| Mon 21 Feb 2011, 9:00 | | MND / MNP - Mondi Limited / Mondi plc - Full year results for the year ended 31 |
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MND MNP
MND MNP
MND / MNP - Mondi Limited / Mondi plc - Full year results for the year ended 31
December 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.
Full year results for the year ended 31 December 2010
Financial Summary Year ended Year ended
EUR million 31 December 2010 31 December 2009 Change %
Group revenue 6,228 5,257 18
EBITDA 1 882 645 37
Underlying operating profit 2 509 294 73
Underlying profit before tax 3 394 182 116
Operating profit 512 166 208
Profit before tax 4 372 49 659
Basic earnings/(loss) per share
(EUR cents) 44.1 (6.5)
Underlying earnings per share
(EUR cents) 5 47.0 18.7 151
Headline earnings per share (EUR cents) 5 47.0 11.4 312
Total dividend per share (EUR cents) 20.0 9.5 111
Cash generated from operations 778 867 (10)
Net debt 1,364 1,517 (10)
Group return on capital employed (ROCE)6 12.3 7.6 62
Notes:
Underlying profit measures are disclosed to provide an additional basis on which
to evaluate the Group`s performance. A reconciliation of the underlying
measures to the statutory results is included in the annual financial
statements.
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 profit before tax and before special items.
4 Profit before tax is reported after special items of EUR22 million.
5 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.
6 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.
Highlights
- Significant improvement in financial performance
- underlying operating profit up 73%;
- underlying earnings per share up 151%; and
- return on capital employed up by 4.7 percentage points to 12.3%.
- Achieved production records at 6 out of the 8 largest paper mills.
- Modernisation of Russian pulp and paper mill successfully completed and
running to plan.
- Continued strong cash management, with net debt down to EUR1.36 billion.
- Proposed full year dividend of 20.0 euro cents per share, up 111%.
David Hathorn, Mondi Group chief executive, said:
"The 2010 financial year saw a much improved financial performance from the
Mondi Group. After the turmoil of 2008 and early 2009 created by the global
financial crisis, the recovery noted in late 2009 continued into 2010.
Pleasingly, this translated into a much improved return on capital employed
(ROCE), increasing to 12.3% for the year. Mondi`s strong performance confirms
the validity of our strategy and reflects the commitment of all our employees.
Given the strong financial performance and good cash generation, we are pleased
to recommend an increase in the full year dividend to 20.0 euro cents per share.
"Demand growth over the past 18 months has been very encouraging, with volumes
in most grades and geographic regions back at satisfactory levels. In 2011,
further demand growth is expected, albeit at more modest rates. Recent industry
capacity adjustments have also resulted in generally stronger fundamentals.
Taken together, this has led to a positive pricing environment. The general
economic recovery also brings cost pressures. We are confident that the Group`s
integrated low cost position, focus on performance, and the contribution from
the major investments made through the down cycle position the business well for
the future."
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 / Nina Delangle +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 09:00 (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 00800 246 78 700 (toll-free)
An online audio cast facility will be available via:
www.mondigroup.com/FYResults10. Password: FYResults10.
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 21 February 2011.
Editors` notes
Mondi is an international paper and packaging Group, with production operations
across 31 countries and revenues of EUR6.2 billion in 2010. The Group`s key
operations are located in central Europe, Russia and South Africa and as at
the end of 2010, Mondi employed 29,000 people.
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,
industrial bags and coatings.
The Group is principally involved in the manufacture of packaging paper,
converted packaging products and uncoated fine paper (UFP).
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 through its inclusion in the
FTSE4Good UK, Europe and Global indices in 2008, 2009 and 2010 and the JSE`s
Socially Responsible Investment (SRI) Index in 2007, 2008, 2009 and 2010.
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`. 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.
Overview of results
The Group`s underlying operating profit of EUR509 million was up 73% compared
to 2009, reflecting a strong operational performance and significantly improved
trading environment with price and volume improvements across all main products.
The Europe & International Division, through its Uncoated Fine Paper, Corrugated
and Bags & Coatings businesses contributed EUR431 million; South Africa
Division, EUR64 million; and Mondi Packaging South Africa, EUR51 million. The
Newsprint operating loss of EUR4 million was disappointing, whilst corporate
costs were at similar levels to previous years.
In line with the Group`s strategy, restructuring activities led to a further
refinement of the Group`s portfolio, with the sale of the UK corrugated
businesses, Europapier merchant business and a reduction of the Group`s interest
in Mondi Hadera to 25% from 50.1%. Furthermore, the Group acquired industrial
bag plants in Spain, France and Italy and also completed the second of its two
major capital projects, the Syktyvkar modernisation in Russia, thereby expanding
in its core business segments.
Input costs, particularly wood, pulp and recycled fibre, increased by
approximately 28% during the year, half of which was attributable to market
price increases whilst the balance was attributable in equal proportions to
increased selling volumes and adverse currency effects.
Interest paid during the year of EUR117 million was EUR46 million less than the
previous year, primarily due to the reduced net debt position and lower interest
rates in Russia and South Africa. Net finance charges however were 3% higher
than the prior year, mainly as a result of lower interest capitalised following
the completion of the two major capital projects in Poland and Russia.
The tax charge for the year was EUR87 million, representing an effective tax
rate before special items of 24%.
Underlying earnings per share of 47.0 euro cents increased by 151% over the
prior year. Basic earnings per share of 44.1 euro cents increased from a loss
of 6.5 euro cents in 2009.
As expected, and in line with the increased turnover, working capital increased
during the year with a net cash outflow of EUR121 million. The net working
capital to turnover ratio was 10.6%. On a continuing business basis, excluding
the results of Europapier and Mondi Hadera, the ratio increased to 11.5% from
10.0% in the previous year, which remains within the Group`s target range of
between 10% and 12%.
Strong cash generation and the proceeds from the businesses disposed of were
applied to reduce net debt to EUR1,364 million at year end, from EUR1,517
million at 31 December 2009.
The Group is proposing to pay a final dividend of 16.5 euro cents per share
giving a total dividend of 20.0 euro cents for the year, an increase of 111%
compared to 2009.
Europe & International - Uncoated Fine Paper business
Year ended Year ended
31 December 31 December
EUR million 2010 2009 Change %
Segment revenue 1,516 1,351 12
- of which inter-segment revenue 129 130 -
EBITDA 279 239 17
Underlying operating profit 179 146 23
Special items 5 (2)
Capital expenditure 151 191 (21)
Net segment assets 1,512 1,494 1
ROCE 16.9% 14.5% 16.6
Underlying operating profit increased by EUR33 million to EUR179 million with
the Syktyvkar mill continuing to generate strong results and the contribution
from the Ruzomberok operation showing a marked improvement, both benefiting from
their pulp integration and improved pricing. The non-integrated mills, despite
achieving price increases, could not entirely offset the higher pulp prices,
leading to margin erosion.
Benchmark UFP prices at 31 December 2010 increased by approximately 11% from 31
December 2009 levels. These price increases, coupled with good volume growth on
the back of a recovery in demand, enabled the business to increase revenue by
12% to EUR1,516 million. Further price increases of approximately 5% have been
announced for the first quarter of 2011. The actual price increases achieved
will be subject to individual negotiations with customers.
The business experienced significant input cost pressures, particularly as a
result of the increased wood and pulp prices. Other cost increases were well
contained through ongoing cost saving initiatives. Productivity, measured in
terms of output per person, improved by approximately 11% during the year, with
annual production records in both Syktyvkar and Ruzomberok.
Capital expenditure for the year was EUR151 million, of which EUR108 million
related to the Syktyvkar modernisation project, completed in the second half of
the year. As planned, an extended shut was taken during August and early
September 2010 for the commissioning of the final phase of the project. The
benefits from this project will be in the form of reduced operating costs,
improved efficiencies, increased energy production and additional volumes from
the rebuilt containerboard and UFP machines. The rebuilt UFP machine was already
in production throughout 2010, contributing 40,600 tonnes of production. At the
year end, around EUR35 million was left to spend on this project.
The ROCE of 16.9%, increasing from 14.5% in the previous year, reflected the
positive trading environment, low cost base and strong operating performance.
Further benefits from the Syktyvkar modernisation project are expected to be
realised during 2011 with the plant expected to achieve full capacity in the
latter half of 2011, in accordance with the ramp-up plan.
Europe & International - Corrugated business
Year ended Year ended
31 December 31 December
EUR million 2010 2009 Change %
Segment revenue 1,235 1,041 19
- of which inter-segment revenue 59 36 64
EBITDA 187 87 115
Underlying operating profit 119 23 417
Special items (15) (55)
Capital expenditure 87 195 (55)
Net segment assets 898 872 3
ROCE 14.9% 3.6% 314
The substantial improvement in the underlying profit of the Corrugated business
from EUR23 million in 2009 to EUR119 million in 2010 reflects improved product
prices and volumes, a positive contribution from the new recycled containerboard
machine at Swiecie, and restructuring and cost reduction initiatives.
During the year, the business concluded its restructuring programme with the
sale of the Frohnleiten mill in Austria and UK corrugated plants. Going forward,
the business will focus on its core central and eastern European markets,
supported by production facilities in Poland, Turkey, Germany and Austria.
The 470,000 tonne recycled containerboard machine at Swiecie performed well
ahead of plan, with total production volumes of 410,580 tonnes (2009: 108,897
tonnes). These increased volumes largely offset the reduction in volumes from
the sale of Frohnleiten. Production from the new containerboard machine is
expected to further increase during 2011 as it continues its ramp-up to full
design capacity.
Benchmark kraftliner prices increased by 45%, recycled containerboard prices by
30% and white top containerboard prices by 20% at year end, from 31 December
2009 levels. Further recycled containerboard price increases of EUR40/tonne and
white top containerboard price increases of EUR50/tonne have been announced to
take effect during the first quarter of 2011. Box price increases largely offset
the increased paper prices, albeit with some time lag. Further box price
increases will be sought in 2011. Pleasing improvements in volume growth were
achieved in both containerboard and corrugated packaging.
Costs of recovered fibre and wood increased significantly during the year, with
average benchmark recovered fibre prices more than doubling. The Polish
operations were particularly impacted by a shortage of supply, reflected in a
price premium for recovered fibre in this region. Recovered fibre pricing is
expected to remain under pressure into 2011. Wood costs increased by
approximately 30% during the year, although the rate of increase slowed during
the second half of 2010. Cost improvement initiatives continued and largely
offset other cost increases.
Productivity, measured by output per person, improved by almost 20% during the
year, with the primary contributor being the increased production volumes from
Swiecie. Capital expenditure of EUR87 million was incurred during the year, of
which EUR20 million related to the completion of the Swiecie project and EUR27
million to the containerboard plant at Syktyvkar.
The ROCE of 14.9%, compared to the prior year figure of 3.6%, reflects the
improved trading environment and the positive impact of the Group`s capital
investment and restructuring activities.
Europe & International - Bags & Coatings business
Year ended Year ended
31 December 31 December
EUR million 2010 2009 Change %
Segment revenue 2,226 1,787 25
- of which inter-segment revenue 39 24 63
EBITDA 238 189 26
Underlying operating profit 133 82 62
Special items 28 (48)
Capital expenditure 92 81 14
Net segment assets 1,333 1,222 9
ROCE 11.8% 7.5% 57
Robust volume growth was the main contributor to the business achieving a 62%
improvement in underlying operating profit to EUR133 million. Whilst significant
price increases of around 30% were realised in kraft paper over the course of
the year, more than offsetting the increases in raw material costs, they were
more muted in the downstream industrial bags business where a large portion of
the sales volume is sold under fixed price contracts. Further industrial bag
price increases are expected to be implemented in 2011.
Demand in the core European market has recovered from the lows of 2008 and 2009
and significant demand growth was experienced in export markets. As a
consequence, the Group restarted its 80,000 tonne kraft paper mill in
Stambolijski in June 2010.
In May 2010, the business acquired Smurfit Kappa`s bag converting plants in
Spain, France and Italy followed by a plant in Poland early in 2011. A process
to integrate and rationalise the expanded plant network was initiated during the
year resulting in the decision to close four of the eight plants acquired,
subject to employee negotiations. Restructuring costs of EUR28 million
associated with this acquisition and subsequent rationalisation programme are
reflected in special items, offsetting a EUR34 million gain on acquisition, also
reflected in special items.
Productivity in kraft paper increased by 12% during the year with production
records set at all kraft paper facilities. A 12% improvement in productivity in
the industrial bags business was also realised.
The coatings and consumer packaging business recorded an improvement in its
performance, mainly due to robust volume growth and efficiency enhancements.
Price increases were realised but offset by increases in input costs,
particularly plastics and other chemicals.
The ROCE of the Bags & Coatings business of 11.8%, compared to 7.5% in 2009,
reflects the robust demand growth and an improvement in operating efficiencies.
South Africa Division
Year ended Year ended
31 December 31 December
EUR million 2010 2009 Change %
Segment revenue 580 478 21
- of which inter-segment revenue 211 210 -
EBITDA 117 76 54
Underlying operating profit 64 32 100
Special items (10) (22)
Capital expenditure 28 26 8
Net segment assets 953 840 13
ROCE 8.4% 4.6% 83
Underlying operating profit doubled in the year to EUR64 million on the back of
a strong recovery in selling prices, restructuring initiatives and a gain on
revaluation of forestry assets, offset by currency headwinds and domestic cost
inflation. Consequently, the ROCE of 8.4%, whilst an improvement on the 4.6%
realised in 2009, is still short of targeted levels.
During the year, the decision was taken to exit the European UFP market due to
poor profitability and to focus on the domestic and African markets. As a
consequence, the 120,000 tonne UFP machine in Merebank was mothballed in
September 2010, and a restructuring programme initiated to realign the cost base
of the business, with the benefits likely to be seen in 2011.
Significant price increases for pulp and UFP were diluted by the impact of the
strong South African rand. Inflationary cost pressures were mitigated by cost
curtailments and restructuring activities.
Mondi Packaging South Africa
Year ended Year ended
31 December 31 December
EUR million 2010 2009 Change %
Segment revenue 647 498 30
- of which inter-segment revenue 29 25 16
EBITDA 84 62 35
Underlying operating profit 51 36 42
Special items (1) 7
Capital expenditure 28 17 65
Net segment assets 393 335 17
ROCE 14.5% 11.5% 26
Underlying operating profit of EUR51 million was 42% up on the prior year,
achieved through improved sales volumes, selling price increases in the plastics
business and a continuing focus on cost containment. This yielded a ROCE of
14.5% up from 11.5%.
Demand improved during the year, largely returning to the levels experienced
before the recession. Agricultural products continued to grow with a number
of exporters focusing on fully packaged products. Industrial sector demand
remains subdued.
While paper and related packaging prices remained largely unchanged during the
year, above inflationary labour and electricity price increases drove costs up.
Only through rigorous cost management was the business able to curtail the
impact of these increased costs and deliver improved profitability. Electricity
price increases in South Africa remain a concern for the foreseeable future.
The business continues to focus on cash flow generation, reducing working
capital levels and maintaining a focus on increasing profitability.
Newsprint
Year ended Year ended
31 December 31 December
EUR million 2010 2009 Change %
Segment revenue 492 528 (7)
- of which inter-segment revenue 1 1 -
EBITDA 10 28 (64)
Underlying operating (loss)/profit (4) 12
Special items (29) (12)
Capital expenditure 7 7 -
Net segment assets 106 194 (45)
ROCE (2.8)% 6.0%
Europapier business included in 2009 information and in 2010 information until
the date of disposal of 4 November 2010.
The Europapier paper merchant business was sold with effect from the beginning
of November 2010. This business generated an operating profit of EUR6 million
during the 10 months ended October 2010 largely through improved volumes and
good cost containment.
The returns of the remaining Newsprint businesses were extremely disappointing
with the segment reflecting an underlying operating loss.
The Aylesford Newsprint joint venture was severely impacted by declining selling
prices on its annual contract volumes whilst recycled paper input costs
increased substantially. The business also incurred additional waste disposal
costs. Significant price increases are required to restore the business to
profitability. Price increases in excess of 20% have been negotiated on the
annual contract volumes to take effect in the first quarter of 2011.
The Mondi Shanduka Newsprint joint venture in South Africa suffered from
slightly reduced demand and selling prices remained under pressure. The strength
of the South African rand reduced returns from export sales and put pressure on
domestic pricing. Increasing electricity prices, up 97% over the previous three
years, with a further 65% expected over the next two years, are severely
hampering the profitability of this business and an asset impairment was
recognised in the year.
Financial Review
Special items (refer note 4 of financial statements)
Special items for the year include the following:
- mothballing of a paper machine and related restructuring provisions in
Merebank, South Africa;
- reversal of previously recognised closure provisions no longer required
following the sale of the Szolnok site in Hungary;
- reversal of impairment and related closure provisions of the Stambolijski mill
following its restart in June 2010;
- partial impairment of underperforming kraft paper assets in Lohja and
Ruzomberok;
- impairment of Newsprint assets in South Africa;
- costs of restructuring and write-off of obsolete assets in Syktyvkar following
completion of the modernisation project;
- gain on acquisition of the industrial bags plants in western Europe, largely
offset by restructuring costs following the announcements to close certain of
these plants;
- loss on sale of the corrugated packaging plants in the UK;
- profit on the sale of forestry assets in South Africa; and
- write-down of assets and loss on disposal of Europapier.
Further detail is provided in note 4 of the financial statements.
Input costs
Input costs increased significantly during the year, although the rate of
increase slowed in the second half of 2010.
Wood, recovered fibre and pulp comprise approximately one third of the input
costs of the Group. Wood prices increased by approximately 30% over the year.
Average benchmark prices for recovered fibre increased by 111% when compared to
the average price of 2009. The increases of 50% and 41% for hardwood pulp and
softwood pulp, respectively, did not have a significant impact on the Group as
it is largely balanced in respect of pulp production and consumption.
These increases in input costs have, to a large extent, been passed on to
customers through selling price increases during the course of the year.
Energy and chemical costs have increased across the business, with particular
pressure on electricity prices in South Africa, which have almost doubled over
last three years. These increases were partially offset in Europe by higher
green energy sales and disposal of emission credits in the Corrugated and Bags &
Coatings businesses.
Currencies
Most of the emerging market currencies to which the Group is exposed as an
exporter have strengthened against the euro during the year. Whilst these
exchange rates are relatively volatile, on average, the South African rand has
strengthened by 17%, the Russian rouble by 9%, the Turkish lira by 8%, the
Polish zloty by 8% and the Czech koruna by around 4%. Together with the
generally higher inflation expectations in these countries, this places
increasing pressure on the Group`s cost base. Conversely, the general
strengthening of the US dollar against the euro benefited European exports and
supported pricing in Europe.
Tax
The effective tax rate before special items was 24%, compared to 32% in 2009.
The main reasons for the reduction in the tax rate are improved profitability
enabling the use of previously unrecognised tax losses; increased profitability
in regions with lower statutory tax rates; and the benefits of tax incentives
granted in certain countries in which the Group operates, notably those related
to the major Polish and Russian projects.
Non-controlling interests
The income attributable to non-controlling interests increased significantly
during the year from EUR30 million in 2009 to EUR61 million in the current year.
This is primarily attributable to the significantly improved profitability of
Mondi Swiecie S.A. and Mondi SCP a.s. (Ruzomberok).
Cash flow and capital expenditure
EBITDA of EUR882 million was EUR237 million higher than in 2009 reflecting the
positive trading environment. The Group generated EUR778 million of cash from
operations (2009: EUR867 million), notwithstanding the EUR121 million increase
in working capital on the back of increased revenues (EUR248 million reduction
in 2009).
Capital expenditure of EUR394 million was EUR124 million lower than the prior
year. This reflects the reduction in spend on the two major capital investments
in Poland, completed towards the end of 2009, and Russia, completed in the
latter half of 2010, and the Group`s tight focus on new capital approvals which
were severely restricted through the height of the global financial crisis in
2008 and 2009. Excluding major expansionary capital investments, the Group aims
to maintain its capital expenditure at between 60% and 80% of its depreciation
charge. In 2010, this ratio was 64%.
The surplus cash as well as the net cash received from the business
restructuring activities was applied to reduce net debt.
Treasury and borrowings
Net debt at year end was EUR1,364 million, EUR153 million lower than the prior
year. This reduction was achieved through strong operational cash flows
offsetting the investment in working capital in line with increased revenues,
capital expenditure to complete the projects in Poland and Russia and a EUR78
million negative currency impact. Gearing as at 31 December 2010 was 29.7%
(2009: 35.1%), and the net debt to trailing 12 months EBITDA ratio was 1.5
(2009: 2.4).
The Group successfully obtained public credit ratings from Moody`s (Baa3) and
Standard & Poor`s (BB+) in March 2010. The Moody`s rating is investment grade.
The ratings have remained on stable outlook since they were issued. Following
the publication of the ratings, Mondi Finance plc established its Euro Medium
Term Note (EMTN) programme under which it successfully issued its inaugural
EUR500 million, 7 year, 5.75% public Eurobond at the end of March 2010. Under
the EMTN programme Mondi is able to issue further Eurobonds subject to market
conditions, thus diversifying and strengthening the Group`s funding structure.
The proceeds of the issuance were used to repay debt drawn under existing bank
facilities.
Financing costs before interest capitalised reduced from EUR185 million to
EUR168 million mainly as a result of lower interest rates in Russia and South
Africa during 2010, offset in part by the interest on the Eurobond being higher
than that on the borrowings it was used to refinance.
Group liquidity is provided through the EUR500 million Eurobond and a range of
committed bank facilities amounting to EUR2.4 billion. With EUR1.5 billion of
these facilities undrawn at the year end, the Group has significant liquidity to
meet its short-term funding requirements.
The Group is actively reviewing refinancing options for the EUR1.55 billion
syndicated revolving credit facility, which matures in June 2012. As at 31
December 2010, EUR122 million of this facility was drawn. Other key Group
facilities include a EUR160 million export credit agency loan in Russia with an
amortising repayment until 2020, a PLN474 million (EUR119 million) European
Investment Bank facility in Poland with an amortising repayment until 2017 as
well as various committed facilities in South Africa amounting to ZAR2.7 billion
(EUR305 million).
The average maturity of the Eurobond and committed debt facilities is 2.6 years
(compared to 2.2 years at 31 December 2009). Drawn committed facilities maturing
over the next 12 months amount to EUR397 million. To the extent they are not
renewed, they can be financed out of existing undrawn committed facilities.
Sustained delivery on Group strategy
Mondi`s strategy continues to deliver robust results and we will take
opportunities to strengthen our position where appropriate as we:
- build on leading positions in packaging and UFP, particularly in high-growth
emerging markets;
- maintain our position as a low-cost, high-quality producer by selectively
investing in production capacity in lower-cost regions and exploiting benefits
of upstream integration (including forestry); and
- focus on continuous productivity improvement and cost reduction, delivered
through business excellence programmes and rigorous asset management.
Leading market positions
Our focus continues to be on achieving the right product mix and geographic
focus and thereby increasing the quality of our earnings. In order to increase
our exposure to the faster growing emerging markets and reduce the risks
associated with some declining western European markets, we have completed a
number of restructuring programmes. As a result Mondi is well positioned with
good exposure to high-growth emerging markets such as eastern Europe, Russia and
South Africa, with 73% of the Group`s net operating assets and 55% of revenue by
destination based in these geographical areas.
High-quality, low-cost asset base
Over the past year, Mondi has continued to develop its high-quality, low-cost
asset base and the EUR545 million modernisation project at the Syktyvkar mill in
Russia not only boosts our leading market position in this key region but the
mill is now a well-invested highly cost-effective asset. The project
incorporated the construction of a new wood yard, the rebuild of the softwood
and hardwood production lines and the white liquor plant, a new lime kiln and
recovery boiler, a new turbo-generator and evaporation plant and the rebuild of
the UFP and containerboard machines. This investment enables Mondi to increase
product quality and output for containerboard and UFP. Most importantly the mill
is now fully self-sufficient in pulp, which is where the major cost advantage
lies.
The European Corrugated business benefited from the new recycled containerboard
machine at Swiecie, which has continued to operate well; restructuring and cost
reduction initiatives; and improved product prices and volumes. The new machine
produced 410,580 tonnes of paper in 2010 and should make good progress in 2011
towards its capacity output of 470,000 tonnes.
Focus on performance
Cost optimisation is entrenched in Mondi`s culture and management`s relentless
approach to cost savings did not lose momentum in 2010. The Group`s focus on
cash flow optimisation resulted in working capital remaining tightly under
control and within the desired range of 10% to 12% of turnover.
The ROCE of 12.3%, whilst representing a pleasing improvement, is just short of
the 13% targeted across the cycle.
Overall, 2010 has been an extremely successful year from an operational
perspective, with significant improvements in production efficiencies across the
business and full year production records being set in a number of key
operations including Swiecie, Syktyvkar, Steti, Ruzomberok, Frantschach and
Richards Bay.
Principal risks and uncertainties
It is in the nature of Mondi`s business that the Group is exposed to risks and
uncertainties which may have an impact on future performance and financial
results, as well as on its ability to meet certain social and environmental
objectives.
On an annual basis, the DLC executive committee and Boards conduct a formal
systematic review of the most significant risks and uncertainties, determined
through a Group wide bottom up review, and the Group`s responses to those risks.
These risks are assessed against pre-determined risk tolerance limits,
established by the Boards, and reviewed on an annual basis.
The Group believes that it has effective systems and controls in place to manage
the key risks identified below within the risk tolerance levels established by
the Boards.
- Mondi operates in a highly competitive environment
The markets for paper and packaging products are highly competitive. Prices of
Mondi`s key products have experienced substantial fluctuations in the past.
Furthermore, product substitution and declining demand in certain markets,
coupled with new capacity being introduced may have an impact on market prices.
A downturn in trading conditions in the future may have an impact on the
carrying value of goodwill and tangible assets and may result in further
restructuring activities. Mondi is flexible and responsive to changing market
and operating conditions and the Group`s geographical and product
diversification provide some measure of protection.
- Input costs are subject to significant fluctuations
Materials, energy and consumables used by Mondi include significant amounts of
wood, pulp, recovered fibre, packaging papers and chemicals. Increases in the
costs of any of these raw materials, or any difficulties in procuring wood or
recovered fibre in certain countries, could have an adverse effect on Mondi`s
business, operational performance or financial position. The Group`s focus on
operational performance, relatively high levels of integration and access to its
own virgin fibre in Russia and South Africa, serve to mitigate these risks.
Fifty percent of the South African forestry acreage is subject to land claims.
The continued acceptance of the Mondi settlement model as the industry standard
by the South African government provides some predictability for future land
claim settlements.
- Foreign currency exposure and exchange rate volatility
The location of some of the Group`s significant operations in emerging markets
results in foreign currency exposure. Adverse currency movements and high
degrees of volatility may impact on the financial performance and position of
the Group. The most significant emerging market currency exposures are to the
South African rand, Russian rouble, Czech koruna, Polish zloty and Turkish lira.
The Group`s policy is to hedge balance sheet exposures against short-term
currency volatility.
- Cost and availability of supply of electricity in South Africa may adversely
impact operations.
South Africa continues to experience increases in the cost of electricity well
above inflation. In 2010, the price of electricity increased by in excess of 25%
and similar increases are forecast for the next three years. Electricity demand
is expected to continue to outstrip supply until new generation capacity is
brought on stream, which is unlikely to be before 2013. Mondi continues to
monitor electricity consumption and has invested in projects to increase its own
generation capacity and reduce its dependence on the national energy provider.
- Significant capital investments including acquisitions carry project risk
The business is capital intensive and therefore requires ongoing capital
investment to expand or upgrade existing facilities and to develop new
facilities. Projects that require significant capital expenditure carry risks
including: failure to complete a project within the required timetable and/or
within budget; failure of a project to perform according to prescribed operating
specifications; and significant, unforeseen changes in raw material costs or
inability to sell the envisaged volumes or achieve envisaged price levels. The
successful completion of the Group`s two most significant capital investment
programmes in Poland and Russia has reduced the potential impact of this risk.
Larger capital projects are subject to specific approval by the Boards and
regular monitoring and reporting. Skilled and experienced teams are assigned to
large capital projects under the oversight of the Group
technical director.
- Investments in certain countries may be adversely affected by political,
economic and legal developments in those countries
The Group operates in a number of countries where the political, economic and
legal systems are less predictable than in countries with more developed
institutional structures. Significant changes in the political, economic or
legal landscape in such countries may have a material effect on the Group`s
operations in those countries. The Group has invested in a number of countries
thereby diversifying its exposure to any single jurisdiction. The Group`s
diversified management structure ensures that business managers are able to
closely monitor and adapt to changes in the environment in which they operate.
Going concern
The Group`s business activities, together with the factors likely to affect its
future development, performance and position are set out in the business review.
The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the annual financial statements. In
addition, the financial statements include the Group`s objectives, policies and
processes for managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and its exposures
to credit and liquidity risk.
Mondi`s geographical spread, product diversity and large customer base mitigate
potential risks of customer or supplier liquidity issues. Proactive initiatives
by management in rationalising the business through cost-cutting, asset closure
and divestitures have consolidated the Group`s leading cost position in its
chosen markets. Working capital levels and capital expenditure programmes are
strictly monitored and controlled.
The Group meets its funding requirements from a variety of sources including the
Eurobond, the syndicated five year revolving credit facility expiring in June
2012 and various facilities in the larger operations in Russia, Poland and South
Africa. The availability of some of these facilities is dependent on the Group
meeting certain financial covenants all of which have been complied with. Mondi
had EUR1.5 billion of undrawn committed debt facilities as at 31 December 2010
which should provide sufficient liquidity for Mondi in the medium term. The
Group`s forecasts and projections, taking account of reasonably possible changes
in trading performance, show that the Group should be able to operate well
within the level of its current facilities and related covenants.
After making enquiries, the directors have a reasonable expectation that the
Mondi 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 annual report and accounts.
Dividend
The Boards` aim is to offer shareholders long-term dividend growth within a
targeted dividend cover range of two to three times over the business cycle.
Given the strong financial performance, good cash generation and the Boards`
stated desire to increase distributions to shareholders, the Boards are pleased
to recommend a significant increase in the final dividend.
The boards of Mondi Limited and Mondi plc have recommended a final dividend of
16.5 euro cents per share (2009: 7.0 euro cents per share), payable on 12 May
2011 to shareholders on the register at 15 April 2011. Together with the interim
dividend of 3.5 euro cents per share, paid on 14 September 2010, this amounts to
a total dividend for the year of 20.0 euro cents per share. In 2009, the total
dividend for the year was 9.5 euro cents per share.
Outlook
Demand growth over the past 18 months has been very encouraging, with volumes in
most grades and geographic regions back at satisfactory levels. In 2011, further
demand growth is expected, albeit at more modest rates. Recent industry capacity
adjustments have also resulted in generally stronger fundamentals. Taken
together, this has led to a positive pricing environment. The general economic
recovery also brings cost pressures. We are confident that the Group`s
integrated low-cost position, focus on performance, and the contribution from
the major investments made through the down cycle, position the business well
for the future.
Directors` responsibility statement
The responsibility statement below has been prepared in connection with the
Group`s annual report for the year ended 31 December 2010. Certain parts thereof
are not included within this announcement.
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with International Financial
Reporting Standards (IFRS), give a true and fair view of the assets,
liabilities, financial position and profit or loss of Mondi Limited, Mondi plc
and the undertakings included in the consolidation taken as a whole; and
- the management report, which is incorporated into the directors` report,
includes a fair view of the development and performance of the business and the
position of the Group and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and uncertainties
that they face.
This responsibility statement was approved by the Boards on 18 February 2011 and
is signed on their behalf by:
David Hathorn Andrew King
Director Director
18 February 2011 18 February 2011
Combined and consolidated income statement
for the year ended 31 December 2010
2010
Before Special After
special items special
EUR million Notes items (note 4) items
Group revenue 3 6,228 - 6,228
Materials, energy and consumables used (3,322) - (3,322)
Variable selling expenses (548) - (548)
Gross margin 2,358 - 2,358
Maintenance and other indirect expenses (298) - (298)
Personnel costs (931) (23) (954)
Other net operating expenses (247) 50 (197)
Depreciation, amortisation and
impairments (373) (24) (397)
Operating profit/(loss) 3 509 3 512
Non-operating special items 4 - (25) (25)
Net income from associates 2 - 2
Total profit/(loss) from operations
and associates 511 (22) 489
Net finance costs (117) - (117)
Investment income 35 - 35
Foreign currency gains/(losses) 8 - 8
Financing costs (160) - (160)
Profit/(loss) before tax 394 (22) 372
Tax (charge)/credit 5 (93) 6 (87)
Profit/(loss) from continuing
operations 301 (16) 285
Attributable to:
Non-controlling interests 62 (1) 61
Equity holders of the parent companies 239 (15) 224
Earnings per share (EPS) for
profit/(loss) attributable to
equity holders of the parent companies
Basic EPS (EUR cents) 6 44.1
Diluted EPS (EUR cents) 6 43.6
Basic underlying EPS (EUR cents) 6 47.0
Diluted underlying EPS (EUR cents) 6 46.5
Basic headline EPS (EUR cents) 6 47.0
Diluted headline EPS (EUR cents) 6 46.5
2009
Before Special After
special items special
EUR million items (note 4) items
Group revenue 5,257 - 5,257
Materials, energy and consumables used (2,768) - (2,768)
Variable selling expenses (472) - (472)
Gross margin 2,017 - 2,017
Maintenance and other indirect expenses (241) - (241)
Personnel costs (838) (24) (862)
Other net operating expenses (293) (14) (307)
Depreciation, amortisation and impairments (351) (90) (441)
Operating profit/(loss) 294 (128) 166
Non-operating special items - (5) (5)
Net income from associates 2 - 2
Total profit/(loss) from operations and
associates 296 (133) 163
Net finance costs (114) - (114)
Investment income 27 - 27
Foreign currency gains/(losses) (1) - (1)
Financing costs (140) - (140)
Profit/(loss) before tax 182 (133) 49
Tax (charge)/credit (58) 6 (52)
Profit/(loss) from continuing operations 124 (127) (3)
Attributable to:
Non-controlling interests 29 1 30
Equity holders of the parent companies 95 (128) (33)
Earnings per share (EPS) for profit/(loss)
attributable to
equity holders of the parent companies
Basic EPS (EUR cents) (6.5)
Diluted EPS (EUR cents) (6.5)
Basic underlying EPS (EUR cents) 18.7
Diluted underlying EPS (EUR cents) 18.2
Basic headline EPS (EUR cents) 11.4
Diluted headline EPS (EUR cents) 11.1
Combined and consolidated statement of comprehensive income
for the year ended 31 December 2010
EUR million 2010 2009
Profit/(loss) for the financial year 285 (3)
Other comprehensive income:
Effect of cash flow hedges 11 26
Actuarial (losses)/gains and surplus restriction on
post-retirement benefit schemes (18) 7
Effect of available-for-sale investments - 1
Exchange differences on translation of foreign operations 193 118
Share of other comprehensive income of associates 1 1
Tax relating to components of other comprehensive income 4 (7)
Other comprehensive income for the financial year, net of tax 191 146
Total comprehensive income for the financial year 476 143
Attributable to:
Non-controlling interests 75 39
Equity holders of the parent companies 401 104
Combined and consolidated statement of financial position
as at 31 December 2010
EUR million 2010 2009
Intangible assets 312 308
Property, plant and equipment 3,976 3,847
Forestry assets 320 251
Investments in associates 16 6
Financial asset investments 34 27
Deferred tax assets 21 29
Retirement benefits surplus 11 8
Derivative financial instruments 3 -
Total non-current assets 4,693 4,476
Inventories 702 617
Trade and other receivables 992 933
Current tax assets 11 16
Cash and cash equivalents 83 123
Derivative financial instruments 11 7
Total current assets 1,799 1,696
Assets held for sale 1 36
Total assets 6,493 6,208
Short-term borrowings (410) (219)
Trade and other payables (1,034) (1,023)
Current tax liabilities (78) (55)
Provisions (64) (40)
Derivative financial instruments (9) (32)
Total current liabilities (1,595) (1,369)
Medium and long-term borrowings (1,037) (1,421)
Retirement benefits obligation (211) (184)
Deferred tax liabilities (349) (316)
Provisions (39) (45)
Other non-current liabilities (23) (21)
Derivative financial instruments (15) (19)
Total non-current liabilities (1,674) (2,006)
Liabilities directly associated with assets classified as
held for sale - (9)
Total liabilities (3,269) (3,384)
Net assets 3,224 2,824
Equity
Ordinary share capital 114 114
Share premium 532 532
Retained earnings and other reserves 2,117 1,753
Total attributable to equity holders of the parent
companies 2,763 2,399
Non-controlling interests in equity 461 425
Total equity 3,224 2,824
The Group`s combined and consolidated financial statements, and related notes,
were approved by the Boards and authorised for issue on 18 February 2011 and
were signed on its behalf by:
David Hathorn Andrew King
Director Director
Mondi Limited company registration number: 1967/013038/06
Mondi plc company registration number: 6209386
Combined and consolidated statement of cash flows
for the year ended 31 December 2010
EUR million Notes 2010 2009
Cash generated from operations 11a 778 867
Dividends from associates 2 2
Dividends from other investments 1 -
Income tax paid (47) (32)
Net cash generated from operating activities 734 837
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and cash
equivalents 9 - (2)
Acquisition of associates, net of cash and cash
equivalents (2) -
Proceeds from disposal of subsidiaries, net of cash
and cash equivalents 10 100 54
Proceeds from disposal of associates 10 - 3
Investment in property, plant and equipment 3 (394) (517)
Investment in intangible assets (4) (5)
Proceeds from the disposal of property, plant and
equipment and intangible assets 14 11
Investment in forestry assets (46) (40)
Investment in financial asset investments (11) (7)
Proceeds from the sale of financial asset investments 3 -
Loan repayments from related parties 1 1
Loan repayments from external parties 2 1
Interest received 10 8
Other investing activities (2) 1
Net cash used in investing activities (329) (492)
Cash flows from financing activities
Repayment of short-term borrowings 11c (51) (288)
Proceeds from medium and long-term borrowings 11c 717 138
Repayment of medium and long-term borrowings 11c (831) (100)
Interest paid (117) (163)
Dividends paid to non-controlling interests (18) (9)
Dividends paid to equity holders of the parent companies (54) (39)
Purchases of treasury shares (2) (1)
Contribution by non-controlling interests - 27
Non-controlling interests bought out (5) -
Net realised (loss)/gain on cash and asset
management swaps (48) 67
Other financing activities - 4
Net cash used in financing activities (409) (364)
Net decrease in cash and cash equivalents (4) (19)
Cash and cash equivalents at beginning of year 1 37 75
Cash movement in the year 11c (4) (19)
Reclassification 11c - (19)
Effects of changes in foreign exchange rates 11c (9) -
Cash and cash equivalents at end of year 1 24 37
Note:
1 `Cash and cash equivalents` includes overdrafts and cash flows from disposal
groups and is reconciled to the combined and consolidated statement of financial
position in note 11b.
Combined and consolidated statement of changes in equity
for the year ended 31 December 2010
Combined
share capital
and share Retained
premium earnings Other reserves 1
EUR million
At 1 January 2009 646 1,809 (132)
Dividends paid - (39) -
Total comprehensive income for the year - (33) 137
Issue of shares under employee share
schemes - 19 (19)
Purchases of treasury shares - (1) -
Non-controlling interests buy in - - -
Non-controlling interests bought out - - -
Reclassification - (12) 15
Other - - 9
At 31 December 2009 646 1,743 10
Dividends paid - (54) -
Total comprehensive income for the year - 224 177
Issue of shares under employee share
schemes - 5 (5)
Purchases of treasury shares - (2) -
Disposal of businesses - - 12
Non-controlling interests bought out - (1) -
Reclassification - 1 (1)
Other - - 8
At 31 December 2010 646 1,916 201
Total
attributable to
equity holders
of the parent Non-controlling Total
companies interests equity
EUR million
At 1 January 2009 2,323 373 2,696
Dividends paid (39) (9) (48)
Total comprehensive income for the year 104 39 143
Issue of shares under employee share
schemes - - -
Purchases of treasury shares (1) - (1)
Non-controlling interests buy in - 27 27
Non-controlling interests bought out - (3) (3)
Reclassification 3 (3) -
Other 9 1 10
At 31 December 2009 2,399 425 2,824
Dividends paid (54) (18) (72)
Total comprehensive income for the year 401 75 476
Issue of shares under employee share
schemes - - -
Purchases of treasury shares (2) - (2)
Disposal of businesses 12 (18) (6)
Non-controlling interests bought out (1) (3) (4)
Reclassification - - -
Other 8 - 8
At 31 December 2010 2,763 461 3,224
Note:
1 Other reserves are analysed further below.
Other reserves 1
Cumulative
Share-based translation
payment adjustment Cash flow
EUR million reserve reserve hedge reserve
At 1 January 2009 24 (336) (35)
Total comprehensive income for the year - 114 16
Mondi share schemes` charge 8 - -
Issue of shares under employee share
schemes (19) - -
Non-controlling put option issued - - -
Reclassification - - -
At 31 December 2009 13 (222) (19)
Total comprehensive income for the year - 180 9
Mondi share schemes` charge 8 - -
Issue of shares under employee share (5) - -
schemes
Disposal of businesses - 12 -
Reclassification 1 (1) -
At 31 December 2010 17 (31) (10)
Other reserves 1
Post-retirement
EUR million benefit reserve Other reserves 2 Total
At 1 January 2009 (36) 251 (132)
Total comprehensive income for the year 6 1 137
Mondi share schemes` charge - - 8
Issue of shares under employee share
schemes - - (19)
Non-controlling put option issued - 1 1
Reclassification 2 13 15
At 31 December 2009 (28) 266 10
Total comprehensive income for the year (12) - 177
Mondi share schemes` charge - - 8
Issue of shares under employee share
schemes - - (5)
Disposal of businesses - - 12
Reclassification - (1) (1)
At 31 December 2010 (40) 265 201
Notes:
1 All movements in other reserves are disclosed net of non-controlling
interests. The movements in non-controlling interests as a direct result of the
movements in other reserves for the year ended 31 December 2010 are as follows -
increase in non-controlling interests related to total comprehensive income for
the year of EUR14 million (2009: EUR9 million).
2 Other reserves consist of the merger reserve of EUR259 million (2009: EUR259
million) and other sundry reserves of EUR6 million (2009: EUR7 million).
Notes to the combined and consolidated financial statements
for the year ended 31 December 2010
1 Basis of preparation
The Group has two separate legal parent entities, Mondi Limited and Mondi plc,
which operate under a dual listed company (DLC) structure. The substance of the
DLC structure is such that Mondi Limited and its subsidiaries, and Mondi plc and
its subsidiaries, operate together as a single economic entity through a sharing
agreement, with neither parent entity assuming a dominant role. Accordingly,
Mondi Limited and Mondi plc are reported on a combined and consolidated basis as
a single reporting entity under International Financial Reporting Standards
(IFRS).
The condensed financial information included in this preliminary announcement
has been prepared in accordance with the measurement and recognition criteria of
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and has been prepared in
accordance with IAS 34, `Interim Financial Reporting`. The Group has also
complied with South African Statements and Interpretations of Statements of
Generally Accepted Accounting Practice. There are no differences for the Group
in applying IFRS as issued by the IASB and as endorsed by the European Union
(EU) and therefore the Group also complies with IFRS as endorsed by the EU. The
financial statements have been prepared on a going concern basis. This is
discussed in the business review under the heading `Going concern`.
The financial information set out above does not constitute the Company`s
statutory accounts for the years ended 31 December 2010 or 2009 but is derived
from those accounts. Statutory accounts for 2009 have been delivered to the
registrar of companies, and those for 2010 will be delivered in due course. The
auditors have reported on those accounts; their reports were (i) unqualified,
(ii) did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the UK Companies Act 2006.
Copies of their unqualified auditors` reports are available for inspection at
the Mondi Limited and Mondi plc registered offices.
2 Accounting policies
The same accounting policies, methods of computation and presentation have been
followed in the preparation of the combined and consolidated financial
statements as were applied in the preparation of the Group`s annual financial
statements for the year ended 31 December 2009, except as described below.
In the current year, the Group has adopted IFRS 3, `Business Combinations`
(revised 2008), and IAS 27, `Consolidated and Separate Financial Statements`
(revised 2008). Both Standards became effective for annual reporting periods
beginning on or after 1 July 2009.
The most significant changes, all of which are applied prospectively, to the
Group`s previous accounting policies for business combinations are as follows:
- acquisition related costs which previously would have been included in the
cost of a business combination are included in administrative expenses in the
combined and consolidated income statement as they are incurred;
- any pre-existing equity interest in the acquiree is remeasured to fair value
at the date of obtaining control (the acquisition date), with any resulting gain
or loss recognised in profit or loss;
- any changes in the Group`s ownership interest subsequent to the acquisition
date are recognised directly in equity, with no adjustment to goodwill; and
- any changes to the cost of an acquisition, including contingent consideration,
resulting from events after the acquisition date are recognised in profit or
loss. Previously, such changes resulted in an adjustment to goodwill.
Any adjustments to contingent consideration for acquisitions made prior to 1
January 2010 which result in an adjustment to goodwill continue to be accounted
for under IFRS 3 (2004) and IAS 27 (2005), for which the accounting policies can
be found in the Group`s annual financial statements for the year ended 31
December 2009. The application of both revised Standards did not have a material
impact on the Group`s results.
3 Operating segments
Identification of the Group`s externally reportable operating segments
The Group`s externally reportable segments reflect the internal reporting
structure of the Group, which is the basis on which resource allocation
decisions are made by management in the attainment of strategic objectives. The
Group operates under two primary geographic regions reflecting its South African
activities and assets, and its international, principally European, activities
and assets. These broad geographic regions are further split by product segments
reflecting the management of the Group. In addition the Group manages Mondi
Packaging South Africa and the Newsprint businesses separately and therefore
these have been presented as separate segments.
Product revenues
The material product types from which the Group`s externally reportable segments
derive both their internal and external revenues are presented as follows:
Operating segments Internal revenues 1 External revenues
Europe & International
Uncoated Fine Paper - Uncoated fine paper - Uncoated fine paper
- Pulp - Pulp
- Newsprint - Newsprint
Corrugated - Corrugated products - Corrugated products
Bags & Coatings - Kraft paper & - Kraft paper &
industrial bags industrial bags
- Coatings & consumer
packaging
South Africa Division - Uncoated fine paper - Uncoated fine paper
- Pulp - Pulp
- Corrugated products - Corrugated products
- Woodchips
Mondi Packaging
South Africa - Corrugated products - Corrugated products
- Recycled fibre - Plastic packaging
products
Newsprint businesses - Newsprint - Newsprint
Note:
1 The Group operates a vertically-integrated structure in order to benefit from
economies of scale and to more effectively manage the risk of adverse price
movements in key input costs. Internal revenues are therefore generated across
the supply chain.
Measurement of operating segment revenues, profit or loss, assets and non-
current non-financial assets
Management has regard to certain operating segment measures in making resource
allocation decisions and monitoring segment performance. The operating segment
measures required to be disclosed adhere to the recognition and measurement
criteria presented in the Group`s accounting policies. In addition, the Group
has presented certain non-IFRS measures by segment to supplement the user`s
understanding. All intra-group transactions are conducted on an arm`s length
basis.
The Group`s measure of net segment assets includes the allocation of retirement
benefits surpluses and deficits on an appropriate basis. The measure of segment
results exclude, however, the financing effects of the Group`s defined benefit
pension plans. In addition, the Group`s measure of net segment assets does not
include an allocation for derivative assets and liabilities, non-operating
receivables and payables and assets held for sale and associated liabilities.
The measure of segment results includes the effects of certain movements in
these unallocated balances.
The Group`s geographic analysis is presented on the following level:
- continental; or
- sub-continental; or
- by individual country (if greater than 10% of the Group total).
The Group disposed of its Merchant business, Europapier, during the year ended
31 December 2010. The results of the Merchant business are included in the
Newsprint businesses segment up to its date of disposal of 4 November 2010.
There has been no change in the basis of measurement of segment profit or loss
in the financial year.
Operating segment revenue
2010
Segment Internal External
EUR million revenue revenue 1 revenue 2
Europe & International
Uncoated Fine Paper 1,516 (129) 1,387
Corrugated 1,235 (59) 1,176
Bags & Coatings 2,226 (39) 2,187
Intra-segment elimination (125) 125 -
Total Europe & International 4,852 (102) 4,750
South Africa Division 580 (211) 369
Mondi Packaging South Africa 647 (29) 618
Newsprint businesses 3 492 (1) 491
Segments total 6,571 (343) 6,228
Inter-segment elimination (343) 343 -
Group total 6,228 - 6,228
2009
Segment Internal External
EUR million revenue revenue 1 revenue 2
Europe & International
Uncoated Fine Paper 1,351 (130) 1,221
Corrugated 1,041 (36) 1,005
Bags & Coatings 1,787 (24) 1,763
Intra-segment elimination (80) 80 -
Total Europe & International 4,099 (110) 3,989
South Africa Division 478 (210) 268
Mondi Packaging South Africa 498 (25) 473
Newsprint businesses 3 528 (1) 527
Segments total 5,603 (346) 5,257
Inter-segment elimination (346) 346 -
Group total 5,257 - 5,257
Notes:
1 Inter-segment transactions are conducted on an arm`s length basis.
2 The description of each business segment reflects the nature of the main
products they sell. In certain instances the business segments sell minor
volumes of other products and due to this reason the external segment revenues
will not necessarily reconcile to the external revenues by each type of product
presented below.
3 Revenue of the Merchant business is included in the results of the Newsprint
businesses segment up to its date of disposal. Excluding the revenue of the
Merchant business, the segment external revenue for the year ended 31 December
2010 would have been EUR151 million.
External revenue by product type
EUR million 2010 2009
Products
Corrugated products 1,626 1,357
Uncoated fine paper 1,351 1,195
Kraft paper & industrial bags 1,090 886
Coatings & consumer packaging 889 731
Merchant 429 468
Pulp 247 129
Newsprint 221 208
Woodchips 76 61
Other 1 299 222
Group total 6,228 5,257
Note:
1 Revenues derived from product types that are not individually material are
classified as other.
External revenue by location of customer
EUR million 2010 2009
Revenue
Africa
South Africa 1 818 644
Rest of Africa 272 196
Africa total 1,090 840
Western Europe
Germany 768 641
United Kingdom 1 323 367
Rest of western Europe 1,474 1,292
Western Europe total 2,565 2,300
Emerging Europe 1,184 1,077
Russia 491 387
North America 234 157
South America 33 17
Asia and Australia 631 479
Group total 6,228 5,257
Note:
1 These revenues, which total EUR1,141 million (2009: EUR1,011 million), are
attributable to the countries in which the Group`s parent entities are
domiciled.
External revenue by location of production
EUR million 2010 2009
Revenue
Africa
South Africa 1 1,195 948
Rest of Africa 21 13
Africa total 1,216 961
Western Europe
Austria 1,161 1,010
United Kingdom 1 155 244
Rest of western Europe 997 855
Western Europe total 2,313 2,109
Emerging Europe
Poland 711 486
Rest of emerging Europe 1,076 927
Emerging Europe total 1,787 1,413
Russia 617 519
North America 131 104
Asia and Australia 164 151
Group total 6,228 5,257
Note:
1 These revenues, which total EUR1,350 million (2009: EUR1,192 million), are
attributable to the countries in which the Group`s parent entities are
domiciled.
There are no external customers which account for more than 10% of the Group`s
total external revenue.
Operating profit/(loss) before special items
EUR million 2010 2009
Europe & International
Uncoated Fine Paper 179 146
Corrugated 119 23
Bags & Coatings 133 82
Total Europe & International 431 251
South Africa Division 64 32
Mondi Packaging South Africa 51 36
Newsprint businesses 1 (4) 12
Corporate & other businesses (33) (37)
Segments total 509 294
Special items (see note 4) (22) (133)
Net income from associates 2 2
Net finance costs (117) (114)
Group profit before tax 372 49
Note:
1 Segment operating profit before special items of the Merchant business is
included in the results of the Newsprint businesses segment up to its date of
disposal. Excluding the operating profit before special items of the Merchant
business, the segment operating loss for the year ended 31 December 2010 would
have been EUR10 million.
Significant components of operating profit/(loss) before special items
The DLC executive committee uses EBITDA as a measure of cash flow, coupled with
the depreciation and amortisation charge, for making decisions about, amongst
others, allocation of funds for capital investment.
Depreciation and
EBITDA amortisation
EUR million 2010 2009 2010 2009
Europe & International
Uncoated Fine Paper 279 239 100 93
Corrugated 187 87 68 64
Bags & Coatings 238 189 105 107
Total Europe & International 704 515 273 264
South Africa Division 117 76 53 44
Mondi Packaging South Africa 84 62 33 26
Newsprint businesses 1 10 28 14 16
Corporate & other businesses (33) (36) - 1
Group and segments total 882 645 373 351
Green energy sales and
disposal of
Operating lease charges emissions credits
EUR million 2010 2009 2010 2009
Europe & International
Uncoated Fine Paper 8 7 6 4
Corrugated 27 25 38 21
Bags & Coatings 9 10 36 22
Total Europe & International 44 42 80 47
South Africa Division 5 5 - -
Mondi Packaging South Africa 9 7 - -
Newsprint businesses 1 6 7 - -
Corporate & other businesses 2 1 - -
Group and segments total 66 62 80 47
Notes:
1 Significant components of operating profit/(loss) before special items of the
Merchant business are included in the results of the Newsprint businesses
segment up to its date of disposal. Excluding the significant components of
operating profit/(loss) before special items of the Merchant business, the
segment result for the year ended 31 December 2010 would have been EUR3 million
for EBITDA; EUR13 million for depreciation and amortisation; and EUR1 million
for rentals under operating leases.
Reconciliation of total profit/(loss) from operations and associates to EBITDA
EUR million 2010 2009
Total profit from operations and associates 489 163
Special items (excluding associates) (see note 4) 22 133
Depreciation and amortisation 373 351
Share of associates` net income (2) (2)
EBITDA 882 645
Operating segment assets
2010 2009
Net Net
Segment segment Segment segment
assets 1 assets assets 1 assets
EUR million
Europe & International
Uncoated Fine Paper 1,672 1,512 1,671 1,494
Corrugated 1,112 898 1,071 872
Bags & Coatings 1,731 1,333 1,531 1,222
Intra-segment elimination (55) - (33) -
Total Europe & International 4,460 3,743 4,240 3,588
South Africa Division 1,091 953 948 840
Mondi Packaging South Africa 507 393 432 335
Newsprint businesses 2 141 106 263 194
Corporate & other businesses 10 7 3 4
Inter-segment elimination (63) - (74) -
Segments total 6,146 5,202 5,812 4,961
Unallocated:
Investments in associates 16 16 6 6
Deferred tax
assets/(liabilities) 21 (328) 29 (287)
Other non-operating
assets/(liabilities) 3 193 (336) 211 (366)
Group trading capital employed 6,376 4,554 6,058 4,314
Financial asset investments 34 34 27 27
Net debt 83 (1,364) 123 (1,517)
Group assets 6,493 3,224 6,208 2,824
Notes:
1 Segment assets are operating assets and as at 31 December 2010 consist of
property, plant and equipment of EUR3,976 million (2009: EUR3,847 million),
intangible assets of EUR312 million (2009: EUR308 million), forestry assets of
EUR320 million (2009: EUR251 million), retirement benefits surplus of EUR11
million (2009: EUR8 million), inventories of EUR702 million (2009: EUR617
million) and operating receivables of EUR825 million (2009: EUR781 million).
2 Following the sale of the Merchant business, the Newsprint businesses segment
results do not include any amounts relating to the disposed business as at 31
December 2010.
3 Other non-operating assets consist of derivative assets of EUR14 million
(2009: EUR7 million), current income tax receivables of EUR11 million (2009:
EUR16 million), other non-operating receivables of EUR167 million (2009: EUR152
million) and assets held for sale of EUR1 million (2009: EUR36 million). Other
non-operating liabilities consist of derivative liabilities of EUR24 million
(2009: EUR51 million), non-operating provisions of EUR92 million (2009: EUR66
million), current income tax liabilities of EUR78 million (2009: EUR55 million),
other non-operating payables and deferred income of EUR335 million (2009: EUR396
million) and liabilities directly associated with assets classified as held for
sale of EURnil (2009: EUR9 million).
Non-current non-financial assets
2010
Non-
current
non- Net
financial Segment segment
assets 1 assets assets
EUR million
Africa
South Africa 2 1,253 1,584 1,344
Rest of Africa 13 25 21
Africa total 1,266 1,609 1,365
Western Europe
Austria 392 752 667
United Kingdom 2 80 135 113
Rest of western Europe 434 714 543
Western Europe total 906 1,601 1,323
Emerging Europe
Poland 580 702 583
Slovakia 492 547 466
Rest of emerging Europe 392 536 394
Emerging Europe total 1,464 1,785 1,443
Russia 896 1,020 961
North America 56 92 74
Asia and Australia 20 39 36
Group total 4,608 6,146 5,202
2009
Non-
current
non- Net
financial Segment segment
assets 1 assets assets
EUR million
Africa
South Africa 2 1,074 1,346 1,163
Rest of Africa 10 19 16
Africa total 1,084 1,365 1,179
Western Europe
Austria 398 735 529
United Kingdom 2 162 231 173
Rest of western Europe 401 605 492
Western Europe total 961 1,571 1,194
Emerging Europe
Poland 600 704 631
Slovakia 544 588 543
Rest of emerging Europe 380 524 425
Emerging Europe total 1,524 1,816 1,599
Russia 742 865 836
North America 46 74 65
Asia and Australia 49 121 88
Group total 4,406 5,812 4,961
Notes:
1 Non-current non-financial assets are non-current assets and consist of
property, plant and equipment, intangible assets and forestry assets, but
excludes retirement benefits surplus, deferred tax assets and non-current
financial assets.
2 These non-current non-financial assets, segment assets and net segment assets,
which total EUR1,333 million, EUR1,719 million and EUR1,457 million respectively
(2009: EUR1,236 million, EUR1,577 million and EUR1,336 million respectively),
are attributable to the countries in which the Group`s parent entities are
domiciled.
Additions to non-current non-financial assets
Additions to non-
current non-financial Capital expenditure
assets 1 cash payments 2
EUR million 2010 2009 2010 2009
Europe & International
Uncoated Fine Paper 138 257 151 191
Corrugated 79 178 87 195
Bags & Coatings 102 83 92 81
Total Europe & International 319 518 330 467
South Africa Division 71 63 28 26
Mondi Packaging South Africa 28 17 28 17
Newsprint businesses 3 10 10 7 7
Corporate & other businesses - 6 1 -
Group and segments total 428 614 394 517
Notes:
1 Additions to non-current non-financial assets reflect cash payments and
accruals in respect of additions to property, plant and equipment, intangible
assets and forestry assets and include interest capitalised as well as additions
resulting from acquisitions through business combinations. Additions to non-
current non-financial assets, however, exclude additions to deferred tax assets,
retirement benefits surplus and non-current financial assets.
2 Capital expenditure cash payments exclude business combinations, interest
capitalised and investments in intangible and forestry assets.
3 Additions to non-current non-financial assets and capital expenditure cash
payments of the Merchant business are included in the results of the Newsprint
businesses segment up to its date of disposal. Excluding the additions to non-
current non-financial assets and capital expenditure cash payments of the
Merchant business, the segment result for the year ended 31 December 2010 would
have been EUR8 million for additions to non-current non-financial assets; and
EUR9 million for capital expenditure cash payments.
Employee numbers
(hundreds) 2010 2009
By business segment
Europe & International
Uncoated Fine Paper 89 98
Corrugated 56 64
Bags & Coatings 83 73
Total Europe & International 228 235
South Africa Division 19 17
Mondi Packaging South Africa 38 37
Newsprint businesses 1 2 11
Corporate & other businesses 1 1
Group and segments total 288 301
Note:
1 Following the sale of the Merchant business, the Newsprint businesses segment
closing number of employees do not include any numbers relating to the disposed
business as at 31 December 2010.
4 Special items
EUR million 2010 2009
Operating special items
Goodwill impairments - (12)
Asset impairments (33) (78)
Reversal of asset impairments 9 -
Restructuring and closure costs
Restructuring and closure costs excluding related
personnel costs (14) (27)
Personnel costs relating to restructuring (24) (21)
Reversal of restructuring and closure costs excluding related
personnel costs 30 5
Reversal of personnel costs relating to restructuring 1 -
Demerger arrangements - (3)
Proceeds on insurance - 8
Gain on acquisition of business (see note 9) 34 -
Total operating special items 3 (128)
Non-operating special items
(Loss)/profit on disposals (see note 10) (11) 3
Impairments of assets held for sale (14) (8)
Total non-operating special items (25) (5)
Total special items before tax and non-controlling interests (22) (133)
Tax (see note 5) 6 6
Non-controlling interests 1 (1)
Total special items attributable to equity holders of the
parent companies (15) (128)
Special items before tax and non-controlling interests by operating segment
EUR million 2010 2009
Europe & International
Uncoated Fine Paper 5 (2)
Corrugated (15) (55)
Bags & Coatings 28 (48)
Total Europe & International 18 (105)
South Africa Division (10) (22)
Mondi Packaging South Africa (1) 7
Newsprint businesses 1 (29) (12)
Corporate & other businesses - (1)
Segments total (22) (133)
Note:
1 Special items of the Merchant business are included in the results of the
Newsprint businesses segment up to its date of disposal. Excluding the special
items of the Merchant business, the segment result for the year ended 31
December 2010 would have been EUR1 million.
Year ended 31 December 2010
Operating special items
A 120,000 tonne uncoated fine paper machine and related converting capacity in
the Merebank plant was mothballed in September 2010 and the business
restructured. This led to the recognition of an asset impairment of EUR20
million and related restructuring costs of EUR6 million.
The completion of the sale of the Szolnok site resulted in the reversal of
previously recognised restructuring and closure provisions and the realisation
of the cumulative translation adjustment reserve, amounting to EUR10 million.
The restarting of the Stambolijski kraft paper line resulted in a reversal of
impairment (EUR8 million) and related provisions (EUR17 million) recognised for
the closure that are no longer required.
Underperforming non-integrated kraft paper assets in Lohja and Ruzomberok were
partially impaired by EUR8 million.
The start-up of the recently completed capital project in Syktyvkar resulted in
the impairment of obsolete assets of EUR3 million and further restructuring
costs of EUR3 million.
The acquisition of eight industrial bag plants in western Europe from Smurfit
Kappa UK Limited resulted in a gain of EUR34 million being recognised.
Restructuring activities were necessary to streamline the acquisition and to
promote efficiency and profitability which resulted in EUR28 million of
restructuring and closure costs being recognised.
Other smaller operating special items include a reversal of asset impairment of
EUR1 million, reversal of certain restructuring and closure costs of EUR4
million, restructuring costs of EUR1 million in Europe & International and asset
impairments of EUR1 million each in Mondi Shanduka Newsprint and Mondi Packaging
South Africa.
Non-operating special items
The sale of the corrugated plants in the UK to Smurfit Kappa resulted in a loss
on disposal (including realisation of the cumulative translation adjustment
reserve) of EUR16 million and an impairment of assets of EUR1 million.
Purchase price adjustments relating to the sale of Cartonstrong and Niedergosgen
resulted in a gain of EUR3 million being recognised.
The Group disposed of a portion of its shareholding in Mondi Hadera Paper
Limited, retaining a non-controlling share of 25% and recognising a gain on
disposal of EUR1 million.
The sale of 38,425 hectares of forestry assets in South Africa realised a gain
of EUR16 million.
On classification as held for sale in May 2010, the non-current assets of
Europapier were impaired in full resulting in a EUR13 million charge. The
transaction was concluded on 4 November 2010 and a loss on disposal of EUR15
million was realised. A total charge of EUR28 million was therefore recognised
in respect of the disposal of Europapier.
Year ended 31 December 2009
Operating special items
Difficult trading conditions during the year resulted in management taking
decisive action to further restructure the cost base incurring restructuring and
closure costs amounting to EUR43 million, the most significant of which was the
closure of the Stambolijski mill.
Goodwill of EUR12 million, relating to the paper merchant Europapier, was
impaired. Further asset impairments of EUR78 million were recognised, the most
significant of which was a UK corrugated plant and an uncoated fine paper
machine in South Africa.
Other operating special items included insurance proceeds for a fire damaged
asset and the cost of equity settled demerger arrangements for senior
management.
Non-operating special items
Various corrugated converting operations in France and a recycled containerboard
plant in Italy were sold generating a net loss of EUR5 million.
5 Tax charge
Analysis of charge for the year from continuing operations
EUR million 2010 2009
UK corporation tax at 28% (2009: 28%) (2) 1
SA corporation tax at 28% (2009: 28%) 5 5
Overseas tax 74 46
Current tax (excluding tax on special items) 77 52
Deferred tax in respect of the current period (excluding tax on
special items) 20 15
Deferred tax in respect of prior period over provision (4) (9)
Total tax charge before special items 93 58
Current tax on special items - 1
Deferred tax on special items (6) (7)
Total tax credit on special items (see note 4) (6) (6)
Total tax charge 87 52
The Group`s effective rate of tax before special items for the year ended 31
December 2010, calculated on profit before tax before special items and
including net income from associates, is 24% (2009: 32%).
6 Earnings per share
EUR cents per share 2010 2009
Profit/(loss) for the financial year attributable to equity
holders of the parent companies
Basic EPS 44.1 (6.5)
Diluted EPS 43.6 (6.5) 3
Underlying earnings for the financial year 1
Basic EPS 47.0 18.7
Diluted EPS 46.5 18.2
Headline earnings for the financial year 2
Basic EPS 47.0 11.4
Diluted EPS 46.5 11.1
Notes:
1 Underlying EPS excludes the impact of special items.
2 The presentation of Headline EPS is mandated under the JSE Listings
Requirements. Headline earnings has been calculated in accordance with Circular
3/2009, `Headline Earnings`, as issued by the South African Institute of
Chartered Accountants.
3 Diluted EPS is consistent with Basic EPS as the impact of potential ordinary
shares is anti-dilutive.
The calculation of basic and diluted EPS, basic and diluted underlying EPS, and
basic and diluted headline EPS is based on the following data:
Earnings
EUR million 2010 2009
Profit/(loss) for the financial year attributable to equity
holders of the parent companies 224 (33)
Special items (see note 4) 22 133
Related tax (see note 4) (6) (6)
Related non-controlling interests (see note 4) (1) 1
Underlying earnings for the financial year 239 95
Profit on disposal of tangible and intangible assets (1) (4)
Special items: demerger arrangements (see note 4) - (3)
Special items: restructuring and closure costs (see note 4) (7) (43)
Impairments not included in special items 6 10
Related tax 2 3
Headline earnings for the financial year 239 58
Number of shares
million 2010 2009
Basic number of ordinary shares outstanding 1 508 508
Effect of dilutive potential ordinary shares 2 6 13
Diluted number of ordinary shares outstanding 514 521
Notes:
1 The basic number of ordinary shares outstanding represents the weighted
average number in issue for Mondi Limited and Mondi plc for the year, as
adjusted for the weighted average number of treasury shares held during the
year.
2 Diluted EPS is calculated by adjusting the weighted average number of ordinary
shares in issue, net of treasury shares, on the assumption of conversion of all
potentially dilutive ordinary shares.
7 Dividends
Dividend payments
An interim dividend for the year ended 31 December 2010 of 33.35878 rand cents /
3.5 euro cents per share was paid on 14 September 2010 to all Mondi Limited and
Mondi plc ordinary shareholders on the relevant registers on 27 August 2010.
A proposed final dividend for the year ended 31 December 2010 of 16.5 euro cents
per share will be paid on 12 May 2011 to all Mondi Limited and Mondi plc
ordinary shareholders on the relevant registers on 15 April 2011. The final
dividend is subject to the approval of the shareholders of Mondi Limited and
Mondi plc at the respective annual general meetings scheduled for 5 May 2011.
Dividends timetable
The proposed final dividend for the year ended 31 December 2010 of 16.5 euro
cents per share will be paid in accordance with the following timetable:
Mondi Limited Mondi plc
Last date to trade shares cum-dividend
JSE Limited 8 April 2011 8 April 2011
London Stock Exchange Not applicable 12 April 2011
Shares commence trading ex-dividend
JSE Limited 11 April 2011 11 April 2011
London Stock Exchange Not applicable 13 April 2011
Record date
JSE Limited 15 April 2011 15 April 2011
London Stock Exchange Not applicable 15 April 2011
Last date for receipt of Dividend
Reinvestment Plan (DRIP) elections by Central
Securities Depository Participants 21 April 2011 21 April 2011
Last date for DRIP elections to UK Registrar
and South African Transfer Secretaries
by shareholders of Mondi Limited and
Mondi plc 26 April 2011 15 April 2011*
Payment Date
South African Register 12 May 2011 12 May 2011
UK Register Not applicable 12 May 2011
DRIP purchase settlement dates 19 May 2011 17 May 2011**
Currency conversion dates
ZAR/euro 21 February 2011 21 February 2011
Euro/sterling Not applicable 26 April 2011
* 26 April 2011 for Mondi plc South African branch register shareholders
** 19 May 2011 for Mondi plc South African branch register shareholders
Share certificates on the South African registers of Mondi Limited and Mondi plc
may not be dematerialised or rematerialised between 11 April 2011 and 17 April
2011, both dates inclusive, nor may transfers between the UK and South African
registers of Mondi plc take place between 6 April 2011 and 17 April 2011, both
dates inclusive.
8 Asset values per share
Net asset value per share is defined as net assets divided by the combined
number of ordinary shares in issue as at the reporting dates presented, less
treasury shares held. Tangible net asset value per share is defined as the net
assets less intangible assets divided by the combined number of ordinary shares
in issue as at the reporting dates presented, less treasury shares held.
Euro 2010 2009
Net asset value per share 6.33 5.55
Tangible net asset value per share 5.71 4.94
9 Business combinations
To 31 December 2010
In line with Mondi`s strategy to strengthen its leading market position in
industrial and consumer bags in Europe an agreement was concluded in April 2010
with Smurfit Kappa UK Limited for the acquisition of its western European
industrial and consumer bag operations in Spain, France and Italy.
The businesses acquired incurred operating losses prior to their acquisition by
Mondi and are subject to restructuring activities. As a result of this and the
cash in the business on date of acquisition, a gain on acquisition is recognised
in special items in the combined and consolidated income statement. The fair
value accounting reflected in these results is provisional in nature. If
necessary, adjustments will be made to these carrying values, and to the gain on
acquisition, within 12 months of the acquisition date. To date, restructuring
costs of EUR28 million have been incurred (see note 4).
Prior to any planned restructuring activities, the acquired industrial bag
plants generated turnover of approximately EUR7 million per month and underlying
operating losses of EUR0.8 million per month. Had the acquisition occurred on 1
January 2010, the increase in revenue would have been EUR95 million with a loss
after tax of EUR40 million. Transaction costs of EUR1 million related to the
acquisition are recognised in the combined and consolidated income statement.
There were no other acquisitions made for the year ended 31 December 2010. The
deferred acquisition consideration relating to the acquisition in 2007 of Tire
Kutsan of EUR14 million was paid during the current year.
Details of the aggregate net assets acquired, as adjusted from book to fair
value, are presented as follows:
EUR million Book value Revaluation Fair value
Net assets acquired:
Property, plant and equipment 27 (13) 14
Inventories 15 - 15
Trade and other receivables 21 (2) 19
Cash and cash equivalents 18 - 18
Trade and other payables (22) (1) (23)
Short-term borrowings (1) - (1)
Retirement benefits obligation (2) - (2)
Provisions (3) 1 (2)
Net assets acquired 53 (15) 38
Gain arising on acquisition (34)
Total cost of acquisition 4
Cash acquired net of overdrafts (18)
Payment of deferred acquisition
consideration 14
Net cash paid -
To 31 December 2009
There were no major acquisitions made for the year ended 31 December 2009.
Details of the aggregate net assets acquired, as adjusted from book to fair
value are presented as follows:
EUR million Book value Revaluation Fair value
Net assets acquired: 1
Long-term borrowings - 2 2
Equity non-controlling interest 3 - 3
Other (1) - (1)
Net assets acquired 2 2 4
Goodwill arising on acquisition -
Total cost of acquisition 4
Debt consideration (2)
Net cash paid 2
Note:
1 The business combinations were not individually material and therefore have
not been shown separately.
During the year to 31 December 2010 adjustments totalling EURnil have been made
to the provisional values estimated of net assets acquired in the year to 31
December 2009.
10 Disposal of subsidiaries and associates
On 5 May 2010, Mondi signed an agreement with the Heinzel Group for the sale of
100% of its shares in Europapier, a paper merchant business selling graphic,
packaging and office papers, as well as other office supplies to customers
across central Europe and Russia. The tangible fixed assets were subsequently
fully impaired (EUR13 million) on classification as held for sale. The
impairment, together with the loss on disposal of the business of EUR15 million,
are recognised in special items in the combined and consolidated income
statement. The transaction was concluded on 4 November 2010.
On 8 September 2010, Mondi signed a sale agreement with Hadera Paper Limited to
reduce its interest in Mondi Hadera Paper Limited, a non-integrated paper mill
in Israel with capacity to produce 145,000 tonnes per annum of office and
printing papers, which are predominately sold in the Israeli market, from a
50.1% controlling interest to a 25% non-controlling interest. The remaining 25%
non-controlling interest is accounted for as an associate. The gain on disposal
of the business of EUR1 million is recognised in special items in the combined
and consolidated income statement. The transaction was concluded on 31 December
2010.
EUR million 2010 2009
Net assets disposed:
Goodwill 1 -
Property, plant and equipment 81 38
Deferred tax assets 4 -
Financial asset investments 1 -
Inventories 80 5
Trade and other receivables 170 34
Cash and cash equivalents 14 -
Assets held for sale 1 37 19
Short-term borrowings (45) (8)
Trade and other payables (130) (28)
Current tax liabilities (2) -
Provisions (3) -
Retirement benefits obligation (6) (3)
Deferred tax liabilities (7) -
Long-term borrowings (52) -
Liabilities directly associated with assets classified as held
for sale 1 (10) (6)
Total net assets disposed 133 51
(Loss)/profit on disposal of subsidiaries (see note 4) (11) 3
Profit on disposal of associates - 3
Cumulative translation adjustment reserve realised 12 -
Non-controlling interests disposed (18) -
Less: fair value of 25% non-controlling interest retained in
Mondi Hadera Paper Limited (6) -
Disposal proceeds 110 57
Net overdrafts disposed 2 8 -
Deferred consideration (18) -
Net cash inflow from disposals 100 57
Net cash inflow from disposal of subsidiaries during the year 100 54
Net cash inflow from disposal of associates during the year - 3
Note:
1 Disposal of assets and liabilities previously classified as held for sale. The
carrying value includes all movements since the date of reclassification up to
the date of disposal.
2 Bank overdrafts are included in short-term borrowings disposed and netted
against cash and cash equivalents disposed to arrive at the net amount of cash
disposed as disclosed.
11 Consolidated cash flow analysis
(a) Reconciliation of profit before tax to cash generated from operations
EUR million 2010 2009
Profit before tax 372 49
Depreciation and amortisation 373 351
Share-based payments 8 5
Non-cash effect of special items 11 98
Net finance costs 117 114
Net income from associates (2) (2)
Decrease in provisions and post-employment benefits (2) (16)
(Increase)/decrease in inventories (104) 80
(Increase)/decrease in operating receivables (130) 170
Increase/(decrease) in operating payables 113 (2)
Fair value gains on forestry assets (36) (28)
Felling costs 65 50
Profit on disposal of tangible and intangible assets (1) (4)
Other adjustments (6) 2
Cash generated from operations 778 867
(b) Cash and cash equivalents
EUR million 2010 2009
Cash and cash equivalents per combined and consolidated
statement of financial position 83 123
Bank overdrafts included in short-term borrowings (59) (86)
Net cash and cash equivalents per combined and consolidated
statement of cash flows 24 37
The fair value of cash and cash equivalents approximate the carrying values
presented.
(c) Movement in net debt
The Group`s net debt position, excluding disposal groups is as follows:
Cash and
cash Debt due Debt due
equivalents 1 within one after one Total net
year 2 year debt
EUR million
At 1 January 2009 75 (298) (1,467) (1,690)
Cash flow (19) 288 (38) 231
Business combinations
(see note 9) - - 2 2
Disposal of businesses
(see note 10) - 8 - 8
Reclassification (19) (119) 153 15
Currency movements - (12) (71) (83)
At 31 December 2009 37 (133) (1,421) (1,517)
Cash flow (4) 51 114 161
Business combinations
(see note 9) - (1) - (1)
Disposal of businesses
(see note 10) - 23 52 75
Movement in
unamortised loan costs - - (4) (4)
Reclassification - (273) 273 -
Currency movements (9) (18) (51) (78)
At 31 December 2010 24 (351) (1,037) (1,364)
Notes:
1 The Group operates in certain countries (principally South Africa) where the
existence of exchange controls may restrict the use of certain cash balances.
These restrictions are not expected to have any material effect on the Group`s
ability to meet its ongoing obligations.
2 Excludes overdrafts, which are included as cash and cash equivalents. As at 31
December 2010, short-term borrowings on the combined and consolidated statement
of financial position of EUR410 million (2009: EUR219 million) include EUR59
million of overdrafts (2009: EUR86 million).
The Group launched its inaugural publicly traded bond on 26 March 2010. The
EUR500 million bond, which matures on 3 April 2017, was issued at a discount of
EUR5.63 million and pays a fixed coupon of 5.75% per annum. The bond contains a
coupon step up clause whereby the coupon will be increased by 1.25% per annum
whilst Mondi fails to maintain at least one investment grade credit rating from
either Moody`s or Standard & Poor`s. Mondi`s credit ratings, which have remained
unchanged since first published in March 2010, were BB+ (Standard & Poor`s)and
Baa3 (Moody`s). The Moody`s credit rating is investment grade.
The following table shows the amounts available to draw down on the Group`s
committed loan facilities.
EUR million 2010 2009
Expiry date
In one year or less 44 141
In more than one year 1,437 849
Total credit available 1,481 990
12 Capital commitments
EUR million 2010 2009
Contracted for but not provided 98 214
Approved, not yet contracted for 316 291
These capital commitments will be financed by existing cash resources and
borrowing facilities.
Capital commitments are based on capital projects approved to date and the
budget approved by the Boards. Major capital projects still require further
approval before they commence.
13 Contingent liabilities and contingent assets
Contingent liabilities comprise aggregate amounts as at 31 December 2010 of
EUR20 million (2009: EUR21 million) in respect of loans and guarantees given to
banks and other third parties. Acquired contingent liabilities of EURnil (2009:
EURnil) have been recorded on the Group`s combined and consolidated statement of
financial position (see note 9).
There are a number of legal and tax claims against the Group. Provision is made
for all liabilities that are expected to materialise.
Contingent assets comprise aggregate amounts as at 31 December 2010 of EUR1
million (2009: EURnil) and mainly relate to tax refunds to be received.
14 Related party transactions
The Group has related party relationships with its associates and joint
ventures. Transactions between Mondi Limited, Mondi plc and their respective
subsidiaries, which are related parties, have been eliminated on consolidation.
The Group and its subsidiaries, in the ordinary course of business, enter into
various sale, purchase and service transactions with joint ventures and
associates and other related parties. These transactions are entered into on an
arm`s length basis at market rates.
There have been no significant changes to the related parties as disclosed in
note 39 of the Group`s annual financial statements for the year ended 31
December 2009.
15 Events occurring after 31 December 2010
With the exception of the proposed final dividend for 2010, included in note 7,
there have been no material reportable events since 31 December 2010.
Production statistics
Year ended Year ended
31 December 31 December
2010 2009
Europe & International
Uncoated fine paper Tonnes 1,524,225 1,470,381
Containerboard Tonnes 1,939,935 1,768,696
Kraft paper Tonnes 984,607 841,378
Hardwood pulp Tonnes 935,628 873,844
Internal consumption Tonnes 825,664 792,768
External Tonnes 109,964 81,076
Softwood pulp Tonnes 1,899,518 1,773,265
Internal consumption Tonnes 1,688,472 1,568,189
External Tonnes 211,046 205,076
Corrugated board and boxes Mm 2 1,308 1,697
Industrial bags M units 3,850 3,303
Coating and release liners Mm 2 3,187 2,672
Newsprint Tonnes 197,601 194,564
South Africa Division
Uncoated fine paper Tonnes 276,957 353,707
Containerboard Tonnes 259,785 238,915
Hardwood pulp Tonnes 589,186 578,032
Internal consumption Tonnes 366,170 407,641
External Tonnes 223,016 170,391
Softwood pulp Tonnes 112,956 109,142
Woodchips Bone dry tonnes 280,154 273,526
Mondi Packaging South Africa
Packaging papers Tonnes 399,344 367,741
Corrugated board and boxes Mm 2 387 369
Newsprint Joint Ventures
(attributable share)
Aylesford Tonnes 187,971 191,035
Mondi Shanduka Newsprint (MSN) Tonnes 126,530 121,701
Exchange rates
Year ended Year ended
31 December 31 December
2010 2009
Closing rates against the euro
South African rand 8.86 10.67
Pounds sterling 0.86 0.89
Polish zloty 3.97 4.10
Russian rouble 40.82 43.15
US dollar 1.34 1.44
Czech koruna 25.06 26.47
Turkish lira 2.07 2.16
Average rates for the period against the euro
South African rand 9.70 11.68
Pounds sterling 0.86 0.89
Polish zloty 3.99 4.33
Russian rouble 40.27 44.12
US dollar 1.33 1.39
Czech koruna 25.29 26.44
Turkish lira 2.00 2.16
21 February 2011
Sponsor: UBS South Africa (Pty) Ltd
Date: 21/02/2011 09:00:01 Produced by the JSE SENS Department.
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