Reviewed) (Reviewed) (Audited)
Six months Six months Year ended 31
EUR million ended 30 June ended 30 June December
2010 2009 2009
Profit /(loss) for the
financial period/year 135 (24) (3)
Other comprehensive income:
Fair value gains on cash
flow hedges 6 14 26
Actuarial (losses)/ gains
and surplus restriction
on post-retirement benefit (9) 1 7
schemes
Fair value gains on
available-for-sale investments - - 1
Exchange gains on translation
of foreign operations 171 72 118
Share of other
comprehensive income of associates - 1 1
Tax relating to components of
other comprehensive income 2 (1) (7)
Other comprehensive
income for the financial
period/year, net of tax 170 87 146
Total comprehensive
income for the financial
period/year 305 63 143
Attributable to:
Non-controlling interests 36 14 39
Equity holders of the
parent companies 269 49 104
Condensed combined and consolidated statement of financial position
as at 30 June 2010
(Reviewed)
EUR million Notes As at 30 June
2010
Intangible assets 314
Property, plant and equipment 3,990
Forestry assets 290
Investments in associates 6
Financial asset investments 33
Deferred tax assets 31
Retirement benefits surplus 11 13
Total non-current assets 4,677
Inventories 688
Trade and other receivables 1,083
Current tax assets 19
Cash and cash equivalents 15b-c 77
Derivative financial instruments 13
Total current assets 1,880
Assets held for sale 14 172
Total assets 6,729
Short-term borrowings 15c (217)
Trade and other payables (1,123)
Current tax liabilities (75)
Provisions (50)
Derivative financial instruments (4)
