Mondi Group Fixed Income Investor Presentation
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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