Mondi Group Integrated report and financial statements 2014 We are Mondi: IN TOUCH EVERY DAY At Mondi, our products protect and preserve the things that matter. We offer over 100 packaging and paper products, customised into more than 100,000 different solutions for customers and end consumers – touching the lives of millions of people every day. And we’re determined to deliver the highest quality in everything we do, from managing forests and producing pulp, paper and compound plastics, to developing effective and innovative industrial and consumer packaging solutions. We work closely with our customers and other strategic partners to develop cutting edge solutions; while also prioritising the responsible and sustainable management of our resources. We are committed to delivering value to our stakeholders. This integrated report provides an overview of how our strategy, governance, people and performance combine to generate this value in a sustainable way. Mondi Group | Integrated report and financial statements 2014 Contents 01 A full contents list is available on the back cover flap Overview Strategic Governance Financial 02 – 11 report 58 – 116 statements 12 – 57 117 – 188 Our 2014 performance Underlying operating profit Return on capital employed (ROCE) Underlying earnings per share €767m 17. 2% 107. 3 € cents 800 767 20 120 699 17.2 107.3 622 15.3 100 95.0 574 15.0 600 15 13.6 12.3 80 458 68.1 69.2 400 10 60 40 40.6 200 5 20 0 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 € million % € cents Total specific CO2e emissions Total recordable case rate (TRCR) from our pulp and paper mills Capital expenditure 0.83 0.82 €562m 1.5 1.0 600 562 0.9 0.86 0.87 0.87 0.81 0.82* 500 1.09 0.8 0.7 394 405 1.0 0.92 400 0.6 0.79 0.83* 0.78 294 0.5 300 263 0.4 0.5 0.3 200 0.2 100 0.1 0.0 0.0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 per 200,000 hours worked tonnes per tonne of € million * Recent acquisitions included therefore saleable production 2014 figures not comparable with * Energy sales increased by 16%, causing historical data an increase in CO2e emissions from 2013 For more information visit: www.mondigroup.com Mondi Group | Integrated report and financial statements 2014 Overview 02 Overview About us 04 Joint chairmen’s statement 08 Mondi Group | Integrated report and financial statements 2014 Overview 03 Our products touch the lives of millions, worldwide, every day Mondi Group | Integrated report and financial statements 2014 Overview 04 About us Who we are Mondi is an international packaging and paper Group with a dual listed company structure (primary listing on the JSE Limited for Mondi Limited and premium listing on the London Stock Exchange for Mondi plc). With around 25,000 employees and operations across more than 30 countries, our people and our culture really matter. We’re connected, guided and inspired by our culture and values. Our people are dynamic, entrepreneurial and empowered, with a real passion for performance. We show we care by being respectful and responsible. We act with integrity, encouraging honesty and transparency in all that we do. The Mondi Way demonstrates how our purpose, strategy and operational framework fit together, underpinned by our shared culture and values. This guides the way in which we work, helping our people to understand how we all contribute to sustainable value creation. The Mondi Way To create solutions for our customers’ success, Purpose delivering exceptional value in a sustainable way Strategy Our key value drivers bring our strategy to life Go to page 22 Our operating framework drives performance The Mondi Diamond across our business Go to page 25 Our culture Culture Dynamic Respectful Responsible Entrepreneurial Our values Values Empowered Passion for performance Transparent Caring Acting with integrity For more information see our Our approach to sustainability Sustainable development report at www.mondigroup.com/sd14 For us, sustainable development makes good business sense. We don’t just talk about sustainability; we make it part of the way we work every day. We have a clear sustainable development strategy, which links our material issues to a comprehensive set of commitments. Our future relies on the responsible stewardship of the natural resources we need to source, manufacture and market our products. That’s why we believe in engaging proactively on global issues and their local consequences, such as climate change, energy and the responsible management of ecosystem services including water. Collaboration with key stakeholders plays a vital role in helping us to achieve this. We play our part by looking for ways to achieve more from less, increasing resource efficiency and extending the range of sustainable product solutions we offer. We have been included in the FTSE4Good Index Series since 2008 and the JSE’s Socially Responsible Investment (SRI) Index since 2007. Mondi Group | Integrated report and financial statements 2014 Overview 05 Mondi is fully integrated across the packaging and paper value chain – from managing forests and producing pulp, paper and compound plastics, to developing effective and innovative industrial and consumer packaging solutions. We are focused on growing our packaging interests. Our key value drivers bring our Read more about our key value drivers strategy to life: on page 22 • We focus on developing in markets that offer us growth opportunities • We invest in our exceptional people and our high-quality, low-cost operations • We are passionate about performance, reliability and sustainability • We work with our customers and help them to succeed by finding innovative solutions Many of our customers are leaders in their industries and their products are household names around the world. Our innovative technologies and products can be found in a variety of applications including hygiene components, stand-up pouches, super-strong cement bags, clever retail boxes and office paper. Our key customers are in industries such as automotive; building and construction; chemicals; food and beverage; home and personal care; medical and pharmaceutical; packaging and paper converting; pet care; and office and professional printing. Our Group is structured into the Europe & International Division (E&I) and the South Africa Division. The E&I Division is further organised along product lines, combining business units with similar product portfolios. Group structure Europe & International South Africa Division Division Packaging Paper Fibre Packaging Consumer Packaging Uncoated Fine Paper • Pulp • Containerboard • Corrugated packaging • Advanced materials • Uncoated fine paper • Uncoated fine paper • Sack kraft paper • Industrial bags • Consumer • Pulp • Containerboard • Speciality kraft paper • Extrusion coatings goods packaging • Pulp Market positions #1 Kraft paper and industrial bags producer in Europe #1 Commercial release liner producer in Europe #1 Industrial bags producer in North America #2 Extrusion coatings producer in Europe #2 Virgin containerboard producer in Europe #1 Uncoated fine paper producer in Europe #1 Containerboard producer in emerging Europe #1 Hardwood pulp, white top kraftliner and uncoated fine paper producer in South Africa #2 Corrugated packaging producer in emerging Europe Mondi Group | Integrated report and financial statements 2014 Overview 06 About us Where we operate The Group’s key operations are located in central Europe, Key Russia, North America and South Africa. Packaging paper Fibre packaging Consumer packaging Uncoated fine paper Pulp Forestry Production sites Austria Belgium Bulgaria China Czech Republic Finland France Germany Greece Hungary Iraq Italy Jordan Lebanon North America Malaysia Mexico Morocco Netherlands Oman Poland Russia Serbia Slovakia Africa South Africa Spain Sweden Thailand Turkey Ukraine UK USA South America Corporate head offices Johannesburg London Mondi Group | Integrated report and financial statements 2014 Overview 07 Europe Asia Employees Revenue by location per region 2014 of production 2014 Australasia 62% 53% Emerging Emerging markets markets Emerging • Emerging Europe • Russia • South Africa • Other Mature • Western Europe • North America Mondi Group | Integrated report and financial statements 2014 Overview 08 Joint chairmen’s statement Read more about global macroeconomic From a global macroeconomic perspective, 2014 was developments on page 21 a year of relatively low and uneven growth. Against this backdrop, Mondi delivered exceptionally strong results, with a ROCE of 17.2%, a record for the Group. Total dividend 42€ cents 50 42* 40 36 30 28 26 20 20 10 0 2010 2011 2012 2013 2014 € cents per share * Based on proposed final dividend of 28.77 euro cents per share Joint chairmen David Williams, left Fred Phaswana, right Mondi Group | Integrated report and financial statements 2014 Overview 09 “We continued to make steady progress in developing our packaging interests in a sustainable way, while maintaining the competitiveness of our existing operations.” Building on our strengths to deliver value In our view, Mondi’s ability to deliver strongly across the cycle is testament to the quality of the business and the strength of our strategy. Mondi’s success is based on investing in our high-quality, low-cost asset base, driving sustainable operational improvements, developing in markets that offer us growth opportunities, and working with our customers to find the right solutions. Combined with a strong balance sheet and sustainable cash flow generation, this makes Mondi an extremely resilient organisation, and one in which we have every reason to be confident going forward. Looking back on another year of good progress Ružomberok, Slovakia We continued to make steady progress in developing our packaging interests in a sustainable way, while maintaining the competitiveness of our existing operations. Improving We expanded our packaging converting footprint through acquisitions and we completed energy a number of key capital projects during the year. A number of our significant capital expenditure projects are aimed at improving energy efficiency and self-sufficiency.