| Thu 16 Feb 2012, 10:40 | | MND/MNP - Mondi Limited/ Mondi plc - Mondi Group makes an offer to acquire the |
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MND MNP
MND MNP
MND/MNP - Mondi Limited/ Mondi plc - Mondi Group makes an offer to acquire the
minority interest in Mondi Swiecie S.A.
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 ("JSE") and the London
Stock Exchange of matters required to be disclosed under the JSE Listings
Requirements and/or the Disclosure Rules and Transparency Rules and/or the
Listing Rules of the United Kingdom Listing Authority.
Mondi Group makes an offer to acquire the minority interest in Mondi Swiecie
S.A.
Mondi Group has made an all cash public tender offer of PLN69.00 (EUR16.48) per
share ("Offer") for 17 million shares representing 34% of the share capital of
Mondi Swiecie S.A. ("Mondi Swiecie") that it does not already own. Mondi
Swiecie is listed on the Warsaw Stock Exchange. The Offer represents a premium
of 15.6% over the last three months average price of PLN59.71 (EUR14.26) and a
premium of 4.1% over the last six months average price of PLN66.26 (EUR15.82).
Mondi Swiecie is a leading integrated manufacturer of virgin and recycled
containerboard in Central Eastern Europe (CEE). In 2011 it produced 1,333
thousand tonnes of containerboard at its operations in Swiecie, Poland. Mondi
Swiecie presently employs approximately 1,020 people under its Managing
Director Maciej Kunda. This acquisition would bring into full ownership an
asset of the Mondi Group, further streamlining its corporate structure.
Mondi Swiecie today announced its results for the year ended 31 December 2011.
The company generated EBITDA of PLN610m (EUR148m), operating profit of PLN457m
(EUR111m) and net earnings of PLN396m (EUR96m). As of 31 December 2011 it had
net cash of PLN70m (EUR16m), gross assets of PLN2,729m (EUR612m) and
shareholders` equity of PLN1,830m (EUR410m). A translation of the company`s
announced Consolidated Financial Statements and Report on Business Activities
for the year ended 31 December 2011 is set out below. Under the Offer, the
implied equity value of the whole of Mondi Swiecie is PLN3.5bn (EUR824m) and
represents an EV/EBITDA multiple of approximately 5.5x and a P/E multiple of
approximately 8.7x for 2011.
The Offer is expected to be concluded in mid April 2012. Full acceptance of the
Offer would result in an aggregate cash consideration payable by the Mondi
Group on closing of PLN1.2bn (EUR280m). The Offer is conditional on Mondi
Group achieving minimum acceptances of 14% of Mondi Swiecie shares (to bring
the Mondi Group`s total interest in the company to not less than 80%). After
completion of the Offer, Mondi intends to delist Mondi Swiecie from the Warsaw
Stock Exchange. The Offer will be funded by Mondi Group`s existing cash
resources and from existing committed bank facilities available to it.
In accordance with the provisions of the JSE Listings Requirements, the
unaudited pro forma financial effects set out below are included for the
purpose of illustrating the effects of a full acceptance of the Offer on Mondi
Group`s underlying earnings, basic earnings from continuing operations, basic
earnings from continuing and discontinued operations, headline earnings, net
asset value and tangible net asset value per ordinary share, for the half year
ended 30 June 2011 as if such transaction had occurred on 1 January 2011 for
income statement purposes and 30 June 2011 for statement of financial position
purposes. These unaudited pro forma financial effects are the responsibility of
the directors and have been prepared in accordance with the guidelines issued
by the South African Institute of Chartered Accountants.
These unaudited pro forma financial effects are presented for illustrative
purposes only and because of their nature, may not give a fair reflection of
Mondi Group`s financial position nor the effect on future earnings following
the acquisition:
Per Mondi Ordinary Share Reviewed Unaudited Percentage
Before After
(Euro cents) Acquisition 3 Acquisition 4 Change
Underlying earnings 1 38.2 41.8 9.4
Basic earnings from continuing 39.0 42.5 9.0
operations
Basic earnings from continuing 41.6 45.1 8.4
and discontinued operations
Headline earnings 2 39.4 42.9 8.9
Diluted underlying earnings 1 37.7 41.2 9.3
Diluted earnings from continuing 38.5 42.0 9.1
operations
Diluted earnings from continuing 41.0 44.5 8.5
and discontinued operations
Diluted headline earnings 2 38.9 42.4 9.0
Net asset value 6.40 5.86 (8.4)
Tangible net asset value 5.93 5.39 (9.1)
Notes:
1. Underlying earnings per share excludes the impact of special items.
2. The presentation of headline earnings per share is mandated under 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. The Group financial information has been extracted, without adjustment,
from the Group`s reviewed results for the six months ended 30 June 2011.
4. The adjustments to earnings, on the basis that the acquisition had
occurred on 1 January 2011 for income statement purposes and 30 June 2011
for statement of financial position purposes, include the following main
items:
- The exclusion of the non-controlling interest charge in respect of Mondi
Swiecie
- The estimated finance charges associated with the financing of the
consideration
- Assumed taxation rate of 26.25%
Net asset value and tangible net asset value, on the basis that the acquisition
had occurred on 1 January 2011 for income statement purposes and 30 June 2011
for statement of financial position purposes, are reduced by the estimated
consideration of EUR280 million.
/ends
Contact:
Mondi Group
Lora Rossler
Group Corporate Affairs Manager
Tel: +27 (0)31 451 2111 or +27 (0)83 627 0292
E-mail: lora.rossler@mondigroup.co.za
Kerry Crandon
Group Communications Manager
Tel: +27 (0)11 994 5425 or +27 (0)83 389 3738
E-mail: kerry.crandon@mondigroup.com
Andrew King
Group CFO
Tel: +27 (0)11 994 5415 or +27 (0)82 870 8100
E-mail: andrew.king@mondigroup.com
Editors` notes
About Mondi:
Mondi is an international paper and packaging Group, with production operations
across 31 countries and revenues of EUR 6.2 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 approximately 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.
Translation of Mondi Swiecie`s Consolidated Financial Statements and Report on
Business Activities for the year ended 31 December 2011:
Mondi Swiecie Group
Report on Business Activities of the Group for 2011
13 February 2012
CONTENTS
1. BACKGROUND 4
2. CORE PRODUCTS 5
2.1. Industry 5
2.2. Product types 5
2.3. The position of the Group in the sector and compared to 6
the competition
2.4. Structure of sales 8
2.5. Sales markets 8
3. SIGNIFICANT IMPACTS ON THE ACHIEVED RESULTS 9
3.1. Analysis of sales revenues 9
3.2. Analysis of other income statement items 10
3.2.1. Production volume 10
3.2.2. Basic raw materials and services 10
4. INFORMATION ON OTHER EVENTS THAT TOOK PLACE IN 2011 12
4.1. Information on significant agreements 12
4.2. Changes in organisational and capital relationships 12
4.3. Related party transactions 13
4.4. Credits, loan agreements, sureties and guarantees 13
4.5. Utilisation of inflows from issue of securities 14
4.6. Variances from the last published forecast 14
4.7. Management of financial resources and liquidity 14
assessment
4.8. Possibility to implement investment projects 15
4.9. Information that is essential for the evaluation of the 15
personnel related situation, assets related situation,
financial condition, financial results and changes in
the situation as well as information that is essential
for the evaluation of the possibility of paying
liabilities
4.10. Factors and untypical events impacting the result 15
4.11. Activities in the Special Economic Zone 15
4.12. Description of the development and operating drivers 16
4.12.1. External drivers 16
4.12.2. Planned development of the Group 16
4.12.3. Achievements in the area of research and development 17
4.12.4. Current and expected financial position of the Group 17
4.12.5. Factors that will impact the Group`s results as expected 17
by the Group
4.13. Management and Computerisation 20
4.14. Changes in basic management of the Company and its Group 20
4.15. Information on proceedings pending before the court, 20
competent body for arbitration proceedings or public
administrative body
4.16. Agreements concluded between the Company and Members of 21
the Management Board of the Company
4.17. Remuneration of Members of the Management and 21
Supervisory Bodies
4.18. Outstanding loans, guarantees and sureties granted to 21
Members of the Management and Supervisory Bodies of the
Company and their relatives
4.19. Shares held by Members of the Management and Supervisory 22
Bodies
4.20. Changes in the shareholding structure 22
4.21. Information on the Controlling System for Employee 22
Shares Programme
4.22. Agreements with the entity authorised to audit financial 22
statements
5. STATEMENT ON COMPLIANCE WITH THE CODE OF BEST PRACTICE 24
OF CORPORATE GOVERNANCE
5.1. Code of Corporate Governance Best Practice that governs 24
the Company and the location where the Code of Best
Practice is available to the public
5.2. The extent to which the Company waived the Code of Best 26
Practice, indication of such Practices and reasons for
the waiver
5.3. Basic characteristics of internal audit and risk 26
management systems used in the Company in the
preparation of financial statements and consolidated
financial statements
5.4. Shareholders that directly or indirectly hold 28
significant parcels of shares, number of shares held by
such entities, their participation in the share capital
in %, number of votes arising out of the participation
in the s:30hare capital and their share in % in the
total number of votes at the General Meeting of the
Company
5.5. Holders of any securities giving special controlling 29
powers and description of such powers
5.6. Any limitations related to exercising the right to vote, 29
such as limitation to exercise the right to vote by
holders of a certain portion or number of votes, time
limitations related to exercising the right to vote or
regulations providing that, with Company`s co-operation,
capital rights related to securities are separated from
holding securities
5.7. Any limitations related to the transfer of ownership 29
title to the Company`s securities
5.8. Rules of appointing and dismissing managing and 29
supervising persons and their powers, in particular
their power to decide about shares issuance or buying
out
5.9. Rules of amending the Statute or Articles of Association 30
5.10. General Meeting rules of procedure and basic powers as 31
well as Shareholders` rights and way of exercising such
rights, in particular the rules arising out the General
Meeting rules of procedure, if such the rules were
adopted, unless information in this regard arises out of
the law
5.11. Members of and changes to the composition of the 34
Company`s Management and Supervisory Boards or
administration body made over the last fiscal year, the
procedure of operation of the Company`s Management and
Supervisory Boards or administration body and their
committees
1. BACKGROUND
As of the balance sheet date Mondi Swiecie Group is composed of:
- parent company - Mondi Swiecie S.A., and
- subsidiary - Swiecie Recykling Sp. z o.o.,
- associated company - Polski System Recyklingu - Organizacja Odzysku
S.A.
The consolidated financial statements as of 31 December 2011 cover the
following companies:
a) parent company - Mondi Swiecie S.A.,
b) company valued with the full method - Swiecie Recykling Sp. z o.o.,
c) company valued with the equity method - Polski System Recyklingu -
Organizacja Odzysku S.A.
Mondi Swiecie S.A. was established at the beginning of the nineteen
nineties. In January 1991, the state-owned entity - Zaklady Celulozy i
Papieru w Swieciu - was transformed into a joint-stock company owned
entirely by the State Treasury. In April 1997, 15% of the Company`s shares
were floated on the Warsaw Stock Exchange. In August 1997, a majority
stake of shares was sold to a strategic investor, Framondi NV of the
Netherlands. The Company was renamed Frantschach Owiecie.
In November 2004, the Frantschach Group and Mondi Packaging Europe Group
merged to form the Mondi Packaging Group with the common brand and logo.
As a result of the merger, the Company changed its name from Frantschach
Swiecie S.A. to Mondi Packaging Paper Owiecie S.A. on 20 January 2005.
The Frantschach Group was wholly owned by Mondi - one of the leading paper
and packaging companies. Mondi was a member of Anglo American plc, the
worldwide leader in mining and natural resources industry, till the end of
June 2007. On 25 June 2007, the Extraordinary Meeting of Shareholders of
Anglo American plc, with the Mondi Group being its member, approved
demerger of the Mondi Group from Anglo American plc and decided to list
Mondi on the London and Johannesburg Stock Exchanges on 3 July 2007.
On 16 May 2008, the Registration Court registered the rebranded Company`s
business name - Mondi Swiecie S.A.
Swiecie Recykling commenced its business activities in January 2002 based
on the Recovered Paper Purchasing Department of Frantschach Owiecie S.A.
Frantschach Swiecie S.A. (now Mondi Swiecie S.A.) took over 100% of shares
in the limited liability company (Swiecie Recykling), thus becoming its
sole shareholder. Owiecie Recykling is the major domestic supplier of
recovered paper, being one of the key raw materials for paper production,
for Mondi Swiecie S.A. In December 2004, the Extraordinary General Meeting
of Shareholders adopted the resolution regarding rebranding of this
subsidiary from Frantschach Swiecie Recykling Sp. z o.o. to Swiecie
Recykling Sp. z o.o. The new name was registered in KRS (National Court
Register of Companies) on 6 January 2005.
2. CORE PRODUCTS
2.1. Industry
In line with the strategy implemented by Mondi Swiecie S.A., the Group`s
activities are focused on manufacturing containerboard. The Group is the
Polish leader in its own products and a significant European manufacturer
of containerboard.
The Group also manufactures sack paper, whose output in 2012 should be
reduced in line with Mondi Group`s strategy of grade consolidation.
However, the intention is to focus on manufacturing lightweight
kraftliners (with a basis weight below 100 gsm) on the fast-growing
segment of paper bags and other applications.
The substantial improvement in paper quality was made thanks to the
implementation of the capital investment programme, which allows the Group
to effectively compete with leading paper producers in Europe and
worldwide.
The start-up of ECO7 in September 2009 allowed increasing capacity in 2010
to 1.3 million tonnes and in 2011 to 1.4 million tonnes.
The following trends on the main product markets are identified:
Sack Paper:
- Since the Group focus is on manufacturing containerboard, the output
of sack paper decreased by 6.6 thousand tonnes compared to 2010.
Kraftliner:
- It is one of the Group`s core products. In 2011, its share in the
sales volume was 33%. In 2011, the sales volume of this product
decreased, whereas its prices increased.
Recycled papers:
- The popularity of this group of papers on the packaging market is
rising systematically (average dynamics of growth over last 15 years
was approx. 6.5% annually) and now it comprises approx. 68% of total
containerboard consumption.
- Major factors supporting the substitution of virgin fibre-based
grades (Kraftliner, Semi-chemical Fluting) with recycled papers
(Testliners, KraftTop X, WB Fluting) are lower prices for the latter
grades and their improved quality. Another important factor is a
rising environmental awareness of communities, which has a real
impact on consumer preferences and their purchasing-related
decisions.
- Recycled papers are the dominant product group on the Polish
containerboard market.
2.2. Product types
Containerboard papers are sold under the common name "ProVantage" used
across the entire Mondi Group:
Containerboard:
- ProVantage Kraftliner (virgin fibre-based paper with an addition of
recycled fibre for outer layers of corrugated board),
- ProVantage Kraftliner XLite (lightweight, virgin fibre-based paper
for outer layers of corrugated board),
- ProVantage Kraft X (lightweight, virgin fibre-based paper with the
addition of recycled fibre for outer layers of corrugated board and
for manufacture of paper bags),
- ProVantage Kraftliner Aqua (virgin fibre-based paper with the
addition of recycled fibre for outer layers of corrugated board, with
increased moisture resistance, offered as a substitute for paraffin-
coated papers),
- ProVantage KraftTop X (virgin and recycled fibre-based paper for
outer layers of corrugated board),
- ProVantage Testliner 3 (recycled fibre-based paper for outer layers
of corrugated board),
- ProVantage Fresco Fluting (paper with increased parameters, made of
semi-chemical and OCC pulp for inner layers of corrugated board),
- ProVantage Fluting WB (recycled fibre-based paper for inner layers of
corrugated board),
- ProVantage Fluting Aqua (paper for inner layers of corrugated board,
made of semi-chemical pulp, with increased moisture resistance,
recommended as the substitute for paraffin and resin-coated
Flutings).
2.3. The position of the Group in the sector and compared to the
competition
ECO7 that manufactures lightweight recycled paper, and is the response to
the increasing industrial demand for such grades allowed significantly
increasing the Group`s competitiveness in Central-Eastern Europe.
The Group still offers innovative "Aqua" products (ProVantage Kraftliner
Aqua and ProVantage Fluting Aqua) that are primarily designed for the
manufacture of fruit board packaging. Their characteristic features are
increased moisture and water resistance. In October 2011, a modified
product, ProVantage Kraft X, was introduced. It is designed for the
production of paper bags. This is a fast-growing, ecological, packaging
segment on the European market.
The position of the Group in the sector and compared to the competition in
particular groups of products is as follows:
CONTAINERBOARD:
Kraftliner
- ProVantage Kraftliner (virgin fibre-based paper for outer layers of
corrugated board) - the Group`s core product - Sales in 2011 reached
33% of the total sales volume, i.e. down 2% (442.8 thousand tonnes in
2011 versus 452.8 thousand tonnes in 2010).
- ProVantage Kraft X (lightweight, virgin fibre-based paper with the
addition of recycled fibre for outer layers of corrugated board and
for the manufacture of paper bags). Thanks to the ecological trend in
Europe towards reducing the manufacture and use of plastic bags,
there are good prospects for this product`s future success. In 2011,
its sales volume reached 2.3 thousand tonnes.
- ProVantage Kraftliner XLite - thanks to this paper`s exceptionally
high strength parameters and very low basis weight, it offers
corrugated board manufacturers an additional benefit - more m2 of
corrugated board to be made from one tonne of paper. In the audited
period, the sales volume of this paper amounted to 24.8 thousand
tonnes, i.e. up 24% compared to 2010.
- ProVantage Aqua Kraftliner - an innovative product introduced to the
Company`s product portfolio in 2005. In 2011, the sales volume of
this product amounted to 5.4 thousand tonnes, down 14% compared to
the sales level in 2010.
Semi-chemical Fluting
- ProVantage Fluting Fresco - this paper is designed, among other things,
for fruit packaging that needs increased moisture resistance. In the
audited period, the sales volume of this product reached 162.4 thousand
tonnes, i.e. up 5.4% compared to 2010.
- ProVantage Aqua Fluting - an innovative product introduced to the
Company`s product portfolio in 2005. The sales volume of this product in
2011 reached 23.8 thousand tonnes, up 10% compared to 2010.
Recycled fibre-based papers
- ProVantage Testliner 2: this grade was not produced in 2011. In 2010, its
sales volume reached 4.4 thousand tonnes.
- ProVantage Testliner 3: in the audited period, the sales volume increased
by 4% (from 178.6 thousand tonnes in 2010 to 185.1 thousand tonnes in
2011).
- ProVantage WB Fluting: in the audited period, the sales volume increased
by 13% (from 245.8 thousand tonnes in 2010 to 277.6 thousand tonnes in
2011).
- ProVantage KraftTop X - very good quality virgin and recycled fibre-based
paper for outer layers of corrugated board - the sales volume reached
199.0 thousand tonnes, up 15% (compared to 173.4 thousand tonnes in 2010).
Containerboard products are sold to many foreign manufacturers. Containerboard
sold abroad accounted for 67.8% of the sales volume.
On the domestic market, 76.6% of the sold volume of containerboard is recycled
papers. The main domestic competitors are Stora Enso Poland S.A. and foreign
manufacturers, mainly from Germany and Hungary.
SACK PAPER:
- The product is fully made from virgin fibre. The main competitor on the
domestic sack market is Stora Enso Poland S.A.
- The sales volume in 2011 reached 34.8 thousand tonnes, down 16% compared
to 2010. Due to the implementation of Group`s strategy and the fact that
Mondi Swiecie S.A. focuses on manufacturing containerboard, production of
sack paper has ceased since January 2012.
After the periodic paper market stagnation caused by the global economic
crisis, paper prices were quite stable, with an upward trend in the first half-
year of 2011. Another economic slump and prospects of another recession means
paper prices have been dropping since the fourth quarter of 2011.
In line with the Group`s strategy, the focus was placed on providing a wide-
range Service to our Customers in 2011. We commenced work on the "ONE" Project
with the aim of optimising and harmonising all logistics and sales-related
processes, which should strengthen our position in the near future. In spite of
the growing prices of raw materials (pulpwood logs, recovered paper) and of
transport services, the Group`s competitiveness remains at quite a high level
thanks to the consistent implementation of the long-term sales strategy by the
Management Board.
2.4. Structure of sales
In 2011, the structure of product sales of the Mondi Swiecie Group by major
groups of products was as follows (in thousand tonnes):
Product group 2011 2010
Sack paper 35 41
Kraftliner 475 479
Semi-chemical fluting 186 176
Recycled paper 662 602
Total 1358 1298
2.5. Sales markets
In 2011, the export share of finished products (by volume) remained at a level
similar to that of the previous year:
Year 2011 2010
Export share 67% 66%
In 2011, the sale of paper grades manufactured by the Group was still focused
on European markets (including the Polish market). The sales volume to these
markets in the audited period accounted for 87.5%.
In the audited period, the geographical structure of revenues from the sale of
paper by Mondi Swiecie S.A. by main sales markets is as follows:
Country Share in gross revenues
Poland 31.0%
Germany 14.0%
Italy 6.1%
Benelux 5.2%
France 5.1%
Great Britain 5.1%
Sweden 3.6%
Turkey 3.5%
Israel 2.5%
Finland 2.1%
Sales to the above-mentioned markets accounted for 78% of Group`s gross
revenues from the sale of paper.
In the audited period, the domestic market share in the revenues from the sale
of paper remained at a similar level and accounted for 31.0% in 2011 versus
30.8% in 2010, whereas the domestic market share by volume decreased by 0.9 %.
This resulted from the increase in the prices of recycled papers such as
Testliner and WB Fluting, which was clearly higher than that applied to other
grades.
3. SIGNIFICANT IMPACTS ON THE ACHIEVED RESULTS
3.1. Analysis of sales revenues
In 2011, the Group`s sales revenues totalled PLN 2,771.1 million,
which was 22.4% higher than the figure of PLN 2,263.7 million posted
in 2010. The change resulted from an increase in both product sales
revenues and goods and materials sales revenues.
In 2011, the revenues from the sale of products advanced by PLN 475.0 million
(up 21.1%) when compared to 2010. The primary factors contributing to the
increase were the rise in the revenues from the sale of finished products (up
PLN 450.3 million), positive difference on exchange rates from the valuation
and settlements of receivables (up PLN 24.5 million).
Higher revenues from the sale of finished products chiefly resulted from the
rise in prices for all the grades of paper manufactured by the Group and, to
the lower degree, from the higher sales volume.
The share of paper sales in total sales revenues was 92%.
In 2011, the weighted average price denominated in EUR increased by 13.1% when
compared to the last years` level. Due to the weakening of Polish zloty against
the euro (by 2.8%), the price denominated in PLN rose by 16.3%. Higher prices
in EUR applied to all the Group`s papers. The price for recycled grades such as
Testliner and WB Fluting increased by 20.6% on average, chiefly because of a
sharp rise in recovered paper prices in the reporting period. The prices of the
Group`s other grades also rose. Prices increased as follows: Kraftliner by 8.6
%, Kraft Top X by 15.0%, and Fresco Fluting by 14.9%. The price of sack paper
rose by 17.3%.
In 2011, the paper sales volume climbed by 59.5 thousand tonnes (up 5%) year on
year, while the production output rose by 54.5 thousand tonnes (up 4%).
In 2011, the revenues from green (renewable) energy and red energy (co-
generated with heat) certificates totalled PLN 137.6 million. These revenues
compare with PLN 139.3 million in 2010. The increase of PLN 19.0 million in the
revenues from green certificates originated primarily from separating, at the
beginning of 2011, the new units generating electric energy from renewable
sources. This allowed obtaining an increased number of green certificates from
biomass burning in the CFB and BFB boilers. Another important cause was the
higher output of pulp, which resulted in a rise in Recovery Boiler steam
generation and thus in an increased output of electric power. The revenues from
the sale of red certificates in 2011 are decidedly lower (by PLN 20.7 million)
compared to the previous year. Sales in 2010 were affected by a one-off event,
which was the allocation by the Energy Regulatory Office of certificates in
arrears for 2008-2009 for the total amount of PLN 13.5 million. However, since
the half-year of 2011 the prices of red certificates have been dropping
significantly, which adversely affects the sales value and the valuation of
certificates on stock. The increase in the output of finished products and pulp
only partially offset the negative impacts of the above-mentioned events on the
value of sales of red certificates.
The Group`s revenues from the sale of goods and materials in 2011 totalled PLN
45.9 million, compared to the revenues of PLN 12.7 million in 2010. One of the
major factors was the increase in the revenues from the sale of CO2 emission
allowances, which also included the surplus generated in 2008-2010.
In addition to the sale of paper, green and red energy certificates and CO2
excess emission allowances, the Group obtains revenues from lease, sale of
electric energy, heat and by-products - primarily resin soap and turpentine.
3.2. Analysis of other income statement items
3.2.1. Production volume
The production volume for main groups of products (in thousand tonnes) was as
follows:
Products 2011 2010
Containerboard 1 333 1 272
Sack paper 35 41
Total 1 368 1 313
The significantly increased production output of containerboard (when compared
to the analogical period of last year) chiefly results from the optimisation of
performance of the new paper machine - PM7 - the output of which in 2011 was
465 thousand tonnes of paper. This figure is higher by 54 thousand tonnes than
the output in 2010.
3.2.2. Basic raw materials and services
Basic raw materials used in production are as follows:
- Wood (Pulpwood): In view of the insufficient supply of wood on the domestic
market, the Group had to satisfy its needs through the less cost-effective
import of raw materials.
In 2011, the Group`s wood purchasing volume grew by 8% year on year. The rise
is attributable to the rebuilding of raw material stocks. In the reporting
period, the purchase prices of pine and birch rose by 18% on average compared
to the price level in 2010. The rise in the average price reflects the price
increase from specific supply sources. The State Forest Enterprise remained the
key pulpwood supplier.
- Recovered paper: In the period under review, recovered paper was acquired
through Swiecie Recykling. In the reporting period, the average purchase price
of recovered paper increased by 17% compared to 2010.
- Coal: In 2011, the average price of coal increased by 24% compared to 2010.
The Group continued its supply sources diversification policy through coal
import.
- Biofuels: Biomass was obtained mostly from sawmill sources (bark, wood strap
and chips). The remaining portion of biofuels was generated in the internal
woodworking and paper production processes. In the period under review, energy
generated by the Group from renewable sources accounted for approx. 83%. This
performance gave rise to the additional revenues from the sale of green energy
certificates.
- Transportation of finished products: In 2011, the Group`s expenditures
incurred for transportation of finished products increased by approx 17.1%
compared to the previous year. The rise in transportation costs was primarily
the result of the increase in the average transportation rate and to a lower
extent of the rise in the sales volume. The average transportation rate
denominated in EUR rose by 8.7% compared to 2010. The rise in fuel prices was
the major factor contributing to the change in the average transportation rate.
The impacts of the above-mentioned factors (as discussed above: the changes of
the prices of products and raw materials and hedge) were reflected in the net
profit of PLN 395.9 million compared to the profit of PLN 249.3 million
generated in 2010.
4. INFORMATION ON OTHER EVENTS THAT TOOK PLACE IN 2011
4.1. Information on significant agreements
In the reporting period the following agreements were signed with Panstwowe
Gospodarstwo Lesne Lasy Panstwowe (State Forest Enterprise) with its registered
office in Warsaw and State Forest Enterprise subsidiaries:
- Wood purchase contracts based on the first and second phases of Internet-
based negotiations for the second half-year of 2011 with the total value of PLN
38.9 million. As security for State Forest liability the Group signed a bank
guarantee facility agreement of up to PLN 18 million, issued by the bank for
the benefit of the State Forest Enterprise;
- Wood purchase contract for the second half-year of 2011 entered into on
Internet-based system auctions with the value of PLN 60.4 million. As security
for State Forest liability a bank guarantee facility agreement of up to PLN 18
million was entered into and the guarantee facility was issued by the bank for
the benefit of the State Forest Enterprise;
- Wood purchase contract based on the first phase of Internet-based
negotiations for the first half-year of 2012 with the value of PLN 46.3
million. As security for State Forest liability a bank guarantee facility
agreement of up to PLN 18 million was entered into and the guarantee facility
was issued by the bank for the benefit of the State Forest Enterprise;
In addition, the Management Board of Mondi Swiecie S.A. entered into:
- on 11 February 2011, a new three-year Guarantee Facility Agreement that
covers the existing nine-year credit from the European Investment Bank dated as
of 30 June 2008 for the amount of PLN 521.8 million with the following banks:
RBS Bank (Polska) S.A., the Royal Bank of Scotland NV, BRE Bank S.A., Bank
Polska Kasa Opieki S.A., and Raiffeisen Bank International AG. After the new
Agreement becomes effective (after conditions precedent are fulfilled), the
existing, valid three-year Guarantee Facility Agreement as of 30 June 2008
(annexed on 30 October 2009, 30 June 2010 and 30 September 2010) will
terminate;
- an additional agreement to the Credit Agreement with Mondi Finance plc
(previous name Mondi Finance Ltd) as of 29 October 2009 with the credit limit
of PLN 200 million, that extends the period of credit`s availability till 31
March 2014;
- Credit Facility (Overdraft) Agreement with the credit facility of PLN 60
million, available by 1 February 2012, with RBS Bank Polska S.A. with the
registered office in Warsaw.
4.2. Changes in organisational and capital relationships
In the reporting period no changes were made.
4.3. Related party transactions
Revenues from sales to Mondi Group companies (in thousand PLN):
Mondi Packaging Paper Sales GmbH 1 745 357
Mondi Packaging Swiecie Sp. z o.o. 93 039
Mondi Packaging Warszawa Sp. z o.o. 75 918
Mondi Packaging BZWP Sp. z o.o. 45 113
Mondi Packaging Szczecin S.A. 44 097
Mondi plc 39 425
Mondi Packaging Dorohusk Sp. z o.o. 31 525
Mondi Bags Swiecie Sp. z o.o. 29 900
Mondi Bags Mielec Sp. z o.o. 14 028
Mondi Wierzbica Sp. Z o.o. 7 167
Slovwood Ruzomberok, a.s. 1 349
Mondi AG 468
Mondi Coating GmbH 259
Mondi Packaging Solec Sp. z o.o 33
Mondi Coating Steti A.S. 17
Mondi Uncoated Fine & Kraft Paper GmbH 15
Mondi Corrugated Services GmbH 10
Mondi Gruenburg GmbH 10
Total 2 127 730
4.4. Credits, loan agreements, sureties and guarantees
Credits and loans
As of the reporting date the Group had the following loan agreements signed:
- with European Investment Bank - a nine-year credit facility for financing the
costs of construction of a new paper machine, PM7, for the amount of PLN 474.3
million (secured with a three-year guarantee facility for 110% of the credit
from the following banks: RBS Bank (Polska) S.A., the Royal Bank of Scotland
N.V., Bank Polska Kasa Opieki S.A., Raiffeisen Bank International AG and BRE
Bank S.A.). This credit facility was valued at PLN 418.2 million in the balance
sheet as of 31 December 2011 (nominal value of PLN 417.4 million, increased
with the reserve for interests of PLN 0.8 million). As per the time schedule,
the Group paid the first three quarterly installments in 2011;
- Loan from Mondi Finance plc (a Mondi Group plc entity - the major shareholder
of Mondi Swiecie S.A.) with the credit limit of PLN 200 million.
- Credit Facility (Overdraft) Agreement with RBS Bank (Polska) S.A. with the
credit facility of PLN 60 million.
Consumption of credit facilities and loans in thousands PLN
Available Consumed %
Short-term 136 717 77 707 57%
Long-term 541 531 341 531 63%
Total 678 248 419 238 62%
Bonds
In the reporting period the Group did not issue any bonds. As of 31 December
2011, the Group did not carry out any bonds.
Guarantee facilities
Information on contingent liabilities (guarantees and sureties) is presented in
the "Consolidated Financial Statements of the Group for 2011" under item 30.
4.5. Utilisation of inflows from issue of securities
In the reporting period the Group did not issue any securities.
4.6. Variances from the last published forecast
No forecasts were published in the reporting period.
4.7. Management of financial resources and liquidity assessment
In 2011, the Group generated surplus cash inflows from operating activities,
which allowed providing the debt service on due dates and locating cash in
short-term deposits. As of 31 December 2011, the available credit facilities
and loans were 62% consumed. The remaining credit reserve of approx. PLN 259
million, increased with the balance of cash and cash equivalents (PLN 489
million) as well as stable sales revenues ensure the Group`s unfailing
liquidity.
Main financial indicators:
31.12.2011 31.12.2010
Return on Sales 14% 11%
Return on Equity 28% 21%
Total assets turnover ratio 1.02 0,98
Debt/total assets ratio 33% 38%
Equity/total assets ratio 67% 62%
Quick ratio 1.66 0.89
4.8. Possibility to implement investment projects
Over the next 12 months the planned expenditures for non-financial fixed
assets, under a cash basis, will amount to PLN 121.7 million and will be
financed by the Group`s own resources.
4.9. Information that is essential for the evaluation of the personnel related
situation, assets related situation, financial condition, financial results and
changes in the situation as well as information that is essential for the
evaluation of the possibility of paying liabilities
The Group`s financial results in 2011 reflect the good economic situation on
the European paper market throughout most of the year. Throughout the last
period, the average paper sales price increased compared to the previous year;
however, the characteristic feature for the last quarter of 2011 was a
declining trend. In 2011, the prices of basic raw materials, namely wood and
recovered paper increased, although the price increase dynamics were
significantly weaker than those of the previous years. The prices of transport
services grew considerably. The sale of excess CO2 emission allowances strongly
contributed to the financial performance of 2011.
In the last period, the assumptions regarding the production area, including
further progress in ECO7 performance optimisation, came true fully.
To further optimise manufacturing costs, the Management Board of the Company
decided to commence the process with the aim to buy back the shares in the
entity that owns the Power Plant assets, which provides services to the
Company and is covered by a long-term contract of lease.
4.10. Factors and untypical events impacting the result
In 2011, no untypical events and factors impacting significantly the Group`s
result occurred.
4.11. Activities in the Special Economic Zone
Due to the execution of the investment project (PM7 machine), Mondi Swiecie
S.A. was granted, on 20 December 2007, the permit to run economic activities in
the Pomorska Special Economic Zone. Thus, the Company was granted the
entitlement to be exempt from income tax for some part of its income. The
existing enterprise of Mondi Swiecie S.A., as well as the areas acquired from
State Forest Enterprise, were included into the area of the Pomorska Special
Economic Zone in pursuance with the Regulation of the Council of Ministers of 2
November 2007 amending the Regulation regarding the Pomorska Special Economic
Zone (Journal of Laws 2007 no. 211 item 1545).
The above-mentioned permit authorised Mondi Swiecie S.A. to obtain public aid,
which comprises the exemption from corporate income tax starting from the
following month after the month when conditions of bearing capital expenditures
and reaching the specific employment level have been fulfilled. Mondi Swiecie
S.A. fulfilled the above-mentioned conditions in July 2009 and was granted the
entitlement to be exempt from the tax for the part of its income since August
2009 till the time for which the Pomorska Special Economic Zone was
established, which is till 30 November 2017. Thus, the incomes from basic
activities, i.e. sale of finished products were exempt. The permit is now being
examined by the European Commission for compliance of the public aid granted
with the common market under Regulation (EC) No. 659/1999 laying down detailed
rules for the application of Article 93 of the EC Treaty. The Group expects
that this process will end in 2012.
In the event of the process prolonging beyond 2012, the total domestic limit
for public aid (EUR 37.5 million) that may be granted to the Group with no
necessity of obtaining the consent of the European Commission will be exhausted
this year. Then, the entitlement of Mondi Swiecie S.A. to be exempt from
corporate income tax under the permit as referred above would be suspended till
the European Commission procedure is closed. In this situation, the Group would
pay monthly advance payments for corporate income tax in the amount that
disregards the exemption, starting from the month when the allowed domestic
limit was exceeded. Since the Group does not expect that the European
Commission procedure will extend beyond 2012, the full amount of corporate
income tax as covered by the exemption under the permit to run business
activities in the Pomorska Special Economic Zone should be settled within the
corporate income tax for 2012.
New investment project related expenditures are the basis for calculating the
public aid pursuant to the rules specified in s 4 Clause 3 of the Regulation of
the Council of Ministers of 5 December 2006 on the Pomorska Special Economic
Zone (Journal of Laws 2006, no. 228 item 1667). Based on discounted
expenditures incurred by 31 December 2011, Mondi Swiecie S.A. was authorised to
receive public aid that is not higher than the amount of PLN 247 853 thousand.
The public aid comprising the exemption of the part of income from the
corporate income tax may be consumed in the period of time over which Mondi
Swiecie S.A. shows the income from the activities covered by exemption, which
is that the total income of Mondi Swiecie S.A. less taxed income, not covered
by the exemption, is positive. The calculated amount of public aid consumed by
31 December 2011 was PLN 91 802 thousand (this includes discounted amounts of
corporate income tax exemption, real property tax exemption and the amounts of
refunding the costs of equipment and providing equipment to workplaces). Out of
this amount, the discounted value of exemption from corporate income tax was
PLN 83 928 thousand (nominal value of exemption was PLN 104 119 thousand).
4.12. Description of the development and operating drivers
4.12.1. External drivers
The influence of external factors that are significant to the Group`s
operations and development is described under "Position of the Group in the
sector and compared to the Competition".
4.12.2. Planned development of the Group
In 2012, the Group will continue to make progress by concentrating on four
strategy pillars which comprise: strive for Operational Excellence, Customer
Focus, Innovation and Human Resources Development.
One of the key activities for this year is to end our works on the preparation
of the Group`s long-term development strategy till 2020, both in the areas of
paper production and ensuring the energy sources.
At the same time, in consideration of the depressed market, in particular in
the fourth quarter of 2011, the Group will undertake initiatives to sustain the
present high profitability of its activities through:
- Maintaining its position on key sales markets, in particular in Poland and EU
states, among other things, by implementing initiatives that aim to improve the
quality of products sold and service offered (harmonising logistics-sales
processes under the ONE Project, extending make-to-stock offer), while keeping
the price competitiveness;
- Further managing effectively the area of satisfying energy needs, including,
among other things, through implementation of the Call Option of power
generating assets from PEP S.A., responding actively to changing legislation;
- Improving the management of working assets of the Group and controlling
operating costs more strictly;
- Searching for further sources of optimisation for the wood, recovered paper,
biomass supply system.
The Management Board of the Group also puts a focus on people development and
improving employee skills. For this reason, the Group has launched and has been
implementing the Talent Management Programme. Also, the School of Leaders and E-
learning have been launched. In addition, the Leadership Development Programme
is being implemented across the organisation.
It is critical for the Group to increase employee safety. Based on the explicit
"Zero Tolerance for Unsafe Acts" principle, the work safety and occupational
hygiene growth strategy has been developed and is being implemented with the
aim to improve working conditions on a continuous basis.
4.12.3. Achievements in the area of research and development
In 2011, the Group implemented the investment programme with the total outlays
(capital expenditures) of PLN 39 million. The major capital projects included:
the continuation of PM7 optimisation (Capex of PLN 10 million in 2011) and
replacement of DCS at the Kraft Pulp Plant (Capex of PLN 3 million).
4.12.4. Current and expected financial position of the Group
As of the reporting date, the Group was in a good financial condition due to
its operational efficiency, strong sector position, invariably positive cash
flows on operating activities and improving financial liquidity ensured through
a gradual reduction of external financing. The Group`s investment projects are
the basis for maintaining the Group`s financial situation safe in the coming
years.
4.12.5. Factors that will impact the Group`s results as expected by the Group
In the short-term, the financial condition of the Group will be significantly
impacted by the trend of paper and basic raw material (wood and recovered
paper) prices that will be either maintained or changed, PLN/EUR exchange rate
stabilisation and optimisation of PM7 performance.
The Group`s business is primarily exposed to the following risks:
- market risks (including foreign currency risk, interest risk),
- liquidity risk,
- credit risk.
Market risk
The Group is exposed to market risks related to prices of paper and basic raw
materials and services, as well as foreign currency exchange and interest
rates.
Paper price
Paper market is highly competitive, partly scattered, with a noticeable
significant price fluctuation in the past, whose prices are strongly affected
by the change in demand and foreign currency exchange rates. Thanks to its
partial production diversification, the Group, depending on market prices, is
prepared to offer a wide range of products, from fully recycled grades to
products fully made of virgin fibre.
Prices of key raw materials and services
Key raw material prices, i.e. wood and recovered paper, energy and transport
services, which are not fully correlated with the changes of paper prices, have
a considerable influence on the Group`s results and financial condition.
In particular, performance may be impacted by:
1) Sales Policy of the major wood supplier - the State Forest Enterprise,
2) Level of waste paper recovery and of exports of recovered paper,
3) Due to the power-consuming production: the coal and biomass prices,
prices of CO2 allowances, legal regulations regarding the support for energy
generation from renewable sources and energy co-generated with heat,
4) Prices for transport services, both road and rail transport.
The Group has been undertaking a number of initiatives that in particular
comprise diversification of raw material supply sources. Also, the activities
are being taken to optimise energy costs. For this purpose, the Group has
undertaken steps the aim of which is to exercise the Voluntary Call Option
covering Saturn Management Sp. z o.o. i Wspolnicy to be bought back from PEP
S.A. Saturn Management is the owner of the Power Plant that operates to satisfy
Mondi Swiecie needs and provides operating services to Mondi Swiecie S.A..
Interest risk
The Group`s exposure to the risk of changes in interest rates primarily relates
to financial liabilities and short-term cash deposits. As of the balance sheet
date, both items compensate significantly, thus reducing the Group`s exposure
to interest risk. The Group`s policy is to manage the interest rate cost using
both a mix of fixed and variable rates of interest.
Foreign currency risk
Due to the fact that approximately 67% of finished product sales transactions
are performed in foreign currencies (EUR - 59%, USD - 8%), whereas the most of
the costs are incurred in the reporting currency, especially in the situation
where the exchange rate fluctuation is very high, the Group is exposed to the
currency exchange risk and consequently to high variability of expected
financial results. The foreign currency transactional exposure comprises mainly
transactions denominated in EUR, USD and GBP (to a significantly lower extent).
The Group uses the hedging policy comprising the coverage of probable future
capital expenditures (for investment projects the value of which exceeds EUR 5
million) and arising balance exposure.
The forward contracts that hedge probable future capital expenditures are
classified as the cash flow hedge and hedge accounting rules are applicable to
them. The hedge accounting rules do not apply to forward contracts hedging the
balance exposure.
The derivatives used by the Group are valued according to the fair value. The
fair value of foreign exchange forward contracts is determined in relation to
the current forward rates for the contracts with a similar maturity date.
For a hedge of the probable future significant capital expenditures that meets
the criteria of hedge accounting, the part of gains or losses on the hedging
instrument, which was recognised to be the effective hedge, is directly booked
to equity, whereas the part which was recognised to be ineffective is booked to
the current period`s financial costs or revenues. For cash flow hedge, gains or
losses booked to equity are transferred to the value of investments commenced
in the same period when the hedged probable capital expenditure is booked to
the value of these investments.
Gains and losses caused by the change in the fair value of the transaction to
which hedge accounting does not apply are booked directly to the current
period`s financial revenues or costs.
The Group discontinues applying hedge accounting principles when the hedging
instrument has expired or has been sold, terminated or completed or when the
hedge does not meet any longer the conditions allowing applying hedge
accounting principles to such an instrument. In this event, total gains or
losses on the hedging instrument, which have been booked hitherto on equity are
still shown in equity until the forecast transaction is made. If the forecast
transaction stops being probable, then total gains or net losses as booked to
equity are transferred to the current period`s net financial result.
Derivatives embedded in other financial instruments or contracts that are not
financial instruments are regarded as separate derivatives if the nature of the
embedded instrument and related risks do not directly relate to the nature of
the basic contract and related risks and if basic contracts are not valued
according to the fair value, the changes of which are booked to the income
statement.
Liquidity risk
Liquidity risks result from the relation of working assets to short-term
liabilities. As of 31 December 2011, the current ratio was 2.17 (compared to
1.45 at the end of 2010). As of 31 December 2011, the value of available credit
lines of the Group amounted to PLN 678.2 million, whereas consumption of them
was PLN 419.2 million.
High competitiveness of the Group and its strong market position ensure that
operating liquidity will be kept and bank financing and co-operation with banks
will be continued. The Group regularly monitors the future liquidity position -
short and medium-term forecasts of inflows and expenditures in specific
currencies are prepared, which are the basis for making decisions to use
external financing such as credit tranches or overdraft.
Credit risk
The Group enters into hedging transactions and locates its deposits only with
recognised, creditworthy financial institutions. As committed in the finance
agreements (the three-year guarantee facility for the 9-year EIB credit) Mondi
Swiecie S.A. is obliged to carry out such transactions only with financial
institutions involved in such financing or with Mondi Finance plc.
The credit risk related to the receivables is significantly limited due to the
fact that the Group`s export sales risk is fully covered by the distribution
company - Mondi Packaging Paper Sales GmbH.
Domestic receivables from unrelated entities are covered by insurance and
Customers are subject to the creditworthiness review procedure. Contractor
receivables are regularly monitored by the financial service.
4.13. Management and Computerisation
In the reporting period, the projects with the aim to improve business
processes, reduce operating costs of IT systems and increase their reliability
were launched. Testing of the wood logs, chips and biomass laser measurement
system for truck`s deliveries was commenced. The monitoring system of strategic
raw material deliveries was started-up. Work on the wood delivery
receipt/acceptance system with virtualisation of IT environment has begun.
4.14. Changes in basic management of the Company and its Group
In the reporting period no such events occurred.
4.15. Information on proceedings pending before the court, competent body for
arbitration proceedings or public administrative body
On 4 February 2011, the Management Board of Mondi Swiecie S.A. adopted the
resolution concerning the Company`s exercising the Voluntary Call Option
("Option"), as specified in the General Agreement of 29 April 2002 entered into
by and between the Company and Polish Energy Partners S.A. with its registered
office in Warsaw ("PEP") and Saturn Management Spolka z ograniczona
odpowiedzialnoscia i Wspolnicy, Spolka komandytowa with its registered office
in Warsaw ("SM sp.k.").
As reported by the Management Board in the report as of 4 February 2011, the
Call Option is to be exercised on the condition that the Arbitration Court of
the Polish Chamber of Commerce renders a favourable award for the Company in
the proceedings initiated by the suit brought by the Company against PEP for
having it determined that the offer for sales of 100% shares of Saturn
Management Sp. z o.o. with its registered office in Warsaw and of all rights
and obligations of PEP as a limited partner in SM sp.k., which was submitted by
PEP to the Company in execution of decisions concerning the Voluntary Call
Option as specified in the General Agreement, has not expired and is binding
for PEP on conditions laid down in the Company`s suit that is the sales price
is to be fixed on the formula provided in the General Agreement. The suit
regarding this issue was brought by the Management Board on 4 February 2011.
On 27 June 2011 PEP brought the counter-claim statement to the Arbitration
Court of the Polish Chamber of Commerce against the Company. In this suit PEP
requests the Arbitration Court to determine, as a principle, that the price for
exercising the Option by Mondi covers the reimbursement to PEP of lost benefits
from energy in renewable sources and co-generated energy. Moreover, PEP
indicated in the above-mentioned counter-claim the detailed mechanism for
calculating the Option price, which is in compliance with the general rules as
specified in the previous clause.
On 13 February 2012 the Company received a favourable ruling from the
Arbitration Court of the Polish Chamber of Commerce, dated 10 February 2012,
that the offer for sales of 100% shares of Saturn Management Sp. z o.o. with
its registered office in Warsaw and of all rights and obligations of PEP as a
limited partner in SM sp.k., which was submitted by PEP on 29 April 2002 in
execution of the General Agreement, is binding for PEP on conditions laid down
in the Company`s suit that is the sales price is to be fixed on the formula
provided in the General Agreement. Consequently, PEP`s counter-claim was
dismissed by the court. The court decision is final, however it may be appealed
in the civil court, based on the Civil Procedure Code. The decision fulfils one
of the conditions precedent for realization of the Voluntary Call Option.
4.16. Agreements concluded between the Company and Members of the Management
Board of the Company
The Members of the Management Board are entitled to compensation for not taking
competitive activities against Mondi Swiecie S.A. for 12 months after
terminating the employment relationship, unless Mondi Swiecie S.A. discharges
them from this ban before contracts of employment expire.
4.17. Remuneration of Members of the Management and Supervisory Bodies
This information is presented under item 34 of "Consolidated Financial
Statements for 2011".
4.18. Outstanding loans, guarantees and sureties granted to Members of the
Management and Supervisory Bodies of the Company and their relatives
In the reporting period no such events occurred.
4.19. Shares held by Members of the Management and Supervisory Bodies
As at the balance sheet date, the Members of the Management and Supervisory
Bodies held no shares in the Company.
4.20. Changes in the shareholding structure
In current report no. 19/2011 as of 28 September 2011, the Management Board of
Mondi Swiecie S.A. informed that on 27 September 2011 the Management Board was
notified that ING Otwarty Fundusz Emerytalny (ING Open Contributory Pension
Fund, ("Fund")) with its registered office in Warsaw reduced their stake of
shares in the Company constituting less than 10% of votes at the general
meeting of Mondi Swiecie S.A.. This results from the sales transactions
concluded at the Warsaw Stock Exchange and settled on 22 September 2011. Before
selling the shares, the Fund owned 5,331,750 (five million three hundred and
thirty one thousand seven hundred and fifty) shares of the Company, which was
10.66% of Mondi Swiecie share capital and the Fund was entitled to 5,331,750
(five million three hundred and thirty one thousand seven hundred and fifty)
votes at the general meeting of the Company, which was 10.66% in the total
number of votes. On 27 September 2011, the Fund owned 4,998,750 (four million
nine hundred and ninety eight thousand seven hundred and fifty) shares of Mondi
Swiecie on its securities account, which is 9.9975% of the share capital and
entitles casting 4,998,750 (four million nine hundred and ninety eight thousand
seven hundred and fifty) votes at the general meeting of shareholders of the
Company, which is 9.9975% in the total number of votes.
The Mondi Swiecie Group does not have any information on any contracts
concluded in 2011 which in the future may cause that proportions of shares held
by the present shareholders will change.
4.21. Information on the Controlling System for Employee Shares Programme
In the reporting period no such events occurred.
4.22. Agreements with the entity authorised to audit financial statements
On 9 June 2011, the Supervisory Board of Mondi Swiecie S.A. appointed an entity
authorised to audit and review Mondi Swiecie S.A. and Mondi Swiecie Group`s
semi-annual and annual financial statements - Deloitte Audyt Sp. z o.o.
On 29 June 2011, the Group concluded an agreement for the review of the
shortened consolidated financial statements and shortened financial statements
for the first half-year of 2011 with Deloitte Audyt Sp. z o.o. The total
outstanding or paid remuneration under this contract for the reviews of the
semi-annual financial statements of the Mondi Swiecie Group amounted to PLN 117
thousand. In 2010, these costs amounted to PLN 115 thousand.
On 10 November 2011, the Group concluded a contract for the audit of the
Company`s annual financial statements, consolidated annual financial statements
and consolidation package for 2011 with Deloitte Audyt Sp. z o.o. The total
outstanding or paid remuneration under this contract for the audits of the
annual financial statements and consolidation package of the Mondi Swiecie
Group amounted to PLN 363 thousand. In 2010, these costs amounted to PLN 388
thousand.
On 10 November 2011, Swiecie Recykling Sp. z o.o. concluded a contract for the
audit of the annual financial statements for 2011 with Deloitte Audyt Sp.z o.o.
The total outstanding or paid remuneration under this contract for the audit of
the annual financial statements of Swiecie Recykling Sp. z o.o. amounted to PLN
42 thousand. In 2010, these costs amounted to PLN 41 thousand.
Furthermore, in 2011 the Group incurred the costs of PLN 109 thousand for
Deloitte Group subsidiaries for other services than the audit of financial
statements. Such a situation did not take place in 2010.
5. STATEMENT ON COMPLIANCE WITH THE CODE OF BEST PRACTICE OF CORPORATE
GOVERNANCE
5.1. Code of Corporate Governance Best Practice that governs the Company and
the location where the Code of Best Practice is available to the public.
In 2011, Mondi Swiecie S.A. complied with the Code of Best Practice for WSE-
listed Companies, as laid down in the Attachment to Resolution No. 17/1249/2010
of the Warsaw Stock Exchange Supervisory Board dated 19 May 2010 (excluding the
rules specified in B), which is available at www.mondigroup.pl, Corporate
Governance.
1) Fulfillment of the recommendations concerning the information policy and
maintaining the company website
Mondi Swiecie S.A. operates the Company`s website that meets the requirements
as specified in the Code of Best Practice and ensures access to important
information on the Company and is one of the communication forms with the
Company`s Shareholders. Mondi Swiecie S.A. publishes its current and periodic
reports on the Company`s website. Investor Relations at www.mondigroup.pl
contain the calendar of the major financial events, periodic financial
statements and information on current events in the Company. The Corporate
Governance part of the website includes the Declaration on Compliance with the
Code of Best Practice, corporate documents as well as documents regarding the
General Meetings of the Company. All information and data published on the
website is also available in English.
Pursuant to the requirement as laid down in Part II, Best Practice for
Management Boards of Listed Companies, point 1 (14), Mondi Swiecie S.A. has
published on the Company`s website the following information about the content
of the Company`s internal rule of changing the company authorised to audit
financial statements:
"The Company is subject to the rule of changing the company authorised to audit
financial statements that applies to the Mondi Group. According to the rule,
such an entity is chosen for all Group`s companies from among renowned
international auditing companies based on the financial criteria - offered
price for auditing the financial statements of the companies".
2) Fulfilment of the recommendation concerning the remuneration policy and
rules of defining the policy
Mondi Swiecie S.A. adheres to the rules of defining the remuneration for the
Company`s employees that are compliant with the internal remuneration rules.
The remuneration rules for Members of Supervisory and Management Boards of the
Company are compliant with the remuneration policy of the Mondi Group (of which
the Company is member). The aim of the policy is to recruit and motivate
competent directors complying with the best practice and at the same time
consider the interests of Shareholders. The major rules of the policy, as
defined and used by the Remuneration Committee of the Mondi Group that has non-
executive directors of the Mondi Group as its members are as follows:
- Remuneration should be on a competitive level for a specific market,
- Remuneration structure, in particular the structure of the changeable part of
the remuneration should depend on achievements, should take into account the
interests of Shareholders and promote achievement of the Mondi Group business
strategy,
- A considerable part of the remuneration should depend on achievement of short-
and long-term objectives,
- When defining the remuneration for managerial staff of the Group, Mondi takes
into account the salary conditions at various areas of the Mondi Group.
The remuneration of Members of the Management Boards of Mondi Group companies
may be composed of fixed and changeable parts. Members of Management Boards of
Group`s companies are entitled to take part in the Bonus Share Plan (BSP).
Under the BSP, the changeable part of the bonus is awarded against achievement
of both individual and corporate targets (leading financial indicators and work
and health indicators). Part of the bonus awarded may be paid immediately in
cash and part is paid in deferred shares of Mondi plc (major company of the
Mondi Group) which vest after three years subject to the executive remaining in
the Group`s service. The rules that apply to the changeable part of the
remuneration and shares are determined by the Mondi Group Remuneration
Committee.
The principle is that the employment relationship with Members of Management
Boards is based on the employment contracts with a term of notice of several
months. The severance pays are paid under the rules of the common labour law.
Members of the Company`s authorities are appointed in compliance with the
Company`s Statute from among the candidates who have the appropriate
professional knowledge and experience that ensure due performance of their
duties. Information on candidates for Members of Mondi Swiecie Supervisory and
Management Boards is published on the Company`s website.
3) Fulfillment of the recommendation concerning a balanced proportion of
women and men in management and supervisory functions in companies
The Mondi Swiecie S.A. standpoint is as follows:
When ensuring a balanced proportion of women and men in management and
supervisory bodies, in accordance with Mondi Leadership Criteria, the Company
regards professional and leadership competences as the major criteria of
employment and promotion of employees, irrespective of gender. Thus, women have
the chances of achieving professional success equal to men. Such actions are
compliant with the rules of the Mondi Global Employment Policy. Under the
rules, we are committed to:
- promote workforce equality and seek to eliminate all forms of unfair
discrimination,
- recruit and hire the most appropriately skilled individuals, investing in
their career development; seek to maintain a regular, two-way flow of
information with employees to maximise their identification with and ability to
contribute to our business; seek to maintain a balance in our work and family
lives.
5.2. The extent to which the Company waived the Code of Best Practice,
indication of such Practices and reasons for the waiver
The Management Board states that in 2011 the Code of Best Practice for WSE-
listed Companies, as laid down in the Attachment to Resolution No. 17/1249/2010
of the Warsaw Stock Exchange Supervisory Board dated 19 May 2010, entitled
"Code of Best Practice for WSE-Listed Companies" was complied with, excluding
the rules specified below:
Part III "Best Practice for Supervisory Board Members"
Rule 6: Instead of the rule providing that at least two members of the
Supervisory Board should meet the criteria of being independent, the Company
has adhered for many years to the rule according to which the Company`s
employees should have their representation in the Supervisory Board membership.
Pursuant to s17 of the Company`s Statute, the General Meeting of the Company`s
Shareholders appoints and dismisses the Supervisory Board Members, with 1/3 of
Members from among the persons elected by the Company`s employees. The
historical background for the Supervisory Board membership of the personnel
representatives ensures that people who are not related to a strategic investor
that has owned a majority of the Company`s shares since the privatisation
participate in the adoption of resolutions of the Supervisory Board.
Rule 8: There are no Supervisory Board committees with membership of people who
are independent Members of the Supervisory Board as understood in Rule 6.
Part IV "Best Practices of Shareholders"
Rule 1: The Company does not exclude the presence of representatives of media
at the General Meetings, but the relevant decision shall be the responsibility
of the Chairman of the General Meeting of Shareholders.
5.3. Basic characteristics of internal audit and risk management systems used
in the Company to the preparation of financial statements and consolidated
financial statements
The Management Board of the Company is responsible for the Company`s internal
audit system and its effectiveness in relation to the preparation of financial
statements and periodic reports that are prepared and published pursuant to
Regulation of 19 February 2009 regarding current and periodic information to be
reported by issuers of securities. The aim of the effective internal audit
system in the financial reporting is to ensure that information presented in
financial statements and periodic reports is adequate and correct.
In the preparation of the Company`s and Group`s financial statements one of the
key audit components comprises the audit of the financial statements by an
independent auditor. Such auditor`s responsibilities include: audit of semi-
annual financial statements as well as preliminary and final audit of the
annual consolidated and separate financial statements. The independent auditor
is appointed by the Supervisory Board. After the audit, financial statements
are sent to the Company`s Supervisory Board Members for their evaluation of the
Company`s and Group`s financial statements.
Internal audit by the Internal Audit Department is a key component of the risk
management in relation to the preparation of financial statements. The annual
schedule of internal audits is made based on a risk assessment prepared jointly
with the Management Board. In addition to scheduled audits, reviews are
conducted that cover the implementation of prior audit recommendations as well
as unscheduled audits are carried out if requested by the Management Board.
Internal Audit prepares reports that include recommendations whose aim is to
make audit mechanism more efficient. Such reports are delivered to the
Management Board Members and the Audit Committee. Pursuant to the latest
amendments to the Act on certified auditors and their self-government (Journal
of Laws No. 77 of 2009, item 649), the Company established the Audit Committee
that, in particular, is responsible for: controlling of the financial reporting
process; monitoring of the efficiency of internal control system, internal
audit system and risk management; supervision of the execution of financial
review activities; monitoring of independence of a certified auditor and an
entity authorised to audit financial statements.
The Audit Committee shall meet once a quarter before the Company`s Supervisory
Board meetings to discuss, among other things, ended internal audits executed
at the Company, audits of the implementation of audit recommendations and those
arising out of prior audits and to discuss the findings and recommendations
made by third party auditors. In addition to Audit Committee Members, the
meetings of this body are attended by delegated Members of the Company`s
Management Board and the Company`s and Mondi Group`s Internal Auditors.
The Finance Area reporting to the Finance Director is responsible for preparing
financial statements, periodic financial reports and current reporting of the
Company.
The Company`s and Group`s financial statements are prepared by middle level
management and before being provided to the independent auditor they are
checked by the Finance Director.
Financial figures that are the basis for financial statements and periodic
reports are taken from the Company`s monthly financial and operating reports.
Middle and senior level management, jointly with the Finance Area analyse
Company`s and particular organisational units` financial performance, comparing
it to business assumptions, after accounting books for each calendar months are
closed.
Identified errors are corrected on a current basis in the Company`s books in
line with the accounting policy. The preparation process of financial
statements and periodic reports commences after results of the period ended are
approved by the Finance Director.
In the Company, business strategies and plans are reviewed on an annual basis.
Medium and senior level management is involved in detailed budgeting that
covers all Company`s areas. The budget and the business plan for the following
year are adopted by the Company`s Management Board and approved by the
Supervisory Board. The Company`s Management Board, during the year, analyses
financial results comparing them to the budget, based on the Company`s
accounting policy.
The Company`s accounting policy with regard to statutory reporting is applied
both to budgeting and during preparation of periodic reporting. The Company
uses coherent accounting principles when presenting financial data in financial
statements, periodic financial reports and other reports delivered to
Shareholders.
The Company evaluates on a regular basis the quality of internal audit and risk
management systems in relation to the preparation of financial statements.
Based on the evaluation made, the Management Board of the Company is of the
opinion that as of 31 December 2011 there were no weaknesses that could
significantly impact the effectiveness of the internal audit in relation to
financial reporting.
5.4. Shareholders that directly or indirectly hold significant parcels of
shares, number of shares held by such entities, their participation in the
share capital in %, number of votes arising out of the participation in the
share capital and their share in % in the total number of votes at the General
Meeting of the Company
The period of time between 1 January 2011 and 26 September 2011:
1. FRAMONDI N.V.: 33,000,000 shares = 33,000,000 votes at the General Meeting
of the Company = 66% share in the share capital = 66% share in the total number
of votes at the General Meeting of the Company,
2. ING OFE: 5,200,000 shares = 5,200,000 votes at the General Meeting of the
Company = 10.4% share in the share capital = 10.4% share in the total number of
votes at the General Meeting of the Company,
3. AVIVA OFE AVIVA BZ WBK: 3,655,965 shares = 3,655,965 votes at the General
Meeting of the Company = 7.31% share in the share capital = 7.31% share in the
total number of votes at the General Meeting of the Company.
The share capital of Mondi Swiecie S.A. amounts to PLN 50,000,000 = 50,000,000
common bearer shares with the nominal value of PLN 1 per share.
The period of time between 27 September 2011 and 31 December 2011:
1. FRAMONDI N.V.: 33,000,000 shares = 33,000,000 votes at the General Meeting
of the Company = 66% share in the share capital = 66% share in the total number
of votes at the General Meeting of the Company,
2. ING OFE: 4,998,750 shares = 4,998,750 votes at the General Meeting of the
Company = 9.9975% share in the share capital = 9.9975% share in the total
number of votes at the General Meeting of the Company,
3. AVIVA OFE AVIVA BZ WBK: 3,655,965 shares = 3,655,965 votes at the General
Meeting of the Company = 7.3119% share in the share capital = 7.3119% share in
the total number of votes at the General Meeting of the Company.
The share capital of Mondi Swiecie S.A. amounts to PLN 50,000,000 = 50,000,000
common bearer shares with the nominal value of PLN 1 per share.
5.5. Holders of any securities giving special controlling powers and
description of such powers
Any Mondi Swiecie S.A. securities are of a privileged type in this respect.
5.6. Any limitations related to exercising the right to vote, such as
limitation to exercise the right to vote by holders of a certain portion or
number of votes, time limitations related to exercising the right to vote or
regulations providing that, with Company`s co-operation, capital rights related
to securities are separated from holding securities
In the reporting period no such events occurred.
5.7. Any limitations related to the transfer of ownership title to the
Company`s securities
In the reporting period no such events occurred.
5.8. Rules of appointing and dismissing managing and supervising persons and
their powers, in particular their power to decide about shares issuance or
buying out
The Supervisory Board shall appoint the President and the other Members of the
Management Board.
The President, a Member of the Management Board or the entire Management Board
may be dismissed by the Supervisory Board before the end of their term of
office.
The Management Board shall be composed of one or more Members. The number of
Members shall be determined by the Supervisory Board.
The term of office for Members of the Management Board shall last for three
consecutive years. The term of office shall be joint for all Members of the
Management Board in the meaning of art. 369 s 3 of the Commercial Companies
Code.
An employment contract with the Members of the Management Board of the Company
shall be executed on behalf of the Company by a representative of the
Supervisory Board delegated from among its Members.
The same course shall apply to other actions related to the employment relation
of a Member of the Management Board.
The Management Board of the Company, presided over by the President, shall
manage the Company and represent it before third parties.
In the case where the Management Board is composed of one person, the President
of the Board and in the case where the Management Board is composed of several
Members, two Members of the Management Board acting jointly or a Member of the
Management Board acting jointly with a holder of a proxy ("prokurent") shall be
entitled to make declarations of will on behalf of the Company relating to its
rights and obligation.
All matters related to the management of the Company and not restricted to the
capacity of the General Meeting or the Supervisory Board shall be left to the
Management Board, provided that any action in respect of any of the following
activities at the Company and its subsidiaries shall require the prior approval
of the Supervisory Board:
a) adoption of an annual operating budget and budget of expenditures for and
divestitureof material assets,
b) incurring an expenditure which is outside the annual budget approved by the
Supervisory Board,
c) any individual sale or purchase of a material asset which exceeds the
equivalent of EUR 500,000, also if planned in the annual budget,
d) any undertaking of any obligations or borrowings which exceeds the
equivalent of EUR 250,000, or encumbrance of assets of the Company of the value
exceeding the equivalent of EUR 250,000, outside the annual budget,
e) significant agreements (including agreements with related entities as
referred to in the law on information to be provided on a current and
periodical basis by issuers of securities), which is:
- agreements that do not exceed one year`s duration and the value of which
exceeds the equivalent of EUR 500,000,
- agreements that exceed one year`s duration and the value of which exceeds the
equivalent of EUR 250,000 per year,
f) acquisition and disposal of real estate, perpetual usufruct or participation
in real estate.
The Company`s Statute (s35 (3)) provides that the Management Board of the
Company shall be entitled to pay to the Shareholder an advance with respect to
a dividend expected as of the end of a fiscal year if the Company possesses
means sufficient for payment. Payment of such advance requires approval of the
Supervisory Board.
The General Meeting of the Company shall be entitled to decide to issue or buy
out shares.
The Management Board Regulations specifies in detail the rules of procedure for
the Management Board. The Management Board Regulations are adopted by the
Management Board and approved by the Supervisory Board.
5.9. Rules of amending the Statute or Articles of Association
In relation to the amendment of the statute, the Statute of Mondi Swiecie S.A.
does not include any provisions different than those of the Commercial
Companies Code.
The General Meeting of the Company shall be entitled to amend the Statute. It
is required to have a majority of three-fourths of votes to amend the Statute.
The Statute amendment shall be entered into the KRS (National Court Register of
Companies).
The General Meeting of the Company may authorise the Supervisory Board to
establish the unified text of the amended Statute or to make other amendments
of an editorial type as specified in the General Meeting resolution.
5.10. General Meeting rules of procedure and basic powers as well as
Shareholders` rights and way of exercising such rights, in particular the rules
arising out the General Meeting rules of procedure, if such the rules were
adopted, unless information in this regard arises out of the law
The General Meeting rules of procedure and Meeting`s basic powers as well as
Shareholders` rights and the way of exercising such rights are governed by the
following legal provisions:
1. Act as of 15 September 2000 Commercial Companies Code (Journal of Laws
00.94.1037 as later amended),
2. Statute of Mondi Swiecie S.A.,
3. Rules of Procedure of General Meetings of Mondi Swiecie S.A. (available at
www.mondigroup.pl; Corporate documents - General Meetings Rules of Procedure),
and
4. Best Practice of Corporate Governance as approved by the Company (available
at www.mondigroup.pl; Corporate Governance_Best Practices).
The General Meeting may adopt resolutions irrespective of the number of
Shareholders present and the number of represented shares. Each share shall
entitle one vote at the General Meeting.
Resolutions of the General Meeting shall be adopted by an absolute majority of
votes, unless the provisions of the law or the Statute provide otherwise.
For the case as stipulated in art. 397 of the Commercial Companies Code, the
resolution on dissolution of the Company shall require the majority of 3/4
votes cast.
The resolution not to consider an issue placed on the agenda may be adopted
only if there are important reasons for adopting such a resolution. A relevant
motion should be accompanied by a detailed justification. An item placed on the
agenda may be removed from the agenda or may not be considered upon a motion of
the Shareholders only if the resolution of the General Meeting of Shareholders
is adopted after prior approval by all the present Shareholders who submitted
the motion and if 75% of votes were cast in favour of adopting the resolution.
The voting shall be open. A secret ballot shall be ordered with respect to
elections or motions on the dismissal of the members of the authorities or
liquidators of the Company, as well as with respect to motions to hold the
persons mentioned above responsible or in personal matters. Also, a secret
ballot shall be ordered at the request of only one present person entitled to
vote.
The powers of the General Meeting shall include:
1) examination and approval of the report of the Management Board
of the Company and of the financial statements for the preceding fiscal year,
2) adopting a resolution regarding the profit distribution or loss coverage,
3) discharging the bodies of the Company from performance of duties by them,
4) changes of the scope of business activity of the Company,
5) amending the Statute of the Company,
6) increasing or decreasing the share capital,
7) merger of the Company and transformation of the Company,
8) dissolution and liquidation of the Company,
9) issuance of bonds,
10) sale or lease of the enterprise of the Company, or its organised part and
establishment of limited rights in property thereof,
11) utilisation of the supplementary (share) and reserve capital,
12) any decisions regarding claims for compensation of damages inflicted in the
course of the Company`s formation or during the exercise of the executive or
supervisory duties.
Apart from the matters stipulated above, a resolution of the General Meeting
shall be required in matters determined in the Commercial Companies Code unless
such matters, within the scope permitted by the Commercial Companies Code, are
delegated by this Statute to the competences of the Supervisory Board.
Since the convocation of the Meeting, the Company shall publish information
specified in Article 402Cubed of the Commercial Companies Code on the Company`s
website through which website Shareholders may communicate with the Company,
including they may notify the Company of granting or withdrawing electronically
the power of attorney to participate in the Meeting. The Company shall publish
on this website, in particular, the form that enables a person authorised to
exercise the right to vote and a list of documents the scanned copies of which
shall be attached to the notification of granting the power of attorney
electronically and the lack of which makes the notification of granting or
withdrawing the power of attorney ineffective towards the Company.
The Company shall undertake required actions for identification of a
Shareholder and the person authorised in order to verify the validity of the
power of attorney granted electronically. Such actions shall be proportional to
the purpose.
The General Meeting (hereinafter referred to as "the Meeting") shall be opened
by the Chairman of the Supervisory Board, his Deputy and if they both are
absent by the President of the Management Board or a person appointed by the
President and then, the Chairman of the Meeting shall be elected from among the
parties entitled to vote.
The Chairman of the General Meeting shall ensure an efficient conduct of the
Meeting and observance of the rights and interests of all Shareholders. The
Chairman should counteract, in particular, the abuse of rights by the
participants of the Meeting and should guarantee that the rights of minority
Shareholders are respected. The Chairman should not, without a sound reason,
resign from his function or put off the signing of the minutes of the Meeting
without well-grounded reasons.
The Chairman, after signing the attendance record, shall state the proper
convocation of the Meeting and its empowerment to adopt resolutions.
If needed, a Scrutiny Commission may be elected from among the parties entitled
to participate in the Meeting, whose duties shall include counting votes,
taking care of the proper conduct of voting and establishing its results.
Voting on matters of routine/procedure may be carried out only on the issues
related to the conduct of the Meeting. The voting procedure cannot apply to
resolutions which may have impact on the exercising of rights by the
Shareholders.
A resolution not to consider the issue placed on the agenda may be adopted if
it is supported by a relevant motion accompanied by a detailed justification
and only if there are important and related reasons for not adopting the
resolution, excluding the issues placed on the agenda at the request of the
Shareholders. The item placed on the agenda may be removed from the agenda or
may not be considered upon a motion of the Shareholders only if the resolution
of the General Meeting of Shareholders is adopted after prior approval by all
the present Shareholders who submitted such motion and if 75% of votes were
cast in favour of adopting the resolution.
The Chairman shall lead the debate of the Meeting, present draft resolutions to
the Meeting, undertake decisions in the procedural and technical matters, take
care of the effective conduct of the Meeting in accordance with the determined
agenda and provisions of law, permit participants to take the floor, receive
motions and draft resolutions and submit them for discussion, order voting,
announce its results and state adoption of resolutions.
Short breaks in the session, which do not defer the session, ordered by the
Chairman of the Meeting in justified cases, cannot be aimed at hindering the
exercising of rights by the shareholders.
The Chairman shall permit participants to take the floor in the sequence they
submit their motions to speak.
The Chairman shall be entitled to permit the invited experts and advisors to
take the floor.
Answers provided by the Management Board or other persons invited to the
General Meeting to the questions posted by the General Meeting should take into
account the fact that the reporting obligations are performed by a public
company in a manner which arises out of the Law applicable to public companies,
and certain information cannot be provided otherwise.
In discussing any point under the agenda, each Shareholder shall have the right
to a 5- minute speech and a 3- minute reply.
Motions as to modifications of the content of draft resolutions shall be
submitted to the Chairman in writing and shall be signed by a submitting party.
Following the end of the discussion, the Chairman, taking into consideration
the discussion and the results of voting on particular motions, shall determine
the final content of the draft resolution being formulated in such a manner so
as each entitled party who objects to the merits of a matter can appeal against
it, and he/she shall submit the draft to voting.
A party objecting to a resolution must have an opportunity to concisely present
the reasons for the objection.
At the request of a participant in the General Meeting, his/her written
statement is recorded in the minutes.
The Scrutiny Commission shall count the votes cast on adopting the resolution.
A written statement of the Commission regarding the number of votes shall be
delivered to the Chairman who shall announce the result of voting.
The resolutions shall be deemed adopted if they have been adopted,
respectively, in an open or secret ballot and by an appropriate majority of
votes as required by the provisions of the Commercial Companies Code and of the
Statute.
The Supervisory Board Members shall be elected, subject to s 17 (2) of the
Company`s Statute, from among candidates proposed by Shareholders who
participate in the Meeting. The candidature for Supervisory Board Members
should be proposed and justified in detail so as a conscious election is
possible. The approval of being a candidate to the Supervisory Board and
approval for processing and publication of personal particulars by the Company
within the required scope in relation to being a candidate and member of the
public company Supervisory Board shall be attached to the application.
When candidates to the Supervisory Board Members are proposed, it should be
taken into account that at least one Supervisory Board Member should be
qualified in accounting and financial review and should meet the conditions of
independence as specified in art. 56 (3) (1,3 and 5) of the Act of 7 May 2009
on certified auditors and their self-government, entities authorised to audit
financial statements and public supervision (Journal of Laws no. 77, item 649).
The election of Supervisory Board Members in one joint voting shall be
allowable only if there are not more candidates than the number of seats/posts
in the Supervisory Board and if no Shareholder participating in the Meeting
objects to the voting.
In the case where the Supervisory Board is elected by voting in separate
groups:
- at the Meeting, for the purpose of electing Supervisory Board Members, at
maximum as many groups of shareholders can be established as there are posts in
the Supervisory Board to be filled,
- the minimum number of shares which is required to establish a group is
defined as the number of shares represented in the Meeting divided by the
number of posts in the Supervisory Board to be filled,
- the group of Shareholders shall be entitled to elect as many Supervisory
Board Members as the number of shares represented by the group`s members is
higher than the calculated minimum number of shares required to establish the
group,
- the groups of Shareholders can become one group to elect jointly,
- the Shareholder can be a member of one group only,
- Shareholders being members of the group established for the purpose of
electing a Supervisory Board Member provide the Chairman with their written
declarations about their membership in this group,
- the majority of votes in the group determines the election of the Supervisory
Board member within this group,
- for each of the groups a separate attendance list shall be drawn up; a
scrutiny commission shall be elected and a Chairman shall be appointed to
preside over the election,
- the resolution regarding the election of the Supervisory Board Member or
Members by the group shall be included in the Minutes by a notary public.
In formal matters the Chairman permits to take the floor outside the sequence
of submitting a motion to speak.
If the Meeting is attended by parties who have no command of Polish, then the
Meeting shall be interpreted by a sworn translator.
Having discussed the issues on the agenda, the Chairman shall declare the
Meeting closed.
5.11. Members of and changes to the composition of the Company`s Management and
Supervisory Boards or administration body made over the last fiscal year, the
procedure of operation of the Company`s Management and Supervisory Boards or
administration body and their committees
The Supervisory Board of Mondi Swiecie S.A. of VIII term of office (appointed
pursuant to the resolution of the Ordinary General Meeting of Shareholders on
16 April 2010) in the period of time from 1 January 2011 to 31 December 2011
was composed of:
- Peter Oswald - Chairman of the Supervisory Board,
- Peter Machacek - Deputy Chairman of the Supervisory Board,
- Jaroslaw Kurznik - Secretary of the Supervisory Board, elected by the
employees of the Company,
- Ryszard Gackowski - Member of the Supervisory Board, elected by the employees
of the Company,
- Franz Hiesinger - Member of the Supervisory Board,
- Karol Mergler - Member of the Supervisory Board, elected by the employees of
the Company,
- Klaus Peller - Member of the Supervisory Board,
- Ladimir Enore Pellizzaro - Member of the Supervisory Board,
- Walter Seyser - Member of the Supervisory Board.
The Supervisory Board supervises on a continuous basis all areas of the
Company`s business and performs activities as specified in the following legal
provisions:
1. Act of 15 September 2000 Commercial Companies Code (Journal of Laws
00.94.1037 with later amendments),
2. Statute of Mondi Swiecie S.A. (available at the Company`s website),
3. Regulations of the Supervisory Board of Mondi Swiecie S.A. (available at the
Company`s website), and
4. Declaration of Mondi Swiecie S.A. on Compliance with Best Practice of
Corporate Governance, excluding the rules specified under B.
A detailed description of the Supervisory Board procedure of operation is
available at the Company`s website.
Pursuant to the Act of 7 May 2009 on certified auditors and their self-
government, entities authorised to audit financial statements and public
supervision (Journal of Laws no. 77, item 649) on 20 November 2009 the
Extraordinary General Meeting of Shareholders appointed Mr Walter Seyser a new,
independent Member of the Supervisory Board who is qualified as specified in
the Act (art. 56 (3) (1,3 and 5)) and a three-Member Audit Committee of the
Supervisory Board was established (composed of: Messrs W. Seyser - the
Chairman, F. Hiesinger, K. Mergler). The Audit Committee Chairman and Members
are appointed by the Supervisory Board from among the Board Members.
The Audit Committee meetings are held before sessions of the Company`s
Supervisory Board.
The Audit Committee responsibilities shall, in particular, include monitoring
of:
a) the financial reporting process;
b) the efficiency of internal control system, internal audit system and risk
management;
c) the execution of financial review activities;
d) independence of a certified auditor and an entity authorised to audit
financial statements as well as recommending to the Supervisory Board the
entity authorised to audit financial statements to perform financial review
activities for the Company.
Pursuant to the amended Supervisory Board Regulations, the Supervisory Board
may establish committees from among Board Members to deal with matters to be
specified by the Supervisory Board.
The Management Board of the Company shall be obliged to co-operate with the
Audit Committee and other committees established by the Supervisory Board and
shall enable such committees to execute their responsibilities.
Minutes of meetings of committees shall be taken. The provisions of s12 of the
Supervisory Board Regulations shall apply to the Minutes.
The Supervisory Board shall consist of at least 6 members. The term of office
of the Members of the Supervisory Board shall be three years. The term of
office of all the Supervisory Board Members shall be joint in the understanding
of article 369 s3 and in connection with art.386 s 2 of the Code of Commercial
Companies.
The Members of the Supervisory Board are appointed and dismissed by the General
Meeting, provided that one third of the Members is appointed from among persons
elected by the employees employed in the enterprise of the Company.
Resignation, death or other material reason resulting in a decrease in the
number of the Members of the Supervisory Board appointed by the employees shall
give rise to a supplementary election. The election shall be called by the
remaining Member(s) of the Supervisory Board elected by the employees. However,
up to the time of appointment of the Members of the Board elected by the
employees, the resolutions of the Supervisory Board shall be valid.
The detailed course of the election of the Members of the Supervisory Board by
the employees shall be determined by the election by-laws adopted by the
representatives of employees in the Supervisory Board.
The Supervisory Board shall elect the Chairman of the Supervisory Board, one or
more Deputy Chairmen and the Secretary of the Board from among its Members.
The meetings of the Supervisory Board shall be called and led by the Chairman
of the Supervisory Board. The Chairman of the Supervisory Board of the previous
term of office shall call and open the first meeting of the newly appointed
Board and shall preside such meeting until a new Chairman is elected.
The Supervisory Board may dismiss the Chairman, Deputy Chairman and the
Secretary of the Supervisory Board.
The Supervisory Board shall hold the meetings at the registered office of the
Company or in any other place indicated in the notification as frequently as it
is needed for the performance of its duties.
The Chairman of the Supervisory Board shall be obliged to call a meeting on a
written request of the Management Board or any one Member of the Supervisory
Board.
The meeting should be called within 14 days from the day of submitting the
request and be held within 14 days from the calling thereof.
The resolutions of the Supervisory Board shall be valid if all Members of the
Supervisory Board have been invited to the meeting and at least half of them
are present.
The resolutions of the Board shall be adopted by a simple majority of votes
cast, provided that at least half of the Members of the Supervisory Board are
present at the meeting. If the vote remains undecided, the vote of the Chairman
of the Supervisory Board shall prevail.
The Supervisory Board shall adopt its Regulations where the procedure of its
operation is specified in detail.
The Supervisory Board may adopt resolutions through voting in writing upon the
order of the Chairman of the Supervisory Board, excluding the matters
stipulated in s 21 (2) (8 and 9) of the Statute as well as the matters in which
voting is conducted by a secret ballot.
The Supervisory Board may hold meetings and adopt resolutions by telephone or
by other means of communication in a way that guarantees communication of all
the present Members of the Supervisory Board.
The resolutions adopted in the course of s 20 (4) and (5) shall be valid if all
Members of the Supervisory Board have been informed about the contents of the
draft resolution. Such resolutions shall be recorded in the minutes in
accordance to Article 376 of the Commercial Companies Code.
The Members of the Supervisory Board may participate in adopting resolutions by
delivering a vote in writing through another Member of the Board.
The Supervisory Board in particular:
1) approves the Regulations of the Management Board of the Company,
2) determines the principles of remuneration of the Members of the Management
Board,
3) appoints and dismisses Members of the Management Board or the entire
Management Board in a secret ballot,
4) suspends the Member or the entire Management Board in the performance of
duties in secret ballot due to material reasons,
5) delegates the Member or Members of the Supervisory Board for the temporary
performance of duties of the Member of the Management Board in case the Member
or the entire Management Board is suspended, dismissed or unable to perform its
duties due to other reasons,
6) permits establishing branches abroad at the request of the Management Board,
7) permits the acquisition and subscribing for shares in companies or joining
other companies,
8) examines the Management Board report on business activities of the Company,
financial statements and Management Board proposals regarding profit
distribution or loss coverage,
9) submits to the General Meeting a written report on results of the
examination as referred to in 8,
10) approves the acquisition and disposal of real estate, perpetual usufruct or
share in real estate,
11) elects an auditor auditing the financial statements of the Company,
12) considers and provides opinions on issues to be covered by the General
Meeting`s resolutions.
The Members of the Supervisory Board shall exercise their rights and perform
duties in person.
Remuneration of Supervisory Board Members shall be fixed by the General
Meeting.
Remuneration of Supervisory Board Members delegated to temporarily act as a
Member of the Management Board shall be fixed by the Supervisory Board
resolution.
The Management Board of Mondi Swiecie S.A. in the period of time from 1 January
2011 to 31 December 2011 was composed of:
- Maciej Kunda (President and Chief Executive Officer),
- Boguslaw Bielecki (Member of the Management Board and Chief Financial
Officer),
- Florian Stockert (Member of the Management Board and Sales Director),
- Tomasz Katewicz (Member of the Management Board and Production Director),
- Jan Zukowski (Member of the Management Board and Investment & Development
Director).
The rules of procedure for the Management Board are governed by:
1. Act of 15 September 2000 Commercial Companies Code (Journal of Laws
00.94.1037 with later amendments),
2. Statute of Mondi Swiecie S.A. (available at the Company`s website),
3. Regulations of the Management Board of Mondi Swiecie S.A. (available at the
Company`s website), and
4. Declaration of Mondi Swiecie S.A. on Compliance with Best Practice of
Corporate Governance, excluding the rules specified under B.
A detailed description of the Management Board procedure of operation is
available at the Company`s website.
The Management Board shall be composed of one or more Members. The number of
Members shall be determined by the Supervisory Board.
The term of office for Members of the Management Board shall last for three
consecutive years. The term of office shall be joint for all members of the
Management Board in the meaning of art. 369 s 3 of the Commercial Companies
Code.
The Supervisory Board shall appoint the President and the other Members of the
Management Board.
The President, the Member of the Management Board or the entire Management
Board may be dismissed by the Supervisory Board before the end of their term of
office.
The Management Board of the Company, presided over by the President, shall
manage the Company and represent it before third parties.
All matters related to the management of the Company and not restricted to the
capacity of the General Meeting or the Supervisory Board shall be left to the
Management Board, provided that any action in respect of any of the following
activities at the Company and its subsidiaries shall require the prior approval
of the Supervisory Board:
a) adoption of an annual operating budget and budget of expenditures for and
divestiture of material assets,
b) incurring an expenditure which is outside the annual budget approved by the
Supervisory Board,
c) any individual sale or purchase of a material asset which exceeds the
equivalent of EUR 500,000 also if planned in the annual budget,
d) any undertaking of any obligations or borrowings which exceeds the
equivalent of EUR 250,000, or encumbrance of assets of the Company of the value
exceeding the equivalent of EUR 250,000, outside the annual budget,
e) significant agreements (including agreements with related entities as
referred to in the law on information to be provided on the current and
periodical basis by issuers of securities), which is:
- agreements that do not exceed one year`s duration and the value of which
exceeds the equivalent of EUR 500,000,
- agreements that exceed one year`s duration and the value of which exceeds the
equivalent of EUR 250,000 per year,
f) acquisition and disposal of real estate, perpetual usufruct or a
participation in real estate.
The Management Board Regulations specifies in detail the rules of procedure for
the Management Board. The Management Board Regulations shall be adopted by the
Management Board and approved by the Supervisory Board.
In the case where the Management Board is composed of one person, the President
of the Board and in the case where the Management Board is composed of several
Members, two Members of the Management Board acting jointly or the Member of
the Management Board acting jointly with a holder of a proxy ("prokurent")
shall be entitled to make declarations of will on behalf of the Company
relating to its rights and obligation.
An employment contract with the Members of the Management Board of the Company
shall be executed on behalf of the Company by a representative of the
Supervisory Board delegated from among its Members.
The same course shall apply to other actions related to the employment relation
of the Member of the Management Board.
The Management Board of the Group:
President: Maciej Kunda
Members: Jan Zukowski
Florian Stockert
Tomasz Katewicz
Boguslaw Bielecki
Swiecie, 13 February 2012.
Consolidated financial statements
for the year 2011
TABLE OF CONTENTS
Consolidated statement of comprehensive income for the period 3
from 1 January 2011 to 31 December 2011
Consolidated statement of financial position as at 31 December 5
2011
Statement of changes in consolidated equity for the period from 6
1 January 2011 to 31 December 2011
Consolidated statement of cash flows for the period from 7
1 January 2011 to 31 December 2011
Explanatory notes to the consolidated financial statements prepared as
at 31.12.2011
1 General information 9
2 Accounting principles applied by the Group 11
3 Revenues from operating activities 21
4 Operating costs 22
5 Employment costs 22
6 Other operating revenues 23
7 Other operating costs 23
8 Financial revenues 23
9 Financial expenses 23
10 Income tax 24
11 Dividends 25
12 Profit per share 25
13 Operating lease agreements 26
14 Intangible assets 27
15 Tangible assets 27
16 Emission rights 28
17 Investments in associates valued with equity method assets 28
18 Other financial assets 29
19 Deferred tax assets 30
20 Inventory 31
21 Other financial assets 31
22 Bank credits and loans 35
23 Financial instruments 36
24 Deferred tax provision 42
25 Liabilities 43
26 Remuneration in the Group`s capital instruments 43
27 Provisions 43
28 Equity 44
29 Explanatory note to the consolidated statement of cash 45
flows
30 Contingent liabilities 46
31 Events after the balance sheet date 46
32 Financial information comparability 46
33 Transactions with related parties 47
34 Management board and supervisory board remuneration 48
35 Remuneration of an auditor or entity authorised to audit 48
financial statements paid or due for the fiscal year
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD FROM
1 JANUARY 2011 TO 31 DECEMBER 2011
Note 2011 2010
PLN`000 PLN`000
Continued activities
Revenues from sales
Revenues from sales of products 2 725 784 2 251 013
Revenues from sales of goods and 45 938 12 661
materials
3 2 771 722 2 263 674
Cost of products, goods and 4 (1 923 422) (1 595 811)
materials sold
Gross profit on sales 848 300 667 863
Other operating revenues 6 2 626 1 078
Cost of sales and distribution (249 026) (222 242)
General and administrative costs (142 514) (113 653)
Other operating costs 7 (2 043) (2 322)
Profit on operating activity 457 343 330 724
Financial expenses 8 (51 105) (69 264)
Financial revenues 9 13 629 2 194
Share in profit of associated entity 101 36
Gross profit 419 968 263 690
Income tax 10 (23 974) (14 373)
Net profit from continued activities 395 994 249 317
Discontinued activities - -
Net profit for the financial year 395 994 249 317
Attributable to:
controlling shareholders 395 994 249 317
minority shareholders - -
Net profit (loss) per share 7.92 4.99
From continued activities
Ordinary profit 12 7.92 4.99
Diluted profit 12 7.92 4.99
From continued and discontinued
activities
Ordinary profit 12 - -
Diluted profit 12 - -
2011 2010
PLN`000 PLN`000
Profit (loss) on revaluation of - -
fixed assets
Profit (loss) on revaluation of - -
assets available-for-sale
Profit (loss) on cash flows hedging - -
Exchange differences from converting - -
financial statements of foreign
entities
Actuarial profits/(losses) on - -
specific employee benefit programs
Tax on amounts charged directly to - -
capitals
Net profit charged directly to - -
capitals
Reclassifications
Reclassification to profit or loss - -
from sales of assets available-for-
sale
Reclassification to profit or loss - -
from cash flow hedge
Reclassification to opening balance - -
of items hedged on cash flow
Tax on items reclassified from - -
capitals
Net profit (loss) 395 994 249 317
Total - profits and losses 395 994 249 317
recognised
Attributable to:
controlling shareholders 395 994 249 317
minority shareholders - -
395 994 249 317
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011
Note Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
ASSETS
Fixed assets (long-term)
Tangible assets 15 1 588 783 1 708 439
Intangible assets 14 2 334 2 904
Investments in associated entities 17 1 126 1 025
valued with equity method
Financial assets available for sale 175 175
Other financial assets 18 168 495
Deferred tax assets 19 18 492 15 348
1 611 078 1 728 386
Current assets (short-term)
Inventory 20 265 679 227 596
Trade receivables and other 21 360 346 339 003
receivables
Foreign currency forward contracts 21 2 130 1 410
Cash and cash equivalents 21 489 333 23 303
Income tax 25 -
1 117 513 591 312
Long-term assets held for sale - -
valued at fair value
1 117 513 591 312
TOTAL ASSETS 2 728 591 2 319 698
LIABILITIES AND EQUITY
Equity
Share capital 28 333 734 333 734
Supplementary capital 1 098 820 848 648
Realised net profit 395 994 249 317
Retained earnings 1 217 2 072
Revaluation reserve capital - -
1 829 765 1 433 771
Equity attributable to equity
holders of the parent
Minority shareholders` interest 1 829 765 1 433 771
Long-term liabilities
Interest bearing bank credits and 341 530 416 366
loans
Provisions 27 3 991 4 064
Deferred tax provision 24 38 450 57 041
384 450 477 471
Short-term liabilities
Trade liabilities and other 418 514 291 904
liabilities
Current portion of interest bearing 22 77 707 100 553
bank credits and loans
Foreign currency forward contracts 1 365 199
Income tax 3 780 3 828
Short-term provisions 27 13 010 11 972
514 376 408 456
Liabilities directly related to - -
fixed assets classified as held for
sale
TOTAL LIABILITIES 898 826 885 927
TOTAL LIABILITIES AND EQUITY 2 728 591 2 319 698
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY FOR THE PERIOD FROM 1 JANUARY 2011
TO 31 DECEMBER 2011
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Opening balance of equity 1 433 771 1 184 453
Changes in adopted accounting principles - -
Opening balance of equity after adjustments 1 433 771 1 184 453
to comparable data
1. Opening balance of share capital, 333 734 333 734
including:
- authorised share capital 50 000 50 000
- hyperinflation adjustment 283 734 283 734
1.1. Changes in share capital - -
1.2. Closing balance of share capital 333 734 333 734
2. Realised net profit 395 994 249 317
3. Retained earnings opening balance 251 389 72 248
3.1. Changes in retained earnings (250 172) (70 177)
a) increases (due to) - -
- profit distribution - -
b) decreases (due to) 250 172 70 177
- profit distribution - -
- contributions to the supplementary 250 172 70 177
capital
3.2. Retained earnings closing balance 1 217 2 072
4. Opening balance of supplementary capital 848 648 778 471
4.1. Changes in supplementary capital 250 172 70 177
a) increases (due to) 250 172 70 177
- profit distribution 250 172 70 177
b) decreases (due to) - -
- dividends - -
4.2. Closing balance of supplementary 1 098 820 848 648
capital
5. Opening balance of revaluation reserve - -
5.1. Changes in revaluation reserve - -
a) increases (due to) - -
- hedging revaluation - -
b) decreases (due to) - -
- hedging revaluation - -
5.2. Closing balance of revaluation reserve - -
Closing balance of equity 1 829 765 1 433 771
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM 1 JANUARY 2011 TO 31
DECEMBER 2011
2011 2010
PLN`000 PLN`000
CASH FLOWS FROM OPERATING ACTIVITIES
GROSS PROFIT 419 968 263 690
Share in net profits (losses) of (101) (36)
subsidiaries valued with equity method
Amortisation and depreciation 153 118 157 360
Exchange gains (losses) (529) (2 666)
Interest and profit sharing (dividend) 24 019 53 665
Profit (loss) on investment activities 21 616 6 838
Change in provisions 964 7 648
Change in inventory (38 083) (53 158)
Change in receivables (66 722) (133 657)
Change in short-term liabilities excluding 132 514 50 955
credits and loans
Other adjustments 436 (2 609)
CASH FLOWS FROM OPERATING ACTIVITIES 647 200 348 030
Interest paid (1) -
Income tax paid 11 (204)
NET CASH FLOWS FROM OPERATING ACTIVITIES 647 210 347 826
CASH FLOWS FROM INVESTMENT ACTIVITIES
Inflows 23 156 27 475
Disposal of intangible and tangible fixed 554 2 612
assets
From financial assets, including: 105 140
In related parties 105 140
- dividend and profit sharing 105 140
- sales of financial assets - -
In other entities - -
- sales of financial assets - -
- interest - -
Other inflows from investment activities 22 497 24 722
Outflows 82 429 139 351
Purchase of intangible assets and tangible 38 991 109 427
fixed assets
For financial assets, including: - -
In related parties - -
In other entities - -
- purchase of financial assets - -
Advance payments for fixed assets in - -
construction
Other outflows from investment activities 43 438 29 924
NET CASH FLOWS FROM INVESTMENT ACTIVITIES (59 273) (111 877)
2011 2010
PLN`000 PLN`000
CASH FLOWS FROM FINANCIAL ACTIVITIES
Inflows 29 743 634
Credits and loans 29 738 613
Other inflows from financial activities 5 20
Outflows 151 659 244 519
Dividend and other payments to shareholders - -
Repayment of credits and loans 126 471 188 870
Payment of liabilities arising from - -
financial leases
Loans granted 100 -
Interest 17 532 29 362
Other outflows from financial activities 7 556 26 286
NET CASH FLOWS FROM FINANCIAL ACTIVITIES (121 916) (243 885)
TOTAL NET CASH FLOWS 466 021 (7 936)
BALANCE CHANGE IN CASH 466 031 (7 070)
Change in cash due to exchange differences 10 865
CASH OPENING BALANCE 23 313 30 383
CLOSING BALANCE OF CASH 489 333 23 313
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED AS AT 31
DECEMBER 2011
1. GENERAL INFORMATION
The Group parent company`s name has been Mondi Swiecie Spolka Akcyjna since the
court decided to register on 16 May 2008 a new name of the Company. The
Extraordinary General Meeting of Shareholders of the Company adopted a
resolution regarding rebranding of the Company from Mondi Packaging Paper
Swiecie Spolka Akcyjna to Mondi Swiecie Spolka Akcyjna on 21 March 2008. The
registered office of the parent company is Swiecie, ul. Bydgoska 1.
The Company was established on the basis of the notarised deed, Repertory A no.
1887/90 dd. 17 December 1990, in the Individual Notary Public Office No. 18 in
Warsaw run by a notary public, Pawel Blaszczak as a result of the
transformation of the state owned company "Zaklady Celulozy i Papieru" with its
registered office in Swiecie into a sole shareholder company of the State
Treasury.
Presently, the Company is registered in the National Court Register of
Companies (KRS) in the District Court in Bydgoszcz, 13th Economic Division
under KRS No. 25742, Pursuant to the Polish Statistical Classification of
Economic Activities the Company is classified under no. 17.12 - manufacture of
paper and board, whereas according to the Warsaw Stock Exchange the Company is
presented in the wood industry sector.
The structure of the Mondi Swiecie Group
As at the balance sheet date the Mondi Swiecie Group comprises:
- Parent company - Mondi Swiecie S.A., and
- Subsidiary - Swiecie Recykling Sp. z o.o.,
- Associated company - Polski System Recyklingu - Organizacja Odzysku S.A.
The consolidated financial statements prepared as at 31 December 2011 cover the
following entities:
a) Parent company - Mondi Swiecie S.A.
b) Company valued with the full method:
- Swiecie Recykling Sp. z o.o.,
c) Companies valued with the equity method:
- Polski System Recyklingu - Organizacja Odzysku S.A.
The financial statements of the subsidiary are prepared for the same reporting
period as the financial statements of the parent company and using the same
rules of accounting.
All balances and transactions between the Group companies have been fully
eliminated.
The consolidated financial statements have been prepared in PLN. PLN is a
functional and presentation currency for the Group.
Duration of the Group`s business
The duration of activities for each company of the Group is indefinite.
The balance sheet date and the period of time covered by the financial
statements
Financial statements consist of:
- the data of the year from 1 January to 31 December 2011,
- the comparative data of the year from 1 January to 31 December 2010.
Information concerning management board and supervisory board of the parent
entity as at 31 December 2011.
Management Board
President of the Board: Maciej Kunda
Members of the Board: Boguslaw Bielecki
Tomasz Katewicz
Florian Stockert
Jan Zukowski
Supervisory Board Chairman of the Supervisory Board: Peter Oswald
Members of the Supervisory Board: Peter Machacek
Ryszard Gackowski
Karol Mergler
Franz J. Hiesinger
Jaroslaw Kurznik
Klaus Peller
Ladimir Enore Pellizzaro
Walter Seyser
Shareholders` structure of the parent company
- Framondi N.V. (S.A. located in Amsterdam, Fort Willemweg 1, 6219 PC
Maastricht) - 33 000 000 shares, 66.00% in share capital,
- ING OFE - 4 998 750 shares, 10.00% in share capital,
- Aviva OFE Aviva BZ WBK - 3 655 965 shares, 7.31% in share capital,
- others - 8 345 285 shares, 16.69%.
The final owner of the whole Mondi Group is Mondi plc.
Statements
Pursuant to s 92 subsection 1 paragraphs 5 and 6 of the Regulation of the
Minister of Finance dated as at 19 February 2009 regarding information to be
published by issuers of securities on a current and periodic basis and
conditions for information required by law of a non-member state to be
recognised as equivalent, the Management Board of Mondi Swiecie S.A. declares
as follows:
- true and fair view of reported financial statements
The Management Board of Mondi Swiecie S.A. composed of the following Members:
Maciej Kunda - President of the Management Board,
Boguslaw Bielecki - Member of Management Board, Financial Director,
Tomasz Katewicz - Member of the Management Board, Production Director,
Florian Stockert - Member of the Management Board, Sales Director,
Jan Zukowski - Member of the Management Board, Investment and Development
Director
declares that the consolidated financial statements for the year 2011 and
comparative data have been prepared in accordance with the accounting rules in
force and reflect in a true, reliable and clear manner the financial position
and assets-related condition of the Group and the Group`s financial result. The
statements present the Group`s real development, achievements and the review of
the Company`s situation including the description of key risks and hazards.
- the appointment of the entity entitled to audit the financial statements
Pursuant to the Statute of Mondi Swiecie S.A., the Management Board of the
Company entrusted the Supervisory Board with the appointment of the authorised
entity to audit the financial statements. The Supervisory Board, by virtue of
the Resolution of 9 June 2011, at a request of the Management Board, appointed
an entity authorised to audit the separate financial statements and the
consolidated financial statements for the year 2011 and to review the separate
financial statements and the consolidated financial statements for the first
half-year 2011. Deloitte Audyt Sp. z o.o., 00-549 Warszawa, ul. Jana Paw3a II
19 was appointed.
The Management Board of Mondi Swiecie S.A. declares that Deloitte Audyt
Sp. z o.o., the entity authorised to audit the financial statements that will
audit the separate financial statements and the consolidated financial
statements for 2011 was appointed in compliance with the legal provisions in
force. Further, this company and expert auditors who are involved in auditing
the financial statements fulfil the conditions for issuing an impartial and
independent opinion on the audit, in pursuance with relevant national law.
Modification of comparative data
In the reporting period, no changes were made to the presentation of financial
statements.
2. ACCOUNTING PRINCIPLES APPLIED BY THE GROUP
Accounting principles
The consolidated financial statements were prepared in compliance with the
International Financial Reporting Standards (IFRS) in the form approved by the
European Union.
The International Financial Reporting Standards in the form approved by the
European Union do not differ significantly from the regulations adopted by the
International Accounting Standards Board, excluding the standards, amendments
to standards and interpretations specified below, which have not been adopted
for application yet as per 16 February 2012:
- IFRS 9 "Financial Instruments" (effective for annual periods beginning on or
after 1 January 2015),
- IFRS 10 "Consolidated Financial Statements" (effective for annual periods
beginning on or after 1 January 2013),
- IFRS 11 "Joint Arrangements" (effective for annual periods beginning on or
after 1 January 2013),
- IFRS 12 "Disclosures of Involvement with Other Entities" (effective for
annual periods beginning on or after 1 January 2013),
- IFRS 13 "Fair Value Measurement" (effective for annual periods beginning on
or after 1 January 2013),
- IAS 27 (revised in 2011) "Separate Financial Statements" (effective for
annual periods beginning on or after 1 January 2013),
- IAS 28 (revised in 2011) "Investments in Associates and Joint Ventures" -
Amendments to IFRS 1 "First-time Adoption of IFRS" - Severe Hyperinflation and
Removal of Fixed Dates for First-time Adopters (effective for annual periods
beginning on or after 1 July 2011),
- Amendments to IFRS 9 "Financial Instruments" and IFRS 7 "Financial
Instruments: Disclosures" - Mandatory Effective Date and Transition
Disclosures,
- Amendments to IAS 1 "Presentation of financial statements" -Presentation of
Items of Other Comprehensive Income (effective for annual periods beginning on
or after 1 July 2012),
- Amendments to IAS 12 "Income Taxes" - Deferred Tax: Recovery of Underlying
Assets (effective for annual periods beginning on or after 1 January 2012),
- Amendments to IAS 19 "Employee Benefits" - Improvements to the Accounting for
Post-employment Benefits (effective for annual periods beginning on or after 1
January 2013),
- IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine"
(effective for annual periods beginning on or after 1 January 2013).
As estimated by the Company, the above-mentioned standards, interpretations and
amendments to standards would not have any significant impacts on the financial
statements if they were used by the entity as at the balance-sheet date.
Hedge accounting for financial assets and liabilities the rules of which have
not been approved for use by the European Union is still beyond the regulations
adopted by the European Union.
As estimated by the Company, the application of hedge accounting for financial
assets or liabilities according to IAS 39 "Financial Instruments: Recognition
and Measurement" would not have any significant impacts of the financial
statements if they were adopted for use as at the balance-sheet date.
When preparing these financial statements the Company did not apply the
following standards, amendments to standards and interpretations, which had
been published and approved for use in the European Union, but which have not
become effective yet:
- Amendments to IFRS 7 "Financial Instruments: Disclosures" - Transfers of
Financial Assets, adopted by the EU on 22 November 2011 (effective for annual
periods beginning on or after 1 July 2011).
The Company decided not to apply these standards, amendments to standards and
interpretations earlier. As estimated by the entity, the above-mentioned
standards, amendments to standards and interpretations would not have any
significant impacts on the financial statements if they were used by the entity
as at the balance-sheet date.
When preparing these financial statements the Company applied the following
amendments to the existing standards published by the International Accounting
Standards Committee and approved by the European Union which became effective
in 2011:
- Amendments to IAS 24 "Related Party Disclosures" - Simplifying the disclosure
requirements for government-related entities and clarifying the definition of a
related party, adopted by the EU on 19 July 2010 (effective for annual periods
beginning on or after 1 January 2011),
- Amendments to IAS 32 "Financial Instruments: Presentation" - Accounting for
rights issues, adopted by the EU on 23 December 2009 (effective for annual
periods beginning on or after 1 February 2010),
- Amendments to IFRS 1 "First-time Adoption of IFRS"- Limited Exemption from
Comparative IFRS 7 Disclosures for First-time Adopters, adopted by the EU on 30
June 2010 (effective for annual periods beginning on or after 1 July 2010),
- Amendments to various standards and interpretations "Improvements to IFRSs
(2010)" resulting from the annual improvement project of IFRS published on 6
May 2010 (IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34, IFRIC 13) primarily
with a view to removing inconsistencies and clarifying wording, adopted by the
EU on 18 February 2011 (amendments are to be applied for annual periods
beginning on or after 1 July 2010 or 1 January 2011 depending on
standard/interpretation),
- Amendments to IFRIC 14 "IAS 19 - The Limit on a defined benefit Asset,
Minimum Funding Requirements and their Interaction" - Prepayments of a Minimum
Funding Requirement, adopted by the EU on 19 July 2010 (effective for annual
periods beginning on or after 1 January 2011),
- IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments",
adopted by the EU on 23 July 2010 (effective for annual periods beginning on or
after 1 July 2010).
Main accounting principles used by the Group are presented below.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the
parent company and financial statements of its controlled companies (or
subsidiaries) as at the balance sheet date. An entity is controlled when the
parent company has a possibility of impacting financial and operating policies
of the controlled entity to benefit from its business.
As at the date of acquisition assets and liabilities of the acquired unit are
valued according to their fair value. In case the acquisition price exceeds the
fair value of identifiable net assets acquired, such an excess of price is
shown as the goodwill. In case the acquisition price is lower than the fair
value of identifiable net assets of the acquired company, such a difference is
shown as a profit in the profit and loss account for the period of time when
acquisition was finalised.
Financial results of acquired or sold companies in the year under review are
shown in the consolidated financial statements from/ until their acquisition or
sale respectively.
Investments in associates
An associate is an entity over which the Company has significant influence. The
Company participates in the financial and operating policy decisions of the
associate but does not control those policies. Associates that compose the
Group are Polski System Recyklingu - Organizacja Odzysku S.A. Financial
participation in associates is valued with equity method, except for the
situation where investment is classified as for sale.
Reporting periods of associates and the Group are identical and all entities
use the same accounting principles.
Investments in associates are presented in note no. 17.
Non-current assets held for sale
Non-current assets classified as held for sale are measured at the lower of
carried values (purchase price) and fair value less sale costs. Non-current
assets are classified as held for sale if it is expected that such sale will be
completed within one year after the date of classification change.
Shares in associates classified as held for sale, pursuant to IFRS 5, are not
recognised in the consolidated financial statements according to equity method.
Revenue recognition
Revenues from sales of products, goods and services are included in the fair
value of receivables or outstanding payments and they represent liabilities
under normal business operations, less discounts, VAT and other sales taxes.
Revenues from sales of products and goods are shown after all conditions below
have been fulfilled:
- Significant risk and benefits from products and goods` property rights are
transferred from the Group to a purchaser;
- Managerial functions are ceded by the Group to the extent related to the
property right and effective control over products and goods sold;
- It is possible to reliably valuate the revenues amount;
- There is a likelihood that the Company is granted economic benefits related
to the transaction;
- It is possible to reliably valuate incurred or expected costs of transaction.
Interest income is accrued on a time basis, in relation to the amount due,
according to the effective interest rate method.
Dividend income is recognised when the shareholders` rights to receive payment
have been established.
Subsidies
Governmental subsidies are recognised as revenue if it is reasonably certain
that such subsidy will be received and all subsidy related conditions will be
fulfilled. If a subsidy concerns a specific cost item, then it is recognised as
revenue that is commensurate / proportional to costs the subsidy is intended to
offset. If a subsidy relates to the asset item, then the subsidy fair value is
recognised on the account of future periods` revenues and then it is gradually
written off, by way of equal annual write-offs, to the statement of
comprehensive income for the estimated service life of a related asset item.
Foreign currencies
Transactions made in a currency other than the Polish zloty (PLN) are valued at
the average National Bank of Poland exchange rate as at the last business day
prior to the date of transaction. Payments to and from foreign currency bank
accounts are recorded using purchasing or selling exchange rates used by the
bank where the transaction is made. As at the balance sheet date, monetary
assets and liabilities that are denominated in foreign currencies are converted
using the average National Bank of Poland exchange rate as per the same day.
In order to hedge its exposure to certain foreign exchange risks, the Group
enters into foreign currency forward contracts. See below for details of the
Group`s accounting policies in respect of such derivative financial
instruments.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
All other borrowing costs that do not meet the above-mentioned criteria are
recognised in profit or loss in the period in which they are incurred.
Retirement benefit costs
Retirement benefit costs provision is recorded equal to the valuation being
carried out using actuarial method. The basis for the provision calculation is
the Company`s collective employment agreement. Unregulated issues are solved
based on the Polish Labour Code.
Division into long and short-term provisions is made according to the
proportion established using statistic methods used by an actuarial.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable (CIT) is based on the taxable profit for the year
established in accordance to corporate income tax law. The taxable profit is
calculated based on a gross result that is next adjusted by non-taxable
revenues, expenses that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The liability for current
tax is calculated using tax rates that are valid in a specific tax year.
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method.
Deferred tax provision is generally recognised for all positive taxable
temporary differences and deferred tax assets are recognised with regard to all
negative taxable temporary differences in such an amount that it is probable
that taxable profits will be available against which deductible temporary
differences can be utilised.
Value of deferred tax assets is verified as at each balance sheet day and is
reduced appropriately if future tax profits sufficient to realise a portion or
all of a given deferred tax asset cease to be expected.
Deferred tax is calculated using the tax rates that are expected to be in force
in the period where the constituent of assets will be completed or the
provision will be consumed, disregarding tax exemptions the application of
which is not certain.
Deferred tax is recognised in the statement of comprehensive income, except
when it relates to deferred tax provision from hedged deals that are charged or
credited directly to equity. Assets and deferred tax provisions are separately
presented in the statement of financial position and are not offset.
Presentation of the corporate income tax exemption due to running economic
activities in Special Economic Zone
Due to the execution of the investment project (PM7 machine), Mondi Swiecie
S.A. was granted, on 20 December 2007, a permit to run economic activities in
the Pomorska Special Economic Zone. Thus, the Company was granted the
entitlement to be exempt from income tax for some part of its income. The
existing enterprise of Mondi Swiecie S.A., as well as the areas acquired from
State Forest Enterprise were included into the area of the Pomorska Special
Economic Zone in pursuance with the Regulation of the Council of Ministers of 2
November 2007 amending the Regulation regarding the Pomorska Special Economic
Zone (Journal of Laws 2007 no. 211 item 1545).
The above-mentioned permit authorised Mondi Swiecie S.A. to obtain public aid,
which comprises the exemption from corporate income tax starting from the
following month after the month when conditions of bearing capital expenditures
and reaching the specific employment level have been fulfilled. Mondi Swiecie
S.A. fulfilled the above-mentioned conditions in July 2009 and was granted the
entitlement to be exempt from the tax for the part of its income since August
2009 till the time for which the Pomorska Special Economic Zone was
established, which is till 30 November 2017. Thus, the incomes from basic
activities, i.e. sale of finished products were exempt. The permit is now being
examined by the European Commission for compliance of the public aid granted
with the common market under Regulation (EC) No. 659/1999 laying down detailed
rules for the application of Article 93 of the EC Treaty. The Group expects
that this process will end in 2012.
In the event the process prolongs beyond 2012, the total domestic limit for
public aid (EUR 37.5 million) that may be granted to the Group with no
necessity of obtaining the consent of the European Commission will be exhausted
this year. Then, the entitlement of Mondi Swiecie S.A. to be exempt from
corporate income tax under the permit as referred above, would be suspended
till the European Commission procedure is closed. In this situation, the Group
would pay monthly advance payments for corporate income tax in the amount that
disregards the exemption, starting from the month when the allowed domestic
limit was exceeded. Since the Group does not expect that the European
Commission procedure will extend beyond 2012, the full amount of corporate
income tax as covered by the exemption under the permit to run business
activities in the Pomorska Special Economic Zone should be settled within the
corporate income tax for 2012.
New investment project related expenditures are the basis for calculating the
public aid pursuant to the rules specified in s 4 Clause 3 of the Regulation of
the Council of Ministers of 5 December 2006 on the Pomorska Special Economic
Zone (Journal of Laws 2006, no. 228 item 1667). Based on discounted
expenditures incurred until 31 December 2011, Mondi Swiecie S.A. was authorised
to receive public aid that is not higher than PLN 247 853 thousand. The public
aid comprising the exemption of the part of income from the corporate income
tax may be consumed in the period of time over which Mondi Swiecie S.A. shows
the income from the activities covered by the exemption, which is that the
total income of Mondi Swiecie S.A. less taxed income, not covered by the
exemption, is positive. The calculated amount of public aid consumed till 31
December 2011 was PLN 91 802 thousand (this includes discounted amounts of
corporate income tax exemption, real property tax exemption and the amounts of
refunding the costs of equipment and providing equipment to workplaces). Out of
this amount, the discounted value of exemption from corporate income tax was
PLN 83 928 thousand (nominal value of exemption was PLN 104 119 thousand).
Tangible assets
Fixed assets used for production, delivery of goods and services as well as for
administrative purposes are shown in the statement of financial position
according to their purchasing prices or manufacturing costs, less depreciation
deduction in future periods and deduction due to a permanent loss of value.
Depreciation of fixed assets is presented in the statement of comprehensive
income.
Fixed assets under construction are measured in the statement of financial
position at manufactured costs less impairment write-offs. The manufactured
cost is increased by fees and for a specific group of assets - borrowing cost
capitalised according to principles described in the accounting principles.
Depreciation of these fixed assets starts in the month following their
commissioning.
Depreciation is calculated for all fixed assets, excluding land and fixed
assets under construction, using the straight-line method over the estimated
duration of their economic usefulness.
For particular groups of fixed assets, the following operation life periods
were used:
Buildings and structures - from 20 to 60 years
Machines and technical equipment - from 5 to 20 years
Means of transport - from 4 to 6 years
Other fixed assets - from 3 to 10 years
Depreciation rates are established based on assets and intangible assets`
estimated economic useful life. The Company verifies, on an annual basis, the
economic useful life periods based on current estimations.
All incomes or losses resulting from sale/liquidation or discontinued use of
fixed assets are determined as the difference between revenues from the sale of
fixed assets and the net value of those fixed assets, and are shown in the
statement of comprehensive income in the period, when a specific item of fixed
assets was removed from the statement of financial position.
Intangible assets
Intangible assets were measured at the purchase cost, or the cost of
manufacture if they were manufactured by the Company.
Intangible assets are amortised on a straight-line basis over their estimated
useful lives.
Licences
Licences are measured in the statement of financial position at the purchase
cost less depreciation on a straight-line basis over their estimated useful
lives.
Impairment of assets
At each balance sheet date, the Group reviews the net amounts of its assets to
determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment write-
off. If the item of fixed assets does not generate cash flows that to a great
extent are independent from flows generated by other assets, the analysis is
made for a group of assets generating cash flows to which the item of assets
belongs.
The recoverable amount is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a discount rate that reflects current
market assessments of the value of money in time and the risks specific to the
asset.
If the recoverable amount of an asset (or group of assets) is estimated to be
less than its assets net book value, the value is reduced to its recoverable
amount. An impairment loss is recognised immediately in cost of the period when
it occurred, unless the relevant asset is carried at
a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the net value of asset (or
group of assets) is increased to the revised estimate of its recoverable
amount, but so that the increased net value does not exceed the net value that
would have been determined if no impairment loss had been recognised for the
asset in prior years. A reversal of an impairment loss is recognised in
revenues, unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a revaluation reserve.
Inventory
Inventories of finished goods, semi-products are measured at actual cost of
manufacture, not higher than their net sale prices. Manufacturing costs
comprise direct materials and direct labour costs and those overheads that
correspond to the level of such costs under normal use of production
capacities.
The Group adopts a principle of accounting of underutilisation costs of
departments manufacturing finished and semi-finished goods. Underutilisation
cost affects the financial result of the period and is not taken into
consideration in finished and semi-finished goods inventories valuation. In the
case of semi-finished and finished products, the period of underutilisation of
production capacities is a shutdown of a manufacturing department due to a lack
of raw material, lack of orders or other events for longer than 30 calendar
days, irrespective of the cause. If such situations occur, shutdown costs are
calculated as the product of hours of shutdown and unit machine-hour cost of a
shutdown department. In the months of annual maintenance shutdown, finished and
semi-finished products are valued at the manufacturing cost of the previous
month.
The net sale price corresponds to the estimated sale prices minus all necessary
costs to complete the production and necessary costs to effect a sale.
Stocks of materials and goods are shown according to the purchasing prices that
are not higher than the net sale price.
Certificates of green energy origin as goods are valued according to the fair
value, which shall mean the market price at the property market less costs of
sales.
Financial instruments
Financial assets and financial liabilities are recognised in the statement of
financial position when the Group becomes a party to the contractual provisions
of the instrument.
Trade receivables and other receivables
Trade receivables as of the date of origin are measured at the current expected
amount due, and are recognised in later periods according to the depreciated
cost fixed using the effective interest rate. Default interest is accounted in
the amount resulting from agreements and is covered by a 100% write off.
Also, prepaid expenses - mainly insurances costs are presented as trade
receivables.
Trade receivables, excluding insured receivables and inter-company receivables,
are adjusted by write offs in the amount of 2% of receivables.
Further,
Overdue receivables > 1 month: 10% of the value less VAT,
Overdue receivables > 3 months: 50% of the value less VAT,
Overdue receivables > 4 months: 100% of the value less VAT.
Additionally, not overdue receivables falling due more than 90 days are
discounted.
Bad receivables are charged to cost when their irrecoverability is stated.
Receivables denominated in the foreign currencies are revaluated using the
average exchange rate of the National Bank of Poland as at the balance sheet
day.
Investments in securities
All investments are initially measured at the purchased value equal to fair
value of amounts paid less transaction costs. All standard transactions like
purchase and sale of financial assets are booked as at the purchase or sale
day.
After the initial measurement, the investments are classified as held for
trading, available for sale and measured at the fair value as at balance sheet
date.
If securities were classified as held for trading, gains and losses resulting
from the change of fair values are presented in the statement of comprehensive
income for a given period. In the case of available for sale assets, gains and
losses resulted from the change of their fair value affect directly the equity
till the sale of the assets or impairment identification. Then the accumulated
gains or losses, that previously affected the equity, are moved to the
statement of comprehensive income for the given period.
Bank borrowings
Interest-bearing bank loans (also overdrafts) are accounted at the amount of
received withdrawn less the direct costs incurred in connection with the
borrowing of founds.
Financial costs, including provisions paid at a moment of repayment or credit
write-off and direct costs of incurring the credit, are shown in the statement
of comprehensive income using the nominal interest rate method and they
increase the book value of a financial instrument with respect to payments made
in the current period.
Non-current liabilities in books are valuated at nominal value, i.e. including
default interest or valorisation of the payables - at the value regulated in
the agreement.
Trade liabilities and other liabilities
Liabilities denominated in foreign currencies are valuated at the average rate
of exchange applicable set by the National Bank of Poland as at the balance
sheet day.
Financial risk management
Business and financial activities of the Group are exposed to a number of
financial risks. If these risks were not managed, they could adversely impact
current and future results of the Group. The Group distinguishes the following
kinds of financial risks: market risk (interest rate risk and foreign currency
risk), credit risk, liquidity risk and capital risk.
The principles and procedures used by the Group are presented in "the financial
risk management policy" approved by the Management Board, in compliance with
the policy that is binding in the entire Mondi plc Group.
Based on powers of attorney granted by the Management Board, chosen specialists
from the Group contract hedge transactions. The risk identification, evaluation
and hedging in the Group is strictly supervised by the Group Finance Director
and Treasury Director of Mondi plc Group.
The main purpose of derivatives used by the Group is to hedge against financial
risks arising from the Company`s business operations. The Group`s instruments
include foreign currency forward contracts (in case of foreign currency risk
hedging).
The main risks arising from the Group`s operations are:
- Market risk
The Group`s activities are primarily exposed to interest rate risk and foreign
currency risk. Both risks are actively monitored on a continuous basis and may
be hedged by hedging (currency forward contracts and interest rate swaps).
Although cash flows of the Group are exposed to a risk for changes in prices of
key raw materials and finished products, such changes reflect rather economical
risk than financial. Therefore, the Group is of the opinion that it is not
significantly exposed to another price risk as specified in IFRS 7.
a) Foreign currency risk
Due to the fact that approximately 67% of sales transactions are performed in
foreign currency, while the most of the costs are borne in the reporting
currency, the Group is exposed to the currency exchange risk. The foreign
currency transactional exposure comprises mainly denominated transactions in
EUR, USD and GBP.
The Group may separately hedge future probable sales transactions and future
probable significant capital expenditures as well as resulting balance
exposure.
The forward contracts that hedge probable future sales transactions and
probable future significant capital expenditures are classified as the cash
flow hedging and hedging accounting rules are used for them. In accordance with
the Mondi Group Policy, in 2011 the Company did not hedge probable sales
(excluding CO2) transactions.
The hedge accounting rules are not used for forward contracts hedging the
balance exposure.
b) Interest rate risk
The Group`s exposure to the interest rate risk is primarily related to
financial liabilities on interest. According to Group`s policy, interest costs
may be managed through the use of fixed and variable interest rates as well as
interest rate hedging using instruments that replace variable rates with fixed
ones (interest rate swaps). However, as decided by the Management Board of the
Group, all available credit facilities as at the balance sheet date were based
on variable interest rate (WIBOR). Furthermore, in the reporting period the
Group did not use any interest rate hedging instruments.
- Credit risk
The Group contracts hedging and located deposits only in recognised,
creditworthy financial institutions. The list of such entities is up-dated on
an annual basis by the Director of the Treasury of the Mondi plc Group.
Credit risk related to receivables is significantly limited thanks to the fact
that the only trade receivables from exports include receivables from Mondi
Packaging Paper Sales GmbH - a distributor being a member of the Mondi plc
Group.
In turn, domestic receivables related to paper sales (excluding receivables in
relation to Polish entities of Mondi plc Group) are hedged. Customers that are
not members of Mondi plc Group are subject to the credit rating verification
procedure using reports from business intelligence agencies. Each limit has a
maximum credit limit and open receivables are monitored on a current basis in
the Group.
- Liquidity risk
The Group`s objective is to maintain flexibility of funding through the use of
bank credits and bank overdrafts. The Group`s policy is to reduce liquidity
risk through maintaining the floating assets provision which constitutes
minimum 5% of annual turn-over of the Group. The floating assets provision
comprises cash and cash equivalents, financial investments that can be
liquidated within 7 days and not used credit facilities.
The derivatives used by the Group are valued according to the fair value. The
fair value of currency forward contracts is determined in relation to the
current forward rates for the contracts with a similar effective date. The
value of contracts for changing interest rates is determined in relation to the
fair value of similar instruments.
In the case of cash flow hedge for the future probable sales contracts or
future probable significant capital expenditures that fulfil the criteria of
hedging accounting, a portion of the profit or loss on the hedging instrument
which is found to be an effective hedging is shown directly in the equity. The
portion that is found to be an ineffective hedge is shown in financial costs or
revenues of the current period. In the case of cash flow hedge for future
probable sales transactions hedging, profits or losses shown in the equity are
transferred to the profit and loss statement in the same period of time when
the hedged probable future sales contract impacts the financial result.
In the case of cash flow hedge for future probable significant capital
expenditures, profits or losses from the valuation are initially shown in the
equity. When the transaction is settled they will be referred to the statement
of financial position thus adjusting the investment project commenced or the
initial value of fixed assets.
Profits and losses resulting from changes in the fair values of the
transactions, for which the hedge accounting is not used, are directly shown in
financial incomes or costs of the current period.
The Group discontinues to use the hedge accounting rules when the hedging
instrument expired or was sold, completed or realised or when hedge does not
fulfill the conditions that allow using the hedging accounting rules for such
an instrument. In such a case, the total profit or loss on the hedging
instrument, which has been shown in the equity to date, is still shown in the
equity until the expected transaction is performed. If such a transaction is
unlikely to occur, then the total net profit or loss as shown in the equity is
transferred to the financial result of the current period.
Derivatives embedded in other financial instruments or contracts that are not
financial instruments are considered to be separate derivatives if the nature
of the embedded instrument and instrument related risks are not directly
related to the nature of the basic contract and contract resulting risks. If
the basic contracts are not valuated according to the fair value, the changes
to them are reflected in the statement of comprehensive income.
- Capital risk
The Group manages the capital to ensure that the Group`s companies will be able
to continue their business with maximising profitability for shareholders
thanks to optimisation of the debt to equity ratio. The Group`s capital
structure includes debt that comprises credits, cash and cash equivalents and
capital for parent company shareholders, including issued shares, reserve
capitals and retained profit.
Provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event, and when it is probable that due to fulfillment of such an
obligation the Group will be required to outflow the funds representing
economical benefits and if the amount of obligation may be reliably valued.
The value of the provisions is determined based on the estimations, excluding
the provisions for the retirement benefits to which the actuarial method is
applied.
Emission rights
Granted emission rights are shown off balance.
The Group creates provisions for pollution cost, when the amount of possessed
emission allowances does not cover the actual pollution emission. The provision
is calculated based on the current market price plus expected penalty fee and
is presented in the statement of comprehensive income.
Sale of excessive emission allowances is recognised in the financial period,
when the sale of the emission allowances was performed.
Net profit per share
The net profit per share for each period is calculated by dividing the net
profit for a specific period of time by the average weighted number of shares
in the reporting period.
The diluted profit per one share is calculated by dividing the net profit for a
specific period for Shareholders by the average weighted number of shares in a
specific period.
In the reporting period and in 2010 no factors occurred that would result in
profit dilution.
Conditional liabilities and receivables
Conditional liabilities mean the obligation to provide performance/ benefits
the occurrence of which depends on defined events. Conditional liabilities are
not shown in the statement of financial position; however, information on the
conditional liability is disclosed unless the likelihood of outflow of means
representing economic benefits is minor.
Conditional receivables are not shown in the statement of financial position;
however, information on the conditional receivables is disclosed if inflow of
means representing economic benefits is probable to occur.
Management Board estimation
Preparing the financial statements in accordance to IFRS requires some
assumptions and estimates to be made. They impact the amounts shown in the
financial statements and in the notes to the financial statements. Assumptions
and estimations are based on the best knowledge of the Management Board of
present and future events and actions; however, the actual results may differ
from the forecasted performance. The areas where the Management Board made
estimations are provisions. The assumptions used for estimation are described
in the accounting policy and relevant notes.
3. REVENUES FROM OPERATING ACTIVITIES
Revenues from sales are as follows:
Continued activities 2011 2010
PLN` 000 PLN` 000
Revenues from sales of products 2 725 784 2 251 013
Revenues from sales of goods and materials 45 938 12 661
2 771 722 2 263 674
Discontinued activities - -
Other revenues from operating activities 2 626 1 078
Total 2 774 348 2 264 752
Revenues from sales of products - by type
2011 2010
PLN` 000 PLN` 000
Products, including: 2 570 938 2 092 006
- Paper 2 556 955 2 080 952
- Others 13 983 11 054
Services 154 846 159 007
Net revenues from sales of products 2 725 784 2 251 013
Revenues from sales of products - by territorial structure
2011 2010
PLN` 000 PLN` 000
Domestic 948 873 813 816
Export 1 776 911 1 437 197
Net revenues from sales of products 2 725 784 2 251 013
Revenues from sales of goods and materials - by territorial structure
2011 2010
PLN` 000 PLN` 000
Domestic 4 652 2 248
Export 41 286 10 413
Net revenues from sales of goods and materials 45 938 12 661
Due to the fact that the Group`s activity, as far as types of goods and
products and geography sectors are concerned, is uniform; financial data
concerning business segments are not presented in the consolidated statements.
4. OPERATING COSTS
Profit on operating activities resulted excluding following costs:
2011 2010
PLN`000 PLN`000
Depreciation 153 084 157 324
Consumption of materials and energy 1 534 581 1 252 142
External services 446 215 374 943
Taxes and charges 27 184 25 793
- Excise 326 988
Payroll 76 176 69 885
Social security and other benefits 16 052 14 689
Other costs by type 75 045 48 343
Goods and materials sold 4 712 3 206
Exchange rates gains/losses net (1 637) (1 823)
2 331 412 1 944 502
Change in the balance of products (16 450) (12 796)
Manufacturing cost of products for internal - -
purposes
Selling and distribution costs (249 026) (222 242)
General and administrative costs (142 514) (113 653)
Manufacturing cost of products sold 1 923 422 1 595 811
Other operating costs (2 043) (2 322)
5. EMPLOYMENT COSTS
Below information presents average employment (including management):
2011 2010
Number of Number of
employees employees
Production employment 697 703
Administration and general employment 326 319
- Management 5 4
- Supervisory 3 3
Total employment 1 023 1 022
2011 2010
PLN`000 PLN`000
The Group`s employment costs are following:
Payroll 76 176 69 885
Social security and other benefits 12 288 11 303
Other employees benefits 3 764 3 385
Total 92 228 84 573
6. OTHER OPERATING REVENUES
2011 2010
PLN`000 PLN`000
Profit from liquidation of non-financial fixed 219 172
assets
Compensation 67 340
Other 2 340 566
Total 2 626 1 078
7. OTHER OPERATING COSTS
2011 2010
PLN`000 PLN`000
Loss due to disposal of non-financial fixed 1 026 2 207
assets
Donations 296 115
Other 721 -
Total 2 043 2 322
8. FINANCIAL REVENUES
2011 2010
PLN`000 PLN`000
Revenue from interest on bank loans 9 391 501
Revenue from other interest 227 337
Dividends 105 140
Valuation of forward currency contracts - 1 211
Positive differences on exchange 3 805 -
Other 101 5
Total 13 629 2 194
9. FINANCIAL EXPENSES
2011 2010
PLN`000 PLN`000
Interest costs - credits and loans 28 886 57 016
Other 192 254
Total of external costs of financing the 29 078 57 270
activity
Valuation of forward currency contracts (765) -
Costs on transactions of derivatives 21 581 2 410
Other - 10 967
Recalculation of last year`s valuation of 1 211 (1 383)
derivative instruments
Total 51 105 69 264
10. INCOME TAX
2011 2010
PLN`000 PLN`000
Income tax for the current year: 45 230 29 152
Corporate income tax for current year 45 123 29 189
Corporate income tax for last year 98 (37)
Tax on dividends 9 15
Deferred tax: (21 256) (14 794)
Total 23 974 14 373
Changes in assets and reserves due to deferred tax are presented in notes no.
19 and 24.
Corporate income tax was calculated by the rate of 19%.
Income tax calculation in the statement of comprehensive income in
correspondence with the financial result:
2011 2010
PLN`000 PLN`000
Gross profit (loss) 419 968 263 690
Differences between gross profit (loss) and the (182 426) (109 874)
taxable income
- Prepayments and accruals 11 480 10 315
- Receivables write-offs 324 (108)
- Depreciation of fixed assets under tax 524 524
allowance
- Costs that are not income costs applicable to 5 010 5 205
prior years
- Assets revaluation 5 489 2 880
- Valuation of financial instruments 446 (2 594)
- Difference between balance-sheet amortization 79 004 80 136
and tax amortization
- Valuation of property rights - certificates 17 521 (25 963)
of origin of green energy
- Provisions for discounts (2 197) 10 541
- Other fixed differences 6 275 5 185
- Other temporary differences (619) 2 229
- Income exempt from corporate income tax due (305 683) (198 336)
to running business activities in Special
Economic Zone
Income tax base 237 542 153 704
Income tax calculated by the rate 19% 45 132 29 204
Increases, allowances, deductions and decreases (9) (15)
of income tax
Income tax declared to the tax authorities 45 123 29 189
Corporate income tax for last year 98 (37)
Tax on dividends 9 15
Change in the status of assets and deferred tax (21 256) (14 794)
provision
Income tax shown in the profit and loss account 45 230 14 373
The table below shows the calculation of effective interest rate for corporate
income tax:
2011 2010
PLN`000 PLN`000
Gross profit (loss) 419 968 263 690
Corporate income tax calculated in 2010 and 79 794 50 101
2009 respectively according to interest rate of
19% in Poland
- Tax from fixed difference 2 153 1 956
- Costs that are not income costs applicable to 952 990
prior years
- Dividends received (26) (27)
- National Disabled Persons Rehabilitation Fund 161 146
contribution
- Representation 22 121
- Consumption 67 47
- Depreciation write-offs for cars 29 21
- Subsidies received (2) 170
- Donations 50 15
- Provision for environmental fees (259) 259
- Other 1 159 219
- Tax on dividends 9 15
- Corporate income tax for last year 98 (20)
Corporate income tax 82 054 52 057
Effective tax rate 19.54% 19.74%
Tax exemption due to running business (58 080) (37 684)
activities in Special Economic Zone
Corporate income tax after taking into account 23 974 14 373
the exempted income
Effective tax rate including the exempted tax 5.71% 5.45%
11. DIVIDENDS
The Parent company`s net profit for 2010 amounting to PLN 249 317 thousand was
wholly distributed to the supplementary capital.
The decision on distribution of net profit for 2011 will be taken by the
General Meeting of the Shareholders during the meeting held after the date of
preparation of these financial statements.
12. PROFIT PER SHARE
The calculation of the profit per share and of the diluted profit per share was
based on the following information:
Profits
2011 2010
PLN`000 PLN`000
Profit calculated as the base of value per 395 994 249 317
share
Profit per share 7.92 4.99
Number of shares issued
2011 2010
pieces in pieces in
thousand thousand
Weighted average number of shares to calculate 50 000 50 000
the value of profit per share
In the reporting period there were no financial instruments the Group that
would result in profit dilution.
13. OPERATING LEASE AGREEMENTS
The Group as a leaseholder
2011 2010
PLN`000 PLN`000
Operating leasing charges presented at the
current profit and loss account
75 023 60 690
The operating leasing is a lease of electric power and heat (steam) generating
fixed assets, including electric energy from renewable sources to Saturn
Management ("SM"). The signed contracts will remain in force till the year
2022.
The General Agreement signed with Polish Energy Partners (PEP - 100% SM
shareholder) provides that in the event specified conditions occur, each Party
shall be entitled to use the option to purchase or sell all rights and
obligations of PEP, being SM limited partner and to purchase 100% shares in
Saturn Management Sp. z o.o.
In current report no. 3/2011 as of 4 February 2011, the Management Board of the
Group notified about the intention of exercising the Voluntary Call Option
toward Saturn Management provided that the Arbitration Court of the Polish
Chamber of Commerce in Warsaw renders a favourable award for the Company in the
proceedings initiated by the suit brought by the Company against PEP
(information about the dispute is provided in Note no 31 of these financial
statements and Note no. 4.15 to the Report on Business Activities of the Group
for the year 2011).
As at the balance sheet date the current Group`s operating leasing liabilities
with the use of the discount rate of 4.99% and the EUR exchange rate of 4.4168
EUR/ PLN amounted to (by date of payment):
2011 2010
PLN`000 PLN`000
Leasing fees due to operating leasing up to one 79 642 68 993
year
from 2-5 years 312 579 306 657
above 5 years 93 067 93 695
Total 485 288 469 345
14. INTANGIBLE ASSETS
Intangible assets
PLN`000
GROSS VALUE
As at 31 December 2010 20 302
Increases 816
Decreases due to liquidation 250
As at 31 December 2011 20 868
DEPRECIATION
As at 31 December 2010 17 398
Depreciation for the year 2011 1 386
Decreases due to liquidation 250
As at 31 December 2011 18 534
NET VALUE
As at 31 December 2010 2 904
As at 31 December 2011 2 334
Patents, licenses and trademarks are depreciated by their useful life which is
approximately from 3 to 4 years.
* "Fixed assets under construction" include also advance payments for fixed
assets under construction.
As at the date of implementation of the IFRS standards the Group decided to use
IFRS 1 points 16-19 to valuation of fixed assets. The fixed assets are valued
at the fair-value and it is settled as the cost value from this moment. The
revaluation of fair-value was performed as at 1 January 2004.
In 2011, the net value of fixed assets was reviewed and no prerequisites were
found for executing the value loss test.
As at the balance sheet date, the Group did not hold any liabilities to acquire
fixed assets.
15. TANGIBLE ASSETS
Land, Fixed assets Machinery, Total
buildings under equipment
and construction* and other
structures fixed
assets
PLN`000 PLN`000 PLN`000 PLN`000
OPENING BALANCE OR
VALUATION
As at 31 December 2010 716 088 34 578 1 732 228 2 482 894
Increases due to 3 210 33 818 37 347 74 375
settlements of fixed
assets under
construction
Decreases 959 41 549 5 073 47 581
As at 31 December 2011 718 339 26 847 1 764 502 2 509 688
DEPRECIATION
As at 31 December 2010 82 204 - 692 251 774 455
Depreciation for the 22 429 - 129 236 151 665
year 2011
Decreases due to 892 - 4 323 5 215
liquidation and sales
As at 31 December 2011 103 741 - 817 164 920 905
NET VALUE
As at 31 December 2010 633 884 34 578 1 039 977 1 708 439
As at 31 December 2011 614 598 26 847 947 338 1 588 783
16. EMISSION RIGHTS
Pursuant to Article 57 item 2 and 3 of the Law of 22 December 2004 on
greenhouse gas and other substance emissions trading and pursuant to the
Regulation of the Council of Ministers of 1 July 2008 on adoption of the Carbon
Dioxide National Allocation Plan for 2008-2012 for the European Union Emission
Trading Scheme in the period of time from 1 January 2008 till 31 December 2012
Mondi Owiecie S.A. received emission allowances that is equivalent to CO2
emissions amount of 318 335 tonnes per year.
In January 2011, the additional allocation of allowances of 604 608 tonnes for
2009-2010 (additional CO2 emission allowance of 83 213 for 2009 and 83 213 for
2010 from the national reserve - due to modernisations and changes to the
plants completed in 2007-2008 and of 89 662 for 2009 and 348 520 for 2010 due
to paper machine erection - PM7) were booked on the Mondi Owiecie account.
CO2 emission allowances, the use, and surplus of allowances for the last two
years are presented in the table below:
Year Average annual Estimated use of Surplus (+)/
number of emission emission Deficiency (-)
allowances allowances
2010 750 068 365 582 384 486
2011 750 068 365 618 384 450
The 2011 annual report will be reviewed in the first quarter 2012.
17. INVESTMENTS IN ASSOCIATES VALUED WITH EQUITY METHOD
Associated entities
Name of the Location % of % at voting The value of Consolidation
associated ownership shares/stocks method
company
% % PLN`000
Polski Warsaw 24.88 24.88 1 126 Equity method
System
Recyklingu
-
Organizacja
Odzysku
S.A.
Name of the Equity Net Liabilities Assets Revenue from
related profit sales
company (loss)
PLN`000 PLN`000 PLN`000 PLN`000 PLN`000
Polski
System
Recyklingu 4 527 524 1 410 5 937 9 108
-
Organizacja
Odzysku
S.A.
18. OTHER FINANCIAL ASSETS
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Other financial assets 168 495
168 495
19. DEFERRED TAX ASSETS
Write-offs to Write-offs to Write-offs to
update the update update
shares` value receivables interests
Balance as at 1.01.2010 108 121 26
Increase - - 5
Decrease - 12 -
Balance as at 31.12.2010, 108 109 31
including:
Shown in the result for the - (12) 5
period
Shown in the equity - - -
Balance as at 1.01.2011 108 109 31
Increase - 70 -
Decrease - - 10
Balance as at 31.12.2011, 108 179 21
including:
Shown in the result for the - 70 (10)
period
Shown in the equity - - -
Prepayments Provisions Other
and accruals for discounts provisions
Balance as at 1.01.2010 6 481 998 391
Increase 1 904 2 002 473
Decrease - - -
Balance as at 31.12.2010, 8 385 3 000 864
including:
Shown in the result for the 1 904 2 002 473
period
Shown in the equity - - -
Balance as at 1.01.2011 8 385 3 000 864
Increase 2 181 - 285
Decrease - 417 -
Balance as at 31.12.2011, 10 566 2 583 1 149
including:
Shown in the result for the 2 181 (417) 285
period
Shown in the equity - - -
Valuation of Write-downs Total
forward of inventory
financial
instruments
Balance as at 1.01.2010 263 2 316 10 704
Increase - 535 4 919
Decrease 263 - 275
Balance as at 31.12.2010, - 2 851 15 348
including:
Shown in the result for the (263) 535 4 644
period
Shown in the equity - - -
Balance as at 1.01.2011 - 2 851 15 348
Increase - 1 035 3 571
Decrease - - 427
Balance as at 31.12.2011, - 3 886 18 492
including:
Shown in the result for the - 1 035 3 144
period
Shown in the equity - - -
The Group did not identify any interim differences that should be included in
deferred tax assets.
20. INVENTORY
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Materials 117 369 79 030
Semi-products and production in progress 24 616 16 491
Finished goods 95 474 86 334
by production costs 95 474 86 334
Certificates of ecological energy* 28 220 45 741
Total 265 679 227 596
*Certificates of origin of green energy were valuated according to fair value.
The fair value shall mean the market price for such assets at the right to
assets market reduced by costs of transaction.
Costs of materials consumption as recognized in the statement of comprehensive
income in the reporting period amounted to PLN 1 429 882 thousand.
Costs of consumption were increased by inventory write-offs amounting to PLN 3
516 thousand.
21. OTHER FINANCIAL ASSETS
Short-term receivables
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
1. Receivables from related parties 255 278 263 978
a) trade receivables, due less than 12 255 278 263 978
months
b) other - -
2. Receivables from other entities 105 068 75 025
a) trade receivables, due less than 12 59 434 37 856
months
b) due to taxes, subsidies, customs duties, 45 597 37 121
social security charges and other
obligations
c) other 37 48
Short-term trade receivables and other 360 346 339 003
receivables
Income tax 25 -
Net short-term receivables, total 360 371 339 003
Receivables write-offs 1 052 724
Gross short-term receivables, total 361 423 339 727
Average period of due dates for trade customers was 45 days. The Group
calculated the penalty interest after the due dates.
The Management Board assumes that the net receivables book value is close to
the fair-value of receivables.
Changes in receivables write-offs
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Receivables write-offs opening balance 724 1 146
Increase 658 388
- Creation of write-offs 658 388
Decrease 330 810
- Closing write-offs 260 384
- Use of write-offs (connecting receivables 70 426
and write-off)
Receivables write-offs closing balance 1 052 724
Foreign currency forward contracts
Although all forward contracts have been bought by the Group to hedge against
foreign exchange risk, the Group does not apply hedge accounting, required by
IAS 39, to all transactions. Hedge accounting principles do not apply to fair
value hedge (non-hedge) for assets and liabilities denominated in foreign
currency.
Hedge accounting principles are applied to some transactions qualified as
hedging transactions according to IAS 39. These transactions are used by the
Group to hedge cash flow arising from confirmed planned sales transactions in
foreign currency.
Details of marketable contracts are presented below ("cash flow hedge" and "non-
hedge"):
Balance as at Balance at
31.12.2011 31.12.2010
PLN`000 PLN`000
Forward contracts (positive valuation) 2 130 1 410
Forward contracts (negative valuation) (1 365) (199)
Total 765 1 211
The fair-value of foreign currency derivatives owned by the Group amounts
approximately to PLN 1 211 thousand /2010: PLN 765 thousand/ as at 31 December
2011. The value has been estimated based on the marketable value of similar
financial instruments valued as at the balance sheet date.
As at 31 December 2011, the Group did not hold any open currency forward
contracts to hedge future sales transactions or future significant capital
expenditures.
The table below presents fair values and settlement dates as well as
information on amounts used as a basis for calculation of future payments and
realisation price of forward contracts hedging the change of balance sheet
measurement of assets and liabilities denominated in foreign currencies (non-
hedge).
Nr Contract Contract value in Bid/Offer Date of
currency foreign currency beginning
1 EUR 5 000 000 Bid 2011-11-17
2 EUR 5 000 000 Bid 2011-11-23
3 EUR 6 000 000 Bid 2011-12-07
4 EUR 1 800 000 Bid 2011-12-14
5 USD 250 000 Bid 2011-12-14
6 EUR 3 000 000 Bid 2011-12-14
7 USD 2 000 000 Bid 2011-12-14
8 EUR 1 200 000 Bid 2011-12-19
9 EUR 3 000 000 Bid 2011-12-19
10 USD 1 000 000 Bid 2011-12-19
Nr Date of Forward exchange Contract fair
completion rate for contract value in
PLN
1 2012-01-25 4,4555 142
2 2012-01-25 4,4978 354
3 2012-01-25 4,4886 369
4 2012-01-25 4,5835 281
5 2012-01-25 3,5212 24
6 2012-02-24 4,5948 460
7 2012-02-24 3,5376 157
8 2012-02-24 4,5187 92
9 2012-02-24 4,5152 220
10 2012-02-24 3,4664 31
Total 2 130
Nr Contract Contract value in Bid/Offer Date of
currency foreign currency beginning
1 USD 1 500 000 Bid 2011-11-23
2 EUR 1 500 000 Bid 2011-12-07
3 USD 650 000 Bid 2011-12-21
4 EUR 800 000 Bid 2011-12-27
5 USD 1 000 000 Bid 2011-12-27
6 EUR 4 484 200 Offer 2011-12-14
7 EUR 13 125 000 Offer 2011-12-21
Nr Date of Forward exchange Contract fair
completion rate for contract value in
PLN
1 2012-01-25 3,3548 -104
2 2012-01-25 3,3545 -106
3 2012-01-25 3,4042 -13
4 2012-01-25 4,4219 -4
5 2012-01-25 3,3826 -42
6 2012-01-25 4,5792 -680
7 2012-01-25 4,4587 -416
Total -1 365
The following risks are related to currency forward contracts: interest rate
risk, exchange rate risk and risk of insolvency of the other party to a
transaction. However, credit risk is limited due to the fact that the other
party to the transaction is usually a first class bank. In addition, in order
to minimize risk concentration, the transaction portfolio is diversified.
Result on "cash flow hedge"
"cash flow hedge"
2011 2010
Valuation of transactions shown in opening
balance of equity: *
- currency sales transactions ("Bid") - -
- currency purchase transactions ("Offer") - -
Profit on purchase transactions ("Offer") - -
adjusting the value of investment began in
the balance sheet
Profit (loss) on sales transactions ("Bid") 379 110
/("Offer") increasing(decreasing) revenues
from sales in the income statement
Valuation of transactions in the closing
balance of equity:
- currency sales transactions ("Bid") - -
- currency purchase transactions ("Offer") - -
Fair values of open hedges are valued at the balance sheet date based on their
valuations from banks with that such hedge was contracted.
As per the reporting date, there are no planned hedges to which hedge
accounting was earlier applied; however they are not expected to be realised.
Cash, cash equivalents and bank deposits
Cash at bank, cash and cash equivalents comprise of cash on current bank
accounts and bank deposits with their maturity of up to 3 months. A book value
of such assets is equal to their fair value.
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Cash in hand and at bank 50 5 839
Other short-term financial assets 489 283 17 464
Total 489 333 23 303
The balance of short-term deposits as at 31 December 2011 comprised deposits at
Mondi Finance plc for the total amount of PLN 488 940 thousand with the
maturity dates from 3 January to 26 January 2012. The balance of deposits was
increased with the interests charged for December 2011 of PLN 323 thousand. The
average interest rate for the opened short-term deposits was 5.52%.
Financial assets available for sale
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Shares at non-public companies 175 175
Total 175 175
Credit risk
Main financial assets held by Mondi Swiecie Group: cash on bank accounts, short-
term deposit, trade receivables and other receivables, representing the maximum
credit risk of the Group due to financial assets.
Amounts presented in the statement of financial position are net amounts
decreased by revaluation write-offs, estimated by the Company`s management
based on past experience and assessment of current economic conditions.
Credit risk related to liquid financial assets and derivative instruments is
limited due to the fact that the other party to the transaction is represented
by banks of high credit rating assigned by international rating agencies.
Credit risk related to receivables is limited due to the fact that a
distribution company of Mondi group is the major customer dealing with export
sales. Further, domestic receivables from customers that are not members of
Mondi are insured. The value of trade receivables insured amounted to PLN 24.5
million as per 31 December 2011.
In the opinion of the Management Board of the Group, the maximum amount exposed
to the credit risk as per 31 December 2011 amounts to PLN 3.5 million and
applies to trade receivables in relation to non-related entities that are not
covered by the receivables insurance.
Security
In accordance with current report no. 4/2011 as of 11 February 2011, the
Company signed a new Three-Year Guarantee Facility Agreement that covers the
nine-year credit from the European Investment Bank.
At the time the afore-said Facility Agreement became effective, the existing
Three-Year Guarantee Facility Agreement as of 30 June 2008 (annexed on 30
October 2009, 30 June 2010 and 30 September 2010) was terminated. As a
consequence of the above changes, the security of the bank guarantee comprising
the corporate guarantee that was issued by Mondi Group plc, a major shareholder
of the Company, for the benefit of financing banks expired. The Corporate
Guarantee Agreement entered into and between the Company and Mondi plc was
terminated accordingly.
Overdue financial assets
As per the reporting date, the Group owned neither overdue financial assets nor
items for which the loss of value has been recognised.
22. BANK CREDITS AND LOANS
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Debt under the cash pooling agreement to - 19 302
related companies
Overdrafts 990 -
Long-term bank credits 418 247 472 617
Loans - 25 000
Total 419 237 516 919
Maturity:
Payable on demand or less than 1 year 77 707 100 553
More than 12 months - up to 2 years 75 896 75 360
Between 3 - 5 years 227 686 227 017
More than 5 years 37 948 113 989
Minus: due amounts in 12 months 77 707 100 553
(presented at short-term payables)
Amounts due more than 12 months 341 530 416 366
Bank credits and loans by currency:
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Debt under the cash pooling agreement to - 19 302
related companies
Overdrafts 990 -
Bank credits 418 247 472 617
Loans - 25 000
419 237 516 919
As at the balance sheet date, the Company owned neither credits nor loans
denominated in foreign currencies.
Weighted average interest on bank credits and loans of Mondi Swiecie Group:
Balance as at Balance as at
31.12.2011 31.12.2010
% %
Overdrafts, bank credits and loans 5.48 8.31
Valuation of the balance value of credits and loans drawn by Mondi Swiecie
Group
The interest on current account credits is classified as floating rate. The
value of flows related to such credits may change depending on interest rates.
The remaining credits are launched based on fixed interest tranches for a
specific drawing period.
As of 31 December 2011, the Group valued the credit from the European
Investment Bank at the nominal value (increased by the reserve for interests)
to be PLN 418 247 thousand (including charged interests of PLN 822 thousand).
As of 31 December 2011, the Group had unused credit facilities of PLN 259
million.
In the reporting period, no events took place that resulted in the Group`s non-
performance of loan liabilities. Furthermore, no violations took place in the
period till the date of the financial statements approval.
BANK Currency % + bank`s margin Balance as at
31.12.2011
Debt under the cash PLN WIBID -
pooling agreement to
associated companies
Overdraft facility in PLN WIBOR 990
RBS Bank (Polska) S.A.
BANK PEKAO S.A.
RAIFFEISEN BANK POLSKA
S.A.
Mondi Finance plc PLN WIBOR -
European Investment PLN WIBOR 418 247
Bank
Total 419 237
BANK Balance as at Due dates
31.12.2010
Debt under the cash 19 098 The agreement was
pooling agreement to terminated in 2011.
associated companies
Overdraft facility in - 2010-09-30
RBS Bank (Polska) S.A.
BANK PEKAO S.A.
RAIFFEISEN BANK POLSKA
S.A.
Mondi Finance plc 25 000 2011-11-01
European Investment 472 617 2017-06-30
Bank
Total 516 715
23. FINANCIAL INSTRUMENTS
Evaluation of exchange risk and interest rates
For risk assessment purposes, the analysis of impacts of interest rates and
changes in exchange rates of foreign currencies on the statement of
comprehensive income and equity (revaluation reserve) was presented. The
analysis covers financial components of the Group`s balance sheet (table
below).
Comments on methodology and assumptions
The Group owns assets and liabilities nominated in foreign currencies.
The present significant variability of exchange rates as well as market
expectations and forecasts indicate that fluctuations of +/- 10% in PLN
exchange rate to foreign currencies and a change of interest rate by +/-50 pb
is possible.
Balance Interest rate risk
sheet value
+/-50 pb SP PLN/EUR
Profit/(Loss) Profit/(Loss)
Financial assets
Cash and cash 489 333 2 447 (2 447)
equivalents
Trade receivables and 360 346 - -
other receivables
Derivatives classified 2 130 - -
for valuation in the
fair value by the
profit and loss account
Derivatives to remain - - -
in hedging
Financial assets 516 - -
available for sale
Other financial assets 168 1 (1)
Impact on financial - 2 448 (2 448)
assets before taxation
Tax (19%) - (465) 465
Impact on financial - 1 983 (1 983)
assets after taxation
Financial liabilities
Credits and loans (419 237) (2 096) 2 096
Trade liabilities and (418 514) - -
other liabilities
Derivatives classified (1 365) - -
for valuation in the
fair value by the
profit and loss account
Derivatives to remain - - -
in hedging
Impact on financial - (2 096) 2 096
liabilities before
taxation
Tax (19%) - 398 (398)
Impact on financial - (1 698) 1 698
liabilities after
taxation
Total - 285 285
Exchange risk
+10% (PLN strengthening) -10% (PLN weakening)
Profit/ (Loss) Changes in Profit/ Changes in
equity (Loss) equity
Financial assets
Cash and cash (3) - 3 -
equivalents
Trade receivables and (22 844) - 22 844 -
other receivables
Derivatives classified 13 877 - 4 569 -
for valuation in the
fair value by the
profit and loss account
Derivatives to remain - - - -
in hedging
Financial assets - - - -
available for sale
Other financial assets - - - -
Impact on financial (8 970) - 27 416 -
assets before taxation
Tax (19%) 1 704 - (5 209) -
Impact on financial (7 266) - 22 207 -
assets after taxation
Financial liabilities
Credits and loans - - - -
Trade liabilities and 16 420 - (16 420) -
other liabilities
Derivatives classified (7 527) - (10 920) -
for valuation in the
fair value by the
profit and loss account
Derivatives to remain - - - -
in hedging
Impact on financial 8 893 - (27 340) -
liabilities before
taxation
Tax (19%) (1 689) - 5 195 -
Impact on financial 7 204 - (22 145) -
liabilities after
taxation
Total (62) - 62 -
Interest rate risk
As at 31 December 2011 the Group`s net profit would increase by PLN 285
thousand if interest rates in PLN and EUR were higher by 50 base points,
assuming that all other parameters remained unchanged. This is due to the fact
that loans significantly exceed financial assets (cash and cash equivalents)
owned. Loans are nominated primarily in PLN, so the impact of Polish interest
rates is a determining factor.
Exchange rate risk
As at 31 December 2011 the Group`s net profit would be lower by PLN 62 thousand
if PLN strengthened by 10% in relation to foreign currencies (mainly EUR) and
other factors remained unchanged. Such a minor influence (when compared to the
Group`s overall business) is related to our consistent hedging policy - losses
caused by lower valuation of receivables would be compensated by valuation of
forward transactions and liabilities nominated in foreign currencies and being
a component of the balance sheet.
Management of foreign currency risk
The Group performs defined transactions nominated in foreign currencies
(approx. 65% of total revenues from sales are in EUR and USD). For this reason,
there is a risk of fluctuations in exchange rates for the above-mentioned
currencies. The management of foreign currency risk is effected according to
the Mondi Group Rules, using foreign currency forward contracts.
The balance value of the Group`s forward contracts as well credits and deposits
denominated in foreign currencies as per the balance sheet date is as follows:
Liabilities
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
EUR Forward transaction 1 206 154
Loans and deposits - -
Total 1 206 154
GBP Forward transactions - -
Loans and deposits - -
Total - -
USD Forward transactions 159 45
Loans and deposits - -
Total 159 45
Assets
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000
EUR Forward transaction 1 917 1 046
Loans and deposits 5 2
Total 1 922 1 048
GBP Forward transactions - -
Loans and deposits 10 -
Total 10 -
USD Forward transactions 213 364
Loans and deposits 14 -
Total 227 364
Liquidity of foreign currency instruments
The table below shows the volumes of all transactions in foreign currencies
owned by the Group in maturity dates. The figures are shown in currencies of
forward contracts. These are total amounts (excluding "bid/ offer" of the
contract).
Forward contracts below 1 month 1-3 months 3-6 months 6 months -
1 year
In thou. EUR 37 709 7 200 - -
In thou. USD 3 400 3 000 - -
In thou. GBP - - - -
Balance foreign currency exposure
The tables below show the levels of receivables and liabilities as of the
balance sheet date structured by their maturity dates. The statement covers
only the values nominated in EUR and USD and GBP, because only these have an
actual impact on the Group`s risk.
Receivables in below 1 month 1-3 months 3-6 months 6 months -
foreign currencies 1 year
In thou. EUR 29 969 15 980 - -
In thou. USD 4 242 3 144 - -
In thou. GBP 47 - - -
Liabilities in below 1 month 1-3 months 3-6 months 6 months -
foreign currencies 1 year
In thou. EUR 29 962 3 856 158 178
In thou. USD 1 948 - - -
In thou. GBP 2 - - -
In thou. CHF 9 - - -
In thou. SEK 2 - - -
Financial instruments by categories (balance values)
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Financial assets valued at the fair values 2 130 1 410
through financial results:
- For trade, of which: 2 130 1 410
- positive value of derivatives to which 2 130 1 410
hedge accounting was not applied
- other financial assets valued at fair - -
value
Positive value of derivatives to which hedge - -
accounting is applied
Financial assets available for sale (shares 516 516
and stocks not listed at the stock exchange)
Financial investments maintained until 168 495
maturity
Receivables 360 371 339 003
Cash and cash equivalents 489 333 23 303
Financial liabilities valued at fair value 1 365 199
through financial result
- For trade, of which: 1 365 199
- negative value of derivatives to which 1 365 199
hedge accounting was not applied
Negative value of derivatives to which hedge - -
accounting is applied
Financial liabilities (credit and loans) 419 237 516 919
The presented values of financial instruments do not differ or differ
insignificantly from their fair values. Therefore, the values presented above
may be deemed to be equal to fair values.
Revenues, costs, profits and losses as presented in the statement of
comprehensive income by categories of financial instruments
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Financial assets valued at fair value - -
through financial result
Financial assets available for sale - -
Financial investment maintained until - -
maturity
Receivables 1 700 (418)
- Receivables write-offs 368 (54)
- Currency valuation 1 332 (364)
Positive value of derivatives 720 392
Financial liabilities valued at depreciated (647) (988)
cost
Negative value of derivatives (1 165) 2 202
Total 608 1 188
FINANCIAL DERIVATIVES - HEDGING
As at 31 December 2010, the Group did not hold any foreign currency forward
contracts to hedge future sales transactions ("Bid") and future significant
capital expenditures ("Offer"), for which the Company would apply the hedge
accounting (cash flow hedge).
24. DEFERRED TAX PROVISION
Investment Unpaid Valuation Differences in
tax credit interests of forward fixed assets
on financial value acc. to
liabilities instruments IFRS and tax
value
Balance as at 1 262 88 - 61 951
1.01.2010
Increase - 5 230 -
Decrease 100 - - 15 225
Balance as at 1 162 93 230 46 726
31.12.2010,
including:
Shown in the result (100) 5 230 (15 225)
for the period
Shown in the equity - - - -
Balance as at 1 262 88 230 46 726
1.01.2011
Increase - 5 - -
Decrease 100 - 85 15 011
Balance as at 1 162 93 145 31 715
31.12.2011,
including:
Shown in the result (100) 5 (85) (15 011)
for the period
Shown in the equity - - - -
Valuation of Valuation of Other Total
property associated
rights - companies using
certificates the equity
of origin of method
green energy
Balance as at 3 758 133 - 67 192
1.01.2010
Increase 4 933 6 - 5 174
Decrease - - - 15 325
Balance as at 8 691 139 - 57 041
31.12.2010,
including:
Shown in the result 4 933 6 - (10 151)
for the period
Shown in the equity - - - -
Balance as at 8 691 139 - 57 041
1.01.2011
Increase - 19 401 420
Decrease 3 328 - - 18 532
Balance as at 5 363 158 401 38 929
31.12.2011,
including:
Shown in the result (3 328) 19 401 (18 112)
for the period
Shown in the equity - - - -
The Group has not identified any temporary differences that should be included
in the deferred tax provision.
25. LIABILITIES
The balance of trade liabilities and other liabilities is primarily composed
of: investment liabilities, trade liabilities and other current liabilities as
well as accruals for trade discounts and commissions, social security and
ecological energy deliveries. The average rotation period of trade liabilities
is 87 days.
In the Management Board`s opinion the book value of financial liabilities is
similar to its fair-value.
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Trade liabilities with payment term of up 311 020 186 732
to 12 months
Accruals 63 691 56 413
Investment liabilities 29 968 34 405
Taxes, subsidies, customs duties, social 10 359 10 859
and health insurance and other benefits
excluding corporate income tax
Remuneration liabilities 3 991 3 391
Other 85 104
Trade liabilities and other liabilities 418 514 291 904
26. REMUNERATION IN THE GROUP`S CAPITAL INSTRUMENTS
Other capital instrument payment programmes
In 2007, following the demerger, the Mondi Group established the new bonus
programme (Mondi Bonus Share Plan- BSP and Mondi Long Term Incentive Plan -
MLTIP) for selected Mondi Group employees, including Mondi Swiecie S.A.
Management Board Members. Under such programmes, employees are granted bonus -
shares. The bonus amount depends on performance by the Group and individual
objectives (BS). In addition, for ensuring a continuous Group growth additional
shares are given, that may be cashed after specified conditions, in particular
those related to the EPS growth over next 3 years after their receipt are
fulfilled (MLTIP).
In connection to the above-mentioned programmes, the amount of PLN 691 thousand
was charged to Mondi Swiecie S.A. in 2011. In case the right to shares expires
or is lost by individual members of the programme, Mondi Swiecie S.A. will be
entitled to have the costs incurred reimbursed partially or wholly. Once the
right to have shares available is received, the relevant income will be
separately shown for each Member of the Management Board.
27. PROVISIONS
Personal Restructurisation Total
provisions provision
PLN`000 PLN`000 PLN`000
Balance as at 31 December 2010 15 900 136 16 036
Increases 965 - 965
Decreases - -
Balance as at 31 December 2011 16 865 136 17 001
Provisions less than 1 year 12 874 136 13 010
Provisions over 1 year 3 991 - 3 991
Personal provisions
Personal provisions comprise disability and retirement allowances of PLN 4 512
thousand and provisions for salaries and bonuses of PLN 10 827 thousand, as
well as provisions for equivalent payment for not taken vacation of PLN 1 526
thousand.
Provision for disability and retirement allowances was calculated by the
actuary based on the Company`s Collective Labour Agreement for the Group`s
employees and in matters not regulated by the Agreement, the Labour Code
applies.
Assumptions regarding death and illness rates were based on the Central
Statistical Office publications (death data PTTZ 2010, Statistical yearbook and
other publications on status and changes to employment in the economy). The
following assumptions were made: the future increase in salaries and wages of
3.0%, average inflation rate of 2.5%, and the discount rate for future
liabilities of 5.75%.
28. EQUITY
The equity is established in accordance with the law, adequate acts and the
statute. The equity consists of: share capital, supplementary capital,
revaluation reserve and undistributed profits.
Share capital
The authorised share capital is presented in the amount of statute settlements
and court registration in face value.
SHARE CAPITAL 1 share value = PLN 1
Series/issuance Type of Type of prefe- Type of No. of shares
of shares shares rences limitations
A bearer 50 000 000
Total no. of 50 000 000
shares
SHARE CAPITAL
SHARE CAPITAL 1 share value = PLN 1
Series/issuance Value of Capital Registration Right to the
of shares series/issue coverage date dividend (after
based on method the date)
nominal
value
A 50 000 000 Transformation 8.04.1997 After the year
from state 1997
entity
Total no. of
shares
SHARE CAPITAL 50 000 000
All shares issued by the parent company are ordinary shares with no preference
as to the participation in profit distribution.
Pursuant to clause 25 of IAS 29 "Financial reporting in hyperinflationary
economies", equity components (except for undivided profit from previous years
and surplus due to asset revaluation) were restated based on general price
index starting from the equity contribution date, while the economy was
hyperinflationary. The revaluation was made as per the day when the Company
started to use the International Financial Reporting Standards, i.e. 1 January
2004.
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Share capital:
- authorised share capital 50 000 50 000
- hyperinflation adjustment 283 734 283 734
Total 333 734 333 734
Supplementary capital
The supplementary capital is cumulated from distribution of profits in
accordance with regulations.
Balance as at Balance as at
31.12.2011 31.12.2010
PLN`000 PLN`000
Established by law 16 667 16 667
Established by the statute, over the law 1 082 153 831 981
(minimum) value
1 098 820 848 648
29. EXPLANATORY NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
2011 2010
PLN`000 PLN`000
Balance sheet amortisation 153 118 157 360
Amortisation not planned - -
Amortisation 153 118 157 360
Balance sheet`s change of short-term 105 920 58 547
liabilities
Elimination of the change of the balance of 5 053 62 504
investments liabilities
Change in income tax liabilities 149 164
Change of the balance of credits and loans 22 846 (67 564)
Valuation of forward contracts as at (1 165) 2 202
balance sheet date
Unrealised differences on exchange related 749 2 497
to investment activities
Interest charged on credit activated for - -
fixed assets under construction
Interest charged on long-term credits - -
Change of the balance of short-term (1 038) (7 395)
provisions
Change of the balance of short-term 132 514 50 955
liabilities
Balance sheet`s change of receivables (21 343) (104 368)
Compensation of receivables due to income (45 302) (29 112)
tax
Change in receivables related to financial (89) (178)
activities
Change in receivables related to investment 12 1
activities
Change of the balance of receivables (66 722) (133 657)
Change of the balance of short-term 1 037 7 396
provisions
Change of the balance of long-term (73) 252
provisions
Change of the balance of provisions 964 7 648
Differences on exchange related to (529) (1 801)
investment activities
Valuation of cash - 549
Non-realised exchange rate gains on credits - (1 414)
and loans
Exchange rate gains/losses/ (529) (2 666)
Dividends and shares in profits 105 140
Credits interest 23 964 20
Interest on loans granted 5 53
Interest on investment activities 37 53 452
Other interest (92) -
Interest and shares in profits 24 019 53 665
Profit on sales of fixed assets (178) 415
Profit on sales of investments 20 978 5 255
Net value of liquidated intangible and 816 1 168
tangible assets
Profit/loss/on investment activity 21 616 6 838
Valuation of forward contracts as at 436 (2 609)
balance sheet date
Commission on overdraft credit - -
Other adjustments 436 (2 609)
Information on inflows and outflows of investment activities
2011 2010
PLN`000 PLN`000
Exchange rates gains - hedging 22 460 24 670
Interest 37 52
Other investment inflows 22 497 24 722
Outflows for fixed assets purchase 33 719 46 227
Change of the balance of investment 5 053 62 504
liabilities
Interest - -
Realised differences on exchange related to 219 696
investment activities
Outflows on intangible and tangible fixed 38 991 109 427
assets
Exchange rates losses - hedging 43 438 29 924
Other investment outflows 43 438 29 924
Information on the structure of a change in cash
2011 2010
PLN`000 PLN`000
Balance sheet`s change in cash 483 474 1 725
Change in other short-term financial assets (17 443) (8 907)
Change in overdraft liabilities - 112
Change in cash 466 031 (7 070)
Information on cash structure
2011 2010
PLN`000 PLN`000
Cash 70 5 839
Other short-term financial assets 489 263 17 464
Overdraft credit liabilities - 10
Cash at the end of the period 489 333 23 313
30. CONTINGENT LIABILITIES
Contingent liabilities as at 31 December 2011 accounted for PLN 17 780
thousand. A guarantee facility was granted as a security for liabilities of
Saturn Management z ograniczon1 odpowiedzialnooci1 i Wspolnicy, Spo3ka
Komandytowa for the benefit of BRE Bank S.A. and Bank Polska Kasa Opieki S.A.
31. POST BALANCE SHEET EVENTS
On 13 February 2012 the Company received a favourable ruling from the
Arbitration Court of the Polish Chamber of Commerce, dated 10 February 2012,
that the offer for sales of 100% shares of Saturn Management Sp. z o.o. with
its registered office in Warsaw and of all rights and obligations of PEP as a
limited partner in SM sp.k., which was submitted by PEP on 29 April 2002 in
execution of the General Agreement, is binding for PEP on conditions laid down
in the Company`s suit that is the sales price is to be fixed on the formula
provided in the General Agreement. Consequently, PEP`s counter-claim was
dismissed by the court. The court decision is final, however it may be appealed
in the civil court, based on the Civil Procedure Code. The decision fulfils one
of the conditions for realization of the Voluntary Call Option of 100% shares
of Saturn Management Sp. z o.o. with its registered office in Warsaw and of all
rights and obligations of PEP as a limited partner in SM sp.k., on which the
Management Board informed in its current report issued 4 February 2011.
32. FINANCIAL INFORMATION COMPARABILITY
The Group did not make any changes to the presentation of figures.
33. TRANSACTIONS WITH RELATED PARTIES
The structure of the Capital Group is presented in General Information.
Transactions concluded between the parent company and its subsidiary were
eliminated at the moment of consolidation and are not presented in this note.
Transactions concluded between the Group and associates are shown below.
Revenues Costs Liabilities Receivables
to related from related
parties parties
2011 2010 2011 2010 2011 2010 2011 2010
PLN`000
Associated
entities
Polski System - - 16 16 - - - -
Recyklingu -
Organizacja
Odzysku S.A.
Transactions with related companies in the Mondi Group (in PLN thousand)
Revenues Costs Liabilities Receivables
Mondi Packaging Paper 1 745 357 - - 223 908
Sales GmbH
Mondi Corrugated Swiecie 93 039 106 056 - 10 231
Sp. z o.o.
Mondi Warszawa Sp. z 75 918 - - 6 167
o.o.
Mondi BZWP Sp. z o.o. 45 113 - - 4 094
Mondi Packaging Szczecin 44 097 - - 4 907
S.A.
Mondi plc 39 425 3 574 - -
Mondi Dorohusk Sp. z 31 525 - - 2 636
o.o.
Mondi Bags Swiecie Sp. z 29 900 - - 4 555
o.o.
Mondi Bags Mielec Sp. z 14 028 - - 29
o.o.
Mondi Wierzbica Sp. z o. 7 167 - - 537
o.
Slovwood Ruzomberok, 1 349 - - -
a.s.
Mondi AG 468 83 337 78 573 180
Mondi Coating GmbH 259 - - 47
Mondi Packaging Solec 33 - - 10
Sp. z o. o
Mondi Coating Steti A.S. 17 30 - -
Mondi Uncoated Fine & 15 4 325 946 -
Kraft Paper GmbH
Mondi Corrugated 10 8 094 - -
Services GmbH
Mondi Gruenburg GmbH 10 - - -
Total 2 127 730 205 416 79 519 257 301
The above amounts do not include exchange differences.
Transactions with related parties are based on market value prices less
quantity bonuses.
34. MANAGEMENT BOARD AND SUPERVISORY BOARD REMUNERATION
Management Board Employment period Remuneration Bonuses
paid or due depending on
for the realisation
employment of expected
position duties
Maciej Kunda 01.01-31.12.11 983 339
Jan Zukowski 01.01-31.12.11 743 202
Florian Stockert 01.01-31.12.10 545 193
Tomasz Katewicz 01.01-31.12.11 743 209
Boguslaw Bielecki 01.01-31.01.11 480 60
Management Board Remuneration gained from Benefits, Total
subsidiaries and income from remuneration
associated companies other sources in 2011
Maciej Kunda - - 1 322
Jan Zukowski - - 945
Florian Stockert - - 738
Tomasz Katewicz - - 952
Boguslaw Bielecki - - 540
The table presents the remuneration paid in 2011 for months from January to
December and bonuses for the year 2009 paid in 2011.
Supervisory Board Employment period Remuneration Bonuses
paid or due depending on
for the realisation
employment of expected
position duties
Karol Mergler 01.01-31.12.11 49 30
Ryszard Gackowski 01.01-31.12.11 49 7
Jaroslaw Kurznik 01.01-31.12.11 49 7
Supervisory Board Remuneration from Total remuneration in
employment contracts 2010
Karol Mergler 115 194
Ryszard Gackowski 105 161
Jaros3aw Kurznik 87 143
No remuneration is paid to other Supervisory Board Members.
The table presents the remuneration paid in 2011 for months from January to
December and bonuses for the year 2010 paid in 2011.
Management Board Transactions
In the reporting period, no loans or credits were granted or other transactions
entered into with the Management Board Members (and other managerial staff).
35. REMUNERATION OF AN AUDITOR OR ENTITY AUTHORISED TO AUDIT FINANCIAL
STATEMENTS PAID OR DUE FOR THE FISCAL YEAR
2011 2010
PLN`000 PLN`000
Audit of financial statements 521 544
Tax consulting - -
Other services - -
Total 521 544
The consolidated financial statements consist of:
1. Statement of comprehensive income, page 3-4
2. Statement of financial position, page 5
3. Statement of changes in equity, page 6
4. Statement of cash flows, page 7-8
5. Explanatory notes to the financial statements, page 9-48
The consolidated financial statements were accepted by the Company`s Management
Board on 13 February 2012.
President of the Board Maciej Kunda
Member of the Board Jan Zukowski
Member of the Board Florian Stockert
Member of the Board Tomasz Katewicz
Member of the Board Boguslaw Bielecki
The person who has been assigned to keep the accounts.
Teresa Czurylo
Swiecie
16 February 2012
Sponsor: UBS South Africa (Pty) Ltd
Date: 16/02/2012 10:40:02 Produced by the JSE SENS Department.
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