Mondi Group Fixed Income Investor Presentation
April 2018 Agenda
Group overview and strategy
Capital structure and financial policies
2017 financial results
Market and operational review
Summary
Appendices
2 Mondi at a glance
Packaging PaperFibre Packaging Consumer Packaging Uncoated Fine Paper
€2,292m €2,055m €1,646m €1,832m
24% 29% 2017 Revenue1 & 21% ROCE 26%
26.3% 11.3% 10.4% 27.8%
Products
1 Segment revenues, before elimination of inter-segment revenues 3 A consistent strategy delivering industry leading returns
Underlying operating profit and ROCE Cash flow generation1 € million € million
23.0% CAGR 7% 20.5% 20.3% 19.7% 17.2% 18.0% 15.3%
13.0% +
8.0%
3.0%
699 767 957 981 1,018 715 796 1,039 1,061 948
-2.0% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
ROCE
1 Cash flow generation based on net cash generated before capital expenditure, shareholder distributions, acquisitions and disposals 4 Robust financial position
Net debt and net debt / underlying EBITDA € million
● Key financial policy
1,800 2.8 ○ Retain Investment Grade credit
1,600 2.3 metrics
1,400
1.8 1.5x 1.4x ● Current ratings:
1,200 1.1x 1.3 ○ Moody’s Investors Service at Baa1 1.0x 0.9x 1,000 + 0.8 (stable outlook)
800
0.3 ○ Standard & Poor’s at BBB+ 600 (stable outlook)
(0.2)
400
(0.7) 200 1,619 1,613 1,498 1,383 1,326
0 (1.2) 2013 2014 2015 2016 2017
Net debt Net debt / underlying EBITDA
5 Strong cash flow generation through the cycle
Cash flow bridge over 5 year period Cash flow generation 1 and kraftliner selling price 2 € million
700
600
500 €/tonne
400
538 705 516 648 549 715 796 1,039 1,061(1.4) 948 300 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.3
kraftliner
€7.5 billion cash generated over the last 10 years
1 Net cash generated before capital expenditure, shareholder distributions, acquisitions and disposals 2 Source: FOEX Indexes Ltd 6 Strong global presence
Revenue by location of customer Revenue by location of production % %
1% 13% Emerging Europe 8% Emerging Europe 22% 9% Western Europe 33% Western Europe 11% Russia Russia 13% 6% South Africa South Africa 10% 38% North America North America 36% Other + Other Product mix Net operating assets by location % %
2% 9% Consumer-related 5% Emerging Europe 1 packaging 13% Western Europe 18% Industrial packaging 39% Russia 11% 51% Uncoated fine paper South Africa
22% North America Other 30% Other
1 Comprises containerboard, corrugated packaging and consumer packaging 7 Well positioned to leverage global industry growth trends
Emerging markets growth Nominal €, 2016-2017E Key global industry trends
+11.6%
+7.9% Sustainability +2.4% Light-weightingRigid to flexibles Recyclable
Western Eastern Mondi Europe Europe revenue GDP1 GDP1 2017 vs 20162
E-commerce Convenience
1 Source: IHS Markit, updated as of 1 March 2018 8 2 Emerging Europe and Russia Our cost advantaged operations
Cost quartile1,4 %
12% 8% 12% Q4
Q3 32% 11%
Q2 27% 57% 25% 40% 100%
Q1 100% 73% 43% 100% 35% 37% UFP² fluting kraftliner Recycled White top kraftliner fluting Unbleached BHKP (pulp)³ kraft paper Semi-chemical Unbleached sack
1 Delivered to Frankfurt except where noted 3 Delivered to Rotterdam Source: RISI (Q3 2017) and Mondi estimates 9 2 Includes specialities 4 European capacity except white top kraftliner, unbleached sack kraft paper and BHKP (global) Continued investment in our world class asset base
Capital expenditure ● Strong contribution from major capital projects € million 900 180% 159% 164% ○ €175 million of incremental operating profit over 800 147% 160% the last four years, including €25 million in 2017 700 140% ○ €15 million expected in 2018 113% 600 124% 120% 500 100% ● Capital expenditure expected to be in the range of 400 80% €700 - €800 million per annum in 2018 and 2019: 300 60% ○ Štětí modernisation and woodyard upgrade 200 40% (€335 million and €41 million)
100 €700 - €800 million €700 - €800 million 20% 405 562 595 465 611 + ○ Ružomberok new kraft top white machine and 0 0% related pulp mill upgrade (€310 million) 2013 2014 2015 2016 2017 2018E 2019E Debottlenecking at Syktyvkar as part of our plan to Capex and investment in intangible assets as a % of ○ depreciation, amortisation and impairments increase saleable production by around 100 ktpa ○ Targeted expansionary investments in €770 million Over €750 million Fibre Packaging and Consumer Packaging committed to major approved major capital Key projects expected to increase current saleable capital projects expenditure projects pulp and paper production by around 9% when in full (2013 – 2016) (2017+) operation
10 Ongoing major capital investment projects
Ružomberok mill, Slovakia (€310 million) Štětí mill, Czech Republic (€335 million)
● 300,000 tonne per annum kraft top white machine ● Replacement of recovery boiler, rebuild of fibre lines and debottlenecking of paper machines ● Debottlenecking pulp mill – increasing capacity by 100,000 tonnes per annum ● Benefits: o increased saleable production – 90,000 tonnes per annum ● Incentives received market pulp and 55,000 tonnes per annum packaging paper ● Pulp mill upgrade in progress, start-up expected in late 2019 o reduced environmental footprint, increased electricity self-sufficiency, lower production costs ● Paper mill expected start-up in 2020 (subject to permitting) ● Approved and in progress, expected start-up in late 2018
11 Acquisition in progress
Powerflute
● Signed agreement to acquire 100% interest for a total consideration of €365 million on a debt and cash-free basis in December 2017
● Integrated pulp and paper mill in Kuopio (Finland) with an annual production capacity of 285,000 tonnes of high-performance semi-chemical fluting
● Production sold to a diverse range of customers, primarily for packaging fresh fruit and vegetables, but also other end-uses such as electronics, chemicals and pharmaceuticals
● Around half of the company’s production is sold in Europe, while the remainder is exported globally
● Anticipate completion of this transaction in the first half of 2018, subject to competition clearance and customary closing conditions
12 Continued innovation with our customers
Dedicated resources driving innovation ● €23 million on R&D in 2017 ● 6 R&D centres Close co-operation with customers, universities and research partners
Simple Sphere Courier Express Packaging – CornerPack e-commerce paper bag - Replaces wooden crates used to transport - Efficient and sustainable, light-weight - Responding to consumers’ demand for car bonnets from Sweden to China packaging solution convenience in snacks on-the-go Sustainable solution - Collaboration with Scandinavian partner - Enables faster packaging process with - Easy-to-use parallel semi-circular openings aPak AB decreased logistic costs - Highly intuitive scoring line giving full control - Heavy-duty cardboard packaging offering - Flexible, yet strong and durable over the size of the opening shorter assembly and dismantling times - Environmentally friendly alternative
13 Strong track record of acquisitions
Excelsior Ṥwiecie Ascania Intercell SIMET Lebedyan Technologies minorities (Consumer (Industrial Bags) (Corrugated) (Corrugated) (Consumer (Containerboard) Packaging) Packaging)
2012 2014 2015 2016 2017
Graphic Nordenia 2 Duropack KSP Uralplastic Kalenobel Packaging plants (Consumer plants (Consumer (Consumer (Consumer (Kraft Paper & Packaging) (Corrugated) Packaging) Packaging) Packaging) Industrial Bags)
€1.6 billion invested in acquisitions since 2012 Mondi has maintained and improved its investment grade credit ratings throughout this period
Packaging Paper Fibre Packaging Consumer Packaging
14 Cash flow priorities – reinvested for growth
Five-year cumulative cash flow (2013–2017) € billion
Maintain our strong and Grow through selective Support payment of Evaluate growth stable financial position and capital dividends to our opportunities through M&A investment grade credit investment opportunities shareholders and/or increased metrics shareholder distributions
4.6
(2.6)
(1.1)
(0.4) (0.5)
Cash flow generation Invested in asset base Distributed to shareholders Net spent on acquisitions Change in net debt and disposals
15 Creating sustainable value through our strategic framework
16 Group overview and strategy
Capital structure and financial policies
2017 financial results
Market and operational review
Summary
Appendices
17 Capital structure & financial policies
Conservative approach to leverage ● Capital structure to maintain investment grade credit metrics ● Articulated as a key strategic objective Single bank facility covenant 3.5x Net Debt/EBITDA ● Significant headroom on current ratio ● Net Debt/EBITDA of 0.9x as at 31 December 2017 Rigorous asset management & capital deployment ● ROCE key internal and public management target ● Significant % of management performance indexed to ROCE Group hedging policies ● Transactional FX exposures hedged ● Interest rate exposure hedged via fixed rate bonds Dividend policy ● Dividend cover (underlying EPS / DPS) of 2 to 3 times on average through the cycle
18 Our cash flow priorities remain unchanged
Maintain our strong and stable financial position and investment grade credit metrics
Grow through selective capital investment opportunities Free cash flow priorities
Support payment of dividends to our shareholders
Evaluate growth opportunities through M&A and/or increased shareholder distributions
As appropriate
19 Finance costs and net debt
% ● Net debt down €57 million reflecting strong cash € million 2017 2016 change generating capacity despite ongoing capital expenditure Net debt 1,326 1,383 4% programme Average net debt 1,376 1,476 7% Net interest expense (before capitalised interest) 61 92 34% ● Lower finance costs driven by Effective interest rate 4.5% 6.2% ○ Lower average net debt Committed facilities 1,987 2,497 Lower effective interest rate Of which undrawn 791 812 ○ Net (bank overdraft) / cash position (66) 377 ● In April 2017, redeemed 5.75% €500 million Eurobond Net debt/12-month trailing underlying EBITDA (times) 0.9 1.0 from available cash and undrawn debt facilities on Currency split of net debt (€1,326 million) maturity % ● Investment grade credit ratings 5% 8% Euro Polish zloty ○ Moody’s Investors Service rating upgraded to 8% 39% Czech koruna + Baa1 (stable outlook) US dollar 20% ○ Standard & Poor’s rating upgraded to BBB+ (stable SA rand Turkish lira outlook) 23% Other1
Strong, stable financial position provides flexibility and underpins strong credit ratings
1 Net cash in other currencies (-3%) 20 Committed debt facilities
Maturity profile of committed facilities € million
1,250
1,000
750
500 733 250 500 500
99 - 2018 2019 2020 2021 202210 > 2022
Drawn Bond RCF headroom Other headroom
1 Mondi – at 31 December 2017 21 Credit Ratings
Moody’s S&P
Issuer Rating: Baa1 Long-Term Corporate Credit Rating: BBB+
Outlook Stable Outlook Stable
“The Baa1 issuer rating of Mondi plc primarily “Mondi Group upgraded to BBB+ on strengthening credit recognises its: well-diversified business profile in terms metrics ... of products, regions and end markets, supporting relatively good stability of the business through the … Despite the recently announced special dividend, Mondi’s cycle… credit metrics retain some headroom for further acquisitions or shareholder returns, while we believe financial policy will …track record of high and structurally improved remain conservative… margins …. and above most of the paper and packaging peers, owing to the majority of the group's … We continue to consider Mondi’s business risk profile as assets being located in higher-growth and lower-cost satisfactory, underpinned by the group’s well-invested asset emerging markets, as well as Mondi’s strong vertical base, which results in excellent profitability compared with integration fibre and energy… the broader forest and paper products sector … ...a track record of good free cashflow generation ...... a track record of managing growth conservatively…” … We also consider Mondi’s strong market positions, its wide product and geographical diversity and its strong cost position as positive for the rating…” Moody’s 8 September 2017 S&P 12 April 2018
22 Continued growth in shareholder returns
Dividends declared and recommended euro cents per share
110 100 ● Ordinary dividend policy unchanged, 2-3x covered 100 across the cycle
90
80 Ordinary dividend ● The Boards regularly review the Group’s capital CAGR: 15% allocation priorities to optimise value accretive 70 62 growth and long-term returns for shareholders 60 57 52 + 50 ○ Given our strong balance sheet position and 42
40 36 confidence in the Group’s ongoing cash
30 generating capacity, the Boards recommended a 2.6x 2.6x 2.6x 2.4x 2.4x special dividend of 100 euro cents per share 20 2013 2014 2015 2016 2017¹ 2017 special Ordinary dividend cover (times) dividend²
1 Based on recommended final ordinary dividend of 42.90 euro cents per share 23 2 Special dividend of 100 euro cents per share recommended in addition to ordinary dividend Group overview and strategy
Capital structure and financial policies
2017 financial results
Market and operational review
Summary
Appendices
24 Highlights
Underlying operating profit and ROCE ● Robust financial performance € million ○ Revenue up 7% and underlying EBITDA up 6% 20.5% 20.3% 19.7% 17.2% 20.0% 15.3% ○ Underlying operating profit up 4%
15.0% ○ Underlying basic earnings per share up 8% 10.0%
5.0% 699 767 957 981 1,018 ● Over €750 million of approved major capital expenditure projects
0.0% 2013 2014 2015 2016 2017 in progress, securing a strong growth pipeline ROCE (%) + ● Acquisitions totalling over €400 million completed or announced, Underlying basic earnings per share euro cents per share expanding our product offering to better serve customers
● Delivered against our 2020 Growing Responsibly model commitments and renewed our WWF partnership
95.0 107.3 133.7 137.8 149.5 ● Recommended special dividend of 100.0 euro cents per share in 2013 2014 2015 2016 2017 addition to full year ordinary dividend of 62.0 euro cents per share
Robust financial performance
25 Operating financial highlights
% € million 2017 2016 change Group revenue 7,096 6,662 7%
Underlying EBITDA 1,444 1,366 6%
% Margin 20.3% 20.5%
Underlying operating profit 1,018 981 4%
% Margin 14.3% 14.7%
Group ROCE 19.7% 20.3%
26 Business unit contribution
Business unit underlying operating profit development 2017 underlying operating profit contribution by business unit¹ € million %
85 (12) 11 (44) (3)
(28) Packaging Paper
31% Fibre Packaging 1,018 + 46% 981 Consumer Packaging
12% Uncoated Fine Paper 11%
2016 Packaging Fibre Consumer Uncoated Corporate 2017 Paper Packaging Packaging Fine Paper
1 Breakdown excludes corporate costs 27 Group overview and strategy
Capital structure and financial policies
2017 financial results
Market and operational review
Summary
Appendices
28 Packaging Paper
Underlying operating profit, margin and ROCE ● Strong performance with underlying operating profit € million up 21% 25.9% 26.3% 24.3% 23.1% ● Driven by: 22.3%
21.0% ○ higher average selling prices 17.9% 19.1% 18.9% 16.0% ○ sales volume growth in higher value added products
● Partly offset by: 341 375 423 397 482 + 2013 2014 2015 2016 2017 ○ higher costs ROCE Underlying operating profit margin ○ negative currency effects Production volumes Volumes indexed to 2013
1.3 1.2 1.1 1.0 0.9 0.8 0.7 2013 2014 2015 2016 2017 VCB RCB Kraft paper
29 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper Packaging Paper | industry fundamentals
Selling prices Virgin containerboard €/tonne ● Strong demand - industry deliveries to Europe grew by
800 around 2%, restricted by supply 750 ● Limited industry capacity additions 700 650 ● Lower kraftliner imports to Europe due to global pick up in 600 demand 550 + ● Higher average prices year-on-year, although magnitude 500 of change varied by grade. Based on average benchmark 450 European prices: 400 ○ unbleached kraftliner up 13% year-on-year and up 16% 350 H2 vs H1 2017 300 12/2012 12/2013 12/2014 12/2015 12/2016 12/2017 ○ white top kraftliner and semi-chemical fluting prices up Kraftliner White top kraftliner 2% to 3% year-on-year ● No significant new capacity expected in Europe in the next three years
Source: FOEX Indexes Ltd and CEPI containerboard deliveries December 2017 30 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper Packaging Paper | industry fundamentals
Selling prices Recycled containerboard €/tonne ● Strong demand - industry deliveries to Europe grew by
800 around 6% 750 ● Average benchmark European prices up 10% 700 year-on-year 650 600 ● Estimated European net industry capacity expansion in 550 2018 of around 1 million tonnes (±3%), currently matched 500 + by demand growth 450 Containerboard 2018 pricing 400 350 ● Price increases in the range of €30 to €50 per tonne 300 implemented in Europe across all containerboard grades 12/2012 12/2013 12/2014 12/2015 12/2016 12/2017 during January and February 2018 Recycled containerboard ○ in response to continued strong demand driven by a generally positive economic environment and ongoing growth in e-commerce
Source: FOEX Indexes Ltd and CEPI containerboard deliveries December 2017 31 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper Packaging Paper | industry fundamentals
Selling prices Sack kraft paper Prices indexed to December 2012 ● Selling price up around 5% to 6% on average in 2017 vs 2016 1.10 ● Good demand, particularly in our export markets 1.05 ● Implemented sack kraft paper price increases in all 1.00 markets from the beginning of 2018 resulting in 0.95 increases in the range of 8% to 9% compared to + average 2017 price levels 0.90 Speciality kraft paper 0.85 ● Good demand 0.80 12/2012 12/2013 12/2014 12/2015 12/2016 12/2017 ● Selling prices on average higher than 2016
Unbleached sack kraft paper - Europe
Source: Mondi 32 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper Fibre Packaging Corrugated Packaging Underlying operating profit, margin and ROCE ● Strong organic volume growth of 6% driven by: € million ○ good growth across central and eastern Europe 13.4% 13.9% 13.5% ○ continued growth in e-commerce 11.8% 11.3% ○ contribution from recently completed capital investments ● Good progress in implementing price increases to compensate significantly higher paper costs - efforts ongoing ● Short-term margin pressure anticipated given usual delay in 5.9% 6.4% 5.1% 5.5% 5.4% passing on paper price increases, compounded by recent paper price increases 86 102 120 123 111 + 2013 2014 2015 2016 2017 Industrial Bags ROCE Underlying operating profit margin ● Volume growth of 2% Production volumes ○ strong growth in eastern Europe, Russia, Africa and SE Asia Volumes indexed to 2013 ○ weaker western European and North American volumes 1.3 ● Margins under pressure in the second half, following sack kraft 1.2 paper price increases in Q2 1.1 ● Strong cost management and continued restructuring initiatives 1.0 to optimise plant network 0.9 ● 2018 annual contracts finalised - price increases implemented 2013 2014 2015 2016 2017 largely reflecting the full cost base impact of recent paper price Corrugated packaging Industrial bags increases
33 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper Consumer Packaging
Underlying operating profit, margin and ROCE ● Underlying operating profit increased 9% on 2016 € million ● Benefiting from:
10.4% 10.7% 10.5% 10.4% ○ improved product mix 8.7% - focus on value-added segments - exiting lower margin business 7.7% 8.0% 7.0% 7.4% ○ one-off gains 5.6% ○ positive contribution from acquisitions + ● Partly offset by: 79 96 108 121 132 ○ lower like-for-like sales 2013 2014 2015 2016 2017 ○ higher fixed costs ROCE Underlying operating profit margin ○ negative currency effects ● Programme launched to restructure the cost base and align capacity to current market requirements ● Joined Ellen MacArthur Foundation’s New Plastics Economy Initiative – three-year initiative to mobilise the transition towards a global plastics system, based on circular economy principles
34 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper Uncoated Fine Paper
Underlying operating profit, margin and ROCE ● Strong performance € million ○ Underlying operating profit of €331 million 32.3% 27.0% 27.8% ○ ROCE of 27.8%
17.0% ● Higher average selling prices achieved across all 15.0% 21.8% 19.3% 18.1% regions on stable volumes and focus on driving 12.2% 13.2% performance mitigating effects of: ○ lower fair value gain on forestry assets 224 227 341 375 331 + (down €21 million year-on-year) 2013 2014 2015 2016 2017 ROCE Underlying operating profit margin ○ higher cash costs, in particular wood and energy in Europe and South Africa Volumes UFP production volumes / net market pulp ● Newsprint production ceased at Merebank mill 2,000 (South Africa) at the end of the year 1,800 1,600 1,400
‘000 tonnes 1,200 1,000 2013 2014 2015 2016 2017 Uncoated fine paper (UFP) Net market pulp
35 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper Uncoated Fine Paper | industry fundamentals
Pulp and A4 B-copy prices Demand €/tonne ● Flat year-on-year European demand, above expected long-term trend of 1-2% per annum decline
900 ● Demand in Russia and South Africa in line with our long-term estimate of 0-1% growth per annum 850 Supply 800 ● Temporary supply disruptions in Europe during the year 750 ● Reduced imports compared to 2016 700 + Prices 650 ● Average benchmark European prices similar to 2016 and 2% up 600 in H2 2017 vs H1 2017 550 ● Price increase of up to 5% implemented in January 2018 in Europe 500 12/2012 12/2013 12/2014 12/2015 12/2016 12/2017 ● Selling prices increased in Russia and South Africa towards the A4 B-copy Pulp (BHKP) end of 2017 to offset domestic inflation ● Further price increases announced across our range of uncoated fine papers in Europe, Russia and South Africa for implementation from the end of March 2018. Price increases achieved remain subject to individual negotiations with customers
Source: FOEX Indexes Ltd 36 Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper Group overview and strategy
Capital structure and financial policies
2017 financial results
Market and operational review
Summary
Appendices
37 Summary
● Robust business model with proven and clear strategy
● Conservative management committed to investment grade credit metrics
● Strong liquidity position supported by significant cash generation
● Recent credit rating upgrades received from Moody’s and S&P reflecting the improved business risk
38 Indicative terms for potential transaction
Terms and Conditions
Issuer Mondi Finance plc Guarantor Mondi plc Expected note rating Baa1 stable / BBB+ stable (Moody's / S&P) Status Senior Unsecured Currency EUR Tenor [7-10] years Size EUR500m expected Use of proceeds General Corporate Purposes Denomination 100k + 1k Governing law English Listing London Covenants / Terms Negative Pledge, 3mth Par Call Documentation EMTN Programme Active bookrunners Bank of America Merrill Lynch, Barclays, HSBC
39 Q&A
40 Group overview and strategy
Capital structure and financial policies
2017 financial results
Market and operational review
Summary
Appendices
41 A global packaging and paper group
Global packaging and paper group ● around 26,300 employees ● present in more than 30 countries ● key operations located in central Europe, Russia, North America and South Africa Offering over 100 packaging and paper products, customised into more than 100,000 different solutions for customers, consumers and industrial end-users Integrated across the packaging and paper value chain from managing forests and producing pulp, paper and plastic films, to developing and manufacturing effective and innovative industrial and consumer packaging solutions Dual listed company structure ● JSE Limited for Mondi Limited (primary listing) ● London Stock Exchange for Mondi plc (premium listing)
42 Industries we serve
Agriculture Automotive Building and construction Chemical
Food and beverages Home and personal care Medical and pharmaceutical Office and professional printing
Packaging and paper converting Pet care Retail and E-commerce Shipping and transport
43 Our global footprint
Key Packaging Paper Fibre Packaging ConsumerPackaging Uncoated FinePaper
Corporate offices Production sites Johannesburg Austria Hungary Netherlands Spain London Belgium Iraq Oman Sweden Vienna Bulgaria Italy Poland Thailand China Jordan Russia Turkey Côte d’Ivoire Lebanon Serbia Ukraine Czech Republic Malaysia Slovakia UK France Mexico South Africa US Germany Morocco South Korea
44 Leading market positions # 1 # 2 # 3
Kraft paper Industrial Uncoated fine Virgin Consumer flexible Global bags paper containerboard packaging Global Europe Europe Europe
Containerboard Commercial Uncoated fine Extrusion Corrugated Emerging Europe release liner paper coatings packaging Europe South Africa Europe Emerging Europe
Please see sources and definitions at the end of this document 45 Underlying operating profit development
Underlying operating profit development € million
270 (127)
(43) (21) (32) (21) 1,018 981 11
2016 Sales Sales Variable Cash fixed Depreciation Currency Fair value 2017 volumes prices costs costs & effects gain on forestry amortisation assets
Higher average prices more than offsetting higher costs and negative currency effects
46 Cash flow effects – movement in net debt
Movement in net debt € million
1,383 (1,447) 53 1,326 273
234
48 49 611
122
Net debt at Cash generated Movement in Capital Investment in AcquisitionsTax and interest Dividends Other Net debt at 31 December from operations working capital expenditure forestry assets paid paid to 31 December 2016 (excluding shareholders 2017 working capital)
Continued strong cash generation used for investment in the business and distribution of dividends
47 Financial review
% € million 2017 2016 change Underlying operating profit 1,018 981 4%
Net finance costs (71) (101) 30%
Net profit from equity accounted investees 1 1
Underlying profit before tax 948 881 8%
Tax charge before special items (181) (166) (9%)
Non-controlling interests (43) (48) 10%
Underlying earnings 724 667 9%
Special items (after tax and non-controlling interests) (53) (29)
Profit after tax and non-controlling interests 671 638 5%
Basic earnings per share (euro cents) 138.6 131.8 5%
Basic underlying earnings per share (euro cents) 149.5 137.8 8%
48 Strong market fundamentals in Packaging Paper
European demand growth (%) & capacities 2018-20E, Demand growth (%) & capacities 2018-20E, Containerboard Sack & speciality kraft paper
2-3% ~3% 3%+ ~2% 0.5-1%
Total Virgin Recycled Global sack European kraft paper speciality kraft paper
Market demand Market demand ~3.3 ~0.5 2.8+ 0.1 0.2-0.3 growth (mt) growth (mt)
Announced Announced 3.3 0.3 3.0 0.1 0.2 capacities (mt) capacities (mt)
Source: RISI and Mondi estimates 49 Sustainable development highlights 2017
5050 Integrated approach to sustainable development
Growing Responsibly Looking ahead to 2020: 16 commitments across 10 action areas Employee and contractor safety Constrained resources and environmental impacts • Avoid work-related fatalities • By 2020, reduce against 2015: • Prevent life-altering injuries • specific contact water consumption (5%)1 • Reduce TRCR by 5% against 2015 • specific waste to landfill (7.5%) • specific NOx emissions (7.5%)1 A skilled and committed workforce • specific effluent load (COD) (5%) • Engage with our people to create a better workplace Biodiversity and ecosystems Fairness and diversity in the workplace • Promote ecosystem stewardship in the landscapes where • Promote fair working conditions in the workplace we operate through continued multi-stakeholder collaboration Sustainable fibre • Maintain 100% FSC™ certification of our forests and Supplier conduct and responsible procurement promote sustainable forest management • Encourage supply chain transparency and promote fair • Procure a minimum of 70% of wood from FSC or PEFC™ working conditions together with our key suppliers certified sources with the balance meeting our company minimum wood standard Relationships with communities • Enhance social value to our communities through effective Climate change stakeholder engagement and meaningful social investments • By 2030, reduce specific CO2e emissions by 15% against 2014¹ Solutions that create value for our customers • Encourage sustainable, responsibly produced products
1 From our pulp and paper mills 51 Pulp and paper integrated value chain (2017)
Net exposure Virgin 1.4 mt containerboard Mondi managed 1.7 mt Consumption2 forests 0.3 mt AAC: 8 million m3 Paper for recycling Net exposure 1.3 mt Recycled Internally balanced containerboard procured wood1 0.6 mt Consumption2 4 million m3 0.6 mt Pulp mill Paper mill3 4.3 mt 5.1 mt Net exposure Externally 0.4 mt procured wood Kraft paper 3 1.2 mt 13 million m Consumption2 0.8 mt Uncoated fine External sales paper3 1.6 mt 1.6 mt Net exposure 0.2 mt
1 Due to commercial, logistic and sustainability considerations, the actual wood procured 2 Total consumption (aggregate of internal and externally procured packaging paper) 52 from our managed forests was lower than the annual allowable cut (‘AAC’) 3 In addition to the 1.6mt of uncoated fine paper, the Group also produced 0.3mt of newsprint in 2017 Input costs
Variable costs € million
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0 2013 2014 2015 2016 2017
Pulp Paper Wood Paper for recycling Energy Chemicals Plastics Other variable costs
53 Fixed costs
Fixed costs composition (excluding special items) € million
2,500
23.5% 24.0% 23.1% 23.2% 22.8% 23.0% 2,000
22.0%
1,500
20.0%
1,000
18.0%
500 16.0%
0 14.0% 2013 2014 2015 2016 2017 Depreciation, amortisation and impairments Other net operating expenses Personnel costs Maintenance and other indirect expenses Fixed costs excluding depreciation, amortisation and impairments as a % of revenue
54 Taxation and working capital
Taxation Taxation % € million 2017 2016 change ● Effective tax rate of 19% Underlying tax charge 181 166 (9%) ○ Benefits of tax incentives related to our capital investments in Poland and Russia Cash tax paid 151 173 13% ○ Recognition of deferred tax assets related to previously Effective tax rate 19% 19% unrecognised tax losses
Working capital management + € million Working capital
12.3% 12.0% 12.7% 11.0% 11.6% ● Net cash outflow of €122 million (2016: inflow of €68 million)
711 811 794 799 899 2013 2014¹ 2015 2016 2017
Working capital Working capital as a % of revenue
1 Working capital as a % of revenue is based on annualised revenue from acquisitions 55 Production volumes
% 2017 2016 change Packaging Paper Containerboard '000 tonnes 2,297 2,253 2% Kraft paper '000 tonnes 1,206 1,204 - Softwood pulp '000 tonnes 2,010 1,976 2% Hardwood pulp '000 tonnes 547 500 9%
Fibre Packaging Corrugated board and boxes million m2 1,650 1,448 14% Industrial bags million units 4,952 4,881 1% Extrusion coatings million m2 1,281 1,249 3%
Consumer Packaging million m2 7,437 7,156 4%
Uncoated Fine Paper Uncoated fine paper '000 tonnes 1,644 1,666 (1%) Softwood pulp '000 tonnes 375 375 - Hardwood pulp '000 tonnes 1,345 1,319 2% Newsprint '000 tonnes 277 313 (12%)
56 Market position sources and definitions
Mondi region definitions
Europe – Europe including Russia and Turkey Emerging Europe – Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Macedonia, Malta, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey, Ukraine North America – Canada, Mexico, USA
Sources for market position estimates
Virgin containerboard (Europe) and Containerboard (emerging Europe) based on capacity – Source: RISI European Paper Packaging Capacity Report and Mondi estimates Kraft paper (Global) based on capacity – Source: RISI European Paper Packaging Capacity Report, RISI Mill Asset Database, Pöyry Smart Terminal Service and Mondi estimates Corrugated packaging (emerging Europe) based on production – Source: Henry Poole Consulting and Mondi estimates Industrial bags (Global) based on sales volume – Source: Eurosac, Freedonia World Industrial Bags 2016 study and Mondi estimates Extrusion coatings (Europe) based on sales volumes – Source: AWA Extrusion Coated Materials European Market Study and Mondi estimates Consumer flexible packaging Europe based on sales – Source: PCI Wood Mackenzie – Flexible Packaging, European Supply/Demand report, 2017 Commercial release liner (Europe) based on sales volumes – Source: AWA European Release Liner Market Study and Mondi estimates Uncoated Fine Paper (Europe) based on sales volumes (Ilim JV considered separate from IP) – Source: Euro-Graph delivery statistics, EMGE Woodfree Forecast, EMGE World Graphic Papers, RISI Mill Asset Database, Eastconsult and Mondi estimates Uncoated Fine Paper (South Africa) based on Mondi estimates
57 Disclaimer
Mondi: Forward-looking statements disclaimer
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, market growth and developments, expectations of growth and profitability and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as “believe”, “expects”, “may”, “will”, “could”, “should”, “shall”, “risk”, “intends”, “estimates”, “aims”, “plans”, “predicts”, “continues”, “assumes”, “positioned” or “anticipates” or the negative thereof, other variations thereon or comparable terminology. 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 and other statements contained in this document regarding matters that are not historical facts involve predictions and are based on numerous assumptions regarding Mondi’s present and future business strategies and the environment in which Mondi will operate in the future. These forward-looking statements speak only as of the date on which they are made.
No assurance can be given that such future results will be achieved; various factors could cause actual future results, performance or events to differ materially from those described in these statements. Such factors include in particular but without any limitation: (1) operating factors, such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development plans and targets, changes in the degree of protection created by Mondi’s patents and other intellectual property rights and the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for Mondi’s products and raw materials and the pricing pressures thereto, financial condition of the customers, suppliers and the competitors of Mondi and potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in Mondi’s principal geographical markets or fluctuations of exchange rates and interest rates.
Mondi expressly disclaims a) any warranty or liability as to accuracy or completeness of the information provided herein; and b) any obligation or undertaking to review or confirm analysts’ expectations or estimates or to update any forward-looking statements to reflect any change in Mondi’s expectations or any events that occur or circumstances that arise after the date of making any forward-looking statements, unless required to do so by applicable law or any regulatory body applicable to Mondi, including the JSE Limited and the LSE.
58 Disclaimer
The information contained in this Investor Presentation is only being distributed to and is only directed at (i) persons who are outside the United Kingdom; or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); or (iii) to high net worth entities and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons in (i), (ii) and (iii) above together being referred to as "relevant persons"). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on the Information or any of its contents. In any EEA Member State that has implemented the Prospectus Directive, the Information is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Directive. The "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including Directive 2010/73/EU, to the extent implemented in that Member State), and includes any relevant implementing measures in that Member State.
The information contained in this Investor Presentation does not constitute or form part of, and should not be construed as an offer or the solicitation of an offer to subscribe for or purchase the Notes in any jurisdiction or an inducement to enter into investment activity, and nothing contained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever, nor does it constitute a recommendation regarding the securities. Any decision to purchase the securities should be made solely on the basis of the information to be contained in the Prospectus and any supplements to the Prospectus (or equivalent disclosure documents) produced in connection with the offering of the securities. Prospective investors are required to make their own independent investigations and appraisals of the business and financial condition of Mondi and the nature of the securities before taking any investment decision with respect to the securities. The Prospectus and any supplements to the Prospectus (or equivalent disclosure documents) may contain information which differs from the information contained in this Investor Presentation. Any purchase of securities should be made solely on the basis of the Prospectus and any supplements to the Prospectus (or equivalent disclosure documents) prepared in connection with the offering of the securities.
59