| Mon 31 Oct 2011, 9:00 | | MND/MNP - Mondi Limited/Mondi plc - Interim Management Statement 31 |
|
MND MNP
MND MNP
MND/MNP - Mondi Limited/Mondi plc - Interim Management Statement 31
October 2001
Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND ISIN: ZAE000156550
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 31 October 2011
This interim management statement provides an update on the financial
performance and financial position of the Group since the half year
ended 30 June 2011, based on management accounts up to 30 September 2011
and estimated results for October 2011, which have not been audited or
reviewed by Mondi`s external auditors.
Audited results for the year ending 31 December 2011 will be published
on or around 23 February 2012.
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 30 June 2011
up to the date of this statement.
Group Performance Overview
The Group`s underlying operating profit in the third quarter 2011 of
Euro136 million (year to date Euro490 million) was well above that of
the comparable prior year period but below that achieved in the previous
quarter (Euro175 million). This performance reflects the impact of the
planned third quarter maintenance shuts, estimated to have negatively
affected underlying operating profit by approximately Euro20 million,
and a generally softer trading environment, including the impact of
destocking, compared to a very strong first half of 2011.
During the quarter, the uncertainties inherent in the macroeconomic
environment resulted in some weakening in demand and moderately lower
sales prices. This was partly offset by stable or reducing input costs.
Average benchmark recovered fibre prices were down by 4% in the quarter,
whilst wood costs remained largely unchanged over the same period.
Most emerging market currencies to which the Group is exposed as a net
exporter were slightly weaker against the euro when compared to the
second quarter, providing a small positive contribution to the Group`s
performance. Similarly, the recent strengthening of the US dollar
versus the euro is offering some support to European pricing.
Divisional Overview
Europe & International
The Uncoated Fine Paper (UFP) business continued to perform very
strongly. Underlying operating profit was in line with that of the
comparable period of the prior year, but below that of the previous
quarter. Sales volumes were lower than the previous quarter due to the
expected seasonal summer slowdown and the impact of planned annual
maintenance shuts. Maintenance shuts were carried out at all three of
the Group`s large mills during the quarter. Average selling prices were
marginally down on the previous quarter on currency and mix effects.
In the Corrugated business, underlying operating profit was well above
the comparable prior year period, but below that of the second quarter
due to the planned maintenance shuts at Swiecie and Syktyvkar, lower
average paper selling prices and reduced income from green energy
credits (around Euro10 million reduction versus the second quarter).
Selling prices for the virgin containerboard products were flat to
marginally down in the quarter. Recycled containerboard prices were
down by around 5% on a combination of currency and mix effects and input
cost declines. Sales volumes were marginally higher than those achieved
in the first two quarters of the year. Recovered fibre input costs
reduced during the period, most notably towards the end of the quarter,
with benchmark recovered fibre prices down by around 4% between 30 June
2011 and 30 September 2011. Wood costs have remained largely constant
when compared to the second quarter of 2011.
In the Bags & Coatings business, underlying operating profit was well
above the comparable prior year period and at similar levels to that
achieved in the second quarter of 2011. Some weakness in demand, due to
a combination of mildly weaker end user demand resulting from the
European macroeconomic slowdown, and destocking in the value chain, led
to lower kraft paper sales volumes. In response, the business took
downtime at certain of its operations in order to manage inventory
levels. In anticipation of further destocking in the value chain,
including at the Group`s own converting operations, plans are in place
for further downtime to be taken in the fourth quarter. Flexibility
will be retained to bring this capacity back on stream as the destocking
process comes to an end. Export demand for kraft paper remains good and
sales prices were generally stable through the quarter.
The weaker end user demand and customer destocking also impacted volumes
in the industrial bags segment when compared to the second quarter,
although the business continued to benefit from the seasonally stronger
European summer months. Volumes are expected to reduce further in the
fourth quarter due to normal seasonal effects and continued customer
destocking.
The Coatings & Consumer Packaging business was impacted by weaker
volumes in certain industrial product segments. Benefits of recent
resin price declines were marginal as these were largely passed on to
customers.
As part of the continued optimisation of the Group`s production base,
the industrial bags facility in Aberdeen is expected to be closed, with
associated impairment and restructuring costs of approximately Euro5
million. With effect from 3 October 2011, the Group disposed of its
Unterland flexible packaging business to Sun European Partners LLP at a
loss of Euro4 million. Further restructuring of the Coatings & Consumer
Packaging business will take place during the fourth quarter resulting
in restructuring costs of approximately Euro6 million.
South Africa Division
The South Africa Division`s underlying operating profit, while down on
the comparable prior year period, was significantly up on the second
quarter of 2011 following the planned maintenance shut at its Richards
Bay mill in the second quarter. Lower average pulp prices in the
quarter were offset to some extent by the weaker rand, while domestic
uncoated fine paper prices were relatively stable. Export sales volumes
of white-top containerboard were lower than the previous quarter,
partially offset by increased domestic sales, whilst sales prices
remained flat to marginally lower.
Newsprint
The Newsprint business continues to deliver poor results. The South
African business, Mondi Shanduka Newsprint, continues to be impacted by
a rising cost base, largely due to a series of significant electricity
price increases. Management is actively assessing various options to
address the resultant unacceptable financial performance. The very weak
European newsprint market continues to impact on Aylesford Newsprint`s
ability to return to profitability.
Financial Position
In September 2011, Standard & Poor`s upgraded Mondi`s credit rating to
investment grade. This is an outcome of the Group`s clear commitment to
achieving and sustaining investment grade credit metrics. The upgrade
provides further testament to the robustness of the Group`s business
model and the ability of the business to generate meaningful cash flows
through the business cycle. The Group now has investment grade credit
ratings from both Moody`s (Baa3 outlook positive) and S&P (BBB- outlook
stable), which will further improve access to liquidity and provide
additional financial flexibility going forward.
Cash flow from operations remained strong with working capital levels
maintained within the Group`s targeted range (10% to 12% of turnover).
Following the conclusion of the major capital projects in Swiecie,
Poland and Syktyvkar, Russia, capital expenditure was markedly reduced
when compared to the third quarter of 2010 and at similar levels to that
incurred in each of the previous two quarters of 2011. Capital
expenditure remains within the targeted range of 80% of depreciation.
The Mpact demerger was completed during July 2011. As a result of the
demerger, net assets were reduced by approximately Euro400 million from
the position at 30 June 2011. The net result of the demerger on the
Group`s consolidated net debt position was a reduction of Euro172
million (of which a reduction of Euro111 million was already reflected
in the Consolidated Statement of Financial Position at 30 June 2011).
The related consolidation of the Mondi Limited shares was completed in
August 2011, reducing the number of shares in issue from 147 million
shares to 118 million shares, bringing the total number of Mondi shares
in issue (Mondi Ltd plus Mondi plc) down from 514 million to 486
million.
The average maturity of the Group`s committed debt facilities is 4.2
years compared to 4.1 years as at 30 June 2011, with unutilised
committed borrowing facilities of Euro726 million. Finance charges have
reduced compared to the previous quarter, primarily as a result of the
reduction in relatively more expensive South African rand denominated
debt following the Mpact demerger.
Net debt reduced to Euro1,054 million at 30 September 2011. The
financial position of the Group at 30 September 2011 remained robust.
Summary
Broader macroeconomic weakness is giving rise to some slowdown in demand
and moderate pricing pressure across certain of the Group`s product
areas. In large part, the current demand weakness would appear to be
driven by destocking, making predictions on near term underlying demand
trends difficult. We will continue to respond decisively by taking
production downtime where appropriate. Supply side fundamentals for the
Group`s core grades remain good. Furthermore, the Group`s robust
financial position, low-cost operating model, and focus on performance
leaves the Group well-positioned to deliver strong returns through the
business cycle.
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
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.
(2010 figures included Mpact Limited.)
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.
31 October 2011
Sponsor: UBS South Africa (Pty) Ltd
Date: 31/10/2011 09:00:01 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.
