Final Results
26 February 2009
Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND ISIN: ZAE000097051
Mondi plc
(Incorporated in England and Wales)
(Registration 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.
Full-year results for the year ended
31 December 2008
Financial Summary
€ million, except for % and per share measures 2008 2007 Change %
Group revenue 6,345 6,269 +1
EBITDA 1 814 870 -6
Underlying operating profit 2 441 502 -12
Underlying profit before tax 3 284 405 -30
Reported (loss) / profit before tax7 (103) 382 -127
Basic (loss)/ earnings per share (€ cents) 4 (41.6) 45.4 -192
Underlying earnings per share (€ cents) 4,5 33.9 46.9 -28
Headline earnings per share (€ cents) 4,5 20.3 39.5 -49
Cash inflow from operations 795 957 -17
Net debt 1,690 1,507 +12
Group ROCE 6 9.5% 10.6% -10
Total dividend per share (€ cents) 4 12.7 23.0 -45
Highlights:
Substantial cash inflow from operations of €795 million, despite the adverse
economic backdrop.
Demonstrated excellent financial discipline with net debt at €1.7 billion
(broadly unchanged since 30 June 2008) and nearly €1.1 billion of undrawn
committed facilities as at end of December, despite €324 million spent on major
capital projects.
Delivered cost savings of €128 million, representing 2.4% of cost base.
Improved profit trend in South Africa Division.
Achieved very strong control of working capital, resulting in a net working
capital inflow of €27 million for the year, following the €97 million inflow in
the prior year.
Further rationalised the business in the face of a weakening trading
environment, exiting around 600,000 tonnes of high cost production capacity,
thereby enhancing the Group's overall cost competitiveness.
The costs of these disposal, restructuring and closure initiatives of €85
million before tax (cash component €56 million) are included in special items,
together with an impairment charge on the write-down of both goodwill and
tangible assets amounting to €293 million.
Major projects in Poland and Russia are on schedule and within budgeted capital
cost.
Despite weaker trading environment achieved ROCE of 9.5%.
Proposed final dividend of 5.0 euro cents per share to give a total dividend of
12.7 euro cents per share.
David Hathorn, Mondi Group Chief Executive, said:
"It is testament to Mondi's low cost production strategy, ingrained cost focus
and ability to respond quickly to changing market conditions that a creditable
performance was delivered in a year which ended amid the most difficult trading
conditions in the Group's history.
"We have responded early and decisively to the challenges posed by the global
economic turbulence, proactively rationalising the business through cost
cutting, asset closures and divestitures, thereby consolidating the Group's
leading cost positions in its chosen markets and enhancing its resilience to
adverse market conditions. Similarly, working capital has reduced as a
percentage of sales and our capital expenditure programmes have been tailored
to the more challenging trading environment which we now face. We will
continue to engage in restructuring actions and cost reduction measures where
appropriate and as required by market conditions.
"Given the level of global economic uncertainty that emerged in the latter part
of 2008, the outlook inevitably remains challenging. However Mondi's strong
financial position, our low cost, high quality asset base and our quick and
decisive response to rapidly changing economic events leave us well positioned
to benefit when market conditions improve. As such, the Boards remain
confident in the medium and long-term prospects for the Group."
1 EBITDA is operating profit of subsidiaries and joint ventures before special
items, depreciation and amortisation.
2 Underlying operating profit is operating profit of subsidiaries and joint
ventures before special items.
3 Underlying profit before tax is reported profit before tax before special
items.
4 2007 is pro forma and based on the number of shares admitted following the
demerger from Anglo American plc on 2 July 2007.
5 The Group has presented underlying earnings per share to exclude the impact of
special items, and headline earnings per share in accordance with circular 8/
2007 'Headline Earnings' as issued by the South African Institute of Chartered
Accountants.
6 Group return on capital employed (ROCE) is an annualised measure based on
underlying operating profit plus share of associates net earnings divided by
average trading capital employed before impairments and adjusted for major
capital projects not yet commissioned.
7 Reported (loss) / profit before tax is reported profit before tax but after
special items of €387 million.
Contact details:
Mondi Group
David Hathorn +27 (0) 11 994 5418
Andrew King +27 (0) 11 994 5415
Lisa Attenborough +44 (0)1932 826380 / +44 (0)7872 672669
Financial Dynamics
Richard Mountain +44 (0)20 7269 7121 / +44(0)7802 877 243
Louise Brugman +27 (0)11 214 2415 / +27 (0)83 504 1186
Dial-in audio cast facility will be available via:
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
UK: 0800 917 7042
Europe & Other: 00800 246 78 700
An online audio cast facility will be available via: www.mondigroup.com/
fullyearresults08
Password: FYResults08
The presentation will be available online via the above web site address an
hour and a half before the audio cast commences.
Questions can be submitted either via the dial-in conference call or by email
via the audio cast.
Should you have any issues on the day with accessing the dial-in conference,
please call +27 (0)11 535 3600.
Should you have any issues on the day with accessing the audio cast, please
email mondi@kraftwerk.co.at and you will be contacted immediately.
An audio recording of the presentation will be available on Mondi's website
from late afternoon on 26 February 2009.
Editors' notes:
Mondi is an international paper and packaging group and in 2008 had revenues of
€6.3 billion. Its key operations and interests are in western Europe, emerging
Europe, Russia and South Africa.
The Group is principally involved in the manufacture of packaging paper and
converted packaging products; uncoated fine paper; and speciality products
including coating and consumer flexibles.
Mondi is fully integrated across the paper and packaging process, the growing
of wood and the manufacture of pulp (including recycled paper) to the
conversion of packaging papers into corrugated packaging and industrial bags.
Mondi has production operations across 38 countries and had an average of
33,000 employees in 2008.
RESULTS
As indicated in Mondi's Interim Management Statement in October 2008, the
worsening of the global economic environment had an adverse impact on our
business. In particular, from October we saw a marked downturn in trading in
Europe.
Group sales rose by 1% to €6.35 billion and underlying operating profit was 12%
below the prior year, with the slowdown in Europe only partially offset by a
much improved performance from the South Africa Division. Within the Europe &
International Division underlying operating profit was down €52 million or
13%. We did not see the usual post-summer seasonal pick-up in demand and
trading in the last three months of 2008 was weak, resulting in falling volumes
and some price weakness. In response, we proactively took significant
market-related downtime in a number of our European operations (mainly in sack
kraft paper) amounting to 130,000 tonnes in the last quarter (12% of capacity)
and 212,000 tonnes for the full year. By the end of the year stock levels were
low across all paper grades, leaving us well placed for the coming year.
By contrast, the South Africa Division was successful in implementing price
increases and enjoyed an improved underlying operating performance, with
profits up €33 million or 42%.
Merchant and Newsprint saw a significant decline in underlying operating
profits (€33 million) as our joint venture, Aylesford Newsprint incurred
losses, suffering from both declining selling prices and increases in input
costs. Aylesford contributed nearly half of Merchant and Newsprint's profits
in the year ending 2007.
A strong working capital performance (net inflow for the year of €27 million
despite higher revenues) coupled with renewed focus on cost reductions and cash
flow optimisation limited the increase in Group borrowings to €183 million,
despite capital expenditure of €324 million on the two major expansionary
capital projects in Poland and Russia. Mondi enjoys a strong liquidity position
and as at the end of December the Group had nearly €1.1 billion of undrawn
committed debt facilities (€0.7 billion of which is available under a €1.55
billion facility, expiring on 22 June 2012).
Cost pressures were evident throughout the year, most significantly chemicals
and energy, although there was some easing of key raw material input costs
towards the latter part of the year (notably recovered fibre, energy and
chemicals). Similarly, while the weaker South African rand supported margin
improvement in export sales from our South Africa Division, the strength of our
major emerging European production currencies negatively impacted on our cost
base. The continued strengthening of the Polish zloty in particular had a
significant negative effect on profitability, although this pressure eased
towards the end of the period.
In mitigation of ongoing cost pressures and the weaker trading environment,
significant additional cost reductions and further productivity improvements
were achieved. Overall, the Group delivered a further €128 million in cost
savings, representing approximately 2.4% of the cash cost base. Mondi remains
committed to targeting annual savings of at least 2% per annum. The 2009
target is €180 million (3.3% of 2008 cash costs). We also completed the
restructuring and simplification of our European Uncoated Fine Paper (UFP)
business, which realised significant cost reductions during the year, with
further benefits flowing in 2009.
Disappointingly, the average return on capital employed, a key measure of
Mondi's performance declined to 9.5% (2007: 10.6%), reflecting the more
difficult trading environment in the second-half. As noted elsewhere, actions
are being taken to improve the profitability of the Group which we are
confident, when taken with an improvement in the business cycle, will lead to
improving returns.
Net finance costs of €159 million were €60 million higher than in 2007 due to
higher borrowings and average interest rates (particularly in emerging markets)
and foreign currency charges on the devaluation of emerging market currencies
to which we are exposed. The effective tax rate before special items of 29%
was in line with the prior-year rate.
Underlying earnings per share were 33.9 euro cents per share, down 28% compared
to 2007.
The Group is proposing to pay a final dividend of 5.0 euro cents per share,
giving a total dividend of 12.7 euro cents per share for the year.
DECISIVE RESPONSE TO THE DOWNTURN
Mondi has acted to close or dispose of certain higher cost operations in
Europe. The total cost of disposal, closure and restructuring initiatives
excluding impairments amounted to €85 million and has been disclosed as a
special item. The cash element of this charge is €56 million.
Actions taken:
The previously announced closure of our 140,000 tonne UFP mill in Hungary and
European UFP reorganisation were completed.
The decision has been taken to mothball the integrated Stambolijski kraft paper
mill in Bulgaria and the Dynäs PM5 kraft paper machine in Sweden.
The recycled containerboard mill in Holcombe, UK was closed.
Three sheet feeder plants in the UK and a recycled container board mill in
Switzerland were sold. The sale of two further corrugated converting
operations in France was also agreed.
A restructuring exercise at the Turkish corrugated business was started.
The Nyborg specialities plant in Denmark and the Zaragoza bag plant in Spain
were closed.
A restructuring of the Finnish & UK coating businesses was initiated.
These moves have the effect of adjusting our production capacity in light of
the changing demand environment, lowering our overall cost base and
streamlining our asset portfolio to focus on those businesses that provide us
with a sustainable competitive advantage in their respective markets. In total
we will have exited around 600,000 tonnes of high cost capacity, thereby
lowering our average European cost per tonne for the related products by around
5%.This is very much in line with the Group's stated strategic objective of
focusing on low cost, high quality assets and achieving cost leadership in its
chosen markets.
Furthermore, steps have been taken to significantly reduce capital expenditure
outside of the two major projects. This initiative is supported by the well
invested nature of our asset base. Capital expenditure approvals will be
limited to 40% of depreciation in 2009. The cash flow effects of this
initiative started to be seen towards the end of the reporting period, with the
main benefits expected to be realised in 2009 and 2010.
A special item impairment charge on the write-down of both goodwill and
tangible assets amounting to €293 million was taken in the period, reflecting
the weaker outlook for several of our business segments in light of the
worsening macro-economic environment.
OPERATIONAL REVIEW
Europe & International Division
€ million 2007 change
2008 %
Segment revenue 5,159 5,189 -1
- of which inter-segment revenue 155 153 +1
EBITDA 623 670 -7
Underlying operating profit 334 386 -13
Bags & Specialities 159 154 +3
Uncoated Fine Paper 126 99 +27
Corrugated 49 133 -63
Capital expenditure¹
- Major Projects² 324 40
-Other 277 271 +2
Net segment assets 3,659 3,907 -6
Return on capital employed (%) 9.6 11.2 -14
1 Capital expenditure is cash payments and excludes business combinations.
² Polish and Russian expansion projects which commenced in second-half of
2007.
The European business environment continues to be challenging and we remain
focused on driving down costs and rationalising any remaining low quality, high
cost assets. As a direct result of the slowdown in European demand, underlying
operating profit was down 13% versus the prior year. The Division delivered €
114 million in cost savings, with the benefits from the various rationalisation
and restructuring measures a significant contributor.
Operations
In the Bags & Specialities business underlying operating profits for the year
were up €5 million, although the second half saw profits down 33% versus the
comparable period. The business benefited from higher average kraft paper and
converted bag prices (up around 6%); however, volumes were soft in the second
half as demand, particularly from the building industry, slowed. This decline
in demand was exacerbated by an element of destocking as the supply chain
adjusted to the weaker economic outlook. In response, the kraft paper business
took significant market related downtime of around 100,000 tonnes in the fourth
quarter (around 40% of available capacity in the quarter) to balance
inventories. Industry statistics suggest the downstream bag demand was down
around 9% in the last quarter versus the comparable period in the prior year.
Specialities were impacted by lower volumes and margins and as a result profits
were marginally below the comparable period. The results benefited modestly
from the acquisition of Unterland in the second half of 2007.
In the Uncoated Fine Paper (UFP) business underlying operating profits were up
€27 million or 27%. Whilst average selling prices were slightly up against the
comparable period, volumes were impacted by the weaker trading environment in
the second half and the closure of Hungary (down 4% on the prior year). Around
37,000 tonnes of commercial downtime (around 2.5% of available capacity) was
taken in the year. UFP benefited from the restructuring actions announced at
the end of 2007, as well as a better performance from all our mills, notably
our Russian pulp and paper mill in Syktyvkar where the local market continued
to experience good demand. Declining pulp prices in the second-half improved
the profitability of our Austrian non-integrated paper mill.
In the Corrugated business, underlying operating profits were down €84 million
at €49 million as costs increased and selling prices fell back following
substantial increases achieved in 2007. Brown kraftliner and testliner prices
were down around 5% year-on-year (on average testliner declined sharply in the
second half, ending the year over 20% down on the prior year close). Whitetop
kraftliner, a key open market product for the Group, was more stable with
prices up around 1% year-on-year. The price declines were due to a combination
of slowing demand and, towards the latter part of the year, falling input
costs. Box prices, having increased in the first half, started to taper off in
the second half. Results were also impacted by market related downtime in
recycled containerboard (around 44,000 tonnes, representing 4% of annual
capacity). The continued strength in eastern European currencies (particularly
the Polish zloty) during the period served to further erode the profitability
of our eastern European production base. This currency trend started to
reverse towards the end of the period, although the positive financial impact
will only be seen in 2009 due to the Group's rolling six-month currency hedging
programme.
Our Turkish corrugated packaging subsidiary, Tire Kutsan, acquired in 2007,
continues to underperform. This is mainly the result of softer demand coupled
with new competitor capacity coming on-stream and the resulting impact on
prices in the local market. We have taken steps to restructure the business
appropriately, including streamlining the organisation and reducing headcount.
Restructuring
2008 saw significant restructuring in response to the economic downturn. In
the first-half, three sheet feeder plants in the UK were sold for an enterprise
value of approximately €21 million, the Nyborg specialities plant in Denmark
was closed and the closure of the Szolnok UFP mill in Hungary was completed.
We closed the Holcombe recycled containerboard mill in the UK (capacity 110,000
tonnes per annum) and the Zaragoza bag converting plant in Spain (capacity 55
million units) in the second half. Towards the end of the year, the sales of
the 160,000 tonne per annum Niedergösgen recycled containerboard mill in
Switzerland and two corrugated converting operations in France were agreed for
total proceeds of approximately €22 million. Further initiatives include the
announced restructuring of the Turkish corrugated business and the
restructuring of the Coatings business in Finland and the UK. The total cost
of these and other closure, disposal and restructuring activities, excluding
impairments, is approximately €85 million and has been treated as a special
item in the accounts. After the year-end we sold the St Quentin corrugated
packaging plant in France and have taken the decision to mothball both the
110,000 tonnes per annum Stambolijski pulp and kraft paper mill in Bulgaria and
the PM5 kraft paper machine (capacity 75,000 tonnes per annum) at our mill in
Dynäs in Sweden.
Major Projects
Despite the challenging business environment, we remain committed to completing
the development of our two major projects in Poland and Russia. We believe the
rationale behind the development of these projects, to secure our position as
cost leader in our chosen markets, is reinforced by current events.
The construction of the new 470,000 tonne recycled containerboard machine at
Swiecie in Poland is progressing well (total cost of €305 million). We remain
on track for completion in the second half of 2009 within the budgeted cost.
We anticipate that this machine will have the lowest operating costs of its
type. Similarly, the related €45 million investment in the new box plant and
associated infrastructure on the Åšwiecie mill site is in progress, with
start-up planned for the end of 2009.
The project to modernise our mill in Syktyvkar (total cost of €525 million) is
also making good progress and we remain on track for completion within the
budgeted cost by 2010. The key value drivers of this project are to improve
efficiency, lower our cost base in Russia and increase energy production and
revenue by selling surplus energy to the grid. In addition it will provide
modest extra capacity (both pulp and paper) for the domestic market.
By the end of the period, €364 million had been spent on these two projects out
of the total capital commitment of €875 million. The bulk of the remaining
expenditures of €511 million are expected to be incurred in 2009, with some
flowing into 2010.
South Africa Division
€ million 2008 2007 change %
Segment revenue 587 591 -1
- of which inter-segment revenue 285 367 -22
EBITDA 152 122 +25
Underlying operating profit 111 78 +42
Uncoated Fine Paper1 75 53 +42
Corrugated 36 25 +44
Capital expenditure 2 44 23 +91
Net segment assets 760 966 -21
Return on capital employed (%) 15.9 9.5 +67
1 Includes pulp and forestry business.
2 Capital expenditure is cash payments and excludes business combinations.
The South Africa Division recorded an increase in underlying operating profits
of €33 million. Profitability increased as the year progressed following a
slow start, due partially to the loss of more than three weeks' production at
Richards Bay (largely as a result of an extensive maintenance shut).
Throughout the period substantial progress was made on the management of
product mix to optimise margins as opposed to volumes, evidenced by 86,000
tonnes of commercial downtime on UFP production, otherwise destined for low
margin export markets. Results towards the end of the period benefited from
these product mix changes as well as selling price increases for both domestic
and export sales. The Division also delivered €6 million in cost savings in
the period.
In the domestic market (which represents about 37% of the Division's UFP
volume), price increases during the year of around 20% were achieved. The
domestic market for UFP continues to grow at around 4% per annum. Sales to
Africa (which represent approximately one-quarter of the Division's UFP volume)
became a major focus area, with price increases (quoted in USD) of around 10%
realised during the year. The remaining UFP volume, which is destined for
non-African markets, was significantly down, but margins benefited from the
weaker rand.
Pulp sales volumes were up by 19%, while price increases (quoted in USD) of 15%
year-on-year were achieved.
Almost 80% of the production from our corrugated operations, comprising the
whitetop linerboard machine at Richards Bay, is exported. Sales levels were
similar to the previous year, as global supply and demand remained in balance
throughout the year. Accordingly, profits were up in the period, with export
sales benefiting from the weaker rand.
A significant breakthrough was achieved in the settlement of land claims in
South Africa, with the signing of a land restitution settlement whereby the
first of Mondi's forestry land will be transferred to two local communities
under a sale and leaseback agreement. Mondi retains ownership of the forests,
which ensures security of timber supply to Mondi's operations, while meeting
the needs of the land restitution process in South Africa. It is anticipated
that this settlement will provide a framework for settling future forestry land
claims with Mondi.
Mondi Packaging South Africa (MPSA)
€ million 2008 2007 change %
Segment revenue 474 419 +13
- of which inter-segment revenue 27 28 -4
EBITDA 52 53 -2
Underlying operating profit 28 35 -20
Capital expenditure 1 38 47 -19
Net segment assets 301 335 -10
Return on capital employed (%) 8.6 13.8 -38
1 Capital expenditure is cash payments and excludes business combinations.
Underlying operating profit was marginally up (1%) in local currency, including
a full year charge for the amortisation of Lenco intangibles acquired in July
2007. The local currency performance was, however, impacted on translation
into euros at the much weaker rand rate, resulting in an underlying operating
profit decline of €7 million to €28 million. Demand and pricing remained
positive and corrugated packaging and containerboard volumes were up 4% and 5%
respectively versus the comparable period. This performance was helped by good
demand from the agricultural sector. Price increases were implemented for the
domestic containerboard market with effect from 1 October 2008. However, price
increases lagged input cost pressures, particularly from recycled fibre. In
anticipation of a softer trading environment in early 2009, the corrugated
mills took market related downtime in the fourth quarter amounting to 7,000
tonnes (10% of the capacity in the quarter). The Lenco acquisition (rigid
plastics manufacturer) contributed positively to profits and is now performing
better after a slow start.
Progress on the execution of major projects has been good, with the Felixton
rebuild commissioned on time in April 2008 and within budget. This will
increase containerboard production by 45,000 tonnes per annum to 155,000 tonnes
per annum. This repositions Felixton to produce lightweight recycled
containerboard to serve the growing domestic market.
During the period MPSA was refinanced through a R1.0 billion cash injection
from Mondi Limited which allowed for the pay down of expensive external debt.
The funds were provided by way of loans and equity. As a result of the
refinancing, Mondi's shareholding in the business increased from 55% to 70%
with effect from 17 December 2008.
Merchant and Newsprint
€ million 2008 2007 change %
Segment revenue 593 591 0
- of which inter-segment revenue 1 1 0
EBITDA 24 60 -60
Underlying operating profit 7 40 -82
Capital expenditure 1 10 18 -44
Net segment assets 196 248 -21
Return on capital employed (%) 3.3 17.3 -81
1 Capital expenditure is cash payments and excludes business combinations.
Mondi's joint venture operation, Aylesford Newsprint (which accounted for just
under half Merchant and Newsprint's 2007 full-year operating profit), recorded
an operating loss for the year as a result of falling selling prices, due to
competition from imports, and rising energy and recycled fibre input costs.
The recent weakening of sterling, together with newsprint capacity closures in
Europe and North America, supported UK newsprint price increases of around 20%
for 2009, which will see a return to profitability of this business. At
Europapier margins came under pressure in the second half as trading was
impacted by the general economic slowdown and adverse currency movements. At
Mondi Shanduka Newsprint earnings were down in local currency, with volume and
price increases largely eroded by cost pressures. A significantly weaker rand
exchange rate exacerbated the earnings decrease on translation into euros.
Corporate and other
Net corporate costs after special items were €1 million higher than the
comparable period in 2007, due mainly to the disposal of non-core businesses at
the end of 2007 which contributed approximately €3 million of profits in the
comparable period.
FINANCIAL REVIEW
Special items (refer to note 6 of the condensed financial statements)
In aggregate, pre-tax special items amounted to a charge of €387 million (€383
million after tax), made up as follows:
An operating special item charge of €358 million, principally comprising:
goodwill impairment costs of €194 million;
asset impairment costs of €99 million;
closure and restructuring costs of €56 million; and
charges related to demerger arrangements put in place for senior executives
following the demerger from Anglo American plc in July 2007 of €9 million.
A non-operating special item charge of €29 million was recognised, which mainly
comprises the loss on the sale of the Niedergösgen recycled containerboard mill
in Switzerland, the two corrugated converting operations in France and three UK
Corrugated sheet feeder plants.
Finance costs
Net finance charges of €159 million were €60 million higher than 2007 due to
higher borrowings and average interest rates, related particularly to emerging
market debt, and foreign currency charges. The latter were incurred mainly in
the fourth quarter and amounted to €28 million (2007: €2 million). This was
largely due to significant devaluations of various emerging market currencies
(notably Turkey, the Ukraine, Mexico and Russia), resulting in foreign exchange
charges being incurred on non local currency denominated loans made to our
businesses in these markets. Excluding these charges, the effective cost of
net debt was 7.5% for the year. (Approximately 25% of the debt is South
African rand-denominated with average interest rates of 12.4% for the year).
Taxation
The effective tax rate before special items of 29% was similar to the 2007
full-year rate. There is only minor tax relief on special items.
Minority interests
Minority interests for the year were €17 million lower than the comparable
period, as earnings were down at the significant operations where there are
non-controlling interests, particularly at Åšwiecie in Poland within the Europe
& International Division.
Cash flow and borrowings
EBITDA of €814 million in the year was 6%, or €56 million, lower than 2007,
reflecting the more difficult trading environment. Cash inflows from
operations of €795 million were €162 million down on the comparable period,
mainly due to the lower EBITDA and lower inflows on working capital than
achieved in the prior year. Cash inflow from working capital of €27 million
was achieved despite a 1% increase in sales and an already strong performance
in the prior year (€97 million). Indeed, since the half-year working capital
inflows amounted to €153 million.
Capital expenditure of €369 million (excluding spend on the two major strategic
projects of €324 million) was slightly lower than depreciation of €373 million.
We have reviewed our capital expenditure plans with a view to limiting 2009
capital expenditure approvals to below 40% of depreciation. The remaining
expenditure on the two major projects is estimated at €511 million, the bulk of
which will be spent in 2009 with some flow through to 2010.
Spending on acquisitions completed during the year totalled €89 million
(enterprise value). Acquisitions were primarily focused on the strengthening of
the product mix and geographic coverage of our Bags & Specialities business.
Balance sheet and returns on invested capital
Trading capital employed at the year-end was €4,367 million, €451 million lower
than 2007, mainly due to special item impairments of €293 million, foreign
exchange movements of €454 million and disposals of €94 million, partially
offset by capital expenditure of €816 million including business combinations
(€443 million in excess of depreciation).
Return on capital employed declined from 10.6% to 9.5% as a result of reduced
profitability. This return is below our target across the cycle of 13%.
Treasury and borrowings
The Group's treasury function operates within clearly defined Board-approved
policies and limits, follows controlled reporting procedures and is subject to
regular internal and external reviews.
Net debt at year-end of €1,690 million was €183 million higher than 2007 (only
€35 million up since the end of June 2008) as the rate of capital expenditure
increased on the two key capital projects in Poland and Russia. Gearing as at
31 December 2008 was 38.7%, and the net debt to EBITDA ratio was 2.1.
Group liquidity is provided through a range of committed debt facilities of €
2.8 billion, which are in excess of the Group's short-term needs. The
principal debt facilities are a €1.55 billion, 5 year, syndicated revolving
credit facility, and a R2.0 billion (€152 million) 3 year amortising term loan
maturing in 2010. Despite the unfavourable banking environment in 2008 the
Group secured additional long-term facilities to assist in funding its two
major investment projects; a €174 million, 11 year amortising facility from
Export Credit Agencies was signed to part fund the investment in Russia; and a
€140 million, 9 year facility from the European Investment Bank was arranged to
fund the investment in Poland. Additionally, R1 billion (€76 million) of new
facilities were arranged in South Africa with a 3 year maturity. The average
maturity of the committed debt facilities is 3.4 years (versus 3.5 years in
2007). Drawn facilities maturing over the next 12 months amount to €371
million. We would expect the majority of these facilities to be renewed, but
to the extent they are not they will be financed out of existing undrawn
committed facilities (nearly €1.1 billion at year-end).
PRINCIPAL RISKS AND UNCERTAINTIES
It is in the nature of our business that Mondi is exposed to risks and
uncertainties which may have an impact on future performance and financial
results, as well as upon our ability to meet certain social and environmental
objectives. The Group believes that it has effective systems and controls in
place to manage the key risks identified below.
Mondi operates in a highly competitive environment
The markets for paper and packaging products are highly competitive. Similarly,
prices of Mondi's key paper grades have experienced substantial fluctuations in
the past. However, Mondi is flexible and responsive to changing market and
operating conditions and the Group's geographic and product diversification
provides some measure of protection. Uncertain future trading conditions may
have an impact on the carrying value of goodwill and tangible assets and may
result in further restructuring activities.
Input costs are subject to significant fluctuations
Materials, energy and consumables used by Mondi include significant amounts of
wood, pulp, recovered paper, packaging papers and chemicals. Increases in the
costs of any of these raw materials, or any difficulties in procuring wood in
certain countries, could have an adverse effect on Mondi's business,
operational performance or financial condition. However, Mondi's focus on
operational performance, and relatively high level of integration and access to
its own fibre in Russia and South Africa, act to mitigate these risks. It is
also anticipated that the recent settlement of land claims in South Africa will
provide a framework for settling future forestry land claims with Mondi.
Significant capital investments including acquisitions carry project risk
Mondi is in the process of completing two significant capital investments to
expand and upgrade existing facilities in Poland and Russia. These projects
carry risks and Mondi has put in place dedicated teams to ensure delivery of
the projects on time and within budget.
Going Concern
The current economic conditions will impact short-term demand growth for our
products, as well as place pressure on both customers and suppliers which may
face liquidity issues, and could have an adverse impact on Mondi's business.
Furthermore, the lack of credit availability could impact the Group's ability
to effectively execute its strategy. However, Mondi's geographic spread,
product diversity and large customer base mitigate these risks. The proactive
initiatives by management in rationalising the business through cost-cutting,
asset closures and divestitures have consolidated the Group's leading cost
position in its chosen markets. Working capital as a percentage of sales has
reduced and capital expenditure programmes have been reduced.
The Group meets its funding requirements through two principal loan facilities,
being a €1.55 billion, 5 year, syndicated revolving credit facility expiring in
June 2012, and a R2 billion (€152 million) 3 year amortising term loan maturing
in May 2010. The availability of these facilities is dependent upon the Group
meeting certain financing covenants, most significantly an EBITDA to net debt
ratio of 3.5. At the year end this ratio was 2.1. Mondi had nearly €1.1
billion of undrawn committed debt facilities as at 31 December 2008 with an
average maturity of 4.0 years, which should provide sufficient liquidity for
Mondi in the medium term.
The Group's forecasts and projections, taking account of reasonable possible
changes in trading performance, show that the Group should be able to operate
within the level of its current facility and the related covenants.
As a consequence, the directors believe that the Group is well placed to manage
its business risks successfully, despite the current uncertain economic
outlook.
After making 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.
BOARD
Paul Hollingworth stepped down from the Boards as chief financial officer
during the fourth quarter. The Boards of Mondi would like to thank Paul for
his significant contribution to the Group and also for his work in helping to
establish Mondi as a separate listed Group following its demerger from Anglo
American plc. We are pleased that we have an excellent replacement, Andrew
King, who has worked for Mondi for seven years, latterly as Group strategy and
business development director. Andrew King joined the Boards as chief
financial officer on 23 October 2008 and is based in South Africa.
DIVIDEND
The Boards recognise the importance of dividends to shareholders. Mondi
remains well financed, with healthy operating cashflows and a strong balance
sheet. However, given the continued uncertain economic outlook and lack of
liquidity in the financial markets, it is proposed to pay a reduced full-year
dividend which remains in line with the targeted dividend cover range of two to
three times.
Accordingly, the boards of Mondi Limited and Mondi plc have recommended a final
dividend of 5.0 euro cents per share, payable on 20 May 2009 to shareholders on
the register at 24 April 2009. An equivalent final dividend will be paid in
South African rand on the same terms. Together with the interim dividend paid
in September 2008 of 7.7 euro cents per share, this gives a full-year dividend
of 12.7 euro cents per share.
MAINTAINING OUR COMPETITIVE ADVANTAGE
We believe that our strategy remains valid especially in the current economic
environment. Leading market positions, low cost operations and a robust focus
on performance have always been key elements of that strategy and in today's
challenging economic times its benefits will be even more pronounced.
Building on market leadership
At a time of global uncertainty in our industry, we believe it is more
important than ever that we continue to strengthen our leading positions in
packaging and UFP, particularly in emerging markets. These markets will not be
immune to recession, as we indicated at the end of last year, but they continue
to offer above-average long-term growth potential.
Remaining a low cost producer
We are committed to delivering superior returns, above the average of our
competitors, and this commitment is undiminished by the difficult trading
conditions. The value of having much of our production in some of the world's
lowest-cost regions is a significant benefit when volumes and selling prices
are under pressure.
Our high level of vertical integration in the supply chain, combining low-cost
upstream assets with low-cost production, gives us good security of supply and
greatly reduces our exposure to volatility in raw material prices.
Sharpening focus on performance
The requirement for continuous productivity improvements and cost reduction is
imperative in our business. Our highly-experienced management teams have
implemented a continuous series of business excellence programmes in recent
years and rigorous asset management is second nature for everyone in our
operations. This unwavering emphasis on cost control and operational
performance has never been more important than in the current economic climate
and we target further cost reductions of €180 million in 2009.
CURRENT YEAR OUTLOOK
Given the level of global economic uncertainty that emerged in the latter part
of 2008, the outlook inevitably remains challenging. However Mondi's strong
financial position, our low cost, high quality asset base and our quick and
decisive response to rapidly changing economic events leave us well positioned
to benefit when market conditions improve. As such, the Boards remain
confident in the medium and long-term prospects for the Group.
Condensed combined and consolidated income statement
for the year ended 31 December 2008
2008 2007
Before After
special Special special Before Special After
items special items special
€ million Notes items (note 6) items items (note 6) items
Group revenue 4 6,345 - 6,345 6,269 – 6,269
Materials, energy and
consumables used (3,384) - (3,384) (3,265) – (3,265)
Variable selling expenses (542) - (542) (558) – (558)
Gross margin 2,419 - 2,419 2,446 – 2,446
Maintenance and other
indirect expenses (300) - (300) (289) – (289)
Personnel costs (926) (41) (967) (906) (17) (923)
Other net operating
expenses (379) (24) (403) (381) – (381)
Depreciation, amortisation
and impairments (373) (293) (666) (368) (60) (428)
Operating profit/(loss)
from subsidiaries and joint
ventures 4 441 (358) 83 502 (77) 425
Net (loss)/profit on
disposals 6 - (27) (27) – 83 83
Impairment of assets held
for sale 6 - (2) (2) - - -
Net income from associates 2 - 2 2 – 2
Total profit/(loss) from
operations and associates 443 (387) 56 504 6 510
Investment income 15 - 15 44 – 44
Interest expense (174) - (174) (143) (29) (172)
Net finance costs 7 (159) - (159) (99) (29) (128)
Profit/(loss) before tax 284 (387) (103) 405 (23) 382
Taxation (charge)/credit 8 (82) 4 (78) (117) 15 (102)
Profit/(loss) from
continuing operations
5 202 (383) (181) 288 (8) 280
Attributable to:
Minority interests 30 - 30 47 – 47
Equity holders 172 (383) (211) 241 (8) 233
Earnings per share (EPS)
for (loss)/profit
attributable to equity
holders
Basic EPS (€ cents) 10 (41.6) 45.4
Diluted EPS (€ cents) 10 (41.6) 45.1
Basic underlying EPS (€
cents) 10 33.9 46.9
Diluted underlying EPS (€
cents) 10 33.4 46.7
Basic headline EPS (€
cents) 10 20.3 39.5
Diluted headline EPS (€
cents) 10 20.0 39.3
There were no discontinued operations in either of the years presented.
Condensed combined and consolidated balance sheet
as at 31 December 2008
€ million Notes 2008 2007
Intangible assets 323 520
Property, plant and equipment 3,611 3,731
Forestry assets 214 224
Investments in associates 5 6
Financial asset investments 19 25
Deferred tax assets 36 32
Retirement benefits surplus - 11
Total non-current assets 4,208 4,549
Inventories 684 760
Trade and other receivables 1,104 1,304
Current tax assets 32 52
Cash and cash equivalents 155 180
Derivative financial instruments 73 17
Total current assets 2,048 2,313
Assets held for sale 5 -
Total assets 6,261 6,862
Short-term borrowings (378) (453)
Trade and other payables (1,035) (1,150)
Current tax liabilities (53) (81)
Provisions (25) (14)
Derivative financial instruments (38) (3)
Total current liabilities (1,529) (1,701)
Medium and long-term borrowings (1,467) (1,234)
Retirement benefits obligation (182) (200)
Deferred tax liabilities (292) (322)
Provisions (39) (50)
Other non-current liabilities (14) (17)
Derivative financial instruments (39) (2)
Total non-current liabilities (2,033) (1,825)
Liabilities directly associated with assets classified as
held for sale (3) -
Total liabilities (3,565) (3,526)
Net assets 4 2,696 3,336
Equity
Ordinary share capital 11/13 114 114
Share premium 11/13 532 532
Retained earnings and other reserves 11 1,677 2,317
Total attributable to equity holders 2,323 2,963
Minority interest in equity 373 373
Total equity 2,696 3,336
Condensed combined and consolidated cash flow statement
for the year ended 31 December 2008
€ million Notes 2008 2007
Cash inflows from operations 15a 795 957
Dividends from associates 2 1
Income tax paid (71) (93)
Net cash inflows generated from operating activities 726 865
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and cash equivalents 14 (49) (193)
Proceeds from disposal of subsidiaries, net of cash and cash
equivalents 17 112
Proceeds from disposal of associates - 54
Purchases of property, plant and equipment 15f (693) (406)
Proceeds from the disposal of property, plant and equipment 29 17
Investment in forestry assets (43) (41)
Purchases of financial asset investments (2) (2)
Purchase of intangible assets (7) (4)
Proceeds from the sale of financial asset investments 1 2
Loan repayments from related parties 1 15
Interest received 28 18
Other investing activities 8 (6)
Net cash used in investing activities (710) (434)
Cash flows from financing activities
Repayment of short-term borrowings 15c (214) (945)
Proceeds from medium and long-term borrowings 15c 543 564
Interest paid (169) (139)
Dividends paid to minority interests (20) (47)
Dividends paid to equity holders 9 (118) (38)
Dividends paid to Anglo American plc group companies - (202)
Increase in Anglo American plc invested capital - 120
Purchase of treasury shares (15) (33)
Other financing activities 1 3
Net cash used in financing activities 8 (717)
Net decrease in cash and cash equivalents 24 (286)
Cash and cash equivalents at start of year1 59 358
Cash movement in the year 15c 24 (286)
Cash acquired through business combinations 15c 3 -
Reclassifications 15c (2) (3)
Effects of changes in foreign exchange rates 15c (9) (10)
Cash and cash equivalents at end of year1 15b 75 59
Note:
1'Cash and cash equivalents' includes overdrafts and cash flows from disposal
groups and is reconciled to the balance sheet in note 15b.
Condensed combined and consolidated statement of recognised income and expense
for the year ended 31 December 2008
€ million 2008 2007
Fair value losses accreted on cash flow hedges, net of amounts
recycled to the combined and consolidated income statement (39) (3)
Actuarial (losses)/gains on post-retirement benefit schemes (14) 12
Fair value losses on available for sale investments (1) (1)
Exchange gains on demerger - 9
Exchange losses on translation of foreign operations (248) (71)
Other movements - (1)
Total expense recognised directly in equity1 (302) (55)
(Loss)/profit for the year (181) 280
Total recognised income and expense for the year (483) 225
Attributable to:
Minority interests 26 56
Equity holders of the parent companies (509) 169
Note:
1 Net of related tax.
Notes to the condensed combined and consolidated financial statements
1 Basis of preparation
The condensed financial information included in this preliminary announcement
has been prepared in accordance with the measurement and recognition criteria
of International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) and have been prepared in
accordance with IAS34, 'Interim Financial Reporting'. There are no differences
for the Group in applying IFRS as issued by the IASB and the European Union
(EU) and therefore the Group also complies with IFRS as endorsed by the EU.
Dual listed structure
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 under IFRS.
Pre-demerger
During the period up to 2 July 2007 (the 'pre-demerger period'), the Group did
not form a separate legal group. 'The Anglo American plc investment in the
Group' is therefore presented for the pre-demerger period, representing the
aggregated share capital, share premium and reserve balances of the Group's
constituent entities, together with debtor and creditor balances held in
respect of the Anglo American group and deemed to be equity funding in nature.
Any interest accruing on such balances is classified as a dividend in specie
and recorded separately through reserves, not through the condensed combined
and consolidated income statement.
The financial information set out does not constitue the Group's statutory
accounts for the year ended 31 December 2008, but is derived from those
accounts. Statutory accounts for 2008 will be delivered to the Registrar of
Companies following the Group's annual general meeting on 7 May 2009. The
auditors have reported on those accounts; their reports were unqualified and
did not draw attention to any matters by way of emphasis without qualifying
their reports and did not contain statements under s237 (2) or (3) of the UK
Companies Act 1985. 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, presentation and measurement principles have been
followed in the condensed combined and consolidated financial statements as
applied in the Group's audited financial information for the year ended 31
December 2007.
3 Seasonality
The seasonality and cyclicality of the Group's operations do not impact
significantly on the condensed combined and consolidated financial statements.
4 Segmental information
Based on the risks and returns of the Mondi Group, the Boards consider the
primary reporting format is by business segment and the secondary reporting
format is by geographical segment.
Primary reporting format - by business segment
2008 2007
Inter- Inter-
Segment segment Group Segment segment Group
€ million revenue revenue1 revenue revenue revenue1 revenue
Europe & International
Bags & Specialities 2,138 (22) 2,116 2,005 (19) 1,986
Uncoated Fine Paper 1,565 (174) 1,391 1,666 (177) 1,489
Corrugated 1,555 (58) 1,497 1,616 (55) 1,561
Intra-segment elimination (99) 99 - (98) 98 -
Sub-total 5,159 (155) 5,004 5,189 (153) 5,036
South Africa
Uncoated Fine Paper 474 (174) 300 491 (267) 224
Corrugated 134 (132) 2 125 (125) -
Intra-segment elimination (21) 21 - (25) 25 -
Sub-total 587 (285) 302 591 (367) 224
Mondi Packaging South Africa 474 (27) 447 419 (28) 391
Merchant and Newsprint
businesses 593 (1) 592 591 (1) 590
Corporate and other businesses - - - 28 - 28
Inter-segment revenue (468) 468 - (549) 549 -
Total 6,345 - 6,345 6,269 - 6,269
Segment operating profit/(loss)
Segment operating profit before
special items2 after special items2
€ million 2008 2007 2008 2007
Europe &
International
Bags &
Specialities 159 154 (58) 153
Uncoated
Fine Paper 126 99 98 36
Corrugated 49 133 (62) 128
Sub-total 334 386 (22) 317
South Africa
Uncoated
Fine Paper 75 53 75 48
Corrugated 36 25 36 25
Sub-total 111 78 111 73
Mondi
Packaging
South Africa 28 35 28 35
Merchant and
Newsprint
businesses 7 40 7 40
Corporate and
other
businesses (39) (37) (41) (40)
Total
441 502 83 425
Notes:
1 Inter-segment transactions are conducted on an arm's length basis.
2 Segment result is defined as being segment revenue less segment expense;
that is operating profit and fair value gains/(losses) that have been recycled
to the combined and consolidated income statement on cash flow hedges of
operating transactions. There are no material inter-segment transfers or
transactions that would affect the segment result.
The segment result before special items, as shown above, is reconciled to
'Profit from continuing operations' in the Group's combined and consolidated
income statement as follows:
€ million 2008 2007
Operating profit before special items and associates' net income 441 502
Operating special items (see note 6)
Subsidiaries and joint ventures: (358) (77)
Europe & International (356) (69)
South Africa - (5)
Corporate and other businesses (2) (3)
Operating profit after special items and before associates' net income 83 425
Net (loss)/profit on disposal of subsidiaries and associates (27) 83
Impairment of assets held for sale (2) -
Net income from associates 2 2
Total profit from operations and associates 56 510
Net finance costs (159) (128)
Profit before tax (103) 382
Taxation charge (78) (102)
Group (loss)/profit from continuing operations (181) 280
Primary segment disclosures for segment assets, liabilities and capital
expenditure are as follows:
Segment assets1 Segment Net segment Capital
liabilities2 assets expenditure3
€ million 2008 2007 2008 2007 2008 2007 2008 2007
Europe &
International
Bags &
Specialities 1,632 1,851 (315) (305) 1,317 1,546 185 169
Uncoated Fine
Paper 1,589 1,491 (177) (203) 1,412 1,288 284 101
Corrugated 1,171 1,389 (241) (316) 930 1,073 246 261
Intra-segment
elimination (76) (45) 76 45 - - - -
Sub-total 4,316 4,686 (657) (779) 3,659 3,907 715 531
South Africa
Uncoated Fine
Paper 720 913 (80) (100) 640 813 40 24
Corrugated 139 165 (19) (12) 120 153 6 2
Intra-segment
elimination (2) (4) 2 4 - - - -
Sub-total 857 1,074 (97) (108) 760 966 46 26
Mondi Packaging
South Africa 371 426 (70) (92) 301 334 44 156
Merchant and
Newsprint
businesses 283 337 (87) (90) 196 247 11 18
Corporate and
other businesses 13 12 (3) (14) 10 (2) - 5
Inter-segment
elimination (101) (157) 101 157 - - - -
Segments total 5,739 6,378 (813) (926) 4,926 5,452 816 736
Unallocated:
Investment in
associates 5 6 - - 5 6
Deferred tax
assets/
(liabilities) 36 32 (292) (322) (256) (290)
Other
non-operating
assets/
(liabilities)4 307 241 (615) (591) (308) (350)
Group trading
capital employed 6,087 6,657 (1,720) (1,839) 4,367 4,818
Financial asset
investments 19 25 - - 19 25
Net debt5 155 180 (1,845) (1,687) (1,690) (1,507)
Group net assets 6,261 6,862 (3,565) (3,526) 2,696 3,336
Notes:
1 Segment assets are operating assets and at 31 December 2008 consist of
property, plant and equipment of €3,611 million (2007: €3,731 million),
intangible assets of €323 million (2007: €520 million), forestry assets of €214
million (2007: €224 million), retirement benefits surplus of €nil (2007: €11
million), inventories of €684 million (2007: €760 million) and operating
receivables of €907 million (2007: €1,132 million).
2 Segment liabilities are operating liabilities and at 31 December 2008
consist of non-interest bearing current liabilities of €619 million (2007: €
711 million), provisions of €12 million (2007: €15 million) and provisions for
post-retirement benefits of €182 million (2007: €200 million).
3 Capital expenditure reflects cash payments and accruals in respect of
additions to property, plant and equipment and intangible assets of €761
million (2007: €429 million) and includes additions resulting from acquisitions
through business combinations of €55 million (2007: €307 million).
4 Other non-operating assets consist of derivative assets of €73 million
(2007: €17 million), current income tax receivables of €32 million (2007: €52
million), other non-operating receivables of €197 million (2007: €173 million)
and assets held for sale of €5 million (2007: €nil million). Other
non-operating liabilities consist of derivative liabilities of €77 million
(2007: €5 million), non-operating provisions of €52 million (2007: €49
million), current income tax liabilities of €53 million (2007: €81 million),
other non-operating liabilities of €430 million (2007: €456 million) and
liabilities directly associated with assets held for sale of €3 million (2007:
€nil million).
5 Overdrafts of €80 million (2007: €121 million) are included in borrowings.
Primary segment disclosures for depreciation, amortisation and impairments are
as follows:
Depreciation and amortisation Impairments
€ million 2008 2007 2008 2007
Europe & International
Bags & Specialities 113 106 190 -
Uncoated Fine Paper 94 104 1 57
Corrugated 82 75 102 -
Sub-total 289 285 293 57
South Africa
Uncoated Fine Paper 34 34 - 4
Corrugated 7 10 - -
Sub-total 41 44 - 4
Mondi Packaging South Africa 25 18 - -
Merchant and Newsprint businesses 17 20 - -
Corporate and other businesses 1 2 - -
Total 373 368 293 61
Secondary reporting format - by geographical segment
The Group's geographical analysis of revenue, allocated based on the country in
which the customer is located, is presented as follows.
Revenue
€ million 2008 2007
Subsidiaries and joint ventures
South Africa 616 618
Rest of Africa 251 213
Western Europe 2,932 3,162
Eastern Europe 1,326 1,148
Russia 430 421
North America 183 194
South America 31 29
Asia and Australia 576 484
Total 6,345 6,269
Additional disclosure of secondary segmental information of revenue by origin
is presented as follows:
Revenue
€ million 2008 2007
Subsidiaries and joint ventures
South Africa 1,015 995
Rest of Africa 15 12
Western Europe 2,772 2,840
Eastern Europe 1,691 1,615
Russia 569 546
North America 120 121
Asia and Australia 163 140
Total 6,345 6,269
The Group's geographical analysis of segment assets, liabilities and capital
expenditure, allocated based on where assets and liabilities are located, is
presented as follows:
Segment assets Segment Net segment Capital
liabilities assets expenditure
€ million 2008 2007 2008 2007 2008 2007 2008 2007
Subsidiaries
and joint
ventures
South Africa 1,195 1,444 (152) (139) 1,043 1,305 92 186
Rest of
Africa 11 19 (1) (5) 10 14 1 1
Western
Europe 1,993 2,376 (392) (546) 1,601 1,830 96 208
Eastern
Europe 1,700 1,855 (190) (144) 1,510 1,711 357 263
Russia 618 446 (33) (27) 585 419 263 65
North
America 86 112 (11) (20) 75 92 2 3
Asia and
Australia 136 126 (34) (45) 102 81 5 10
Total 5,739 6,378 (813) (926) 4,926 5,452 816 736
5 (Loss)/profit from continuing operations
€ million 2008 2007
(Loss)/profit for the year has been arrived at after charging/
(crediting):
Depreciation of property, plant and equipment 364 363
Amortisation of intangible assets 9 5
Rentals under operating leases 71 31
Research and development expenditure 10 9
Restructuring/closure costs (excluding special items) 7 28
Operating special items(see note 6) 358 77
Net foreign currency (gains)/losses (7) 4
Green energy sales and disposal of emissions credits (53) (42)
Fair value gains on forestry assets (46) (32)
Felling costs 43 51
(Profit)/loss on disposal of property, plant and equipment (6) 1
6 Special items
€ million 2008 2007
Operating special items
Asset impairments
Bags & Specialities (Europe & International) (70) -
Uncoated Fine Paper (Europe & International) (1) (57)
Uncoated Fine Paper (South Africa) - (4)
Corrugated (Europe & International) (28) -
Total asset impairments (99) (61)
Restructuring and closure costs
Bags & Specialities (Europe & International) (8) -
Uncoated Fine Paper (Europe & International) (15) -
Corrugated (Europe & International) (1) -
Total restructuring and closure costs (24) -
Goodwill impairments
Bags & Specialities (Europe & International) (120) -
Corrugated (Europe & International) (74) -
Total goodwill impairments (194) -
Mondi Packaging South Africa negative goodwill - 1
Demerger arrangements (9) (9)
Personnel costs relating to restructuring
Bags & Specialities (Europe & International) (18) -
Uncoated Fine Paper (Europe & International) (8) -
Corrugated (Europe & International) (6) -
Accelerated charge on Anglo American plc share-based award schemes - (8)
Total operating special items (358) (77)
(Loss)/profit on disposals
Disposal of Niedergosgen (16) -
Disposal of Mondi Packaging Emball SAS (8) -
Disposal of UK Sheetfeeders (3) -
Disposal of partial interest in Mondi Packaging Paper Swiecie S.A. - 57
Disposal of Bischof + Klein GmbH - 19
Sale of other businesses - 7
Net (loss)/profit on disposal (27) 83
Asset impairment of assets held for sale (2) -
Financing cost - (29)
Total non-operating special items (29) 54
Total special items before tax and minority interests (387) (23)
Taxation 4 15
Total special items attributable to equity holders (383) (8)
Year ended 31 December 2008
Operating special items
The sharp decline in demand experienced in a number of markets, together with
the recognition that we are entering a prolonged global economic slowdown has
resulted in management taking a number of actions.
Bags & Specialities
Significant market related down time has been taken due to overcapacity created
by a significant slowdown in demand. Various restructuring initiatives have
been implemented in response to the lower demand environment. As a result the
Group has incurred restructuring and closure costs of €26 million, and asset
impairment costs of €70 million. Management has also impaired goodwill by €120
million.
Uncoated Fine Paper
Management has closed and restructured operations resulting in costs of €23
million, and asset impairment costs of €1 million.
Corrugated
Given the continued difficult trading conditions in the Corrugated Packaging
sector Mondi responded by closing, or restructuring, certain high cost
operations. This has resulted in restructuring and closure costs of €7 million
and asset impairment costs of €28 million. The business has suffered from
price erosion due to a combination of overcapacity and slowing demand, and has
impaired goodwill of €74 million.
Demerger arrangements
Equity settled demerger arrangements for senior management have also resulted
in additional share based payments of €9 million. It is expected that a further
and final €5 million will be incurred by the Group in respect of senior
management demerger arrangements over the period ending 3 July 2009.
Non-operating special items
The Group disposed of 100% of its interest in Niedergosgen on 31 December 2008
for a consideration of approximately €19 million at a loss on disposal of €16
million. The Group also disposed of its interest in Mondi Packaging Emball SAS
for a consideration of approximately €4 million at a loss of €8 million on 1
December 2008 and UK Sheetfeeders for a consideration of approximately €21
million at a loss of €3 million on 12 May 2008. The Group impaired the €2
million assets of Ile de France that is reflected as held for sale on the
balance sheet.
7 Net finance costs
Net finance costs and related foreign exchange gains/(losses) are presented
below:
€ million 2008 2007
Investment income
Interest income
Bank deposits, loan receivables and other 22 22
Available for sale investments - 1
Past due receivables 1 1
Total interest income 23 24
Expected return on defined benefit arrangements 20 22
Foreign currency losses (28) (2)
Impairment of financial assets (excluding trade receivables) (1) -
Other financial income 1 -
Total investment income 15 44
Financing costs
Interest expense
Interest on bank overdrafts and loans (169) (119)
Interest on obligations under finance leases (1) (1)
Interest on defined benefit arrangements (28) (28)
Total interest expense (198) (148)
Other
Net gains on held for trading interest rate swaps - 2
Net losses arising on derivatives in a designated fair value hedge
accounting relationship - (1)
Total other - 1
Less: interest capitalised 24 4
Total financing costs prior to special items (174) (143)
Special items financing cost (see note 6) - (29)
Total financing costs after special items (174) (172)
Net finance costs (159) (128)
The weighted average interest rate applicable to interest on general borrowings
capitalised for the year ended 31 December 2008 is 13.0% (2007: 8.4%) mainly
related to loans in Russia and Poland.
8 Taxation charge
Analysis of charge for the year from continuing operations
€ million 2008 2007
UK corporation tax at 28.5% (2007: 30%) (5) (1)
Overseas taxation 66 89
Current tax (excluding tax on special items) 61 88
Deferred tax in respect of the current period (excluding tax on special
items) 30 29
Deferred tax in respect of prior period over provision (9) -
Total tax charge before special items 82 117
Current tax on special items (2) (1)
Deferred tax on special items (2) (14)
Total tax credit on special items (4) (15)
Total tax charge 78 102
The Group's effective rate of taxation before special items for the year ended
31 December 2008, which includes taxation on net income from associates, is 29%
(2007: 29%).
9 Dividends
Dividend payments
An interim dividend for the year ended 31 December 2008 of 88.68113 rand cents
/ 7.7 euro cents per share was paid on 16 September 2008 to all Mondi Limited
and Mondi plc ordinary shareholders on the relevant registers on 29 August
2008.
A proposed final dividend for the year ended 31 December 2008 of 5.0 euro cents
per share will be paid on 20 May 2009 to all Mondi Limited and Mondi plc
ordinary shareholders on the relevant registers on 24 April 2009. 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 7 May 2009.
Dividend timetable
The proposed final dividend for the year ended 31 December 2008 will be paid in
accordance with the following timetable:
Mondi Mondi plc
Limited
Last date to trade shares cum-dividend
JSE Limited 17 April 17 April
2009 2009
London Stock Exchange Not 21 April
applicable 2009
Shares commence trading ex-dividend
JSE Limited 20 April 20 April
2009 2009
London Stock Exchange Not 22 April
applicable 2009
Record date
JSE Limited 24 April 24 April
2009 2009
London Stock Exchange Not 24 April
applicable 2009
Last date for Dividend Reinvestment Plan (DRIP) 5 May 2009 5 May 2009
elections by Central Securities Depository
Participants
Last date for DRIP elections to UK Registrar and 6 May 2009 6 May 2009
South African Transfer Secretaries by shareholders
of Mondi Limited and Mondi plc
Payment Date
South African Register 20 May 20 May
2009 2009
UK Register Not 20 May
applicable 2009
Depositary Interest Holders (dematerialised DIs) 26 May Not
2009 applicable
Holders within the Equiniti Corporate Nominee 28 May Not
2009 applicable
Currency conversion date
ZAR/euro 26 26
February February
Euro/sterling 2009 2009
Not 11 May
applicable 2009
DRIP purchase settlement dates 27 May 26 May
2009 2009*
*27 May 2009 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 20 April 2009 and 24
April 2009, both dates inclusive, nor may transfers between the UK and South
African registers of Mondi plc take place between 15 April 2009 and 24 April
2009, both dates inclusive.
In the event South African National Elections are confirmed for 22 April 2009,
a public holiday may be declared and the above dividend timetable would be
impacted. In such instance, Mondi would likely bring the Mondi Limited and
Mondi plc South African branch register cum-dividend dates forward by one day
to 16 April 2009, with the respective ex-dividend dates being changed to 17
April 2009. The record and payment dates would remain as stated above.
10 Earnings per share
For 2007, the Group was not a stand-alone entity prior to the demerger date on
2 July 2007. The number of ordinary shares issued on admission was
retrospectively applied to the comparative period, so that a meaningful
comparison can be made.
€ cents per share 2008 2007
(Loss)/profit for the financial year attributable to equity-holders
Basic EPS (41.6) 45.4
Diluted EPS (41.6)3 45.1
Underlying earnings for the financial year1
Basic EPS 33.9 46.9
Diluted EPS 33.4 46.7
Headline earnings for the financial year2
Basic EPS 20.3 39.5
Diluted EPS 20.0 39.3
Notes:
1 The Boards believe that underlying EPS provides a useful additional non-GAAP
measure of the Group's underlying performance. Underlying EPS excludes the
impact of special items.
2 The presentation of Headline EPS is mandated under the JSE Listings
Requirements. Headline earnings has been calculated in accordance with
Circular8/2007, 'Headline Earnings', as issued by the South African Institute
of Chartered Accountants. Please see the reconciliation presented below.
3 Diluted EPS is consistent with Basic EPS as the impact of potential ordinary
shares is anti-dilutive.
The calculation of basic and diluted EPS, basic and diluted underlying EPS, and
basic and diluted Headline EPS is based on the following data.
Earnings
€ million 2008 2007
(Loss)/profit for the financial year attributable to equity
holders (211) 233
Special items: operating 358 77
Net loss/(profit) on disposals 27 (83)
Impairment of assets held for sale 2 -
Special items: financing costs - 29
Related tax (4) (15)
Underlying earnings 172 241
(Profit)/loss on disposal of tangible fixed assets (6) 1
Special items: financing costs - (29)
Special items: demerger arrangements (9) (9)
Special items: accelerated charges on exiting Anglo American plc
share and option schemes - (8)
Special items: Restructuring and closure cost (56) -
Related tax 2 7
Headline earnings 103 203
Number of shares
million 2008 2007
Basic number of ordinary shares outstanding1 507 513
Effect of dilutive potential ordinary shares2 8 4
Diluted number of ordinary shares outstanding 515 517
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.
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.
11 Reconciliation of movement in combined and consolidated equity
Share capital
Combined
share Total
Mondi Mondi Mondi capital equity
Limited Limited plc and attributable
2008/€ share share share share Retained Other to equity
million capital premium capital premium earnings reserves1 holders
At 1
January 11 532 103 646 2,154 163 2,963
Final
dividend -
2007 - - - - (80) - (80)
Interim
dividend -
2008 - - - - (38) - (38)
Retained
loss - - - - (211) - (211)
Issue of
shares
under
employee
share
schemes - - - - 7 (7) -
Purchase
of
treasury
shares2 - - - - (15) - (15)
Share
options
exercised
- Anglo
American
share
scheme - - - - (3) - (3)
Disposal
of
business - - - - (1) - (1)
Minority
share
dilution - - - - (4) - (4)
Other - - - - - (288) (288)
At 31
December 11 532 103 646 1,809 (132) 2,323
Notes:
1 Other reserves are further analysed below.
2 The treasury shares purchased represents the cost of shares in Mondi plc and
Mondi Limited purchased in the market and held by the Mondi Employee Share
Trust and the Mondi Incentive Schemes Trust respectively to satisfy options
under the Group's share options schemes. The number of ordinary shares held by
the Mondi Employee Share Trust and the Mondi Incentive Schemes Trust at 31
December 2008 was 7,943,115 and 115,000 shares respectively (2007: 5,820,232
and nil respectively) at an average price of ₤3.95 and R47.51 per share
respectively (2007: ₤4.08 and Rnil per share respectively).
Share capital
Combined
share Total
Anglo Mondi Mondi Mondi capital equity
investment Limited Limited plc and attributable
2007/€ in Mondi share share share share Retained Other to equity
million Group capital premium capital premium earnings reserves1 holders
At 1 January
- as restated 1,899 – – – 1,899 1,100 (33) 2,966
Anglo
American plc
contribution 120 – – – 120 – – 120
Dividend in
specie2 32 – – – 32 (32) – –
Dividends
paid to Anglo
American plc – – – – – (202) – (202)
Retained
profit
pre-demerger – – – – – 164 – 164
Termination
of Anglo
American plc
equity
interest (2,051) 3 540 – (1,508) (832) 2,411 71
Dividend in
specie to
Anglo
American plc
shareholders – – – 2,938 2,938 – (2,938) –
Share issue
expenses – – – – – (74) – (74)
Share capital
reduction – – – (2,864) (2,864) 2,864 – –
Dividend in
specie to
Mondi plc
shareholders – – – – – (794) 794 –
Issue of
special
converting
shares – 8 (8) 29 29 (29) – –
Interim
dividend – – – – – (38) – (38)
Purchase of
treasury
shares3 – – – – – (33) – (33)
Post-demerger
retained
profit – – – – – 68 - 68
Share-based
payments
transfer – – – – – (8) - (8)
Other – – – – – – (71) (71)
At 31
December – 11 532 103 646 2,154 163 2,963
Notes:
1 Other reserves are further analysed below.
2 The dividend in specie represents interest accrued to Anglo American plc
during the period ended 3 July 2007 on a loan instrument classified as equity
under IAS 32, 'Financial Instruments: Presentation'. On demerger from Anglo
American plc, the Group's obligation under this loan instrument ceased.
3 The treasury shares purchased represents the cost of shares in Mondi plc and
Mondi Limited purchased in the market and held by the Mondi Employee Share
Trust and the Mondi Incentive Schemes Trust respectively to satisfy options
under the Group's share options schemes. The number of ordinary shares held by
the Mondi Employee Share Trust and the Mondi Incentive Schemes Trust at 31
December 2007 was 5,820,232 and nil shares respectively at an average price of
₤4.08 and Rnil per share respectively.
Other reserves
Post
Cumulative Cash retirement
Share-based translation Available flow benefit
2008/€ payment adjustment for sale hedge obligation Merger Other
million reserve reserve reserve reserve reserve reserve reserves Total
At 1
January 13 (88) – 4 (22) 259 (3) 163
Mondi share
schemes'
charge 18 - - - - - - 18
Issue of
shares
under
employee
share
schemes (7) - - - - - - (7)
Actuarial
and surplus
restriction
movements - - - - (14) - - (14)
Fair value
losses
accreted - - (1) (25) - - - (26)
Fair value
gains
recycled to
the income
statement - - - (14) - - - (14)
Call option
issued - - - - - - (4) (4)
Currency
translation
adjustment - (248) - - - - - (248)
At 31
December 24 (336) (1) (35) (36) 259 (7) (132)
Other reserves
Post
Cumulative Cash retirement
Share-based translation Available flow benefit
2007/€ payment adjustment for sale hedge obligation Merger Other
million reserve reserve reserve reserve reserve reserve reserves Total
At 1
January 12 (17) 1 7 (34) – (2) (33)
Termination
of Anglo
American plc
equity
interest – 9 – – – 2,403 (1) 2,411
Dividend in
specie to
Anglo
American plc
shareholders – – – – – (2,938) – (2,938)
Dividend in
specie to
Mondi plc
shareholders – – – – – 794 – 794
Purchase of
Anglo
American plc
shares (19) – – – – – – (19)
Anglo
American plc
share
schemes'
charge 10 – – – – – – 10
Exiting
Anglo
American plc
share
schemes (3) - - - - - - (3)
Mondi share
schemes'
charge 13 – – – – – – 13
Actuarial
and surplus
restriction
movements – – – – 12 – – 12
Fair value
gains/
(losses)
accreted – – (1) (20) – – – (21)
Fair value
(gains)/
losses
recycled to
the income
statement – – – 17 – – – 17
Currency
translation
adjustment – (80) – – – – – (80)
At 31
December 13 (88) – 4 (22) 259 (3) 163
12 Asset values per share
Asset values per share are disclosed in accordance with the JSE Listings
Requirements. Net asset value per share is defined as net assets divided by
the combined number of shares in issue as at 31 December 2008, less treasury
shares held. Tangible net asset value per share is defined as the net assets
less intangible assets divided by the combined number of shares in issue as at
31 December 2008, less treasury shares held.
2008 2007
Net asset value per share (€) 5.34 6.56
Tangible net asset value per share (€) 4.70 5.54
13 Share capital and share premium
Authorised
Number of shares R million
Mondi Limited R0.20 ordinary shares 250,000,000 50
Authorised
Number of shares € million
Mondi plc €0.20 ordinary shares 3,177,608,605 636
There has been no change to the authorised share capital of either Mondi
Limited or Mondi plc since listing on the respective stock exchanges on 3 July
2007.
Number of Called up, allotted and fully
2008 shares paid/€ million
Share Share
capital premium Total
Mondi Limited R0.20 ordinary shares 146,896,322 3
issued on the JSE 532 535
Mondi plc1 €0.20 ordinary shares 367,240,805 74
issued on the LSE – 74
Total ordinary shares in issue 514,137,127 77 532 609
Mondi Limited R0.20 special 367,240,805 8 - 8
converting shares2
Mondi plc €0.20 special converting 146,896,322 29 29
shares –
Total special converting shares 514,137,127 37 - 37
Total shares 1,028,274,254 114 532 646
Number of Called up, allotted and fully
2007 shares paid/€ million
Share Share
capital premium Total
Mondi Limited R0.20 ordinary shares 146,896,322 3
issued on the JSE 532 535
Mondi plc1 €0.20 ordinary shares 367,240,805 74
issued on the LSE – 74
Total ordinary shares in issue 514,137,127 77 532 609
Mondi Limited R0.20 special 367,240,805 8 - 8
converting shares2
Mondi plc €0.20 special converting 146,896,322 29 29
shares 2 –
Total special converting shares 514,137,127 37 - 37
Total shares 1,028,274,254 114 532 646
Notes:
1 Mondi plc also issued 50,000 5% cumulative £1 preference shares in 2007.
The Group classifies these preference shares as a liability, and not as equity
instruments, since they contractually obligate the Group to make cumulative
dividend payments to the holders. The dividend payments are treated as a
finance cost rather than distributions.
2 The special converting shares are held on trust and do not carry dividend
rights. The special converting shares provide a mechanism for equality of
treatment on termination for both Mondi Limited and Mondi plc ordinary equity
holders.
14 Business combinations
Principal acquisitions made during the year to 31 December 2008, accounted for
under the acquisition method, were:
Name of entity Nature of entity Date of Percentage
acquired acquired acquisition acquired
Dunapack Bag converting April 2008 100.0
Rochester Coating April 2008 100.0
Loparex Group Coating and Kraft paper April 2008 100.0
Details of the aggregate net assets acquired, as adjusted from book to fair
value, and the attributable goodwill are presented as follows:
€ million Book value Revaluation Fair value
Net assets acquired:
Intangible assets 1 8 9
Property, plant and equipment 59 (32) 27
Financial asset investments 5 - 5
Deferred tax assets 1 2 3
Inventories 22 (1) 21
Trade and other receivables 44 2 46
Cash and cash equivalents 3 - 3
Short-term borrowings (3) - (3)
Other current liabilities (44) - (44)
Long-term borrowings (37) - (37)
Deferred tax liabilities (3) (1) (4)
Contingent liabilities 2 - 2
Retirement benefits obligation - - -
Equity minority interest 5 - 5
Net assets acquired 55 (22) 33
Goodwill arising on acquisition 19
Total cost of acquisition 52
Cash acquired net of overdrafts (3)
Net cash paid 49
The values used in accounting for the identifiable assets and liabilities of
these acquisitions are provisional in nature at the balance sheet date. If
necessary, adjustments will be made to these carrying values, and to the
related goodwill, within 12 months of the acquisition date.
During the year to 31 December 2008 adjustments totalling €7 million have been
made to the provisional values estimated of net assets of Tire Kutsan acquired
in the year to 31 December 2007.
The goodwill which arose on the acquisition of Dunapack represents the value
harnessed of further expanding into the emerging markets of Hungary and Ukraine
and consolidating the Group's position in Bag Converting in the CEE region.
Furthermore it represents significant potential for synergies and
rationalisation in Hungary. The goodwill which arose in Rochester represents
the value associated with strengthening the Group's market position in Coatings
and the realisation of substantial synergies. No goodwill was recognised on
acquisition of the Loparex Group.
15 Consolidated cash flow analysis
(a) Reconciliation of profit before tax to cash inflows from operations
€ million 2008 2007
(Loss)/profit before tax (103) 382
Depreciation and amortisation 373 368
Share option expense 9 6
Non-cash effect of special items of subsidiaries and joint ventures 368 23
Net finance costs 159 99
Net income from associates (2) (2)
Decrease in provisions and post-employment benefits (21) (14)
Decrease/(increase) in inventories 26 (69)
Decrease/(increase) in operating receivables 106 25
(Decrease)/increase in operating payables (105) 141
Fair value gains on forestry assets (46) (32)
Cost of felling 43 51
(Profit)/loss on disposal of fixed assets (6) 1
Purchase of Anglo American plc shares - (19)
Other adjustments (6) (3)
Cash inflows from operations 795 957
(b) Cash and cash equivalents
€ million 2008 2007
Cash and cash equivalents per balance sheet 155 180
Bank overdrafts included in short-term borrowings (80) (121)
Net cash and cash equivalents per cash flow statement 75 59
(c) Movement in net debt
The Group's net debt position, excluding disposal groups is as follows:
Debt due
Cash and Debt due after
cash within one one Total net
equivalents1 year2 year debt
Balance at 1 January 2007 358 (1,181) (656) (1,479)
Cash flow (286) 945 (564) 95
Business combinations3 - (38) (122) (160)
Disposal of businesses - 1 - 1
Reclassifications (3) (82) 85 -
Currency movements (10) 23 23 36
Closing balance at 31 December 59 (332) (1,234) (1,507)
2007
Cash flow 24 214 (543) (305)
Business combinations3 3 (3) (37) (37)
Disposal of businesses - 5 20 25
Reclassifications (2) (215) 215 (2)
Currency movements (9) 33 112 136
Closing balance at 31 December 75 (298) (1,467) (1,690)
2008
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. At
31 December 2008, short-term borrowings on the combined and consolidated
balance sheet of €378 million (2007: €453 million) include €80 million of
overdrafts (2007: €121 million).
3 See note 14.
(d) Reconciliation of cash inflows from operations to EBITDA for the
years ended 31 December
€ million 2008 2007
Cash inflows from operations 795 957
Share option expense (9) (6)
Fair value gains on forestry assets 46 32
Cost of felling (43) (51)
Decrease in provisions and post employment benefits 21 14
(Decrease)/increase in inventories (26) 69
(Decrease)/increase in operating receivables (106) (25)
Decrease/(increase) in operating payables 105 (141)
Purchase of Anglo American plc shares - 19
Profit/(loss) on disposal of assets 6 (1)
Add back cash effect of operating special items of subsidiaries and
joint ventures 19 -
Other adjustments 6 3
EBITDA1 814 870
Note:
1 EBITDA is operating profit before special items plus depreciation and
amortisation in subsidiaries and joint ventures.
(e) EBITDA by business segment
€ million 2008 2007
Europe & International
Bags & Specialities 271 260
Uncoated Fine Paper 221 202
Corrugated 131 208
Sub-total 623 670
South Africa
Uncoated Fine Paper 109 87
Corrugated 43 35
Sub-total 152 122
Mondi Packaging South Africa 52 53
Merchant and Newsprint businesses 24 60
Corporate and other businesses (37) (35)
EBITDA 814 870
EBITDA is stated before special items and is reconciled to 'Total profit from
operations and associates' as follows:
€ million 2008 2007
Total profit from operations and associates 56 510
Special items (excluding associates) 358 77
Net loss/(profit) on disposals (excluding associates) 27 (83)
Impairment of assets held for sale 2 -
Depreciation and amortisation: subsidiaries and joint ventures 373 368
Share of associates' net income (2) (2)
EBITDA 814 870
(f) Capital expenditure cash payments1
€ million 2008 2007
By business segment
Europe & International
Bags & Specialities 136 102
Uncoated Fine Paper 266 98
Corrugated 199 111
Sub-total 601 311
South Africa
Uncoated Fine Paper 37 21
Corrugated 7 2
Sub-total 44 23
Mondi Packaging South Africa 38 47
Merchant and Newsprint businesses 10 18
Corporate and other businesses - 7
Total 693 406
Note:
1 Excludes business combinations and purchase of intangible assets.
16 Capital commitments
€ million 20081 2007
Contracted for but not provided 405 74
Approved, not yet contracted for 219 824
Note:
1 The significant shift relates to the development of the new lightweight
recycled containerboard machine and new box plant at the Swiecie mill in
Poland, and the modernisation and expansion of the Syktyvkar mill in Russia.
17 Contingent liabilities and contingent assets
Disclosable contingent liabilities comprise aggregate amounts at 31 December
2008 of €17 million (2007: €16 million) in respect of loans and guarantees
given to banks and other third parties. Acquired contingent liabilities of €2
million (2007: €5 million) have been recorded on the Group's combined and
consolidated balance sheet.
There are a number of legal or potential claims against the Group. Provision
is made for all liabilities that are expected to materialise.
There were no significant disclosable contingent assets at 31 December 2008 or
31 December 2007.
18 Related party transactions
The Group has a related party relationship with its associates and joint
ventures and, up to the date of demerger, with certain Anglo American plc group
companies. Transactions between Mondi Limited, Mondi plc and their respective
subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
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 others in which the Group has a material interest. These
transactions are under terms that are no less favourable than those arranged
with third parties. These transactions, in total, are not considered to be
significant.
Anglo
American plc Joint
€ million group Ventures Associates
2008
Sales to related parties - 11 -
Purchases from related parties - (1) (32)
Loans to related parties - 10 -
Receivables due from related parties - 7 1
2007
Sales to related parties - 8 8
Purchases from related parties - (2) (1)
Net finance costs (22) - -
Dividends paid to related parties (202) - -
Dividends in specie (32) - -
Loans to related parties - 13 -
Receivables due from related parties - 5 -
Cyril Ramaphosa, joint chairman of Mondi, has a 32.7% (2007:39.96%) stake in
Shanduka Group (Pty) Limited, an entity that has controlling interests in
Shanduka Advisors (Pty) Limited, Shanduka Resources (Pty) Limited, Shanduka
Packaging (Pty) Limited and Shanduka Newsprint (Pty) Limited and participating
interests in Mondi Shanduka Newsprint (Pty) Limited, Kangra Coal (Pty) Limited,
Rennies Distribution Services (Pty) Limited and Mondi Packaging South Africa
(Pty) Limited. Fees of €340,000 (2007: €379,000) and €392,000 (2007: €681,000)
were paid to Shanduka Advisors (Pty) Limited and Shanduka Resources (Pty)
Limited respectively for management services provided to the Group during the
year ended 31 December 2008. Shanduka Packaging (Pty) Limited and Shanduka
Newsprint (Pty) Limited have also provided a shareholder's loan to the Group.
The balance outstanding at 31 December 2008 was €12.9 million (2007: €16.8
million) and €7.1 million (2007: €9.2 million), respectively. In the normal
course of business, and on an arm's length basis, the Group purchased supplies
from Kangra Coal (Pty) Limited totalling €12 million (2007: €9 million) and
made use of transport and warehousing services provided by Rennies Distribution
Services (Pty) Limited totalling €9 million (2007: €13 million) during the
period. €1 million (2007: €1 million) remains outstanding on these purchases
at 31 December 2008.
Production statistics
Year Ended Year Ended
31 December 31 December
2008 2007
Europe & International
Containerboard Tonnes 1,926,829 1,849,702
Kraft paper Tonnes 814,187 891,385
Corrugated board and boxes Mm² 2,104 2,088
Bag converting m units 3,536 3,642
Coating and release liners Mm² 2,667 2,971
Uncoated fine paper Tonnes 1,452,058 1,517,792
Newsprint Tonnes 192,921 192,329
Total hardwood pulp Tonnes 1,012,470 1,182,476
Total softwood pulp Tonnes 1,620,155 1,748,294
External hardwood pulp Tonnes 126,479 76,244
External softwood pulp Tonnes 200,676 213,218
South Africa
Containerboard Tonnes 251,944 251,661
Uncoated fine paper Tonnes 416,509 469,782
Bone dry
Wood chips tonnes 780,932 690,447
Total hardwood pulp Tonnes 595,449 630,210
Total softwood pulp Tonnes 106,390 98,613
External hardwood pulp Tonnes 139,235 86,802
Mondi Packaging South Africa
Packaging papers Tonnes 388,199 368,574
Corrugated board and boxes Mm² 381 367
Total hardwood pulp Tonnes 82,554 65,829
Total softwood pulp Tonnes 43,090 64,274
Newsprint Joint Ventures
(attributable share)
Newsprint Tonnes 331,929 314,847
Aylesford Tonnes 200,540 185,990
Shanduka Tonnes 131,389 128,857
Total softwood pulp Shanduka Tonnes 86,464 86,469
Exchange rates
Year Ended Year Ended
31 December 31 December
2008 2007
Closing rates against the euro
South African rand 13.07 10.03
Pounds sterling 0.95 0.73
Polish zloty 4.15 3.59
Russian rouble 41.28 35.99
Slovakian koruna 30.13 33.58
US dollar 1.39 1.47
Czech koruna 26.87 26.63
Average rates for the period against the
euro
South African rand 12.06 9.66
Pounds sterling 0.80 0.68
Polish zloty 3.52 3.78
Russian rouble 36.45 35.02
Slovakian koruna 31.28 33.77
US dollar 1.47 1.37
Czech koruna 24.97 27.76
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