| Thu 23 Feb 2012, 8:54 | | MND/MNP - Mondi Limited/ Mondi plc - Full year results for the year ended 31 |
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MND MNP
MND MNP
MND/MNP - Mondi Limited/ Mondi plc - Full year results for the year ended 31
December 2011
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)
(Registered number: 6209386)
JSE share code: MNP ISIN: GB00B1CRLC47
LSE share code: MNDI
As part of the dual listed company structure, Mondi Limited and Mondi plc
(together `Mondi Group`) notify both the JSE Limited and the London Stock
Exchange of matters required to be disclosed under the Listings Requirements
of the JSE and/or the Disclosure and Transparency and Listing Rules of the
United Kingdom Listing Authority.
Full year results for the year ended 31 December 2011
Highlights
- Record financial performance
- underlying operating profit up 36%;
- earnings per share - alternative measure up 57%; and
- return on capital employed of 15%, significantly in excess of through the
cycle target of 13%.
- Excellent cash generation
- net debt down 39% to EUR831 million; and
- free cash flow of 72 euro cents per share, up 72%.
- Significant contribution from Syktyvkar modernisation project
- Successful demerger of Mpact, further focusing Group strategic priorities
- Investment grade credit ratings from Standard & Poors` and Moody`s Investors
Service
- Proposed full year dividend of 26.0 euro cents per share, up 30%
Financial Summary
Year ended Year ended 31
31 December December
2011 2010 1 Change %
EUR million, except for percentages
and per share measures
From continuing operations
Group revenue 5,739 5,610 2.3
Underlying EBITDA2 964 798 20.8
Underlying operating profit2 622 458 35.8
Underlying profit before tax2 512 354 44.6
Operating profit 568 462 22.9
Profit before tax 457 333 37.2
Per share measures
Basic earnings per share -
alternative measure3 (EUR cents) 71.8 45.6 57.5
Basic earnings per share from
continuing operations (EUR cents) 57.5 37.8 52.1
Basic earnings per share from total
operations (EUR cents) 66.1 44.1 49.9
Total dividend per share (EUR cents) 26.0 20.0 30
Free cash flow per share4 (EUR cents) 72.4 42.2 71.6
Cash generated from operations 917 778 17.9
Net debt 831 1,364 (39.1)
Group return on capital employed (ROCE)5 15.0 12.3 22.0
Notes:
1 Comparative information has been restated where appropriate to take
cognisance of the discontinued operation.
2 The Group presents underlying EBITDA, operating profit and profit before tax
as measures which exclude special items in order to provide a more effective
comparison of the underlying financial performance between reporting periods.
3 The directors have elected to present an alternative, non-IFRS measure of
earnings per share from continuing operations. As more fully set out in note 8
of the enclosed extract of the audited annual financial statements, the
effects of the recapitalisation and the demerger of Mpact (formerly Mondi
Packaging South Africa) and the Mondi Limited share consolidation have been
adjusted to reflect the position as if the transaction had been completed at
the beginning of each period presented. This will enable a useful comparison
of earnings per share from continuing operations, based on the consolidated
number of shares.
4 Free cash flow per share is net increase in cash and cash equivalents before
changes in net debt and dividends paid divided by the net number of shares in
issue at year end.
5 ROCE is underlying operating profit expressed as a percentage of the average
capital employed for the year, adjusted for impairments and spend on strategic
projects which are not yet in operation.
David Hathorn, Mondi Group chief executive, said:
"The Group`s focus on performance, low-cost operating model, and robust
financial position, enabled Mondi to deliver record results in 2011. This was
against a backdrop of a strong trading environment in the first half followed
by a more difficult second half as macroeconomic uncertainties weighed on our
markets.
Our strong cash flow generation through the cycle enables us to ensure our
asset base remains appropriately invested and exploit value adding growth
opportunities, whilst maintaining our investment grade credit ratings and
increasing returns to shareholders. In this regard, we have approved
investments in certain high return energy and de-bottlenecking projects and
launched a tender offer for the non-controlling interest in Mondi Swiecie.
Furthermore, the directors have recommended a final dividend of 17.75 euro
cents per share, bringing the total dividend to 26.0 euro cents per share for
the year, an increase of 30% on the prior year.
Looking ahead, while macroeconomic risks remain, it is encouraging to note
that in recent weeks order books have improved and prices have stabilised,
with price increases announced in certain grades. This should allow some
recovery of price declines experienced over the course of the second half of
2011, although recent strengthening of emerging market currencies is impacting
margins. Supply side fundamentals in our core grades remain good following
further announcements of capacity closures in the industry."
Contact details
Mondi Group
David Hathorn +27 (0)11 994 5418
Andrew King +27 (0)11 994 5415
Lora Rossler +27 (0)31 451 2040 / +27 (0)83 627 0292
FTI Consulting
Richard Mountain / Sophie McMillan +44 20 7269 7186 / +44 20 7909 684 466
Chloe Webb +27 (0)11 214 2421
Conference call dial-in and audio cast details
Please see below details of our dial-in conference call and audio cast that
will be held at 09:00 (UK) and 11:00 (SA).
The conference call dial-in numbers are:
South Africa 0800 200 648 (toll-free)
UK 0800 917 7042 (toll-free)
Europe & Other 00800 246 78 700 (toll-free)
An online audio cast facility will be available via:
www.mondigroup.com/FYResults11.
The presentation will be available online via the above website address before
the audio cast commences. Questions can be submitted via the dial-in
conference call or by e-mail via the audio cast.
Should you have any issues on the day with accessing the dial-in conference
call, please call +27 (0)11 535 3600.
Should you have any issues on the day with accessing the audio cast, please e-
mail mondi@kraftwerk.co.at and you will be contacted immediately.
An audio recording of the presentation will be available on Mondi`s website
during the afternoon of 23 February 2012.
Editors` notes
Mondi is an international paper and packaging Group, with production
operations across 28 countries and revenues of EUR5.7 billion in 2011. The
Group`s key operations are located in central Europe, Russia and South Africa
and as at the end of 2011, Mondi employed 23,400 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 since 2008 and the JSE`s Socially
Responsible Investment (SRI) Index since 2007.
Forward-looking statements
This document includes forward-looking statements. All statements other than
statements of historical facts included herein, including, without limitation,
those regarding Mondi`s financial position, business strategy, plans and
objectives of management for future operations, are forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Mondi, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such forward-looking statements
are based on numerous assumptions regarding Mondi`s present and future
business strategies and the environment in which Mondi will operate in the
future. Among the important factors that could cause Mondi`s actual results,
performance or achievements to differ materially from those in the forward-
looking statements include, but are not limited to, those discussed under
`Principal risks and uncertainties`. These forward-looking statements speak
only as of the date on which they are made. Mondi expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statement contained herein to reflect any change in Mondi`s
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
Overview of results
The Group`s underlying operating profit of EUR622 million was up 36% compared
to 2010. The Group benefited from a generally positive trading environment,
although a noticeable slowdown in demand in the second half led to some volume
and pricing pressures when compared to the strong first half of the year.
The Europe & International Division, through its Uncoated Fine Paper,
Corrugated and Bags & Coatings businesses contributed EUR611 million to
underlying operating profit and the South Africa Division EUR62 million. The
Newsprint operating loss of EUR18 million was disappointing, whilst corporate
costs were at similar levels to previous years.
Input costs, particularly wood, pulp and recycled fibre, increased by
approximately 7% compared to the prior year. This was mainly attributed to
market price increases, offset in part by currency gains and lower volumes,
although some softening in key fibre input costs was seen in the second half
of the year.
Net finance charges of EUR111 million were EUR5 million higher than those of
the prior year reflecting the lower average net debt, more than offset by
lower net foreign exchange gains and reduced capitalisation of finance charges
following the completion of the Syktyvkar modernisation project.
The tax charge, before special items, for the year was EUR102 million (2010:
EUR88 million), representing an effective tax rate before special items of 20%
compared to 25% in 2010.
The demerger of Mpact (formerly Mondi Packaging South Africa) and related
consolidation of Mondi Limited shares was concluded during August 2011.
Comparative figures in the income statement have been restated to reflect
Mpact as a discontinued operation. The details of the transaction are more
fully described in note 6 of the enclosed extract of the audited annual
financial statements. Consequently, to reflect the continuing business of
Mondi, the Group has elected to present an alternative, non-IFRS measure of
earnings per share as if the recapitalisation and demerger of Mpact and Mondi
Limited share consolidation had taken place at the beginning of each period
presented. Basic earnings per share - alternative measure was 71.8 cents, an
increase of 57% on the prior year.
In line with the increased turnover, working capital increased during the year
with a net cash outflow of EUR68 million. The decrease in demand and selling
prices, coupled with a focus on active inventory management in certain grades
in light of the lower demand towards the end of 2011, resulted in some
reduction of year end working capital levels compared to average levels during
the year. The net working capital to turnover ratio was 10% at the year end,
the bottom of our targeted range of 10-12%.
Capital expenditure of EUR263 million was EUR131 million lower than the prior
year, reflecting the reduction in spend following completion of the major
capital investment in Russia. Excluding major expansionary capital
investments, the capital expenditure to depreciation ratio was 63%, unchanged
from 2010.
Strong cash generation and the proceeds from the demerger of Mpact led to a
reduction in net debt to EUR831 million at year end, from EUR1,364 million at
31 December 2010.
The Group is proposing to pay a final dividend of 17.75 euro cents per share
giving a total dividend of 26.0 euro cents for the year, an increase of 30%
compared to 2010.
Europe & International - Uncoated Fine Paper (UFP) business
Year ended Year ended 31
31 December December
EUR million 2011 2010 Change %
Segment revenue 1,429 1,516 (5.7)
- of which inter-segment revenue 20 129
EBITDA 309 279 10.8
Underlying operating profit 205 179 14.5
Special items 2 5
Capital expenditure 61 151
Net segment assets 1,283 1,512
ROCE 16.7% 16.9%
Underlying operating profit increased by EUR26 million to EUR205 million. The
Syktyvkar mill delivered a very strong result, benefiting from the first full
year contribution from the mill modernisation investment completed in the
second half of 2010. Together with a solid performance from the Ruzomberok and
Neusiedler mills, this more than offset the lost contribution from the sale at
the end of 2010 of Mondi`s controlling interest in Mondi Hadera.
The ROCE of 16.7%, marginally down on the previous year, reflects the positive
trading environment, low cost base and strong operating performance as well as
the contribution from the Syktyvkar modernisation.
Average benchmark UFP prices were approximately 7% higher than in 2010,
although they closed the year at similar levels to December 2010, reflecting
some selling price pressure towards the end of the year. Product mix
improvements also contributed to improved profitability. Sales volumes,
excluding the contribution of Mondi Hadera in 2010, were largely flat. Sales
into emerging Europe increased during the year to approximately 43% of total
sales volumes.
Input costs increased versus the prior year. Wood costs were up on average in
excess of 10%, although benchmark hardwood pulp costs were down around 4% per
tonne on average. The Syktyvkar modernisation had the effect of reducing
overall fibre input costs, as increased pulp self-sufficiency meant that
higher wood usage was more than offset by the reduction in purchased pulp
costs. Gas and electricity costs increased in both Syktyvkar and Ruzomberok.
Productivity, measured in terms of output per person, improved by
approximately 12% during the year, with annual production records in both
Syktyvkar and Ruzomberok.
The Syktyvkar modernisation project generated a return on capital employed in
excess of 10% through increased volumes, energy sales and lower consumption of
purchased pulp, with further benefits expected in 2012 as full ramp up is
achieved. The business continues to focus on further optimisation with
particular emphasis on energy, procurement and operating efficiencies. In
addition, initiatives to improve forestry operations will be implemented over
the next two years, with an expected increase in underlying operating profit
in excess of EUR15 million per year.
Capital expenditure for the year was EUR61 million, of which EUR24 million
related to the Syktyvkar modernisation project.
Europe & International - Corrugated business
Year ended Year ended 31
31 December December
EUR million 2011 2010 Change %
Segment revenue 1,384 1,235 12.1
- of which inter-segment revenue 64 59
EBITDA 251 187 34.2
Underlying operating profit 178 119 49.6
Special items 3 (15)
Capital expenditure 44 87
Net segment assets 967 898
ROCE 18.5% 14.9%
The substantial improvement in the underlying profit of the Corrugated
business in 2010 continued in 2011, reflecting the benefit of the improved
trading conditions, recent capital investments and restructuring and cost
reduction initiatives undertaken over the last few years. Underlying operating
profit increased by 50% to EUR178 million. The profitability of the business
and well invested capital base is reflected in the ROCE of 18.5%, improving
from 14.9% in 2010.
The Syktyvkar containerboard machine rebuild, completed as part of the
Syktyvkar modernisation programme, made a strong contribution, while the
Swiecie mill delivered a further significant improvement in performance.
Total containerboard sales volumes increased by 3% compared to 2010, with
kraftliner and recycled containerboard volumes remaining largely unchanged
whilst white top kraftliner volumes increased by 14%. Demand slowed in the
second half of the year, necessitating some commercial downtime in the fourth
quarter. The order book has improved during the first weeks of 2012 although
demand for white-top containerboard still remains subdued.
Average benchmark kraftliner prices increased by 14%, recycled containerboard
prices by 20% and white top containerboard prices by 14% compared to 2010
levels. However, closing prices were down by 11% for kraftliner from 31
December 2010 and closing benchmark prices of all containerboard products were
well below the highs achieved during the year. Price increases were announced
in January 2012. The actual price increases achieved will be subject to
individual negotiations with customers, and will take effect towards the end
of the first quarter of 2012.
Box price increases more than offset the increased paper prices, leading to
margin expansion and a significant increase in underlying operating profit,
albeit off a low base.
Costs of recovered fibre and wood increased significantly during the year,
with average benchmark recovered fibre prices increasing by 28%. Some relief
was experienced in the second half of the year with recovered fibre prices
dropping sharply off their highs. Wood costs increased in excess of 10% during
the year. Fixed cost increases were largely inflation driven.
Productivity, measured by output per person, improved by 10% compared to the
prior year. Capital expenditure of EUR44 million was incurred during the year.
Europe & International - Bags & Coatings business
Year ended Year ended 31
31 December December
EUR million 2011 2010 Change %
Segment revenue 2,478 2,226 11.3
- of which inter-segment revenue 46 39
EBITDA 327 238 37.4
Underlying operating profit 228 133 71.4
Special items (27) 28
Capital expenditure 110 92
Net segment assets 1,279 1,333
ROCE 19.0% 11.8%
The ROCE of the Bags & Coatings business of 19.0%, compared to 11.8% in 2010,
reflects the very positive trading environment, particularly in the first half
of the year.
A 71% increase in underlying operating profit to EUR228 million was largely
due to significant selling price increases in kraft paper (approximately 20%
increase in year-on-year average prices) and strong sales volumes during the
first half of the year. Weaker end user demand and destocking in the value
chain led to the kraft paper business taking significant downtime to manage
inventory levels in the second half of the year. While weakness in end user
demand in Europe was evident from early in the second half, export demand
remained strong throughout the period, weakening only in the fourth quarter.
Exports comprise approximately 55% of total kraft paper sales. Limited further
downtime is anticipated during the first quarter of 2012 as the outlook is
improving with evidence of an end to the destocking process. However, sales
prices in the first quarter are down compared to average prices in the fourth
quarter of 2011.
Increases in wood costs, currency headwinds and the detrimental impact of the
commercial downtime taken negatively impacted the overall cost base.
Operating performance in all kraft paper mills was excellent, although
downtime in the second half of the year impacted productivity. The total
commercial downtime, the majority of which was taken towards the end of the
third quarter and during the fourth quarter of 2011, amounted to approximately
10% of annual production capacity.
In the downstream industrial bags business, selling price increases more than
offset increased paper input costs. Together with the benefits of integrating
the Smurfit Kappa bag plants acquired in 2010, this gave rise to a significant
improvement in underlying operating profit. Weaker end user demand impacted
sales volumes in the second half of the year resulting in a small decline in
total sales volumes for the year. The restructuring, following the acquisition
in 2010 of the Smurfit Kappa bag plants in Spain, France, Italy and Poland
(acquired in January 2011), has been largely completed.
The coatings and consumer packaging business continued to perform well, with
underlying operating profit at similar levels to the previous year. Some
margin pressure was experienced, with growth constrained by the macroeconomic
environment, although variable cost increases were largely passed on to
customers. Following some internal restructuring and renewed focus on higher
growth and value adding products, the extrusion coating segment delivered a
pleasing improvement in performance while the consumer packaging segment
remained stable. The release liner segment was negatively impacted in the
second half by the costs of starting up new production lines, the benefits of
which are expected to be realised in 2012. The sale of Unterland, a flexible
packaging business, was completed in October 2011.
South Africa Division
Year ended Year ended 31
31 December December
EUR million 2011 2010 Change %
Segment revenue 569 580 (1.9)
- of which inter-segment revenue 155 211
EBITDA 114 117 (2.6)
Underlying operating profit 62 64 (3.1)
Special items - (10)
Capital expenditure 27 28
Net segment assets 828 953
ROCE 8.9% 8.4%
Underlying operating profit of EUR62 million was marginally down on the
previous year. The ROCE of 8.9% reflects a continuing improvement, but remains
short of targeted levels.
Average benchmark pulp prices declined by 4% year-on-year. While pricing held
up well in the first half, the second half saw a significant decline in
prices, such that the benchmark closing price for BEKP pulp was down around
23% on the level at the end of 2010. Average benchmark white top
containerboard prices increased by approximately 14% year-on-year, but weaker
demand towards the end of the year resulted in some commercial downtime and a
somewhat weaker pricing environment. Input costs increased, mainly as a result
of increased wood, energy and chemical costs.
Despite the weaker trading environment, management actions have ensured that
underlying operating profit remained largely unchanged. The business benefited
from the mothballing of the 120,000 tonne per annum UFP machine in Merebank
and the related restructuring programme which delivered both substantial cost
savings and improved margins arising from an increased focus on the domestic
market. The integrated pulp and paper operation at Richards Bay achieved
record saleable production in excess of 750,000 tonnes in the calendar year.
The business continues to focus on operational efficiencies and improvement
opportunities with strong emphasis on energy efficiency and self generating
capacity.
Newsprint
Year ended Year ended 31
31 December December
2011 2010
EUR million
Segment revenue 164 492
- of which inter-segment revenue - 1
EBITDA (5) 10
Underlying operating loss (18) (4)
Special items (33) (29)
Capital expenditure 4 7
Net segment assets 59 106
ROCE (19.2)% (2.8)%
Note:
Europapier business included in 2010 information until the date of disposal of
4 November 2010.
The returns of the Newsprint businesses were extremely disappointing with the
segment recording an underlying operating loss of EUR18 million in the period.
Selling price increases were insufficient to restore the Aylesford Newsprint
joint venture to profitability. In addition, the business incurred further non-
recurring waste disposal costs in the second half. The poor operating
performance and outlook for this business necessitated an impairment of the
underlying assets with the Group`s attributable share being EUR33 million.
Restructuring activities have been announced with further cost containment
initiatives to be implemented during 2012 as a result of ongoing pricing
pressure in European newsprint.
The Mondi Shanduka Newsprint joint venture in South Africa was negatively
impacted by currency translation effects and rising electricity costs. The
business has however concluded renewed contracts with its major domestic
customers at prices which will offset input cost increases over the coming
year and restore a reasonable level of profitability.
Financial review
Special items
Special items for the year include the following:
- Impairment of Aylesford Newsprint joint venture assets;
- Restructuring activities and impairment of certain assets in the Bags &
Coatings business;
- Loss on disposal of the Unterland flexible packaging business; and
- Various other smaller adjustments relating to the finalisation of
transactions from prior years.
Further detail is provided in note 4 of the enclosed extract of the audited
annual financial statements.
Input costs
Wood, recovered fibre and pulp comprise approximately one third of the input
costs of the Group. Wood prices increased by approximately 10% over the year.
Average benchmark prices for recovered fibre increased by 28% when compared to
the average price for 2010, although the benchmark price at the end of 2011
was 12% lower than that at 31 December 2010. Average prices for hardwood pulp
and softwood pulp were largely unchanged through the year although this masks
significant price fluctuations experienced during the year. At year end,
prices were respectively 24% and 11% below the levels seen at 31 December
2010. As the Group is largely balanced in respect of pulp production and
consumption, pulp prices do not have a significant impact on the Group as a
whole, but do impact the performance of individual business units.
Energy and chemical costs increased across the business, with particular
pressure on electricity prices in South Africa, which continued to increase at
well above inflationary levels. Various initiatives to reduce dependence on
purchased energy and utilise energy more efficiently are being pursued both in
South Africa and at the Group`s European operations.
Currencies
The impact of exchange rates was relatively muted in 2011. The first half of
the year was characterised by strengthening emerging market currencies which,
coupled with relatively high levels of inflation in these jurisdictions,
increased the underlying cost base of operations in those countries. This
trend was largely reversed in the second half with higher levels of volatility
and, on average, weakening of the emerging market currencies against the euro.
Most currencies ended the year weaker against the euro than 31 December 2010
levels and weaker than the average rate applicable during the year, although
there has been some strengthening of these currencies during the first weeks
of 2012.
Tax
The effective tax rate before special items was 20%, compared to 25% in 2010.
The main reasons for the reduction in the tax rate include the improved
profitability enabling the use of previously unrecognised tax losses;
increased profitability in regions with lower statutory tax rates; and the
benefits of tax incentives granted in certain countries in which the Group
operates, notably those related to the major Polish and Russian projects.
Non-controlling interests
The income attributable to non-controlling interests increased during the year
to EUR70 million, reflecting mainly the increased profit contribution from 66%
owned Mondi Swiecie SA.
Cash flow
EBITDA from continuing operations of EUR964 million was EUR166 million higher
than in 2010. The Group generated EUR917 million of cash from operations
(2010: EUR778 million), notwithstanding the EUR68 million increase in working
capital on the back of increased revenues (2010: EUR129 million). The cash
generated has been applied to invest in the Group`s asset base and provide
increased dividends to shareholders with the balance being utilised to reduce
net debt.
Capital Investment programme
Excluding major expansionary investments, the Group has targeted to maintain
its capital expenditure at between 60% and 80% of its depreciation charge.
Including the approved strategic projects mentioned below, over the next three
years, it is anticipated that total capital expenditure will approximate the
Group`s depreciation charge.
The Group has approved certain energy related investments across a number of
its operations. These include:
- A bark boiler in Syktyvkar;
- A steam turbine and recovery boiler economiser in Stambolijski;
- A new recovery boiler in Frantschach; and
- A steam turbine in Richard`s Bay.
The focus of these and other projects still under consideration is to improve
energy efficiency and self-sufficiency whilst providing opportunities to
capture additional benefits in the form of electricity sales. In addition, a
de-bottlenecking project has been approved to invest in a 100,000 tonne per
annum pulp dryer in Syktyvkar to further exploit the benefits of the recently
completed mill modernisation programme.
The approved projects, totalling approximately EUR170 million in capital
expenditure, are expected to generate significant benefits with returns in
excess of 40%, from 2013 onwards.
A number of other similar projects are under consideration at several of the
Group`s operations. If approved, these projects are expected to be completed
over the next three to four years, with a total estimated capital expenditure
of about EUR250 million.
Subsequent events
In February 2011, Mondi Swiecie announced its intention to exercise an option
to acquire the power and heat generating plant which supplies Mondi Swiecie
with the majority of its electricity requirements and all its heat and steam
needs. The option was subject to certain conditions precedent, being a ruling
from the Arbitration Court of the National Chamber of Commerce in Poland,
consent of the financing banks of the power and heat generating plant and
receipt of approval from the competition authorities. On 10 February 2012, the
Arbitration Court ruled in favour of Mondi Swiecie, fulfilling the first of
these conditions. Competition approval has been received and application has
been made to the financing banks for approval. Based on the option price, the
implied enterprise value of the business is around EUR90 million. The outcome
and timing of any potential acquisition remains uncertain.
On 16 February 2012, Mondi made an all cash offer of PLN69.00 (EUR16.48) per
share for the 34% of Mondi Swiecie S.A. shares that it does not already own.
Mondi Swiecie is listed on the Warsaw Stock Exchange. The maximum
consideration, should all outstanding shares be acquired, is PLN1.2 billion
(EUR280 million).
Treasury and borrowings
Net debt at the end of the year was EUR831 million, a EUR533 million reduction
from the prior year end. The demerger of Mpact accounted for EUR172 million of
this reduction whilst the balance was a result of the strong operating cash
flows and the reduction in capital expenditure together with a positive
currency impact of EUR68 million. Gearing reduced to 21.5% at the end of 2011,
down from 29.7% at the end of 2010 and the net debt to 12 month trailing
EBITDA ratio improved from 1.55 to 0.83 over the year.
The Group`s public credit ratings, first issued in March 2010, improved as a
result of the strong financial performance. Standard and Poor`s upgraded the
Group`s long-term rating to investment grade from BB+ to BBB- in October
whilst Moody`s Investors Service put their Baa3 investment grade rating on
positive outlook for upgrade.
The Group actively manages its liquidity risk by ensuring it maintains
diversified sources of funding and debt maturities. During the year the Euro
Medium Term Note programme under which the EUR500 million, seven year bond was
issued in March 2010 was renewed allowing continued access to debt capital
markets. The Group`s EUR1.5 billion bank facility that was due to mature in
June 2012 was refinanced early with a new five year, EUR750 million revolving
credit facility. Further diversification of funding sources was achieved with
the signing of a EUR100 million ten year facility with the European Investment
Bank (EIB) and a EUR40 million 11 year facility from the European Bank for
Reconstruction and Development (EBRD).
At the end of the year the Group`s committed debt facilities amounted to
EUR1.8 billion with EUR889 million undrawn, which together with cash of EUR191
million provides significant liquidity to meet short-term funding
requirements. Drawn committed facilities maturing in 2012 amount to EUR251
million. To the extent they are not renewed, they can be financed out of
existing cash and undrawn committed facilities.
Following the refinancing of the Group`s principal bank facility and the new
long-term facilities from the EIB and EBRD the weighted average maturity of
the Eurobond and committed debt facilities increased to 4.3 years as at 31
December 2011 compared to 2.6 years a year earlier.
Sustained delivery on Group strategy
Mondi`s strategic positioning continues to demonstrate the required
combination of focus and flexibility to deliver results across the business
cycle as we:
- build on leading positions in packaging and UFP, particularly in high-growth
emerging markets;
- maintain our low-cost, high-quality asset base by selectively investing in
production capacity in lower-cost regions and realising benefits from upstream
integration (including forestry); and
- focus on performance through continuous productivity improvement and cost
reduction, delivered through business excellence programmes and rigorous asset
management.
Leading market positions
Mondi continues to focus on achieving the right product and geographic mix in
order to promote sustained profitability. The Group benefits from our exposure
to faster growing emerging markets such as eastern Europe, Russia and South
Africa, with 71% of the Group`s net operating assets and 50% of revenue by
destination in these geographical areas. While our strategy clearly focuses on
emerging markets, Mondi continues to enjoy a uniquely strong market position
in the Bags & Coatings segment in both eastern and western Europe, where the
coatings & consumer packaging segment enjoys attractive growth rates and
returns.
High-quality, low-cost asset base
Both Mondi`s recent major capital investments, the modernisation of the
Syktyvkar mill in Russia and the new lightweight recycled containerboard paper
machine at Swiecie in Poland, are running well and contributed significantly
to the Group`s profitability in 2011. Over the past 10 years, Mondi has
invested more than EUR4.5 billion in its high-quality, low-cost asset base and
our appropriately invested operations are delivering superior returns across
the cycle.
Mondi`s UFP business is reaping the rewards of its integrated low-cost
positioning while the restructured Corrugated business delivered strong
results. The Bags & Coatings business enjoys good, and in many cases leading,
market shares in its key markets and benefited from the very strong market
recovery in the first half of 2011.
Focus on performance
Our relentless focus on cost containment ensured that the Group`s fixed cost
increases remained within inflation in the countries we operate in. Ongoing
initiatives are directed towards ensuring efficient procurement of our most
critical raw materials and operational efficiency.
The ROCE of 15%, despite the challenging market conditions in the second half
of the year, was significantly in excess of the 13% targeted across the cycle.
Overall, 2011 has been an extremely successful year from an operational
perspective, with significant improvements in production efficiencies across
the business and full year production records being set in a number of key
operations.
Principal risks and uncertainties
It is in the nature of Mondi`s business that the Group is exposed to risks and
uncertainties which may have an impact on future performance and financial
results, as well as on its ability to meet certain social and environmental
objectives.
On an annual basis, the DLC executive committee and Boards conduct a formal
systematic review of the most significant risks and uncertainties and the
Group`s responses to those risks. These risks are assessed against pre-
determined risk tolerance limits, established by the Boards. Additional risk
reviews are undertaken on an ad-hoc basis for significant investment decisions
and when changing business conditions dictate.
The Group believes that it has effective systems and controls in place to
manage the key risks identified below within the risk tolerance levels
established by the Boards.
- Mondi operates in a highly competitive environment
The markets for paper and packaging products are highly competitive. Prices of
Mondi`s key products have experienced substantial fluctuations in the past.
Furthermore, product substitution and declining demand in certain markets,
coupled with new capacity being introduced may have an impact on market
prices. A downturn in trading conditions in the future may have an impact on
the carrying value of goodwill and tangible assets and may result in further
restructuring activities.
Mondi is flexible and responsive to changing market and operating conditions
and the Group`s geographical and product diversification provide some measure
of protection.
- Cost and availability of a sustainable supply of fibre
Fibre (wood, pulp, recovered paper) is Mondi`s most important raw material,
comprising approximately one-third of total input costs. Increases in the
costs of any of these raw materials, or any difficulties in procuring a
sustainable supply of wood, pulp or recovered paper in certain countries,
could have an adverse effect on Mondi`s business, operational performance or
financial position.
The Group`s focus on operational performance, relatively high levels of
integration and access to its own FSCTM certified virgin fibre in Russia and
South Africa, serve to mitigate these risks. It is the Group`s objective to
acquire fibre (wood and pulp) from sustainable sources with internationally
credible certification and to avoid any illegal or controversial supply.
- Foreign currency exposure and exchange rate volatility
The location of a number of the Group`s significant operations in a range of
different countries results in foreign currency exposure. Adverse currency
movements and high degrees of volatility may impact on the financial
performance and position of the Group. The most significant currency exposures
are to the South African rand, Russian rouble, Czech koruna, Polish zloty,
Swedish krona and Turkish lira.
The Group`s policy is to hedge balance sheet exposures against short-term
currency volatility. Furthermore, the Group`s geographic diversification
provides some level of protection.
- Investments in certain countries may be adversely affected by political,
economic and legal developments in those countries
The Group operates in a number of countries with differing political, economic
and legal systems. In some countries, such systems are less predictable than
in countries with more developed institutional structures. The current
macroeconomic uncertainties in the Eurozone have heightened the political and
economic risks in this region. Significant changes in the political, economic
or legal landscape of any country in which the Group is invested may have a
material effect on the Group`s operations in that country.
The Group has invested in a number of countries thereby diversifying its
exposure to any single jurisdiction. The Group`s diversified management
structure ensures that business managers are able to closely monitor and adapt
to changes in the environment in which they operate. The Group continues to
actively monitor its exposure to the Eurozone environment.
- Employee attraction, retention and safety
The complexity of operations and geographic diversity of the Group demands
high quality, experienced employees in all operations.
Appropriate reward and retention strategies are in place to attract and retain
talent at all levels of the organisation. Mondi has a policy of working
towards zero-harm. Incidents are fully investigated, remedial actions taken
and early warning indicators used to direct preventative work. Mondi adopts
internationally recognised safety and health management systems across all its
operations.
- Capital intensive operations
Mondi operates large facilities, often in remote locations. The on-going
safety and sustainable operation of such sites is critical to the success of
the Group.
Mondi`s management system ensures on-going monitoring of all operations to
ensure they meet the requisite standards and performance requirements. A
structured maintenance programme is in place under the auspices of the Group
technical director. Emergency preparedness and response procedures are in
place and subject to periodic drills. Mondi has adequate insurance in place to
cover material property damage, business interruption and liability risks.
Going concern
The Group`s business activities, together with the factors likely to affect
its future development, performance and position are set out in the business
review. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the financial statements.
In addition, the notes to the integrated report and financial statements 2011
will include the Group`s objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its financial
instruments and hedging activities; and its exposures to credit and liquidity
risk.
Mondi`s geographical spread, product diversity and large customer base
mitigate potential risks of customer or supplier liquidity issues. Ongoing
initiatives by management in implementing profit improvement initiatives which
include plant optimisation, cost-cutting, and restructuring and
rationalisation activities have consolidated the Group`s leading cost position
in its chosen markets. Working capital levels and capital expenditure
programmes are strictly monitored and controlled.
The Group meets its funding requirements from a variety of sources as more
fully described in note 10 of the enclosed extract of the audited annual
financial statements. The availability of some of these facilities is
dependent on the Group meeting certain financial covenants all of which have
been complied with. Mondi had EUR889 million of undrawn committed debt
facilities as at 31 December 2011 which should provide sufficient liquidity in
the medium term.
The Group`s forecasts and projections, taking account of reasonably possible
changes in trading performance, including an assessment of the current
macroeconomic environment, particularly in Europe, indicate that the Group
should be able to operate well within the level of its current facilities and
related covenants.
The directors have reviewed the overall Group strategy, the budget for 2012
and subsequent years, considered the assumptions contained in the budget and
reviewed the critical risks which may impact the Group`s performance. After
making such enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing the annual report and accounts.
Dividend
The Boards` aim is to offer shareholders long-term dividend growth within a
targeted dividend cover range of two to three times over the business cycle.
Given the strong financial performance, good cash generation and the Boards`
stated desire to increase distributions to shareholders, the Boards are
pleased to recommend a significant increase in the full year dividend.
The boards of Mondi Limited and Mondi plc have recommended a final dividend of
17.75 euro cents per share (2010: 16.5 euro cents per share), payable on 10
May 2012 to shareholders on the register at 13 April 2012. Together with the
interim dividend of 8.25 euro cents per share, paid on 13 September 2011, this
amounts to a total dividend for the year of 26.0 euro cents per share. In
2010, the total dividend for the year was 20.0 euro cents per share. Both the
interim and final dividends are based on the consolidated number of Mondi
Limited shares following completion of the share consolidation in August 2011.
Outlook
Looking ahead, while macroeconomic risks remain, it is encouraging to note
that in recent weeks order books have improved and prices have stabilised,
with price increases announced in certain grades. This should allow some
recovery of price declines experienced over the course of the second half of
2011, although recent strengthening of emerging market currencies is impacting
margins.
Supply side fundamentals in our core grades remain good following further
announcements of capacity closures in the industry. Mondi`s integrated low-
cost operations, emerging markets exposure and unrelenting focus on
sustainable performance ensure that the Group remains well positioned to
continue generating strong cash flow through the cycle and adding value for
shareholders over the longer term.
Directors` responsibility statement
These financial statements have been prepared under supervision of the Group
Chief Financial Officer, Andrew King CA (SA), as required by Section
29(1)(e)(ii) of the Companies Act of South Africa 2008.
The responsibilty statement below has been prepared in connection with the
Group`s annual report for the year ended 31 December 2011. Certain parts
thereof are not included within this announcement.
The directors confirm that to the best of their knowledge:
- the financial statements, prepared in accordance with the relevant financial
reporting framework, give a true and fair view of the assets, liabilities,
financial position and profit and loss of Mondi Limited, Mondi plc and the
undertakings included in the consolidation taken as a whole; and
- the management report, which is incorporated into the directors` report,
includes a fair view of the development and performance of the business and
the position of the Group and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face.
David Hathorn Andrew King
Director Director
22 February 2012 22 February 2012
Audited financial information
Combined and consolidated income statement
for the year ended 31 December 2011
2011
Before Special After
special items special
Notes items (note 4) items
EUR million
Continuing operations
Group revenue 3 5,739 - 5,739
Materials, energy and consumables
used (2,998) - (2,998)
Variable selling expenses (511) - (511)
Gross margin 2,230 - 2,230
Maintenance and other indirect
expenses (272) - (272)
Personnel costs (808) (4) (812)
Other net operating expenses (186) (2) (188)
Depreciation, amortisation and
impairments (342) (48) (390)
Operating profit/(loss) 3 622 (54) 568
Non-operating special items 4 - (1) (1)
Net income from associates 1 - 1
Total profit/(loss) from operations
and associates 623 (55) 568
Net finance costs (111) - (111)
Investment income 30 - 30
Foreign currency gains - - -
Finance costs (141) - (141)
Profit/(loss) before tax 512 (55) 457
Tax (charge)/credit 5 (102) 2 (100)
Profit/(loss) from continuing
operations 410 (53) 357
Discontinued operation 43
Profit from discontinued operation 6 14
Net gain on distribution of
discontinued operation 6 29
Profit for the financial year 400
Attributable to:
Non-controlling interests 70
Equity holders of the parent
companies 330
Earnings per share (EPS) for
profit/(loss) attributable
to equity holders of the parent
companies
From continuing operations
Basic EPS (EUR cents) 7 57.5
Diluted EPS (EUR cents) 7 56.8
Basic underlying EPS (EUR cents) 7 68.1
Diluted underlying EPS (EUR cents) 7 67.3
From continuing and discontinued
operations
Basic EPS (EUR cents) 7 66.1
Diluted EPS (EUR cents) 7 65.3
Basic headline EPS (EUR cents) 7 69.9
Diluted headline EPS (EUR cents) 7 69.1
(Restated)
2010
Before Special After
special items special
items (note 4) items
EUR million
Continuing operations
Group revenue 5,610 - 5,610
Materials, energy and consumables used (3,006) - (3,006)
Variable selling expenses (494) - (494)
Gross margin 2,110 - 2,110
Maintenance and other indirect expenses (272) - (272)
Personnel costs (829) (23) (852)
Other net operating expenses (211) 50 (161)
Depreciation, amortisation and impairments (340) (23) (363)
Operating profit/(loss) 458 4 462
Non-operating special items - (25) (25)
Net income from associates 2 - 2
Total profit/(loss) from operations and
associates 460 (21) 439
Net finance costs (106) - (106)
Investment income 31 - 31
Foreign currency gains 7 - 7
Finance costs (144) - (144)
Profit/(loss) before tax 354 (21) 333
Tax (charge)/credit (88) 6 (82)
Profit/(loss) from continuing operations 266 (15) 251
Discontinued operation 34
Profit from discontinued operation 34
Net gain on distribution of discontinued
operation -
Profit for the financial year 285
Attributable to:
Non-controlling interests 61
Equity holders of the parent companies 224
Earnings per share (EPS) for profit/(loss)
attributable
to equity holders of the parent companies
From continuing operations
Basic EPS (EUR cents) 37.8
Diluted EPS (EUR cents) 37.4
Basic underlying EPS (EUR cents) 40.6
Diluted underlying EPS (EUR cents) 40.1
From continuing and discontinued operations
Basic EPS (EUR cents) 44.1
Diluted EPS (EUR cents) 43.6
Basic headline EPS (EUR cents) 47.0
Diluted headline EPS (EUR cents) 46.5
Combined and consolidated statement of comprehensive income
for the year ended 31 December 2011
EUR million 2011 2010
Profit for the financial year 400 285
Other comprehensive income:
Effect of cash flow hedges 12 11
Actuarial losses on post-retirement benefit schemes (18) (15)
Surplus restriction on post-retirement benefit schemes (3) (3)
Exchange differences on translation of foreign operations (196) 193
Share of other comprehensive income of associates (1) 1
Tax relating to components of other comprehensive income - 4
Other comprehensive income for the financial year, net of tax (206) 191
Total comprehensive income for the financial year 194 476
Attributable to:
Non-controlling interests 43 75
Equity holders of the parent companies 151 401
Combined and consolidated statement of financial position
as at 31 December 2011
EUR million Notes 2011 2010
Intangible assets 238 312
Property, plant and equipment 3,377 3,976
Forestry assets 297 320
Investments in associates 10 16
Financial asset investments 33 34
Deferred tax assets 5 21
Retirement benefits surplus 8 11
Derivative financial instruments 3 3
Total non-current assets 3,971 4,693
Inventories 637 702
Trade and other receivables 829 992
Current tax assets 6 11
Financial asset investments 1 -
Cash and cash equivalents 191 83
Derivative financial instruments 10 11
Assets held for sale - 1
Total current assets 1,674 1,800
Total assets 5,645 6,493
Short-term borrowings 10 (286) (410)
Trade and other payables (891) (1,034)
Current tax liabilities (78) (78)
Provisions (43) (64)
Derivative financial instruments (8) (9)
Total current liabilities (1,306) (1,595)
Medium and long-term borrowings 10 (737) (1,037)
Retirement benefits obligation (202) (211)
Deferred tax liabilities (310) (349)
Provisions (35) (39)
Derivative financial instruments - (15)
Other non-current liabilities (20) (23)
Total non-current liabilities (1,304) (1,674)
Total liabilities (2,610) (3,269)
Net assets 3,035 3,224
Equity
Ordinary share capital and stated capital 11 542 646
Retained earnings and other reserves 2,044 2,117
Total attributable to equity holders of the
parent companies 2,586 2,763
Non-controlling interests in equity 449 461
Total equity 3,035 3,224
The Group`s combined and consolidated financial statements, and related notes,
were approved by the Boards and authorised for issue on 22 February 2012 and
were signed on its behalf by:
David Hathorn Andrew King
Director Director
Mondi Limited company registration number: 1967/013038/06
Mondi plc company registered number: 6209386
Combined and consolidated statement of cash flows
for the year ended 31 December 2011
EUR million Notes 2011 2010
Cash generated from operations 12a 917 778
Dividends from associates 2 2
Dividends from other investments - 1
Income tax paid (85) (47)
Net cash generated from operating activities 834 734
Cash flows from investing activities
Investment in property, plant and equipment 3 (263) (394)
Investment in intangible assets (5) (4)
Proceeds from the disposal of property, plant and
equipment and intangible assets 9 14
Investment in forestry assets (42) (46)
Investment in financial asset investments (13) (11)
Proceeds from the sale of financial asset investments 8 3
Acquisition of subsidiaries, net of cash and cash
equivalents (12) -
Acquisition of associates, net of cash and cash
equivalents (2) (2)
Proceeds from the disposal of subsidiaries, net of
cash and cash equivalents 17 100
Disposal of discontinued operation`s cash and cash
equivalents 6 (38) -
Loan (advances to)/repayments from related parties - 1
Loan repayments from external parties (1) 2
Interest received 9 10
Other investing activities 2 (2)
Net cash used in investing activities (331) (329)
Cash flows from financing activities
Repayment of short-term borrowings 12c (135) (51)
Proceeds from medium and long-term borrowings 12c 123 717
Repayment of medium and long-term borrowings 12c (127) (831)
Interest paid (106) (117)
Dividends paid to non-controlling interests (43) (18)
Dividends paid to equity holders of the parent
companies (126) (54)
Purchases of treasury shares (12) (2)
Non-controlling interests bought out (1) (5)
Net realised gain/(loss) on cash and asset
management swaps 9 (48)
Other financing activities (1) -
Net cash used in financing activities (419) (409)
Net increase/(decrease) in cash and cash equivalents 84 (4)
Cash and cash equivalents at beginning of year1 24 37
Cash movement in the year 12c 84 (4)
Effects of changes in foreign exchange rates 12c 9 (9)
Cash and cash equivalents at end of year1 117 24
Note:
1 `Cash and cash equivalents` includes overdrafts and cash flows from disposal
groups and is reconciled to the combined and consolidated statement of
financial position in note 12b.
Combined and consolidated statement of changes in equity
for the year ended 31 December 2011
Combined
share capital
and stated Retained
capital 1 earnings Other reserves 2
EUR million
At 1 January 2010 646 1,743 10
Dividends paid - (54) -
Total comprehensive income for
the year - 224 177
Issue of shares under employee
share schemes - 5 (5)
Purchases of treasury shares
(see note 11) - (2) -
Disposal of businesses - - 12
Non-controlling interests
bought out - (1) -
Reclassification - 1 (1)
Other - - 8
At 31 December 2010 646 1,916 201
Dividends paid - (126) -
Effect of dividend in specie
distributed (see note 6) (104) (101) -
Total comprehensive income for
the year - 330 (179)
Issue of shares under employee
share schemes - 12 (12)
Purchases of treasury shares
(see note 11) - (12) -
Disposal of treasury shares - 4 -
Disposal of discontinued
operation (see note 6) - - (5)
Disposal of businesses - - (1)
Non-controlling interests
bought out - 5 -
Reclassification - 13 (13)
Other - - 12
At 31 December 2011 542 2,041 3
Total
attributable to
equity holders
of the parent Non-controlling Total
companies interests equity
EUR million
At 1 January 2010 2,399 425 2,824
Dividends paid (54) (18) (72)
Total comprehensive income for
the year 401 75 476
Issue of shares under employee
share schemes - - -
Purchases of treasury shares
(see note 11) (2) - (2)
Disposal of businesses 12 (18) (6)
Non-controlling interests
bought out (1) (3) (4)
Reclassification - - -
Other 8 - 8
At 31 December 2010 2,763 461 3,224
Dividends paid (126) (43) (169)
Effect of dividend in specie
distributed (see note 6) (205) - (205)
Total comprehensive income for
the year 151 43 194
Issue of shares under employee
share schemes - - -
Purchases of treasury shares
(see note 11) (12) - (12)
Disposal of treasury shares 4 - 4
Disposal of discontinued
operation (see note 6) (5) (6) (11)
Disposal of businesses (1) - (1)
Non-controlling interests
bought out 5 (6) (1)
Reclassification - - -
Other 12 - 12
At 31 December 2011 2,586 449 3,035
Notes:
1 In August 2011, Mondi Limited`s par value shares were converted by special
resolution to shares with no par value. As a result Mondi Limited`s share
capital and share premium were combined into a stated capital account. The
share consolidation described in notes 7 and 11 had no impact on the stated
capital and share capital of Mondi Limited and Mondi plc respectively.
2 Other reserves are analysed further below.
Other reserves 1
Cumulative
Share-based translation
payment adjustment Cash flow
reserve reserve hedge reserve
EUR million
At 1 January 2010 13 (222) (19)
Total comprehensive income
for the year - 180 9
Mondi share schemes` charge 8 - -
Issue of shares under
employee share schemes (5) - -
Disposal of businesses - 12 -
Reclassification 1 (1) -
At 31 December 2010 17 (31) (10)
Total comprehensive income
for the year - (171) 8
Mondi share schemes` charge 12 - -
Issue of shares under
employee share schemes (12) - -
Disposal of discontinued
operation (see note 6) - (5) -
Disposal of businesses - (1) -
Reclassification - - -
At 31 December 2011 17 (208) (2)
Post-retirement Statutory
benefit reserve reserves 2 Total
EUR million
At 1 January 2010 (28) 266 10
Total comprehensive income
for the year (12) - 177
Mondi share schemes` charge - - 8
Issue of shares under
employee share schemes - - (5)
Disposal of businesses - - 12
Reclassification - (1) (1)
At 31 December 2010 (40) 265 201
Total comprehensive income
for the year (16) - (179)
Mondi share schemes` charge - - 12
Issue of shares under
employee share schemes - - (12)
Disposal of discontinued
operation (see note 6) - - (5)
Disposal of businesses - - (1)
Reclassification - (13) (13)
At 31 December 2011 (56) 252 3
Notes:
1 All movements in other reserves are disclosed net of non-controlling
interests. The movement in non-controlling interests as a direct result of the
movement in other reserves for the year ended 31 December 2011 was a decrease
in non-controlling interests related to total comprehensive income for the
year of EUR27 million (2010: increase of EUR14 million).
2 Statutory reserves consist of the merger reserve of EUR259 million (2010:
EUR259 million) and other sundry reserves in deficit of EUR7 million (2010:
surplus of EUR6 million).
Notes to the combined and consolidated financial statements
for the year ended 31 December 2011
1 Basis of preparation
Basis of preparation
The Group has two separate legal parent entities, Mondi Limited and Mondi plc,
which operate under a dual listed company (DLC) structure. The substance of
the DLC structure is such that Mondi Limited and its subsidiaries, and Mondi
plc and its subsidiaries, operate together as a single economic entity through
a sharing agreement, with neither parent entity assuming a dominant role.
Accordingly, Mondi Limited and Mondi plc are reported on a combined and
consolidated basis as a single reporting entity.
The condensed combined and consolidated financial information included in this
preliminary announcement has been prepared in accordance with the measurement
and recognition criteria of International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB) and contains
the information required by IAS 34, `Interim Financial Reporting`. The Group
has also complied with South African Statements and Interpretations of
Statements of Generally Accepted Accounting Practice. There are no differences
for the Group in applying IFRS as issued by the IASB and IFRS as adopted by
the European Union (EU) and therefore the Group also complies with Article 4
of the EU IAS Regulation. The combined and consolidated financial statements
have been prepared on a going concern basis as discussed in the business
review, under the heading `Going concern`.
Comparative information has been restated where appropriate to reflect the
discontinued operation of Mpact (formerly Mondi Packaging South Africa) as
described in note 6.
The financial information set out above does not constitute the Company`s
statutory accounts for the years ended 31 December 2011 or 2010 but is derived
from those accounts. Statutory accounts for 2010 have been delivered to the
registrar of companies, and those for 2011 will be delivered in due course.
The auditors have reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498(2) or (3) of the UK
Companies Act 2006. Copies of their unqualified auditors` reports are
available for inspection at the Mondi Limited and Mondi plc registered
offices.
2 Accounting policies
The same accounting policies, methods of computation and presentation have
been followed in the preparation of the combined and consolidated financial
statements as were applied in the preparation of the Group`s annual financial
statements for the year ended 31 December 2010.
3 Operating segments
Identification of the Group`s externally reportable operating segments
The Group`s externally reportable segments reflect the internal reporting
structure of the Group, which is the basis on which resource allocation
decisions are made by management in the pursuit of strategic objectives. The
Group operates under two primary geographic regions reflecting its South
African activities and assets, and its international, principally European,
activities and assets. The broad European region is further split by product
segments reflecting the management of the Group. In addition the Group manages
the Newsprint businesses separately and therefore these have been presented as
a separate segment.
Product revenues
The material product types from which the Group`s externally reportable
segments derive both their internal and external revenues are presented as
follows:
Operating segments Internal revenues 1
Europe & International
Uncoated Fine Paper - Uncoated fine paper
- Pulp
- Newsprint
Corrugated - Corrugated products
Bags & Coatings - Kraft paper & industrial bags
South Africa Division - Uncoated fine paper
- Pulp
- Corrugated products
Newsprint businesses - Newsprint
Operating segments External revenues
Europe & International
Uncoated Fine Paper - Uncoated fine paper
- Pulp
- Newsprint
Corrugated - Corrugated products
Bags & Coatings - Kraft paper & industrial bags
- Coatings & consumer packaging
South Africa Division - Uncoated fine paper
- Pulp
- Corrugated products
- Woodchips
Newsprint businesses - Newsprint
Note:
1 The Group operates a vertically-integrated structure in order to benefit
from economies of scale and to more effectively manage the risk of adverse
price movements in key input costs. Internal revenues are therefore generated
across the supply chain.
Measurement of operating segment revenues, profit and loss, assets and non-
current non-financial assets
Management has regard to certain operating segment measures in making resource
allocation decisions and monitoring segment performance. The operating segment
measures required to be disclosed adhere to the recognition and measurement
criteria presented in the Group`s accounting policies. In addition, the Group
has presented certain non-IFRS measures by segment to supplement the user`s
understanding. All intra-group transactions are conducted on an arm`s length
basis.
The Group`s measure of net segment assets includes the allocation of
retirement benefits surpluses and deficits on an appropriate basis. The
measure of segment results exclude, however, the financing effects of the
Group`s defined benefit pension plans. In addition, the Group`s measure of net
segment assets does not include an allocation for derivative assets and
liabilities, non-operating receivables and payables and assets held for sale
and associated liabilities. The measure of segment results includes the
effects of certain movements in these unallocated balances.
The Group`s geographic analysis is presented on the following level:
- continental; or
- sub-continental; or
- by individual country (if greater than 10% of the Group total).
As more fully described in note 6, the Group separated its interest in Mondi
Packaging South Africa through a demerger during the year ended 31 December
2011. The results of the discontinued operation have been excluded from the
segment results presented below, other than as a reconciling item between the
segments` totals and Group totals where appropriate, for both the years ending
31 December 2011 and 31 December 2010. During the year ended 31 December 2010,
the Group disposed of its Merchant business, Europapier. The results of the
Merchant business are included in the Newsprint businesses segment up to its
date of disposal of 4 November 2010. As this disposal did not meet the
definition of a discontinued operation, no restatement of the segment results
is permitted.
There has been no change in the basis of measurement of segment profit and
loss in the financial year.
Operating segment revenue
2011
Segment Internal External
revenue revenue1 revenue2
EUR million
Europe & International
Uncoated Fine Paper 1,429 (20) 1,409
Corrugated 1,384 (64) 1,320
Bags & Coatings 2,478 (46) 2,432
Intra-segment elimination (129) 129 -
Total Europe & International 5,162 (1) 5,161
South Africa Division 569 (155) 414
Newsprint businesses 164 - 164
Segments total 5,895 (156) 5,739
Inter-segment elimination (156) 156 -
Group total 5,739 - 5,739
(Restated)
2010
Segment Internal External
revenue revenue1 revenue2
EUR million
Europe & International
Uncoated Fine Paper 1,516 (129) 1,387
Corrugated 1,235 (59) 1,176
Bags & Coatings 2,226 (39) 2,187
Intra-segment elimination (125) 125 -
Total Europe & International 4,852 (102) 4,750
South Africa Division 580 (211) 369
Newsprint businesses 492 (1) 491
Segments total 5,924 (314) 5,610
Inter-segment elimination (314) 314 -
Group total 5,610 - 5,610
Notes:
1 Inter-segment transactions are conducted on an arm`s length basis.
2 The description of each business segment reflects the nature of the main
products they sell. In certain instances the business segments sell minor
volumes of other products and due to this reason the external segment revenues
will not necessarily reconcile to the external revenues by type of product
presented below.
External revenue by product type
(Restated)
EUR million 2011 2010
Products
Corrugated products 1,369 1,212
Uncoated fine paper 1,337 1,351
Kraft paper & industrial bags 1,350 1,170
Coatings & consumer packaging 881 809
Pulp 263 247
Newsprint 251 221
Woodchips 60 76
Merchant 41 373
Other1 187 151
Group total 5,739 5,610
Note:
1 Revenues derived from product types that are not individually material are
classified as other.
External revenue by location of customer
(Restated)
EUR million 2011 2010
Revenue
Africa
South Africa1 303 249
Rest of Africa 268 226
Africa total 571 475
Western Europe
Germany 810 768
United Kingdom1 278 323
Rest of western Europe 1,529 1,474
Western Europe total 2,617 2,565
Emerging Europe 1,144 1,184
Russia 556 491
North America 243 234
South America 30 30
Asia and Australia 578 631
Group total 5,739 5,610
Note:
1 These revenues, which total EUR581 million (2010: EUR572 million), are
attributable to the countries in which the Group`s parent entities are
domiciled.
External revenue by location of production
(Restated)
EUR million 2011 2010
Revenue
Africa
South Africa1 617 593
Rest of Africa 10 5
Africa total 627 598
Western Europe
Austria 1,110 1,161
United Kingdom1 147 155
Rest of western Europe 1,090 997
Western Europe total 2,347 2,313
Emerging Europe
Poland 794 711
Rest of emerging Europe 1,075 1,076
Emerging Europe total 1,869 1,787
Russia 703 617
North America 159 131
Asia and Australia 34 164
Group total 5,739 5,610
Note:
1 These revenues, which total EUR764 million (2010: EUR748 million), are
attributable to the countries in which the Group`s parent entities are
domiciled.
There are no external customers which account for more than 10% of the Group`s
total external revenue.
Operating profit from continuing operations before special items
(Restated)
EUR million 2011 2010
Europe & International
Uncoated Fine Paper 205 179
Corrugated 178 119
Bags & Coatings 228 133
Total Europe & International 611 431
South Africa Division 62 64
Newsprint businesses (18) (4)
Corporate & other businesses (33) (33)
Segments total 622 458
Special items (see note 4) (55) (21)
Net income from associates 1 2
Net finance costs (111) (106)
Group profit from continuing operations before tax 457 333
Significant components of operating profit from continuing operations before
special items
The DLC executive committee uses EBITDA as a measure of cash flow, coupled
with the depreciation and amortisation charge, for making decisions about,
amongst others, allocation of funds for capital investment.
Depreciation and
EBITDA amortisation
(Restated) (Restated)
2011 2010 2011 2010
EUR million
Europe & International
Uncoated Fine Paper 309 279 104 100
Corrugated 251 187 73 68
Bags & Coatings 327 238 99 105
Total Europe & International 887 704 276 273
South Africa Division 114 117 52 53
Newsprint businesses (5) 10 13 14
Corporate & other businesses (32) (33) 1 -
Group and segments total from
continuing operations 964 798 342 340
Green energy sales and
disposal of emissions
credits
Operating lease charges
(Restated) (Restated)
2011 2010 2011 2010
EUR million
Europe & International
Uncoated Fine Paper 7 8 5 6
Corrugated 32 27 43 38
Bags & Coatings 10 9 36 36
Total Europe & International 49 44 84 80
South Africa Division 5 5 - -
Newsprint businesses 1 6 - -
Corporate & other businesses 1 2 - -
Group and segments total from
continuing operations 56 57 84 80
Reconciliation of total profit from operations and associates to EBITDA
(Restated)
2011 2010
EUR million
Total profit from operations and associates 568 439
Special items (excluding associates) (see note 4) 55 21
Depreciation and amortisation 342 340
Share of associates` net income (1) (2)
EBITDA 964 798
Operating segment assets
(Restated)
2011 2010
Net
Segment Net segment Segment segment
assets1 assets assets1 assets
EUR million
Europe & International
Uncoated Fine Paper 1,473 1,283 1,672 1,512
Corrugated 1,215 967 1,112 898
Bags & Coatings 1,640 1,279 1,731 1,333
Intra-segment elimination (87) - (55) -
Total Europe & International 4,241 3,529 4,460 3,743
South Africa Division 964 828 1,091 953
Newsprint businesses 94 59 141 106
Corporate & other businesses 6 3 10 7
Inter-segment elimination (40) - (63) -
Segments total 5,265 4,419 5,639 4,809
Unallocated:
Discontinued operation - - 507 393
Investments in associates 10 10 16 16
Deferred tax
assets/(liabilities) 5 (305) 21 (328)
Other non-operating
assets/(liabilities) 2 140 (291) 193 (336)
Group trading capital employed 5,420 3,833 6,376 4,554
Financial asset investments 33 33 34 34
Net debt 192 (831) 83 (1,364)
Group assets 5,645 3,035 6,493 3,224
Notes:
1 Segment assets are operating assets and as at 31 December 2011 consist of
property, plant and equipment of EUR3,377 million (2010: EUR3,761 million),
intangible assets of EUR238 million (2010: EUR238 million), forestry assets of
EUR297 million (2010: EUR320 million), retirement benefits surplus of EUR8
million (2010: EUR9 million), inventories of EUR637 million (2010: EUR621
million) and operating receivables of EUR708 million (2010: EUR690 million).
2 Other non-operating assets consist of derivative assets of EUR13 million
(2010: EUR14 million), current income tax receivables of EUR6 million (2010:
EUR11 million), other non-operating receivables of EUR121 million (2010:
EUR167 million) and assets held for sale of EURnil (2010: EUR1 million). Other
non-operating liabilities consist of derivative liabilities of EUR8 million
(2010: EUR24 million), non-operating provisions of EUR68 million (2010: EUR92
million), current income tax liabilities of EUR78 million (2010: EUR78
million) and other non-operating payables and deferred income of EUR277
million (2010: EUR335 million).
Non-current non-financial assets
Non- 2011
current
non- Net
financial Segment segment
assets1 assets assets
EUR million
Africa
South Africa2 825 974 827
Rest of Africa 6 17 16
Africa total 831 991 843
Western Europe
Austria 453 796 576
United Kingdom2 68 128 93
Rest of western Europe 398 671 525
Western Europe total 919 1,595 1,194
Emerging Europe
Poland 469 594 511
Slovakia 439 490 427
Rest of emerging Europe 342 482 388
Emerging Europe total 1,250 1,566 1,326
Russia 836 957 917
North America 57 105 91
Asia and Australia 19 51 48
Segments total 3,912 5,265 4,419
(Restated)
Non- 2010
current
non- Net
financial Segment segment
assets1 assets assets
EUR million
Africa
South Africa2 969 1,088 959
Rest of Africa 8 14 13
Africa total 977 1,102 972
Western Europe
Austria 392 752 667
United Kingdom2 80 135 113
Rest of western Europe 434 714 543
Western Europe total 906 1,601 1,323
Emerging Europe
Poland 580 702 583
Slovakia 492 547 466
Rest of emerging Europe 392 536 394
Emerging Europe total 1,464 1,785 1,443
Russia 896 1,020 961
North America 56 92 74
Asia and Australia 20 39 36
Segments total 4,319 5,639 4,809
Notes:
1 Non-current non-financial assets are non-current assets and consist of
property, plant and equipment, intangible assets and forestry assets, but
exclude retirement benefits surplus, deferred tax assets and non-current
financial assets.
2 These non-current non-financial assets, segment assets and net segment
assets, which total EUR893 million, EUR1,102 million and EUR920 million
respectively (2010: EUR1,049 million, EUR1,223 million and EUR1,072 million
respectively), are attributable to the countries in which the Group`s parent
entities are domiciled.
Additions to non-current non-financial assets
Additions to non-
current non-financial Capital expenditure
assets1 cash payments2
(Restated) (Restated)
2011 2010 2011 2010
EUR million
Europe & International
Uncoated Fine Paper 51 138 61 151
Corrugated 43 79 44 87
Bags & Coatings 120 102 110 92
Total Europe & International 214 319 215 330
South Africa Division 66 71 27 28
Newsprint businesses 7 10 4 7
Corporate & other businesses - - - 1
Segments total 287 400 246 366
Unallocated:
Discontinued operation 18 28 17 28
Group total 305 428 263 394
Notes:
1 Additions to non-current non-financial assets reflect cash payments and
accruals in respect of additions to property, plant and equipment, intangible
assets and forestry assets and include interest capitalised as well as
additions resulting from acquisitions through business combinations. Additions
to non-current non-financial assets, however, exclude additions to deferred
tax assets, retirement benefits surplus and non-current financial assets.
2 Capital expenditure cash payments exclude business combinations, interest
capitalised and investments in intangible and forestry assets.
4 Special items
(Restated)
EUR million 2011 2010
Operating special items
Asset impairments (48) (32)
Reversal of asset impairments - 9
Restructuring and closure costs
Restructuring and closure costs excluding related
personnel costs (5) (14)
Personnel costs relating to restructuring (4) (24)
Reversal of restructuring and closure costs excluding
related personnel costs 3 30
Reversal of personnel costs relating to restructuring - 1
Gain on acquisition of business - 34
Total operating special items (54) 4
Non-operating special items
Loss on disposals (1) (11)
Impairments of assets held for sale - (14)
Total non-operating special items (1) (25)
Total special items from continuing operations before tax
and non-controlling interests (55) (21)
Tax (see note 5) 2 6
Non-controlling interests - 1
Total special items attributable to equity holders of the
parent companies (53) (14)
Special items from continuing operations before tax and non-controlling
interests by operating segment
(Restated)
EUR million 2011 2010
Europe & International
Uncoated Fine Paper 2 5
Corrugated 3 (15)
Bags & Coatings (27) 28
Total Europe & International (22) 18
South Africa Division - (10)
Newsprint businesses (33) (29)
Corporate & other businesses - -
Group and segments total from continuing operations (55) (21)
Operating special items
Restructuring activities undertaken in Bags & Coatings resulted in
restructuring costs of EUR5 million and related personnel costs of EUR4
million being recognised in the coatings & consumer packaging business. In
addition, a strategic review of certain assets in the kraft paper business
resulted in an asset impairment of EUR15 million being recognised.
Losses incurred and a weak trading outlook has necessitated the impairment of
the Group`s share of assets at Aylesford Newsprint amounting to EUR33 million.
Purchase price adjustments on the sale of businesses in prior years resulted
in the reversal of previously recognised restructuring provisions of EUR2
million in Uncoated Fine Paper and EUR1 million in Bags & Coatings.
Non-operating special items
Finalisation of the sales of Frohnleiten and the UK corrugated plants resulted
in a gain on disposal of EUR3 million in the Corrugated business.
The sale of Unterland, a flexible packaging business, resulted in a loss on
disposal of EUR4 million in Bags & Coatings.
5 Tax charge
(a) Analysis of charge for the year from continuing operations
(Restated)
EUR million 2011 2010
UK corporation tax at 26.5% (2010: 28%) 1 (2)
SA corporation tax at 28% (2010: 28%) 7 3
Overseas tax 84 74
Current tax (excluding tax on special items) 92 75
Deferred tax in respect of the current period (excluding
tax on special items) 22 18
Deferred tax in respect of prior period over provision (12) (5)
Total tax charge before special items 102 88
Deferred tax on special items (2) (6)
Total tax credit on special items (see note 4) (2) (6)
Total tax charge from continuing operations 100 82
(b) Factors affecting tax charge for the year
The Group`s effective rate of tax from continuing operations before special
items for the year ended 31 December 2011, calculated on profit from
continuing operations before tax before special items and including net income
from associates, is 20% (2010: 25%).
The Group`s total tax charge from continuing operations for the year can be
reconciled to the tax on the Group`s profit from continuing operations before
tax at the weighted average UK and SA corporation tax rate of 26.6% (2010:
28%), as follows:
(Restated)
EUR million 2011 2010
Profit from continuing operations before tax 457 333
Tax on profit from continuing operations before tax
calculated at the weighted average UK
and SA corporation tax rate of 26.6%1 (2010: 28%) 121 93
Tax effect of net income from associates, calculated at
26.6% (2010: 28%) - (1)
Tax effects of:
Tax in Mondi Limited on intercompany interest received
from Mpact Limited 4 8
Expenses not (taxable)/deductible for tax purposes (7) (13)
Intangible amortisation and non-qualifying depreciation (11) (6)
Special items not deductible/(taxable) 1 (10)
Other non-deductible expenses 3 3
Non-taxable income (1) (1)
Temporary difference adjustments 14 23
Current year tax losses and other temporary differences
not recognised 26 30
Prior period tax losses and other temporary differences
not previously recognised (12) (7)
Other adjustments (31) (27)
Current tax prior period adjustments 6 8
South African Secondary Tax on Companies 4 2
Tax incentives (20) (16)
Effect of differences between local rates and UK and SA
rates (28) (27)
Other adjustments 7 6
Tax charge from continuing operations for the financial
year 100 82
Note:
1 The weighted average tax rate has been determined by weighting the profit
from continuing operations before tax after special items of Mondi Limited and
its subsidiaries and Mondi plc and its subsidiaries.
IAS 1 requires income from associates to be presented net of tax on the face
of the combined and consolidated income statement. The Group`s share of its
associates` tax is therefore not presented within the Group`s total tax charge
from continuing operations. The associates` tax charge included within `Net
income from associates` for the year ended 31 December 2011 is EURnil (2010:
EUR1 million).
6 Discontinued operation
On 30 June 2011, the Mondi Group shareholders approved a special resolution to
separate the Group`s interest in Mondi Packaging South Africa (MPSA) via a
demerger in terms of which all the ordinary shares in MPSA held by Mondi
Limited were distributed to the Mondi Limited ordinary shareholders by way of
a dividend in specie. MPSA was listed on 11 July 2011 under a new name, Mpact
Limited (Mpact), on the securities exchange operated by the JSE Limited (JSE).
Prior to the demerger (i) Mondi Limited and Shanduka Packaging (Proprietary)
Limited (Shanduka Packaging) subscribed for new Mpact shares; (ii) certain
shareholder loans made to Mpact were repaid using the cash proceeds received
from the new share subscription and newly arranged borrowing facilities of
Mpact; and (iii) the Mpact shares held by Mondi Limited`s employee share
ownership trust were acquired by the Mondi Group. The Mondi Group`s
shareholding in Mpact increased to 89.55% of the total number of Mpact shares
in issue following these steps and Shanduka Packaging`s shareholding reduced
to 10.45%.
The resulting interest in Mpact held by the Mondi Group was distributed to
Mondi Limited shareholders by way of a dividend in specie.
The net result of the demerger on the Group`s consolidated net debt position
was a reduction of EUR172 million.
The dividend in specie declared to Mondi Limited shareholders was measured at
the fair value of the Mpact shares distributed, which was EUR205 million. The
carrying value of the investment, immediately prior to distribution as a
dividend in specie, was EUR170 million. The resulting net gain on disposal of
the business was EUR29 million, after deducting demerger costs incurred of
EUR6 million. The demerger and disposal of Mpact was completed during July
2011. The gain on disposal was separately recognised as part of the
discontinued operation.
Subsequent to the demerger, a consolidation of the Mondi Limited ordinary
shares owned by Mondi Limited shareholders, the effect of which was to reduce
their proportionate interest in the Mondi Group, was undertaken in order to
compensate Mondi plc shareholders for the value distributed to Mondi Limited
shareholders in terms of the demerger.
The Mondi Limited share consolidation was intended to have, as far as
practicable, an equivalent but not necessarily identical economic effect on
Mondi plc shareholders as the economic effect that the demerger had on Mondi
Limited shareholders.
The total number of new Mondi Limited ordinary shares held by Mondi Limited
shareholders after the Mondi Limited share consolidation was determined by
reference to the volume weighted average price (VWAP) of Mpact shares traded
on the JSE, the VWAP of existing Mondi Limited ordinary shares traded on the
JSE and the VWAP of Mondi plc ordinary shares traded on the London Stock
Exchange plc (LSE) and JSE, in each case during the applicable VWAP
determination period, being the nine business days from 11 July 2011 to 21
July 2011.
The result of the Mondi Limited share consolidation was that the number of
Mondi Limited shares in issue reduced from 147 million to 118 million and the
total number of Mondi shares in issue reduced from 514 million to 486 million.
Mpact paid interest of EUR13 million (2010: EUR28 million) to Mondi Limited in
respect of intercompany financing provided. This interest is eliminated on
consolidation and is thus not taken into consideration in the tables below.
The results of the discontinued operation up to 30 June 2011, which have been
included in the condensed combined and consolidated income statement for the
year ended 31 December 2011, were as follows:
EUR million 2011 2010
Revenue 296 618
Expenses (282) (579)
Profit before tax 14 39
Related tax charge - (5)
Profit after tax from discontinued operation 14 34
Gain on distribution of discontinued operation 29 -
Related tax charge/(credit) - -
Net gain on distribution of discontinued operation 29 -
Total profit attributable to discontinued operation 43 34
Attributable to:
Non-controlling interests - 2
Equity holders of the parent companies 43 32
Mpact contributed the following cash flows to the Group:
EUR million 2011 2010
Net cash generated from operating activities 32 69
Net cash used in investing activities (55) (29)
Net cash generated from/(used in) financing activities 26 (36)
Earnings per share from the discontinued operation are
presented as follows (see note 7):
EUR cents per share 2011 2010
Profit from discontinued operation for the financial year
attributable to equity holders of the
parent companies
Basic EPS 8.6 6.3
Diluted EPS 8.5 6.2
Details of the net assets disposed were as follows:
2011
EUR million
Net assets disposed:
Goodwill 63
Other intangible assets 6
Property, plant and equipment 195
Investments in associates 6
Financial asset investments 1
Deferred tax assets 3
Retirement benefits surplus1 1
Inventories 73
Trade and other receivables 129
Cash and cash equivalents 38
Short-term borrowings (15)
Trade and other payables (109)
Current tax liabilities (1)
Derivative financial instrument liabilities (3)
Medium and long-term borrowings (195)
Retirement benefits obligation1 (7)
Deferred tax liabilities (1)
Other non-current liabilities (3)
Total net assets disposed 181
Cumulative translation adjustment reserve realised (5)
Non-controlling interests disposed (6)
Net carrying value of discontinued operation distributed 170
Dividend in specie distributed to Mondi Limited shareholders 205
Net carrying value of discontinued operation distributed (170)
Fair value gain on discontinued operation distributed 35
Transaction costs (6)
Net fair value gain on discontinued operation distributed 29
Note:
1 The retirement benefits surplus disposed of consists of the fair value of
plan asset of EUR19 million less the pension plans defined benefits obligation
of EUR16 million and a surplus restriction of EUR2 million. The retirement
benefits obligation disposed of consists of the post- retirement medical plans
defined benefit obligation of EUR7 million.
7 Earnings per share
(a) From continuing operations
As more fully described in note 6, Mondi Limited`s ordinary shares were
subject to a share consolidation which was recognised from 1 August 2011, the
date on which the new Mondi Limited ordinary shares commenced trading on the
JSE.
The share consolidation is the matching action to compensate Mondi plc
shareholders for the dividend in specie declared to Mondi Limited
shareholders. IFRS requires that the number of shares subject to the
consolidation be adjusted from the effective date of the consolidation, hence,
for the year under review the effect of the share consolidation is included
from 1 August 2011.
(Restated)
EUR cents per share 2011 2010
Profit from continuing operations for the
financial year attributable to equity holders
of the parent companies
Basic EPS 57.5 37.8
Diluted EPS 56.8 37.4
Underlying earnings for the financial year1
Basic EPS 68.1 40.6
Diluted EPS 67.3 40.1
Note:
1 Underlying EPS excludes the impact of special items
The calculation of basic and diluted EPS and
basic and diluted underlying EPS from
continuing operations is based on the following data:
Earnings
(Restated)
EUR million 2011 2010
Profit for the financial year attributable to
equity holders of the parent companies 330 224
Profit from discontinued operation (see note 6) (14) (39)
Net gain on distribution of discontinued
operation (see note 6) (29) -
Related tax (see note 6) - 5
Related non-controlling interests (see note 6) - 2
Profit from continuing operations for the
financial year attributable to equity holders
of the parent companies 287 192
Special items (see note 4) 55 21
Related tax (see note 4) (2) (6)
Related non-controlling interests (see note 4) - (1)
Underlying earnings for the financial year1 340 206
Note:
1 Underlying earnings excludes the impact of special items.
Number of shares
million 2011 2010
Basic number of ordinary shares outstanding 1 499 508
Effect of dilutive potential ordinary shares 2 6 6
Diluted number of ordinary shares outstanding 505 514
Notes:
1 The basic number of ordinary shares outstanding represents the weighted
average number in issue for Mondi Limited and Mondi plc for the year, as
adjusted for the weighted average number of treasury shares held during the
year, and includes the impact of the share consolidation in 2011.
2 Diluted EPS is calculated by adjusting the weighted average number of
ordinary shares in issue, net of treasury shares, on the assumption of
conversion of all potentially dilutive ordinary shares.
(b) From continuing and discontinued operations
EUR cents per share 2011 2010
Profit for the financial year attributable to equity holders of
the parent companies
Basic EPS 66.1 44.1
Diluted EPS 65.3 43.6
Headline earnings for the financial year1
Basic EPS 69.9 47.0
Diluted EPS 69.1 46.5
Note:
1 The presentation of Headline EPS is mandated under the 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.
The calculation of basic and diluted EPS and basic and diluted headline EPS
from continuing and discontinued operations is based on the following data:
Earnings
(Restated)
EUR million 2011 2010
Profit for the financial year attributable to equity
holders of the parent companies 330 224
Net gain on distribution of discontinued operation (see
note 6) (29) -
Special items 55 21
Special items: restructuring and closure costs (6) (7)
Remeasurements related to the discontinued operation1 - 1
Profit on disposal of tangible and intangible assets - (1)
Impairments not included in special items 1 6
Related tax (2) (4)
Related non-controlling interests - (1)
Headline earnings for the financial year 349 239
Note:
1 Remeasurements as defined in Circular 3/2009, `Headline Earnings`, as issued
by the South African Institute of Chartered Accountants.
8 Alternative measure of earnings per share
The directors have elected to present an alternative, non-IFRS measure of
earnings per share from continuing operations in order to provide shareholders
with a comparison of the continuing operations of the Group as if the demerger
and related share consolidation had occurred at the beginning of each period
presented. This is deemed appropriate as it is the continuing operations of
the Group, after taking the impact of the share consolidation into
consideration, which will be the basis of the future performance of the Group.
This approach will enable a useful comparison of earnings per share from
continuing operations, based on the consolidated shares, for all future
periods.
The presentation of such an alternative, non-IFRS measure of earnings per
share is classified by the JSE Limited as pro-forma financial information.
Refer to the pro-forma financial information set out at the end of this
report.
In addition, the effect of the recapitalisation of Mpact resulted in a
repayment of intercompany debt by Mpact to Mondi Limited on 4 and 5 July 2011
of EUR76 million. These proceeds were used to reduce the Group`s net debt. The
alternative measure of earnings per share has therefore been adjusted to take
the related saving on interest paid into consideration as if the
recapitalisation had occurred at the beginning of each period presented.
Earnings
(Restated)
EUR million 2011 2010
Underlying earnings for the financial year1 340 206
Tax saving by Mondi Limited on intercompany interest
received from Mpact2 4 8
Saving of interest paid on net debt at 8.6% per annum 3 7
Tax at 28% on saving of interest paid (1) (2)
Adjusted earnings for the financial year 346 219
Notes:
1 Underlying earnings excludes the impact of special items.
2 Had the recapitalisation of Mpact occurred at the beginning of each period
presented, Mondi Limited would no longer have received interest on its
intercompany loans to Mpact and thus the tax charge on the interest received
would not have been incurred.
The revised weighted average number of shares is determined as follows:
Number of shares
(Restated)
million 2011 2010
Basic number of ordinary shares outstanding 499 508
Adjustment for Mondi Limited share consolidation1 (17) (28)
Adjusted basic number of ordinary shares outstanding2 482 480
Effect of dilutive potential ordinary shares3 6 5
Diluted number of ordinary shares outstanding after Mondi
Limited share consolidation 488 485
Notes:
1 The actual number of shares subject to consolidation was 29 million. The
adjustment reflects the impact on the number of shares as if the share
consolidation had occurred with effect from 1 January 2011 and takes treasury
shares into consideration. In 2011, the adjustment reflects the period up to
the date of the share consolidation as the share consolidation is included in
the basic number of ordinary shares outstanding from 1 August 2011.
2 The basic number of ordinary shares outstanding represents the weighted
average number in issue for Mondi Limited and Mondi plc for the year, as
adjusted for the weighted average number of treasury shares held during the
year.
3 Diluted EPS is calculated by adjusting the weighted average number of
ordinary shares in issue, net of treasury shares, on the assumption of
conversion of all potentially dilutive ordinary shares.
Based on the adjusted earnings and weighted average number of shares, the
alternative, non-IFRS earnings per share figures for continuing operations
would be:
(Restated)
EUR cents per share 2011 2010
Earnings per share - alternative measure for
the financial year
Basic EPS - alternative measure 71.8 45.6
Diluted EPS - alternative measure 70.9 45.2
9 Dividends
Dividend payments
An interim dividend for the year ended 31 December 2011 of 78.79484 rand cents
/ 8.25 euro cents per share was paid on 13 September 2011 to all Mondi Limited
and Mondi plc ordinary shareholders on the relevant registers on 19 August
2011.
A proposed final dividend for the year ended 31 December 2011 of 17.75 euro
cents per share will be paid on 10 May 2012 to all Mondi Limited and Mondi plc
ordinary shareholders on the relevant registers on 13 April 2012. The final
dividend is subject to the approval of the shareholders of Mondi Limited and
Mondi plc at the respective annual general meetings scheduled for 3 May 2012.
Dividend timetable
The proposed final dividend for the year ended 31 December 2011 of 17.75 euro
cents per share will be paid in accordance with the following timetable:
Mondi Limited Mondi plc
Last date to trade shares cum-dividend
JSE Limited 4 April 2012 4 April 2012
London Stock Exchange Not applicable 10 April 2012
Shares commence trading ex-dividend
JSE Limited 5 April 2012 5 April 2012
London Stock Exchange Not applicable 11 April 2012
Record date
JSE Limited 13 April 2012 13 April 2012
London Stock Exchange Not applicable 13 April 2012
Last date for receipt of Dividend
Reinvestment Plan
(DRIP) elections by Central Securities
Depository
Participants 19 April 2012 19 April 2012
Last date for DRIP elections to UK
Registrar and South
African Transfer Secretaries by
shareholders of Mondi
Limited and Mondi plc 20 April 2012 15 April 2012*
Payment Date
South African Register 10 May 2012 10 May 2012
UK Register Not applicable 10 May 2012
DRIP purchase settlement dates 17 May 2012 15 May 2012**
Currency conversion date
ZAR/euro 23 February 2012 23 February 2012
Euro/sterling Not applicable 24 April 2012
*20 April 2012 for Mondi plc South African branch register shareholders
**17 May 2012 for Mondi plc South African branch register shareholders
Share certificates on the South African registers of Mondi Limited and Mondi
plc may not be dematerialised or rematerialised between 5 April 2012 and 15
April 2012, both dates inclusive, nor may transfers between the UK and South
African registers of Mondi plc take place between 4 April 2012 and 15 April
2012, both dates inclusive.
10 Borrowings
2011
Non-
Current current Total
EUR million
Secured
Bank loans and overdrafts 9 1 10
Obligations under finance leases 2 10 12
Total secured 11 11 22
Unsecured
Bank loans and overdrafts 253 155 408
Bonds - 492 492
Other loans 22 79 101
Total unsecured 275 726 1,001
Total borrowings 286 737 1,023
2010
Non-
Current current Total
EUR million
Secured
Bank loans and overdrafts 26 127 153
Obligations under finance leases 4 14 18
Total secured 30 141 171
Unsecured
Bank loans and overdrafts 363 282 645
Bonds - 491 491
Other loans 17 123 140
Total unsecured 380 896 1,276
Total borrowings 410 1,037 1,447
Obligations under finance leases
The maturity of obligations under finance leases is:
EUR million 2011 2010
Not later than one year 3 4
Later than one year but not later than five years 10 15
Later than five years - 2
Future value of finance lease liabilities 13 21
Future finance charges (1) (3)
Present value of finance lease liabilities 12 18
The Group does not have any individual finance lease arrangements which are
considered material.
Financing facilities
Group liquidity is provided through a range of committed debt facilities which
are in excess of the Group`s short-term needs. The principal loan arrangements
in place include the following:
EUR750 million Syndicated Revolving Credit Facility (RCF)
The RCF is a five year multi-currency revolving credit facility which was
signed on 14 April 2011. The RCF refinances the EUR1.55 billion Syndicated
Revolving Credit Facility (UKRCF) which was due to mature on 22 June 2012 and
which has since been cancelled. Interest is charged on the balance outstanding
at market-related rates linked to EURIBOR.
EUR500 million Eurobond
Mondi Finance plc launched its inaugural publicly traded bond, guaranteed by
Mondi plc, on 26 March 2010. The EUR500 million bond, which matures on 3 April
2017, was issued at a discount of EUR5.63 million and pays a fixed coupon of
5.75% per annum. The bond contains a coupon step up clause whereby the coupon
will be increased by 1.25% per annum if Mondi fails to maintain at least one
investment grade credit rating from either Moody`s Investors Service or
Standard & Poor`s. Mondi currently has investment grade credit ratings from
both Standard & Poor`s (BBB-, outlook stable) and Moody`s Investors Service
(Baa3, outlook positive).
EUR160 million Export Credit Agency Facility (ECAF)
The ECAF is used to part finance expansionary capital expenditure in Russia.
The facility has an amortising repayment until 2020 and interest is charged on
the balance outstanding at a market-related rate linked to LIBOR.
PLN 474 million European Investment Bank Facility (EIBF1)
The EIBF1 is used to part finance expansionary capital expenditure at Mondi
Swiecie in Poland. The facility has an amortising repayment until 2017 and
interest is charged at a market-related rate linked to WIBOR (Warsaw Interbank
Offered Rate).
EUR100 million European Investment Bank Facility (EIBF2)
The EIBF2 is used to part finance expansionary capital expenditure in Russia.
The facility is currently undrawn and is available to be drawn until 28 May
2013. Once drawn, the facility amortises over 12 years with a two year grace
period. Interest is charged on the balance outstanding at a market-related
rate linked to EURIBOR.
RUB 1.6 billion European Bank for Reconstruction and Development Facility
(EBRDF)
The EBRDF is used to part finance expansionary capital expenditure in Russia.
The facility has an amortising repayment until 2019 and interest is charged on
the balance outstanding at a market-related rate linked to MOSPRIME (Moscow
Prime Offered Rate).
In addition to the facilities above, the Group has committed facilities
amounting to ZAR 1.1 billion in South Africa.
The Group`s borrowings as at 31 December are analysed by nature and underlying
currency as follows:
Non-interest
Floating rate Fixed rate bearing
2011/EUR million borrowings borrowings borrowings
Euro 152 503 -
South African rand 178 - -
Polish zloty 94 - -
Russian rouble 39 - -
Turkish lira 26 - -
Pounds sterling 19 - -
Other currencies 3 9 -
Carrying value 511 512 -
Fair value 511 539 -
Total carrying
2011/EUR million value Fair value
Euro 655 682
South African rand 178 178
Polish zloty 94 94
Russian rouble 39 39
Turkish lira 26 26
Pounds sterling 19 19
Other currencies 12 12
Carrying value 1,023
Fair value 1,050
Non-interest
Floating rate Fixed rate bearing
2010/EUR million borrowings borrowings borrowings
Euro 262 643 2
South African rand 367 1 14
Polish zloty 119 - -
Turkish lira 13 - -
Pounds sterling 13 - -
US dollar - 5 -
Other currencies 2 6 -
Carrying value 776 655 16
Fair value 777 682 16
Total carrying
2010/EUR million value Fair value
Euro 907 935
South African rand 382 382
Polish zloty 119 119
Turkish lira 13 13
Pounds sterling 13 13
US dollar 5 5
Other currencies 8 8
Carrying value 1,447
Fair value 1,475
In addition to the above, the Group swaps euro debt into other currencies
through the foreign exchange market.
The fair value of the EUR500 million Eurobond is estimated with reference to
the last price quoted in the secondary market and for all other financial
liabilities is estimated by discounting the future contractual cash flows at
the current market interest rate that is available to the Group for similar
financial instruments.
The Group has pledged specific assets as collateral against certain
borrowings. The fair values of these assets as at 31 December are as follows:
EUR million 2011 2010
Assets held under finance leases
Property, plant and equipment 9 20
Assets pledged as collateral for other borrowings
Property, plant and equipment 21 230
Inventories 5 79
Financial assets 17 166
Other 17 20
Total value of assets pledged as collateral 69 515
The Group is entitled to receive all cash flows from these pledged assets.
Further, there is no obligation to remit these cash flows to another entity.
11 Share capital and stated capital
As part of the Mpact demerger, as more fully described in note 6, the
following actions, which directly impacted on the Group`s share capital and
share premium, were undertaken during the year ended 31 December 2011:
- In order to facilitate the share consolidation of Mondi Limited, all Mondi
Limited`s authorised and issued share capital was converted from par value
shares to shares with no par value prior to the share consolidation, in
compliance with the South African Companies Act 2008 which came into effect on
1 May 2011. As a result, both the amounts of Mondi Limited`s share capital and
share premium were converted to stated capital.
- Mondi Limited`s ordinary shares were subject to a share consolidation which
was recognised from 1 August 2011, the date on which the new Mondi Limited
ordinary shares commenced trading on the JSE. The share consolidation is the
matching action to compensate Mondi plc shareholders for the dividend in
specie declared to Mondi Limited shareholders.
- In response to the Mondi Limited share consolidation, Mondi plc`s special
converting shares were split into 146,896,322 EUR0.0389 deferred shares and
146,896,322 EUR0.1611 special converting shares. The new special converting
shares were subsequently consolidated to 118,312,975 EUR0.20 special
converting shares in order to equal the number of Mondi Limited ordinary
shares in issue after the consolidation was effected.
- The dividend in specie distributed to Mondi Limited shareholders was
partially apportioned to the stated capital of Mondi Limited, resulting in a
reduction of stated capital from EUR543 million to EUR439 million.
Authorised
Number of
shares
Mondi Limited ordinary shares with no par value 250,000,000
Mondi Limited special converting shares with no par value 650,000,000
In accordance with the UK Companies Act 2006, Mondi plc changed its Articles
of Association on 6 May 2010 to remove the limit on the number of shares which
can be issued. Immediately prior to this date, Mondi plc had authorised share
capital of 3,177,608,605 EUR0.20 ordinary shares and 250,000,000 EUR0.20
special converting shares.
2011
Number of shares Share capital
Mondi Limited ordinary shares with no par
value issued on the JSE 118,312,975 -
Mondi plc EUR0.20 ordinary shares issued on
the LSE 367,240,805 74
Total ordinary shares in issue 485,553,780 74
Mondi Limited special converting shares
with no par value 367,240,805 -
Mondi plc EUR0.20 special converting shares 118,312,975 24
Total special converting shares1 485,553,780 24
Mondi plc EUR0.04 deferred shares2 146,896,322 5
Total shares 1,118,003,882 103
Called up, allotted and fully paid/EUR million
Stated capital Total
Mondi Limited ordinary shares with no par
value issued on the JSE 431 431
Mondi plc EUR0.20 ordinary shares issued on the LSE - 74
Total ordinary shares in issue 431 505
Mondi Limited special converting shares
with no par value 8 8
Mondi plc EUR0.20 special converting shares - 24
Total special converting shares1 8 32
Mondi plc EUR0.04 deferred shares2 - 5
Total shares 439 542
2010
Number of shares Share capital
Mondi Limited R0.20 ordinary shares issued
on the JSE 146,896,322 3
Mondi plc EUR0.20 ordinary shares issued on
the LSE 367,240,805 74
Total ordinary shares in issue 514,137,127 77
Mondi Limited R0.20 special converting shares 367,240,805 8
Mondi plc EUR0.20 special converting shares 146,896,322 29
Total special converting shares1 514,137,127 37
Total shares 1,028,274,254 114
Called up, allotted and fully paid/EUR million
Share
premium Total
Mondi Limited R0.20 ordinary shares issued on the JSE 532 535
Mondi plc EUR0.20 ordinary shares issued on the LSE - 74
Total ordinary shares in issue 532 609
Mondi Limited R0.20 special converting shares - 8
Mondi plc EUR0.20 special converting shares - 29
Total special converting shares1 - 37
Total shares 532 646
Notes:
1 The special converting shares are held in trust and do not carry dividend
rights. The special converting shares provide a mechanism for equality of
treatment on termination of the DLC arrangement for both Mondi Limited and
Mondi plc ordinary equity holders.
2 The deferred shares resulted from the Mpact demerger. They are held in trust
and do not carry any dividend or voting rights.
Treasury shares purchased represents the cost of shares in Mondi Limited and
Mondi plc purchased in the market and held by the Mondi Incentive Schemes
Trust and the Mondi Employee Share Trust respectively to satisfy share awards
under the Group`s employee share schemes. These costs are reflected in the
combined and consolidated statement of changes in equity. The number of
ordinary shares held by the Mondi Incentive Schemes Trust as at 31 December
2011 was 761,462 shares (2010: 338,267) at an average price of R60.01 per
share (2010: R53.40 per share). The number of ordinary shares held by the
Mondi Employee Share Trust as at 31 December 2011 was 2,991,811 shares (2010:
4,102,373) at an average price of GBP4.20 per share (2010: GBP4.03 per share).
12 Consolidated cash flow analysis
(a) Reconciliation of profit from continuing operations before tax to cash
generated from operations
(Restated)
EUR million 2011 2010
Profit from continuing operations before tax 457 333
Depreciation and amortisation 342 340
Share-based payments 10 7
Non-cash effect of special items 36 11
Net finance costs 111 105
Net income from associates (1) (2)
Decrease in provisions and post-employment benefits (25) (3)
Increase in inventories (55) (102)
Increase in operating receivables (32) (127)
Increase in operating payables 19 119
Fair value gains on forestry assets (49) (36)
Felling costs 65 65
Profit on disposal of tangible and intangible assets - (1)
Other adjustments 5 (4)
Cash generated from continuing operations 883 705
Cash generated from discontinued operation 34 73
Cash generated from operations 917 778
(b) Cash and cash equivalents
EUR million 2011 2010
Cash and cash equivalents per combined and consolidated
statement of financial position 191 83
Bank overdrafts included in short-term borrowings
(see note 12c) (74) (59)
Net cash and cash equivalents per combined and
consolidated statement of cash flows 117 24
The fair value of cash and cash equivalents approximate the carrying values
presented.
(c) Movement in net debt
The Group`s net debt position, excluding disposal groups is as follows:
Cash and Debt due Debt due
cash within one after one
equivalents1 year2 year
EUR million
At 1 January 2010 37 (133) (1,421)
Cash flow (4) 51 114
Business combinations - (1) -
Disposal of businesses - 23 52
Movement in unamortised loan costs - - (4)
Reclassification - (273) 273
Currency movements (9) (18) (51)
At 31 December 2010 24 (351) (1,037)
Cash flow 84 135 4
Business combinations - (4) (1)
Disposal of discontinued operation
(see note 6) - 15 195
Disposal of businesses - 30 12
Movement in unamortised loan costs - - (6)
Reclassification - (64) 64
Currency movements 9 27 32
At 31 December 2011 117 (212) (737)
Current
financial asset Total net
investments debt
EUR million
At 1 January 2010 - (1,517)
Cash flow - 161
Business combinations - (1)
Disposal of businesses - 75
Movement in unamortised loan costs - (4)
Reclassification - -
Currency movements - (78)
At 31 December 2010 - (1,364)
Cash flow 1 224
Business combinations - (5)
Disposal of discontinued operation (see note 6) - 210
Disposal of businesses - 42
Movement in unamortised loan costs - (6)
Reclassification - -
Currency movements - 68
At 31 December 2011 1 (831)
Notes:
1 The Group operates in certain countries (principally South Africa) where the
existence of exchange controls may restrict the use of certain cash balances.
These restrictions are not expected to have any material effect on the Group`s
ability to meet its ongoing obligations.
2 Excludes overdrafts, which are included as cash and cash equivalents. As at
31 December 2011, short-term borrowings in the combined and consolidated
statement of financial position of EUR286 million (2010: EUR410 million)
include EUR74 million of overdrafts (2010: EUR59 million).
13 Capital commitments
EUR million 2011 2010
Contracted for but not provided 140 98
Approved, not yet contracted for 372 316
These capital commitments relate to the following categories of
non-current non-financial assets:
EUR million 2011 2010
Intangible assets 13 7
Property, plant and equipment 499 407
Total capital commitments 512 414
The expected maturity of these capital commitments is:
EUR million 2011 2010
Within one year 339 296
One to two years 141 77
Two to five years 32 39
After five years - 2
Total capital commitments 512 414
Capital commitments are based on capital projects approved to date and the
budget approved by the Boards. Major capital projects still require further
approval before they commence. These capital commitments will be financed by
existing cash resources and borrowing facilities.
Capital commitments related to joint venture entities are immaterial.
14 Contingent liabilities and contingent assets
Contingent liabilities comprise aggregate amounts as at 31 December 2011 of
EUR17 million (2010: EUR20 million) in respect of loans and guarantees given
to banks and other third parties. No acquired contingent liabilities have been
recorded in the Group`s combined and consolidated statement of financial
position for both years presented.
There are a number of legal and tax claims against the Group. Provision is
made for all liabilities that are expected to materialise.
There were no contingent assets at 31 December 2011 or 31 December 2010.
Contingent assets and liabilities related to joint venture entities are
immaterial.
15 Related party transactions
The Group has related party relationships with its associates and joint
ventures. Transactions between Mondi Limited, Mondi plc and their respective
subsidiaries, which are related parties, have been eliminated on
consolidation.
The Group and its subsidiaries, in the ordinary course of business, enter into
various sale, purchase and service transactions with joint ventures and
associates and other related parties. These transactions are entered into on
an arm`s length basis at market rates.
There have been no significant changes to the related parties as disclosed in
note 38 of the Group`s annual financial statements for the year ended 31
December 2010.
16 Events occurring after 31 December 2011
In November 2011 the trustees of the defined benefit pension plan in South
Africa, with agreement from the participating pensioners and employees,
resolved to wind up the fund subject to regulatory approval. Regulatory
approval was received in January 2012. Mondi Limited will receive a
reimbursement of the pension surplus of EUR6 million. A settlement charge of
EUR2 million will be recognised in 2012.
In February 2011, Mondi Swiecie announced its intention to exercise an option
to acquire the power and heat generating plant which supplies Mondi Swiecie
with the majority of its electricity requirements and all its heat and steam
needs. The option was subject to certain conditions precedent, being a ruling
from the Arbitration Court of the National Chamber of Commerce in Poland,
consent of the financing banks of the power and heat generating plant and
receipt of approval from the competition authorities. On 10 February 2012, the
Arbitration Court ruled in favour of Mondi Swiecie, fulfilling the first of
these conditions. Competition approval has been received and application has
been made to the financing banks for approval. Based on the option price, the
implied enterprise value of the business is around EUR90 million. The outcome
and timing of any potential acquisition remains uncertain.
On 16 February 2012, Mondi made an all cash offer of PLN69.00 (EUR16.48) per
share for the 34% of Mondi Swiecie S.A. shares that it does not already own.
Mondi Swiecie is listed on the Warsaw Stock Exchange. The maximum
consideration, should all outstanding shares be acquired, is PLN1.2 billion
(EUR280 million).
Other than as set out above, with the exception of the proposed final dividend
for 2011, included in note 9, there have been no material reportable events
since 31 December 2011.
Pro-forma financial information
The directors have in the past presented underlying earnings per share in
accordance with IAS33.73 as they believe it provides a useful measure for
shareholders to understand the underlying financial performance of the Group.
Underlying earnings represents the earnings of the Group, from continuing
operations, excluding special items. Special items are those non-recurring
financial items which the Group believes should be separately disclosed on the
face of the combined and consolidated income statement to assist in
understanding the underlying financial performance of the Group. IAS33
requires that the number of shares subject to the Mondi Limited share
consolidation be adjusted from the effective date of the consolidation. This
results in a mismatch between the underlying earnings, which excludes the
discontinued operation for the full year, and the weighted average number of
shares, which only reflects the adjusted number of shares from the date of the
share consolidation.
The directors have therefore elected to present an alternative, non-IFRS
measure of underlying earnings per share from continuing operations in order
to provide shareholders with a comparison of the continuing operations of the
Group as if the demerger of Mpact and related Mondi Limited share
consolidation had occurred at the beginning of each financial year presented.
This is deemed appropriate as it is the continuing operations of the Group,
after taking the impact of the share consolidation into consideration, which
will be the basis of the future performance of the Group. This approach will
enable a useful comparison of earnings per share from continuing operations,
based on the consolidated shares, for all future periods.
The presentation of such an alternative, non-IFRS measure of earnings per
share is classified by the JSE Limited (JSE) as pro-forma financial
information and must comply with section 8 of the JSE Listings Requirements.
The unaudited pro-forma financial information below has been prepared for
illustrative purposes to provide information on how the alternative measure of
earnings per share adjustments would have impacted on the financial results of
the Group. Because of its nature, the unaudited pro-forma financial
information does not reflect the Group`s actual results of operations which
are set out in the audited financial statements.
The unaudited pro-forma results set out below only reflect an adjustment to
the combined and consolidated income statement as the statement of financial
position already reflects the demerger of Mpact and no adjustments are deemed
necessary. The statement of comprehensive income is not presented as the pro-
forma information relates only to the earnings per share measures, determined
from the combined and consolidated income statement. The directors do not
propose to present any pro-forma measures other than those relating to
underlying earnings per share and therefore have not presented the effect of
the pro-forma adjustments to headline earnings per share or earnings per share
measures from continuing and discontinued operations.
The underlying information used in the preparation of the pro-forma financial
information has been prepared using the accounting policies set out in note 1
of the audited financial statements for the year ended 31 December 2011
without adjustment.
The directors of the Group are responsible for the compilation, contents and
preparation of the unaudited pro-forma financial information set out below.
Their responsibility includes determining that: the unaudited pro-forma
financial information has been properly compiled on the basis stated; the
basis is consistent with the accounting policies of the Group; and the pro-
forma adjustments are appropriate for the purposes of the unaudited pro-forma
financial information disclosed in terms of the JSE Listings Requirements.
Since there are no significant subsequent events after 31 December 2011 that
would impact these results, no adjustments have been made to the unaudited pro-
forma financial information. The unaudited pro-forma financial information
should be read in conjunction with the Deloitte & Touche independent reporting
accountants` report thereon, which is available for inspection at Mondi
Limited`s registered office in South Africa.
Pro-forma combined and consolidated income statement
for the year ended 31 December 2011
2011
Audited Adjust- Pro-forma
(A) ments (unaudited)
EUR million
Continuing operations
Group revenue 5,739 - 5,739
Materials, energy and consumables used (2,998) - (2,998)
Variable selling expenses (511) - (511)
Gross margin 2,230 - 2,230
Maintenance and other indirect expenses (272) - (272)
Personnel costs (excluding special items) (808) - (808)
Other net operating expenses (excluding
special items) (186) - (186)
Depreciation and amortisation (342) - (342)
Underlying operating profit 622 - 622
Special items (note B) (55) - (55)
Net income from associates 1 - 1
Total profit from operations and associates 568 - 568
Net finance costs (111) 3 (108)
Investment income 30 - 30
Foreign currency gains - - -
Finance costs (note B) (141) 3 (138)
Profit before tax 457 3 460
Tax (charge)/credit (note B) (100) 3 (97)
Profit from continuing operations 357 6 363
Profit from discontinued operations 43 - 43
Profit for the financial year 400 6 406
Attributable to:
Non-controlling interests 70 - 70
Equity holders of the parent companies 330 6 336
Earnings per share (EPS) for profit
attributable to equity holders of the
parent companies
From continuing operations (note D)
Basic underlying EPS (EUR cents) 68.1 71.8
Diluted underlying EPS (EUR cents) 67.3 70.9
2010
Audited Adjust- Pro-forma
(A) ments (unaudited)
EUR million
Continuing operations
Group revenue 5,610 - 5,610
Materials, energy and consumables used (3,006) - (3,006)
Variable selling expenses (494) - (494)
Gross margin 2,110 - 2,110
Maintenance and other indirect expenses (272) - (272)
Personnel costs (excluding special items) (829) - (829)
Other net operating expenses (excluding
special items) (211) - (211)
Depreciation and amortisation (340) - (340)
Underlying operating profit 458 - 458
Special items (note B) (21) - (21)
Net income from associates 2 - 2
Total profit from operations and associates 439 - 439
Net finance costs (106) 7 (99)
Investment income 31 - 31
Foreign currency gains 7 - 7
Finance costs (note B) (144) 7 (137)
Profit before tax 333 7 340
Tax (charge)/credit (note B) (82) 6 (76)
Profit from continuing operations 251 13 264
Profit from discontinued operations 34 - 34
Profit for the financial year 285 13 298
Attributable to:
Non-controlling interests 61 - 61
Equity holders of the parent companies 224 13 237
Earnings per share (EPS) for profit
attributable to equity holders of the
parent companies
From continuing operations (note D)
Basic underlying EPS (EUR cents) 40.6 45.6
Diluted underlying EPS (EUR cents) 40.1 45.2
Notes to the pro-forma combined and consolidated income statement
A. The Group financial information has been extracted, without adjustment,
from the Group`s audited combined and consolidated financial statements for
the year ended 31 December 2011.
B. The adjustments to the audited financial statements to reflect the
unaudited pro-forma earnings are set out below:
Earnings
(Restated)
EUR million 2011 2010
Profit for the year attributable to equity holders of the
parent companies 330 224
Discontinued operations (43) (34)
Non-controlling interest in discontinued operations - 2
Effect of special items (refer note 10(a) of the audited
annual financial statements) 55 21
Tax and non-controlling interest in respect of special
items (refer note 10(a) of the audited annual
financial statements) (2) (7)
Underlying earnings attributable to equity holders of the
parent companies (refer note 10(a)
of the audited annual financial statements)1 340 206
Pro-forma adjustments
Saving of interest paid on net debt at 8.6% per annum2 3 7
Tax at 28% on saving of interest paid (1) (2)
Tax saving by Mondi Limited on intercompany interest
received from Mpact3 4 8
Adjusted pro-forma underlying earnings for the financial
year 346 219
Notes:
1 Underlying earnings excludes the impact of special items as described in
note 5 of the audited annual financial statements.
2 The effect of the recapitalisation of Mpact resulted in a repayment of
intercompany debt by Mpact to Mondi Limited on 4 and 5 July 2011 of EUR76
million. These proceeds were used to reduce the Group`s net debt. The
alternative measure of earnings per share has been adjusted to take the
related saving on interest paid into consideration as if the recapitalisation
had occurred at the beginning of each period presented.
3 Had the recapitalisation of Mpact occurred at the beginning of each
financial year presented, Mondi Limited would no longer have received interest
on its intercompany loans to Mpact and thus the tax charge on the interest
received would not have been incurred.
C. The revised weighted average number of shares is determined as follows:
Number of shares
(Restated)
million 2011 2010
Basic number of ordinary shares outstanding 499 508
Adjustment for Mondi Limited share consolidation1 (17) (28)
Adjusted basic number of ordinary shares outstanding2 482 480
Effect of dilutive potential ordinary shares3 6 5
Diluted number of ordinary shares outstanding after Mondi
Limited share consolidation 488 485
Notes:
1 The actual number of shares subject to consolidation was 29 million. The
adjustment reflects the impact on the number of shares as if the share
consolidation had occurred with effect from 1 January 2011 and takes treasury
shares into consideration. In 2011, the adjustment reflects the period up to
the date of the share consolidation as the share consolidation is included in
the basic number of ordinary shares outstanding from 1 August 2011 as set out
in note 10(a) of the audited annual financial statements.
2 The basic number of ordinary shares outstanding represents the weighted
average number in issue for Mondi Limited and Mondi plc for the year, as
adjusted for the weighted average number of treasury shares held during the
year.
3 Diluted EPS is calculated by adjusting the weighted average number of
ordinary shares in issue, net of treasury shares, on the assumption of
conversion of all potentially dilutive ordinary shares.
D. Based on the adjusted earnings and weighted average number of shares, the
alternative, non-IFRS underlying earnings per share figures for continuing
operations would be:
(Restated)
EUR cents per share 2011 2010
Underlying earnings per share - alternative measure for
the financial year
Basic EPS - alternative measure 71.8 45.6
Diluted EPS - alternative measure 70.9 45.2
The directors do not propose to present any pro-forma measures other than
those relating to underlying earnings per share and therefore have not
presented the effect of the pro-forma adjustments to headline earnings per
share or earnings per share measures from continuing and discontinued
operations.
Unaudited financial information
Production statistics
2011 2010
Europe & International
Uncoated fine paper Tonnes 1,400,991 1,524,225
Containerboard Tonnes 2,009,984 1,939,935
Kraft paper Tonnes 955,741 984,607
Hardwood pulp Tonnes 1,033,226 935,628
Internal consumption Tonnes 975,121 825,664
External Tonnes 58,105 109,964
Softwood pulp Tonnes 1,954,284 1,899,518
Internal consumption Tonnes 1,799,577 1,688,472
External Tonnes 154,707 211,046
Corrugated board and boxes MmSquared 1,213
1,308
Industrial bags M units 3,958 3,850
Coating and release liners MmSquared 3,357
3,187
Newsprint Tonnes 199,337 197,601
South Africa Division
Uncoated fine paper Tonnes 233,837 276,957
Containerboard Tonnes 257,680 259,785
Hardwood pulp Tonnes 637,205 589,186
Internal consumption Tonnes 316,388 366,170
External Tonnes 320,817 223,016
Softwood pulp Tonnes 115,606 112,956
Woodchips Bone dry tonnes 206,150 280,154
Newsprint Joint Ventures
(attributable share)
Aylesford Tonnes 188,536 187,971
Mondi Shanduka Newsprint (MSN) Tonnes 124,914 126,530
Exchange rates
2011 2010
Closing rates against the euro
South African rand 10.48 8.86
Pounds sterling 0.84 0.86
Polish zloty 4.46 3.97
Russian rouble 41.77 40.82
US dollar 1.29 1.34
Czech koruna 25.79 25.06
Turkish lira 2.44 2.07
Average rates for the period against the euro
South African rand 10.10 9.70
Pounds sterling 0.87 0.86
Polish zloty 4.12 3.99
Russian rouble 40.88 40.27
US dollar 1.39 1.33
Czech koruna 24.59 25.29
Turkish lira 2.34 2.00
23 February 2012
Sponsor: UBS South Africa (Pty) Ltd
Date: 23/02/2012 08:54:01 Produced by the JSE SENS Department.
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