| Thu 5 May 2011, 8:00 | | MND/MNP - Mondi - Interim Management Statement |
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MND MNP
MND MNP
MND/MNP - Mondi - Interim Management Statement
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.
Mondi Group: Interim Management Statement 5 May 2011
This interim management statement provides an update on the financial
performance and financial position of the Group since the year ended 31 December
2010, based on management accounts up to 31 March 2011 and estimated results for
April 2011, which have not been audited or reviewed by Mondi`s external
auditors.
Reviewed half-yearly results for the six months ending 30 June 2011 will be
published on or around 28 July 2011.
Group Overview
The Group`s underlying operating profit in the first quarter 2011 of Euro187
million was above that of each of the last two quarters of the prior year and
well in excess of that achieved in the comparable period of the prior year. This
reflects both the positive trading environment and a very strong operating
performance.
Price increases have been realised across all major products in the first
quarter of 2011. Coupled with sales volume increases across all businesses on a
like for like basis, this has more than offset the ongoing cost pressures being
experienced across most business segments. Furthermore, there were no major
plant maintenance shuts during the first quarter.
Cash flow from operations remains strong despite an increase in working capital,
largely attributable to increased revenue and seasonal effects. Following the
conclusion of the major capital projects in Swiecie and Syktyvkar, capital
expenditure was markedly reduced when compared to the first quarter of 2010.
The financial position of the Group at 31 March 2011 remained robust with net
assets largely unchanged from the position at 31 December 2010.
In April 2011, Mondi announced its intention to separate its interest in Mondi
Packaging South Africa (MPSA) via a demerger whereby all the ordinary shares in
MPSA held by Mondi Limited will be distributed to Mondi Limited shareholders and
MPSA listed under a new name on the JSE. This will be coupled with a matching
action, in terms of the dual listed structure, in the form of a share
consolidation of Mondi Limited shares. Full details of the proposed transaction
will be provided in a separate circular to be issued to shareholders during May
2011. Should the transaction be approved by shareholders, MPSA will be
classified as a discontinued operation and underlying operating profit restated
to exclude the results of MPSA.
On 14 April 2011, Mondi signed a new Euro750 million 5 year syndicated
revolving credit facility with 10 banks to refinance its existing Euro1.55
billion revolving facility that was due to mature in June 2012. Following this
refinancing the average maturity of the Group`s committed debt facilities is
extended to 4.2 years from 2.6 years as at December 2010, with unutilised
committed borrowing facilities of Euro760 million.
Except as discussed in this interim management statement, there have been no
other significant events or transactions impacting either the financial
performance or financial position of Mondi since 31 December 2010 up to the date
of this statement.
Divisional Overview
Europe & International
The Uncoated Fine Paper (UFP) business continued to perform very strongly.
Underlying operating profit was well above that of the comparable period of the
prior year and the final quarter of 2010, which was largely attributable to a
strong operating performance at the Group`s integrated Syktyvkar and Ruzomberok
mills, with the former now benefiting from the recently completed mill
modernisation programme. The unintegrated operations also benefited from lower
average input pulp prices.
In the Corrugated business, underlying operating profit was well above the first
quarter of 2010 and above that achieved in the fourth quarter of last year on
the back of increased volumes from the Swiecie plant. Average benchmark
containerboard prices increased marginally when compared to the fourth quarter
of 2010. These gains were however largely offset by ongoing input fibre cost
pressures. Notably, benchmark recovered fibre prices were up 18% between 31
December 2010 and 31 March 2011, while wood costs were up on average in excess
of 10% in central Europe when compared to the fourth quarter of 2010. In
response to rising recycled fibre costs, further price increases of around
Euro60 per tonne for European recycled containerboard have been announced.
In the Bags & Coatings business, underlying operating profit was up
significantly on both the comparable period in the prior year and the fourth
quarter of 2010 primarily due to an improved performance in the kraft paper
business. When compared to the fourth quarter 2010 performance, results were
also positively impacted by a recovery in the profitability of the industrial
bags business with price increases having been successfully implemented on
annual contract volumes. Kraft paper prices were up in the first quarter, with
further price increases of 7-12% announced to take effect during April 2011, on
the back of rising input costs and continued good demand. The coatings &
consumer packaging business continues to deliver good results with price and
volume improvements over the prior year.
South Africa Division
The South Africa Division`s underlying operating profit was up significantly on
the comparable period in the prior year, and broadly in line with the fourth
quarter of 2010. Benchmark hardwood pulp prices were marginally lower in the
first quarter of 2011 compared to average price levels achieved in the fourth
quarter of 2010, although this was offset by stronger export containerboard
prices. The continued strength of the local currency remains a challenge for the
business, while a maintenance shut in Richards Bay will impact the results for
the second quarter.
Mondi Packaging South Africa (MPSA)
The business continues to perform well with operating profit in the first
quarter exceeding that of the comparable prior year period. Profitability is
impacted by seasonal effects with results in the second half of the year
typically higher than those of the first half.
Newsprint
The Newsprint business continues to deliver below expectation with price
increases achieved at Aylesford insufficient to restore this business to
profitability. The Mondi Shanduka Newsprint joint venture is impacted by rising
electricity prices resulting in underlying operating profit below that of the
prior year.
Input Costs
Input costs remain elevated, at or near the highs of 2010. Recovered fibre
costs continue to increase with benchmark recovered fibre costs having increased
18% by 31 March 2011 compared to levels at 31 December 2010. Similarly, wood
costs remain under pressure, with average central European wood prices
increasing in excess of 10% when compared to the fourth quarter 2010. Energy
and other raw material input costs have also increased during the first quarter,
mainly on the back of rising crude oil prices. The Group remains largely
balanced with respect to pulp production and consumption and thus the impact of
the slightly lower pulp prices, although impacting the various divisional
results, is largely neutral for the Group.
Currency
The emerging market currencies remain relatively strong against the euro,
placing pressure on the Group`s cost base. The weakening of the US dollar
against the euro seen over the reporting period is of concern to the extent it
may undermine support for product pricing in the Group`s key European markets.
Capital Expenditure
Capital expenditure remains within the targeted range of around 80% of
depreciation. Spending on the mill modernisation in Syktyvkar is expected to be
completed by the middle of the year.
Finance Charges
Finance charges remain at similar levels to the second half of the previous year
although the amount capitalised has reduced significantly following the
completion of the Syktyvkar investment.
Summary
Rising input costs are impacting on margins, and the recent weakening of the US
dollar is a concern to the extent it may inhibit the ability to pass on further
cost increases. However, fundamentals generally remain strong in the Group`s key
paper grades, with the upward pricing momentum witnessed in 2010 continuing into
the first quarter of 2011. Given the Group`s favourable product and geographic
exposures, coupled with its integrated low cost position and focus on
performance, we are confident of making further progress in 2011.
End
Contact details:
Mondi Group
David Hathorn +27 (0)11 994 5418
Andrew King +27 (0)11 994 5415
Lora Rossler +27 (0)11 994 5400 / +27 (0)83 627 0292
Financial Dynamics
Richard Mountain +44 20 7269 7186 / +44 20 7909 684 466
Chloe Webb +27 (0)11 214 2421
5 May 2011
Sponsor: UBS South Africa (Pty) Ltd
Editors` notes
Mondi is an international paper and packaging Group, with production operations
across 31 countries and revenues of Euro6.2 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.
Date: 05/05/2011 08:00:31 Produced by the JSE SENS Department.
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