| Thu 28 Jul 2011, 10:09 | | MND/MNP - Mondi Limited/Mondi plc - Half-yearly re |
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MND MNP
MND MNP
MND/MNP - Mondi Limited/Mondi plc - Half-yearly results for the six months
ended 30 June 2011
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 Listings Requirements
of the JSE and/or the Disclosure and Transparency and Listing Rules of the
United Kingdom Listing Authority.
Half-yearly results for the six months ended 30 June 2011
Financial summary1
Six months Six months
ended 30 June ended 30 June Half-year
2011 2010 2 change %
EUR million, except for
percentages and per share measures
From continuing operations
Group revenue 2,942 2,752 7
EBITDA 526 371 42
Underlying operating profit 354 204 74
Underlying profit before tax 296 164 80
Profit before tax 300 166 81
Per share measures
Basic earnings per share from
continuing operations (EUR cents) 39.0 19.3 102
Basic earnings per share -
alternative measure3 (EUR cents) 41.7 20.2 106
Basic earnings per share from
total operations (EUR cents) 41.6 21.5 93
Interim dividend per share (EUR cents) 8.25 3.5 136
Cash generated from operations 403 269 50
Net debt 1,200 1,632 (26)
Group Return on Capital Employed (ROCE) 15.2% 9.9%
Notes:
1 Refer to definitions in the glossary of financial terms in the half-yearly
financial statements.
2 Comparative information has been re-presented where appropriate to take
cognisance of the discontinued operation.
3 The directors have elected to present an alternative, non-IFRS measure of
earnings per share from continuing operations. As more fully set out in note
11 of the half-yearly financial statements, the effects of the
recapitalisation and the demerger of Mpact (formerly Mondi Packaging South
Africa) and the Mondi Limited share consolidation have been adjusted to
reflect the position as if the transaction had been completed at the beginning
of each period presented. This will enable a useful comparison of earnings per
share from continuing operations, based on the consolidated number of shares.
Operational and financial highlights
- Underlying operating profit up 74%, driven by a very strong performance from
the Europe & International Division
- Demerger of Mpact successfully completed
- Refinancing of Group revolving credit facility completed
- Interim dividend of 8.25 euro cents per share
- Return on capital employed up to 15.2%, in excess of the Group`s through-the-
cycle target of 13%
David Hathorn, Chief executive officer, said:
"The good result achieved in positive market conditions confirms the validity
of our strategy. All operations are running well and our recent major
investments have made a meaningful contribution to the Group`s profits.
The successful completion of the Mpact demerger endorses the strategies of
both Mondi and Mpact, allowing both businesses to pursue their increasingly
divergent strategic priorities and focus on their respective growth
opportunities.
In the Europe & International Division, following a period of strong demand
order books remain good but are somewhat softer, having returned to more
normalised levels. As previously indicated, maintenance shuts planned at a
number of the large and strongly profitable European mills will impact second
half performance. The South Africa Division should benefit from improved
output following the extended maintenance shut taken in the first half.
Looking further ahead, while the uncertainties in the broader macroeconomic
environment continue to be a concern for demand, supply-side fundamentals in
our core grades remain good. Overall, we believe Mondi remains well-positioned
to continue adding value for shareholders."
Contact details
Mondi Group
David Hathorn +27 (0)11 994 5418
Andrew King +27 (0)11 994 5415
Lora Rossler +27 (0)31 451 2040 / +27 (0)83 627 0292
Financial Dynamics
Richard Mountain +44 20 7269 7186 / +44 20 7909 684 466
Chloe Webb +27 (0)11 214 2421
Conference call dial-in and audio cast details
Please see below details of our dial-in conference call and audio cast that
will be held at 10:00 (UK) and 11:00 (SA).
The conference call dial-in numbers are:
South Africa 0800 200 648 (toll-free)
UK 0800 917 7042 (toll-free)
Europe & Other 00800 246 78 700 (toll-free)
An online audio cast facility will be available via:
www.mondigroup.com/HYResults11. Password: HYResults11.
The presentation will be available online via the above website address an
hour 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 28 July 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. (2010 figures include
Mpact.)
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, below. These forward-looking statements
speak only as of the date on which they are made. Mondi expressly disclaims
any obligation or undertaking to release publicly any updates or revisions to
any forward-looking statement contained herein to reflect any change in
Mondi`s expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
Group performance review
The Group`s underlying operating profit from continuing operations of EUR354
million was up 74% on the comparable prior year period and up 39% on the
second half of the previous year.
Sales volumes continued to improve and average selling prices for the period
were higher across all key paper grades compared to the second half of the
previous year. Rising commodity input costs partially offset the benefit from
revenue gains.
The demerger of Mpact was approved by shareholders on 30 June 2011 and was
effected on 18 July 2011, with Mpact having commenced trading as an
independent listed entity on 11 July 2011. The related consolidation of Mondi
Limited shares will be effected on 8 August 2011, with the new Mondi Limited
shares commencing trading on 1 August 2011. Mondi Limited`s shares in issue
will reduce from 147 million shares to 118 million shares, bringing the total
number of shares in issue for the Mondi Group down from 514 million to 486
million.
At 30 June 2011, the results of Mpact are presented as a discontinued
operation and comparative information has been re-presented accordingly. In
order to reflect the continuing business of the Mondi Group, the Group has
elected to present an additional alternative measure of earnings per share as
if the recapitalisation and demerger of Mpact and Mondi Limited share
consolidation had taken place at the beginning of each period presented. This
is more fully detailed in note 11 of the financial statements. Set out in the
table following the principal risks and uncertainties, are the illustrative
effects on the Mondi Group as if the Mpact recapitalisation, subsequent
demerger and Mondi Limited share consolidation had taken place at the
beginning of each period presented.
Basic earnings per share - alternative measure was 41.7 cents, an increase of
106%.
An interim dividend of 8.25 euro cents will be paid.
Net debt at 30 June 2011 decreased from 31 December 2010 by EUR164 million to
EUR1.20 billion, excluding the net external debt of Mpact (EUR111 million).
Robust EBITDA generation and the benefits of an exchange rate gain were offset
primarily by an increase in working capital (in line with growth in revenue),
the annual interest payment on the Eurobond, payable in April of each year and
a significantly increased final dividend payment. The average maturity of the
Group`s committed debt facilities is 4.1 years with unutilised committed
borrowing facilities of EUR781 million.
Europe & International Division
Uncoated Fine Paper
Six months Six months
ended 30 June ended 30 June Half-year
2011 2010 change %
EUR million
Segment revenue 734 762 (4)
- of which inter-segment revenue 13 75
EBITDA 169 146 16
Underlying operating profit 118 98 20
Capital expenditure 33 82
Net segment assets 1,360 1,642
ROCE 16.9% 17.5%
The underlying operating profit of EUR118 million was 20% up on the comparable
prior year period, giving a very strong ROCE of 16.9%. This continued
excellent performance reflects the positive trading environment supported by a
strong operational performance and an increasing contribution from the
Syktyvkar mill modernisation investment, completed in the second half of 2010.
The reduction in turnover is largely attributable to the sale of the Group`s
controlling interest in Mondi Hadera at the end of the previous year and the
decline in sales of uncoated fine paper from South Africa, following the
decision in mid-2010 to mothball a paper machine at Mondi South Africa
Division`s Merebank mill and withdraw from the European export markets.
Average benchmark European cut-size office paper prices increased by
approximately 11% from the comparable prior year period and by approximately
2% compared to the second half of the previous year. The increase in selling
prices was offset to some extent by increased wood, pulp, energy and chemical
costs. Maintenance shuts in all three of the mills (Syktyvkar, Ruzomberok and
Neusiedler) are planned for the second half of the year, which will impact
results, both due to the maintenance charges associated with these shuts and
the lost contribution from what are strongly profitable operations.
Corrugated
Six months Six months
ended 30 June ended 30 June Half-year
2011 2010 change %
EUR million
Segment revenue 704 610 15
- of which inter-segment revenue 34 26
EBITDA 142 82 73
Underlying operating profit 105 48 119
Capital expenditure 18 42
Net segment assets 1,058 862
ROCE 20.1% 9.4%
The Corrugated business achieved a significant improvement in underlying
operating profit to EUR105 million, delivering a ROCE of 20.1%. The business
benefited from significant increases in selling prices, increased volumes from
the Swiecie mill as the recycled containerboard machine commissioned in late
2009 continues to ramp-up to full production and a significantly increased
contribution from the rebuilt containerboard machine at Syktyvkar, completed
in the second half of 2010.
Average benchmark selling price increases were recorded for recycled
containerboard (28% up on the first half of 2010 and in excess of 10% up on
the second half of 2010), kraftliner (31% up on the first half of 2010 and 6%
up on the second half of 2010) and white top containerboard (18% up on the
first half of 2010 and 7% up on the second half of 2010). Input cost pressures
remain with average benchmark recovered paper prices having increased by 23%
in the period compared to the second half of the previous year and wood and
chemical prices also continuing to increase.
Price increases achieved in the corrugated box plants more than offset the
increased paper input costs, leading to some margin expansion.
Planned maintenance shuts at both Swiecie and Syktyvkar, the two largest and
most profitable operations in this business unit, will impact the second half.
Bags & Coatings
Six months Six months
ended 30 June ended 30 June Half-year
2011 2010 change %
EUR million
Segment revenue 1,319 1,060 24
- of which inter-segment revenue 27 20
EBITDA 179 108 66
Underlying operating profit 128 55 133
Capital expenditure 43 35
Net segment assets 1,398 1,318
ROCE 17.4% 9.2%
The Bags & Coatings business achieved an underlying operating profit of EUR128
million, an increase of 133% on the comparable prior year period resulting in
a ROCE of 17.4%. This reflects both improved sales volumes, attributable in
part to the restarted Stambolijski plant, and increased selling prices.
Average benchmark sack kraft paper selling price increases of around 27% were
achieved against the comparable prior year period (9% up on the second half of
the prior year), more than offsetting the continued increase in input costs,
particularly wood and chemicals. Price increases were achieved on strong
demand growth, particularly in export markets, coupled with the effects of
reduced industry capacity following the closures that took place during the
2008/9 economic downturn.
Volumes were good in the bag converting segment. Significant price increases
were achieved from the beginning of the year on annual contractual volumes,
although subsequent increases in paper input costs have eroded some of these
gains. The business is benefiting from the integration of the Smurfit Kappa
bags plants, acquired in mid-2010.
Robust volume increases in Coatings & Consumer Packaging, particularly the
release liner segment, coupled with selling price increases largely offset
increasing paper and chemical input costs.
Maintenance shuts are planned at various paper mills during the second half of
the year, notably at the large operation of Steti in the Czech Republic.
South Africa Division
Six months Six months
ended 30 June ended 30 June Half-year
2011 2010 change %
EUR million
Segment revenue 269 276 (3)
- of which inter-segment revenue 90 106
EBITDA 54 44 23
Underlying operating profit 27 18 50
Capital expenditure 13 9
Net segment assets 877 932
ROCE 9.7% 3.1%
Notwithstanding the negative impact of the planned extended maintenance shut
at Richards Bay during June 2011, the South Africa Division realised a 50%
improvement in underlying operating profit to EUR27 million versus the
comparable prior year period. The ROCE of 9.7% reflects the benefits of higher
average selling prices, improved operating efficiencies and the positive
impact of the closure of the 120,000 tonne uncoated fine paper machine in the
previous year and related restructuring of the fixed cost base.
Against the comparable prior year period, average sales prices have improved
across most products with containerboard and pulp being the main contributors
during the period. These benefits have been partially offset by increased
fibre and energy costs as well as the negative impact of the stronger rand.
The recent industry-wide strike had no impact on the Division as resolution
was achieved at a local level.
The Division continues to pursue the settlement of outstanding land claims
with further progress expected during the second half of the year.
Newsprint
Six months Six months
ended 30 June ended 30 June
2011 2010
EUR million
Segment revenue 80 271
- of which inter-segment revenue - -
EBITDA 2 8
Underlying operating (loss)/profit (5) 1
Capital expenditure 2 2
Net segment assets 100 108
ROCE (9.2%) 2.2%
Note:
The 2010 comparative figure includes turnover of EUR198 million, EBITDA of
EUR4 million and underlying operating profit of EUR3 million attributable to
the Europapier business.
The Newsprint business made an underlying operating loss of EUR5 million.
Despite significant sales price increases having been realised at Aylesford
Newsprint, these were not sufficient to return the business to profitability
on the back of increased input costs. In South Africa, Mondi Shanduka
Newsprint has been severely impacted by electricity price increases which
cannot be passed on to customers.
Input costs and currency exposure
Average fibre input costs have increased during the first half of the year.
- Procured wood prices in central Europe continue to increase, albeit at a
slower pace than in the comparable prior year period. Average costs have
increased by approximately 12% compared to the second half of the previous
year.
- Average pulp prices have increased by 2% for softwood whilst prices have
reduced by 2% for hardwood during the period when compared to the second half
of the prior year. Closing benchmark prices at 30 June 2011 were 8% up for
softwood and 3% up for hardwood compared to 31 December 2010 prices.
- The average benchmark price of recovered paper increased by 23%, when
compared to the second half of the previous year.
Energy and chemical prices also increased during the period under review.
Mondi benefits from its structural position in South Africa and Russia due to
integration into wood supply. Similarly, the Group`s integrated pulp and paper
mills negate the impact of pulp price escalations. The Group, on an annualised
basis, is now marginally long on pulp following the completion of the
Syktyvkar modernisation and other restructuring activities. Restructuring
initiatives and an ongoing focus on cost reduction and productivity
improvement further mitigate the impact of input cost pressures.
More recently there has been evidence of some weakness in certain key input
costs, most notably recovered paper.
The Group continues to experience the effects of significant exchange rate
volatility. The Group`s hedging programme is intended to curb the impact of
short-term fluctuations in exchange rates by hedging its on-balance sheet
exposure. Over the period under review, strong emerging market currencies,
coupled with ongoing relatively high levels of inflation in these
jurisdictions, served to increase the underlying cost base of operations in
those countries, thus eroding their relative competitiveness. This is
particularly the case in South Africa, and to a lesser extent in the emerging
European markets of Poland, Czech Republic, Turkey and Russia. The ongoing
weakness of the US$ relative to the euro continues to pose challenges,
weakening the ability to achieve price increases in Europe.
Financial review
Special items
There were no significant special items during the period. Special items
(aggregate gain of EUR4 million), as more fully set out in the notes to the
half-yearly financial statements, include the impact of ongoing restructuring
initiatives as well as the finalisation of certain business combination
transactions from previous periods.
Finance costs
Despite lower average borrowings, net finance costs of EUR60 million were
higher than those of the comparable prior year period mainly due to the
reduction in capitalisation of finance charges following the completion of the
Syktyvkar modernisation, and an exchange rate loss of EUR2 million compared to
a gain in the comparable prior year period of EUR11 million. Whilst interest
rates have remained largely unchanged during the period, the higher interest
rate on the EUR500 million Eurobond, compared to the interest rate on the
facilities it replaced, resulted in the effective interest rate (pre-
capitalised interest) for the period of 8.97% being above that of 7.64% in the
comparable prior year period. A large proportion of the Group`s debt (76%) is
at fixed rates of interest for varying terms.
The first annual interest payment on the Eurobond of EUR29 million, made
during April 2011, results in an increase in interest paid in the statement of
cash flows.
Taxation
The reduction in the underlying effective tax rate on continuing operations to
20% is primarily due to increased profitability in regions with lower tax
rates and the benefits of tax incentives granted in certain countries in which
the Group operates, notably Poland.
Discontinued Operation - Mpact
(previously Mondi Packaging South Africa)
Six months Six months
ended 30 June ended 30 June Half-year
2011 2010 change %
EUR million
Segment revenue 310 298 4
EBITDA 36 33 9
Underlying operating profit 19 18 6
Capital expenditure 17 14
Mpact`s underlying operating profit increased marginally during the period due
to improved margins offset to some extent by reduced sales volumes.
Cash flow
Cash generated from operations amounted to EUR403 million, an increase of 50%
on the comparable prior year period primarily due to the significant increase
in EBITDA generation. As expected, cash flow generated from operating
activities was negatively impacted by an increase in working capital on
increased trading activity and seasonal fluctuations, although working capital
levels remain well within the target range of 10-12% of turnover.
Capital expenditure
Capital expenditure of EUR126 million, including EUR16 million on the major
project in Russia, was incurred. Outside of this major project, capital
expenditure for the period, excluding Mpact, is at 53% of depreciation.
The Group is exploring various opportunities in respect of energy efficiencies
in its European mills. The previously announced process for the intended
exercise of the option by Mondi Swiecie to acquire the power and heat
generating plant owned by Saturn Management is unlikely to be concluded before
the end of the current year.
Treasury and borrowings
Net debt at 30 June 2011 was EUR1.20 billion, a decrease of EUR164 million
from 31 December 2010. Positive exchange rate movements of EUR46 million and
the classification of the Mpact external debt of EUR111 million as held for
sale positively impacted this figure. The settlement of intercompany loans
from Mpact, following its recapitalisation and subsequent listing, will be
reflected in the second half of the year.
The net debt to trailing 12 month EBITDA ratio was 1.3 times. On 14 April
2011, Mondi signed a new EUR750 million five year syndicated revolving credit
facility to refinance its existing EUR1.55 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 4.1 years from 2.6 years
as at December 2010, with unutilised committed borrowing facilities of EUR781
million.
The long-term corporate credit ratings received of Baa3 (stable outlook) from
Moody`s Investor Service and BB+ (positive outlook) from Standard & Poor`s
were confirmed during the period.
Dividend
A dividend of 8.25 euro cents per share has been declared by the directors and
will be paid on 13 September 2011 to those shareholders on the register of
Mondi plc on 19 August 2011. An equivalent South African rand interim dividend
will be paid on 13 September 2011 to shareholders on the register of Mondi
Limited on 19 August 2011. Note that the dividend to Mondi Limited
shareholders will be based on the new Mondi Limited shares, following the
completion of the share consolidation in August 2011.
Outlook
In the Europe & International Division, following a period of strong demand
order books remain good but are somewhat softer, having returned to more
normalised levels. As previously indicated, maintenance shuts planned at a
number of the large and strongly profitable European mills will impact second
half performance. The South Africa Division should benefit from improved
output following the extended maintenance shut taken in the first half.
Looking further ahead, while the uncertainties in the broader macroeconomic
environment continue to be a concern for demand, supply-side fundamentals in
our core grades remain good. Overall, we believe Mondi remains well-positioned
to continue adding value for shareholders.
Supplementary information
Going concern
Positive trading conditions are evident although some risks remain in specific
locations and business segments. This is mitigated by Mondi`s geographical
spread, product diversity and large customer base. Through ongoing initiatives
of cost management, prudent capital investment, stringent working capital
targets and restructuring and rationalisation of assets where appropriate,
Mondi has a leading cost position in its chosen markets.
The Group maintains adequate committed undrawn borrowing facilities (EUR781
million at 30 June 2011) and the average maturity of its debt is approximately
four years, thus providing sufficient short and medium-term liquidity.
The Group`s forecasts, taking into account reasonably possible changes in
trading performance, show that Mondi will be able to operate well within the
levels of its current facilities and related covenants.
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the going concern basis continues to be
adopted in preparing financial reports.
Principal risks and uncertainties
It is in the nature of its business that Mondi is exposed to risks and
uncertainties that may have an impact on future performance and financial
results, as well as on its ability to meet certain social and environmental
objectives. The Group believes that it has effective systems and controls in
place to manage the key risks identified below. The key risks identified
remain consistent with those presented on page 31 of the 2010 annual report.
- 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.
Approximately 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.
Financial effects of Mpact demerger
The Mpact demerger was completed on 18 July 2011, with Mpact having commenced
trading as an independent listed entity on 11 July 2011, and the related Mondi
Limited share consolidation will be concluded on 8 August 2011, with the
consolidated shares commencing trading on 1 August 2011. The following table
presents the illustrative effect on the Mondi Group as if the recapitalisation
and demerger of Mpact and related Mondi Limited share consolidation had taken
place at the beginning of each period presented.
Details of the adjustments are set out in note 11 of the half-yearly financial
statements.
As reported
Six months Six months Year ended
ended 30 ended 30 31 December
June 2011 June 2010 2010
EUR million
Continuing operations
Underlying operating profit 354 204 458
Net income from associates 2 2 2
Finance costs (60) (42) (106)
Tax charge (59) (46) (88)
Non-controlling interests (42) (27) (60)
Underlying earnings attributable to
equity holders of the
parent companies 195 91 206
Discontinued operations1 13 11 32
Profit before special items
attributable to equity holders of
the parent companies 208 102 238
Special items1 4 7 (14)
Profit for the year attributable to
equity holders of the parent companies 212 109 224
Weighted average shares in issue 510 508 508
Underlying earnings per share (EUR cents) 38.2 17.9 40.6
Basic earnings per share (EUR cents) 41.6 21.5 44.1
Adjusted earnings
Six months Six months Year ended
ended ended 31 December
3 June 2011 30 June 2010 2010
EUR million
Continuing operations
Underlying operating profit 354 204 458
Net income from associates 2 2 2
Finance costs (57) (39) (99)
Tax charge (56) (43) (82)
Non-controlling interests (42) (27) (60)
Underlying earnings attributable
to equity holders of the
parent companies 201 97 219
Discontinued operations1 - - -
Profit before special items
attributable to equity holders of
the parent companies 201 97 219
Special items1 4 7 (14)
Profit for the year attributable
to equity holders of the
parent companies 205 104 205
Weighted average shares in issue 482 480 480
Underlying earnings per share (EUR cents)41.7 20.2 45.6
Basic earnings per share (EUR cents)
Note:
1 Reported net of tax and non-controlling interests.
Directors` responsibility statement
The directors confirm that to the best of their knowledge:
- the condensed set of combined and consolidated financial statements has been
prepared in accordance with International Financial Reporting Standards and in
particular with International Accounting Standard 34, `Interim Financial
Reporting`;
- the half-yearly report includes a fair review of the important events during
the six months ended 30 June 2011 and a description of the principal risks and
uncertainties for the remaining six months of the year ending 31 December
2011; and
- there have been no significant individual related party transactions during
the first six months of the financial year and nor have there been any
significant changes in the Group`s related party relationships from those
reported in the Group`s annual financial statements for the year ended 31
December 2010.
David Hathorn Andrew King
Director Director
27 July 2011
Independent review report to the members of Mondi Limited
Introduction
We have reviewed the Group`s condensed combined and consolidated financial
statements for the six months ended 30 June 2011 which comprise the condensed
combined and consolidated income statement, the condensed combined and
consolidated statement of comprehensive income, the condensed combined and
consolidated statement of financial position, the condensed combined and
consolidated statement of cash flows and the condensed combined and
consolidated statement of changes in equity, the summary of significant
accounting policies and other explanatory notes. Management is responsible for
the preparation and presentation of these condensed combined and consolidated
financial statements in accordance with International Accounting Standards on
Interim Financial Reporting (IAS 34) and the Companies Act of South Africa.
Our responsibility is to express a conclusion on these Group condensed
combined and consolidated financial statements based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, `Review of Interim Financial Information Performed by the
Independent Auditor of the Entity`. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the Group`s interim condensed combined and consolidated financial
statements is not prepared, in all material respects, in accordance with
International Accounting Standards on Interim Financial Reporting (IAS 34) and
the Companies Act of South Africa.
Deloitte & Touche
Per Bronwyn Kilpatrick
Partner
Sandton
27 July 2011
Deloitte & Touche
Registered Auditors
Buildings 1 and 2, Deloitte Place, The Woodlands
Woodlands Drive, Woodmead, Sandton
Republic of South Africa
National Executive GG Gelink Chief Executive AE Swiegers Chief Operating
Officer GM Pinnock Audit DL Kennedy Risk Advisory NB Kader Tax & Legal
Services L Geeringh Consulting L Bam Corporate Finance JK Mazzocco Human
Resources CR Beukman Finance TJ Brown Clients & Markets NT Mtoba Chairman of
the Board MJ Comber Deputy Chairman of the Board
A full list of partners and directors is available on request.
Independent review report to the members of Mondi plc
We have been engaged by the Company to review the condensed combined and
consolidated set of financial statements in the half-yearly financial report
for the six months ended 30 June 2011 which comprises the condensed combined
and consolidated income statement, the condensed combined and consolidated
statement of comprehensive income, the condensed combined and consolidated
statement of financial position, the condensed combined and consolidated
statement of cash flows, the condensed combined and consolidated statement of
changes in equity and related notes 1 to 21. We have read the other
information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, `Review of Interim
Financial Information Performed by the Independent Auditor of the Entity`,
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the Company those matters we are required to state to it in
an independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Company, for our review work, for this report, or for the conclusions
we have formed.
Directors` responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom`s Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, `Interim Financial Reporting`, as
adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity`, issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2011 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom`s Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
27 July 2011
Note: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no
control procedures can provide absolute assurance in this area.
Condensed combined and consolidated income statement
for the six months ended 30 June 2011
(Reviewed)
Six months ended 30 June 2011
Before Special After
special items special
Notes items (note 6) items
EUR million
Continuing operations
Group revenue 4 2,942 - 2,942
Materials, energy and consumables used (1,528) - (1,528)
Variable selling expenses (257) - (257)
Gross margin 1,157 - 1,157
Maintenance and other indirect expenses (133) - (133)
Personnel costs (417) - (417)
Other net operating expenses (81) 1 (80)
Depreciation, amortisation and
impairments (172) - (172)
Operating profit 4/5 354 1 355
Non-operating special items 6 - 3 3
Net income from associates 2 - 2
Total profit/(loss) from operations
and associates 356 4 360
Net finance costs (60) - (60)
Investment income 15 - 15
Foreign currency (losses)/gains (2) - (2)
Finance costs 7 (73) - (73)
Profit/(loss) before tax 296 4 300
Tax (charge)/credit 8 (59) - (59)
Profit/(loss) from continuing operations 237 4 241
Discontinued operation
Profit from discontinued operation 9 13
Profit for the financial period/year 254
Attributable to:
Non-controlling interests 42
Equity holders of the parent companies 212
(Restated)
(Reviewed)
Six months ended 30 June 2010
Before Special After
special items special
items (note 6) items
EUR million
Continuing operations
Group revenue 2,752 - 2,752
Materials, energy and consumables used (1,480) - (1,480)
Variable selling expenses (252) - (252)
Gross margin 1,020 - 1,020
Maintenance and other indirect expenses (120) - (120)
Personnel costs (409) (2) (411)
Other net operating expenses (120) 56 (64)
Depreciation, amortisation and impairments (167) (17) (184)
Operating profit 204 37 241
Non-operating special items - (35) (35)
Net income from associates 2 - 2
Total profit/(loss) from operations and
associates 206 2 208
Net finance costs (42) - (42)
Investment income 14 - 14
Foreign currency (losses)/gains 11 - 11
Finance costs (67) - (67)
Profit/(loss) before tax 164 2 166
Tax (charge)/credit (46) 4 (42)
Profit/(loss) from continuing operations 118 6 124
Discontinued operation
Profit from discontinued operation 11
Profit for the financial period/year 135
Attributable to:
Non-controlling interests 26
Equity holders of the parent companies 109
(Restated)
(Audited)
Yea
