(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND ISIN: ZAE000156550
(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 JSE Listings
Requirements and/or the Disclosure and Transparency and Listing Rules of the
United Kingdom Listing Authority.
Mondi Group: Interim Management Statement 6 November 2013
This interim management statement provides an update on the financial
performance and financial position of the Group since the half-year ended 30
June 2013, based on management accounts up to 30 September 2013 and estimated
results for October 2013. These results have not been audited or reviewed by
Mondi's external auditors.
Audited results for the year ending 31 December 2013 will be published on or
around 28 February 2014.
Except as discussed in this interim management statement, there have been no
significant events or transactions impacting either the financial performance
or financial position of Mondi Group since 30 June 2013 up to the date of this
Group Performance Overview
Underlying operating profit of EUR172 million for the third quarter ended 30
September 2013 was 25% above the comparable prior year period (EUR138 million),
the result of improved market conditions in Packaging Paper and the South
Africa Division and the benefits from the acquisitions completed towards the
end of 2012.
As previously announced, the performance for the quarter was impacted by the
planned annual maintenance shuts at a number of the Group's larger operating
sites. During the quarter, around half of the maintenance shuts scheduled for
the second half of the year were completed, primarily at the Group's large
European containerboard and uncoated fine paper mills. The balance of the
planned shuts will take place during the fourth quarter. As previously
indicated, the negative impact of these shuts on the second half 2013
underlying operating profit when compared to the first half is estimated at
around EUR50 million to EUR60 million.
Sales volumes were broadly in line with the comparable prior year period
(adjusted for acquisitions), but below the previous quarter due to the
scheduled maintenance shuts and seasonally weaker demand for uncoated fine
paper. The business benefited from increased recycled containerboard prices
during the period, with other key packaging and uncoated fine paper prices
remaining at similar levels to the previous quarter. Towards the end of the
quarter, modest price declines were seen, particularly in virgin containerboard
grades, uncoated fine paper and hardwood pulp.
The net impact of currency movements on underlying operating profit in the
third quarter was limited. The Group generally benefited from weaker emerging
market production currencies to which it is exposed. These gains were largely
offset by the effects of a stronger euro versus the US dollar impacting
profitability of US dollar denominated exports.
Europe & International
As anticipated, profitability of Packaging Paper was impacted by the effects of
the planned annual maintenance shuts at the Group's key containerboard mills
during the period.
Selling price increases were achieved in recycled containerboard grades during
the quarter and further price increases have been announced to take effect in
the final quarter of the year. European virgin containerboard prices were
similar to the previous quarter but have come under modest pressure from
increased imports on the back of the weaker US dollar and substitution by lower
priced recycled grades.
In kraft paper, European pricing and sales volumes remained relatively stable
throughout the quarter. While the important export markets also continued to
perform well, the combined effects of increasing competition from other
exporters to these regions and softer demand, caused by political unrest in
certain of the important Middle-East and north African markets, is a concern
going into 2014.
In the Fibre Packaging business unit, corrugated packaging remains under
pressure from rising paper input costs. We expect to recover these input cost
increases with the usual lag. In industrial bags, good cost control largely
offset moderate selling price pressure in the third quarter. The fourth quarter
will be impacted by the usual seasonal slowdown. The coatings business remains
challenged by increased competitor capacity and weak demand, particularly in
Consumer Packaging is benefiting from further realisation of planned synergies
related to the Nordenia acquisition in late 2012 and other cost reduction
initiatives. We are however experiencing some volume and margin pressure in
Uncoated Fine Paper was impacted during the third quarter by the planned
maintenance shuts at the Syktyvkar and Ruzomberok mills and the usual seasonal
slowdown in demand. The recent increases in capacity in both France and Russia
in the face of the ongoing structural decline in demand in western Europe and
cyclically softer demand in Russia remain a concern. Benchmark prices at the
end of the quarter were around EUR10 per tonne lower than at the close of the
previous quarter. The business benefited from ongoing cost management,
particularly in the Russian forestry operations, with average wood costs
continuing to decrease.
During the quarter, unutilised assets amounting to EUR9 million in the
Syktyvkar mill were written off, recorded as an operating special item.
South Africa Division
The Division has benefited from strong domestic demand, with both sales prices
and volumes increasing during the quarter, as well as the weaker South African
rand. The business was, however, negatively affected by lower average benchmark
hardwood pulp prices towards the end of the quarter. The maintenance shut at
the Richards Bay mill took place during October.
Capital investment projects
Good progress is being made on the Group's major capital investment projects.
The new recovery boiler at Frantschach was commissioned during the quarter,
while the new steam turbine at Richards Bay and steam turbine and recovery
boiler economiser at Stambolijski are on track for completion by the end of the
year. The other major projects are on schedule for completion during 2014 and
2015. In September the Boards approved a EUR166 million investment at the Mondi
Swiecie mill in Poland, bringing forward the planned replacement of the
recovery boiler and the mill's coal fired boilers. Expected to be completed
early in 2016, the new recovery boiler and conversion of the existing recovery
boiler to a biofuel boiler will result in a reduction in ongoing maintenance
costs, an improvement in overall energy efficiency, a reduction in CO2
emissions and provide the mill with future potential capacity expansion
Net debt of EUR1,761 million at the end of the quarter reflected a decrease of
EUR83 million from EUR1,844 million at 30 June 2013. The Group benefited from
strong operating cash inflows, offset in part by the expected ramp-up in
capital expenditure and outflows from financing activities, most notably the
interim dividend in September.
Finance charges were similar to those of the previous quarter and above the
comparable prior year period, reflecting the higher average net debt as a
consequence of the acquisitions completed in the fourth quarter of 2012.
The average maturity of the Group's committed debt facilities at 30 September
2013 was 3.8 years. The Group had EUR797 million of committed, unutilised
borrowing facilities available at 30 September 2013.
Management remains confident of delivering in line with its expectations for
the full year.
The current low-growth environment, coupled with increased competition in
certain areas of the business presents some challenges going into the new year.
However, this is balanced by the expected benefits from the capital expenditure
programme currently underway, further synergies from the large acquisitions
made in 2012, and ongoing cost containment initiatives. Ultimately, the outlook
for 2014 remains dependent on the nature and extent of the macroeconomic
recovery and related demand for the Group's key products.
David Hathorn +27 11 994 5418
Andrew King +27 11 994 5415
Lora Rossler +27 83 627 0292
Richard Mountain +44 20 7269 7186
Sophie McMillan +44 20 7909 684 466
Mondi is an international packaging and paper Group, with production operations
across 30 countries and revenues of EUR5.8 billion in 2012. The Group's key
operations are located in central Europe, Russia, the Americas and South Africa
and as at the end of 2012, Mondi employed 25,700 people.
Mondi Group is fully integrated across the packaging and paper value chain,
from the growing of wood and the production of pulp and paper (packaging paper
and uncoated fine paper), to the conversion of packaging paper into corrugated
packaging, industrial bags, extrusion coatings and release liner. Mondi is also
a supplier of innovative consumer packaging solutions, advanced films and
hygiene products components.
Mondi Group 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 Global, European and UK Index Series (since 2008) and the JSE's
Socially Responsible Investment (SRI) Index since 2007. The Group was also
included in the Carbon Disclosure Project's (CDP) Carbon Disclosure Leadership
Index for the third year and in CDP's Carbon Performance Leadership Index
(CPLI) for the first time in 2012.
Sponsor in South Africa: UBS South Africa (Pty) Ltd
-0- Nov/06/2013 07:00 GMT
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