| Thu 5 May 2011, 12:00 | | MND/MNP - Mondi Limited and Mondi plc - Annual general meetings |
|
MND MNP
MND MNP
MND/MNP - Mondi Limited and Mondi plc - Annual general meetings
Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND ISIN: ZAE000097051
Mondi plc
(Incorporated in England and Wales)
(Registration number: 6209386)
JSE share code: MNP ISIN: GB00B1CRLC47
LSE share code: MNDI
As part of the dual listed company structure, Mondi Limited and Mondi plc
notify both the JSE Limited and the London Stock Exchange of matters required
to be disclosed under the JSE Listing Requirements and/or the Disclosure and
Listing Rules of the United Kingdom Listing Authority.
5 May 2011
MONDI LIMITED AND MONDI plc - ANNUAL GENERAL MEETINGS
ADDRESS TO SHAREHOLDERS BY THE JOINT CHAIRMEN AND CHIEF EXECUTIVE OFFICER
Cyril Ramaphosa, Joint Chairman, speaking from Johannesburg:
Good morning, ladies and gentlemen. On behalf of the boards of Mondi Limited
and Mondi plc, welcome to the fourth Annual General Meeting of the Mondi
Group. We are delighted that you have been able to join us here in
Johannesburg and there in London. Thanks once again to the marvel of
technology, although we`re on separate continents, David Williams and I, and
our fellow board directors, take great pleasure in being able to talk to you
this morning, as one.
As you know, David Williams and I share the chair of Mondi Group and we would
both like to say a few words this morning about Mondi`s progress over the
last year. Your Chief Executive, David Hathorn, will then review the Group`s
performance and strategy in a little more detail as well as update you on the
Group`s Interim Management Statement that we published earlier today. After
this we will be delighted, as a board, to take your questions. But first, let
me introduce you to your directors.
To my immediate left is Imogen Mkhize, an independent non-executive director.
Next to her is David Hathorn, your Chief Executive Officer. And on his left
is Philip Laubscher, Company Secretary of Mondi Limited. Next to Philip is
Andrew King, your Chief Financial Officer.
With David Williams in London, we have Colin Matthews, an independent non-
executive director and chairman of the DLC Sustainable Development Committee.
Anne Quinn, our senior independent non-executive director and chair of the
DLC Remuneration Committee. And beside her Carol Hunt, Company Secretary of
Mondi plc.
To David`s right, we have Stephen Harris, an independent non-executive
director who joined the boards on 1 March 2011, Peter Oswald, Chief Executive
Officer of the Europe & International Division and, finally, John Nicholas
independent director and chairman of the DLC Audit Committee.
For the benefit of our new shareholders I should point out that, although the
dual listed company structure means that Mondi Limited in South Africa and
Mondi plc in the UK are separate corporate entities, each with its own board
and shareholders, Mondi operates as a single corporate group, managed as a
single economic enterprise. The two companies have the same board members and
the same management team. The DLC structure means that shareholders in each
company fully share in the performance of the Group as a whole.
In 2010 the Mondi Group delivered very good results set against a backdrop of
improved market conditions.
We achieved increased volumes and strong prices amid sector-wide demand
growth.
The Group`s streamlined operating base, comprising high-quality assets
providing low-cost production with a focus on high-growth emerging markets,
performed very well throughout the year.
We completed the largest capital project in our history in Syktyvkar, Russia
on-time and within the revised budget of 545 million Euro. Also, our
investment made at Swiecie in Poland, commissioned in late 2009, is running
very well.
Mondi remains a strong Group with a robust strategy and operational model. As
a low-cost producer, we are fully integrated across the paper and packaging
process, adding value at every stage of the product chain, from forestry,
pulp and paper to the conversion of packaging papers into corrugated
packaging and industrial bags.
The strength of our financial performance in 2010, backed by our competitive
position and a strong balance sheet, gives us the confidence to recommend a
significant increase in the final dividend to 16.5 Euro cents per share. If
approved, this will make a total dividend for the year of 20.0 Euro cents per
share.
Before I hand over to David Williams, I would just like to highlight a few
areas in which we made particular progress last year.
At the end of 2010 Mondi employed twenty nine thousand people at 103 separate
operating sites across 31 countries, with a particularly strong presence in
central and Eastern Europe, Russia and South Africa. Often, we are the
single largest employer in the area in which we are located. This brings with
it a great responsibility, which we take very seriously. We want Mondi to be
a sustainable, socially-responsible business that makes a real and lasting
contribution to every community within which we operate.
We evaluate the economic and social impact of each of our operations on its
local community. This enables us to build tailored programmes that bring
tangible benefits to those communities. In 2010 we invested over 12.6 million
Euros in charitable donations and community projects with a focus on health
and education.
Here in South Africa, we continue to be a supporter of the government`s
policy of broad-based black economic empowerment, which influences many of
our employment and procurement practices. We also play an active role in
helping to reduce the prevalence of HIV/AIDS in communities and through
routine counselling and testing of our employees.
But one of the most significant developments for us in South Africa was the
further progress we made on land restitution. To date we have concluded
eleven land claims and reached agreement on the settlement of all outstanding
Kwazulu Natal claims in the next two years. Based on a unique model, we are
working in close consultation with the South African ministry of land
affairs, which provides a long-term, mutually beneficial and sustainable
solution to communities, government and the Group.
Over several years, we have taken steps to improve the working conditions in
our forests including making improvements in education and training,
transport, accommodation and our feeding schemes which ensures that workers
get a nourishing meal every day.
All of these developments and more are covered in detail in our annual report
and sustainability summary review, additional copies of which are available
today - or you can download these from our web site.
With that, I`d like to hand over to my co-chairman, David Williams, in
London. David.
David Williams, Joint Chairman, speaking from London:
Thank you, Cyril. As Cyril said, although Mondi is a dual listed company
domiciled on two continents, it is a single group with a unified management.
This means that the boards comprise the same directors, with independent non-
executives in each, and those boards remain independent of the executive
committee, led by David Hathorn, which manages the Group on a day-to-day
basis.
This enables your boards to exercise the highest standards of financial and
operational control and to ensure that the key risks and performance criteria
of the business are diligently scrutinised and reviewed on your behalf.
Although Mondi is less than four years old as an independently listed Group,
I am pleased to report that the boards are functioning at a high standard.
Your directors provided clear guidance throughout the year, applying their
skills and experience in support of the executive team. The board committees
were effectively led and did some extremely good work during the year.
We are satisfied that Mondi has in place the highest standards of governance
practice. But we are not at all complacent. The operation of the boards and
committees is regularly reviewed and the performances of the directors were
externally evaluated in 2010, producing clear action plans for further
improvement in 2011.
As you will have read in our annual report, your directors took the
opportunity to visit as many of Mondi`s operations as possible in 2010, to
see for ourselves the working conditions of our employees and our
contractors.
Safety remains paramount to us across the Group and we continued to reduce
accidents in the workplace. However, following 2009`s success in delivering
zero fatalities, we deeply regret that two people were fatally injured during
the year, both in South Africa. The Group`s policy of zero harm remains our
target and a thorough investigation was undertaken after each incident to
ensure that we continue to refine the safety measures, including training
programmes necessary to keep all our employees and contractors safe. Safety
is a key item on the agenda at every DLC board meeting and we have tasked
management with finding new ways to further entrench safe behaviour
throughout our business.
We are pleased that in 2010 a number of our operations were very successful
in their pursuit of zero harm, with nine out of 21 mills and forest areas
reporting more than a million lost time injury free hours.
Our focus on safety, of course, is only one part of our commitment to
sustainability across the Group. Every one of our sites is monitored against
the very demanding standards of our integrated sustainable development
management system and the DLC sustainable development committee, under Colin
Matthews` chairmanship, receives timely and accurate data using MORIS - our
Mondi reporting and information system.
We are particularly pleased with our progress on sustainable forestry,
resource usage and emission reductions. All our forests have now been
assessed for forest stewardship council certification, with certification of
the last outstanding area in Russia completed in 2010.
We have reported significant progress in reducing and optimising our resource
usage, in particular water and energy. More than half of our energy usage
comes from biomass a renewable energy sources.
Operating as we do in emerging markets where the effects of climate change
are likely to have more impact, we have given critical consideration both to
our role in respect of climate change and to the impact of climate change on
our Group and our communities.
In 2010, we also reviewed our performance against our five year commitments
in all our sustainable development areas and I am pleased to report that we
achieved or exceeded all our environmental commitments. We reduced specific
CO2 equivalent emissions by 23% in the period 2004 to 2010. We had a 79% self-
sufficiency rate in electricity production by the end of 2010. And between
2004 and 2010, we reduced our specific energy consumption for pulp and paper
making by 11%.
The positive role played by sustainably managed forests has been recognised
in the international climate change debate and we again participated in the
Carbon Disclosure Project`s 2010 Greenhouse Gas Emission and Climate Change
Survey.
You can read more about our achievements in the sustainability section of our
web site, where we report on all these areas in full.
The 2010 financial year has been one of vastly improved performance from both
a financial and operational perspective and this is in no small part, thanks
to the continued dedication of Mondi`s twenty nine thousand employees across
the globe. The management have been quick to react to change when necessary,
and their professional approach has delivered the very good results we have
seen.
The Mondi Group maintained its strategic course in 2010 and the effectiveness
of this strategy, as evidenced in the robust performance of the past year,
places us in a strong position in 2011. With the completion of our major
European projects in 2010 we should see strong cash generation in the period
ahead. We plan to use this to ensure our asset base remains appropriately
invested and our debt levels are such that we maintain investment grade
credit metrics. This strong cashflow should enable the Group to continue to
provide increasing cash returns to shareholders.
Looking further ahead, the world economy continues to strive to steady itself
in the wake of the 2008 crisis. There remain a number of uncertainties, and a
close watch will be maintained over pricing levels and input costs as we seek
to further improve the Group`s performance in the year ahead.
I`m sure that you will have seen the announcement that Mondi is planning to
demerge Mondi Packaging South Africa during this year. David Hathorn
addresses this in a little more detail in his presentation.
Before I hand back to South Africa I would like to extend our appreciation to
Colin Matthews, who steps down from the boards at the conclusion of these
AGMs for his contribution to the Mondi Group over the last 4 years as a non-
executive director and particularly for his contribution as chairman of the
sustainable development committee. Stephen Harris who joined us as a non-
executive director in March will take over from Colin as chairman of the
committee and we wish him well in this capacity.
Now I`d like to hand back to South Africa and to your Chief Executive, David
Hathorn, who will expand on our performance in 2010 and also take you through
the highlights of our latest Interim Management Statement, released earlier
this morning. David.
David Hathorn, Chief Executive Officer, speaking from Johannesburg:
Thank you, David. As your chairmen have said, 2010 saw a much improved
financial performance for the Mondi Group. After the turmoil of 2008 and
early 2009 created by the global financial crisis, the recovery we noted in
late 2009 continued into 2010.
Demand growth over the past eighteen months has been very encouraging with
volumes in most grades and geographic regions back to satisfactory levels.
During 2011 further demand growth is evident, albeit at more modest rates.
Industry capacity adjustments through the downturn have also resulted in
generally stronger fundamentals which has resulted in a positive pricing
environment.
The Mondi Group is pleased to have delivered much improved financial and
operating results for the year, with Group revenue of 6,228 million Euros and
underlying operating profit of 509 million Euros, up by 18% and 73%
respectively compared to 2009. These figures signify a very good performance
against the backdrop of improved market conditions.
Capital expenditure for the year amounted to 64% of depreciation. This
follows the decision to limit capital expenditure in 2008 and 2009 during the
recession. We will now return to more normal levels of ongoing capital
expenditure of around 80% of depreciation.
During the year, 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, being the modernisation of the Syktyvkar mill in Russia,
In April 2011, Mondi Group announced its intention to separate its interest
in Mondi Packaging South Africa via a demerger whereby all the ordinary
shares in MPSA held by Mondi Limited will be distributed to the Mondi Limited
ordinary shareholders. MPSA would be listed under a new name on the
securities exchange operated by the JSE Limited.
MPSA`s future growth plans, particularly with respect to its rigid plastics
business, are constrained by the Mondi Group`s differing strategic focus. The
demerger endorses MPSA`s own strategy and provides shareholders with a clear
benefit as both businesses would be able to take better advantage of their
respective growth opportunities.
Going forward, we will regularly assess our product portfolio to ensure
maximum value is achieved and while growth clearly remains an option, we will
continue to be disciplined as regards acquisitions and expansionary capital
expenditure and will use this free cash flow to reduce debt and increase
distributions to shareholders.
Our balance sheet remains strong with net debt at year end of 1,364 million
Euros, or about 1.5 times EBITDA.
In April 2011 Mondi announced the signing of a new 750 million Euro, 5-year
multi currency revolving credit facility to refinance its existing 1.55
billion Euro credit facility that was due to mature in June 2012. This
completes the refinancing of the 1.55 billion Euro facility that was
partially refinanced via Mondi`s inaugural 500 million Euro 7 year Eurobond
in March 2010.
As you know, earlier today we released our Interim Management Statement. I
would like to take this opportunity to briefly summarise the main points of
the announcement.
The Group`s underlying operating profit in the first quarter 2011 of 187
million Euros was above that of each of the last two quarters of the prior
year and well in excess of that of 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.
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 our Europe & International Division, 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.
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. The Coatings & Consumer Packaging business
continues to deliver good results with price and volume improvements over the
prior year.
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. The continued strength of the local currency remains
a challenge for the business, while a maintenance shut in Richards Bay will
impact results for the second quarter.
Mondi Packaging South Africa continues to perform well with operating profit
for 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.
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, capital expenditure
was markedly reduced when compared to the first quarter of 2010.
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.
I would like add my enormous thanks to our workforce. They continue to
demonstrate a dedication and commitment to Mondi which contributes to our
success and particularly the improved results of the past year.
In closing, I would like to acknowledge two valued colleagues who are
retiring from the Mondi Group. Firstly, I would like to thank Peter Machacek
CEO of our Uncoated Fine Paper and Containerboard business in our Europe &
International Division for his contribution to the Group over many years. He
retires at the end of this year.
Secondly, I would also like to thank Ladimir Pellizzaro our Group Technical
Director who retires at the end of September, for his contribution over many
years and particularly for the role he played in the successful completion of
our large capital investment projects over the last two years. John Lindahl
has been appointed Group Technical Director effective 1 August.
Thank you.
Now I would like to hand you back to our joint chairman David Williams.
About Mondi
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 12:00:03 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
