Half-yearly Report

Mondi Limited (Incorporated in the Republic of South Africa) (Registration number: 1967/013038/06) JSE share code: MND ISIN: ZAE000156550 Mondi plc (Incorporated in England and Wales) (Registered number: 6209386) JSE share code: MNP ISIN: GB00B1CRLC47 LSE share code: MNDI 7 August 2014 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 Listings Requirements of the JSE Limited and/or the Disclosure and Transparency and Listing Rules of the United Kingdom Listing Authority. Half-yearly results for the six months ended 30 June 2014 Highlights * Steady improvement in all key financial metrics * + Underlying operating profit of â‚¬377 million, up 3% + Underlying earnings of 51.9 euro cents per share, up 5% + Cash generated from operations of â‚¬439 million, up 2% * ROCE of 16%, well in excess of through-the-cycle hurdle rate of 13% * Acquisition of Graphic Packaging's bags and kraft paper operations consolidates global market leadership position in Industrial Bags * Capital projects * + Recently completed projects delivering on expectation + Ongoing major projects on time, within budget * Interim dividend of 13.23 euro cents per share, up 39% Financial summary â‚¬ million, except for percentages and per share Six Six Six measures months months months ended 30 ended 30 ended 31 June June December 2014 2013 2013 Group revenue 3,148 3,342 3,134 Underlying EBITDA 1 553 554 514 Underlying operating profit 1 377 366 333 Underlying profit before tax 1 328 310 276 Operating profit 374 285 320 Profit before tax 312 229 270 Per share measures Basic underlying earnings per share (â‚¬ cents) 51.9 49.4 45.6 Basic earnings per share (â‚¬ cents) 48.6 35.3 44.5 Interim dividend per share (â‚¬ cents) 13.23 9.55 Free cash flow per share 2(â‚¬ cents) 12.4 14.7 Cash generated from operations 439 431 605 Net debt 1,751 1,844 1,621 Group Return on Capital Employed (ROCE)3 (%) 16.0 14.8 15.3 Notes: 1 The Group presents underlying EBITDA, operating profit and profit before tax as measures which exclude special items in order to provide a more effective comparison of the underlying financial performance between reporting periods. 2 Free cash flow per share is net increase in cash and cash equivalents before the effects of acquisitions and disposals of businesses, changes in net debt and dividends paid divided by the net number of shares in issue at the end of the reporting period. 3 ROCE is the 12 month rolling average underlying operating profit expressed as a percentage of the average rolling 12 month capital employed, adjusted for impairments and spend on strategic projects which are not yet in operation. David Hathorn, Mondi Group chief executive, said: "The Mondi Group continues to deliver a strong performance, generating a return on capital employed of 16%. Strong cost management and contributions from successfully completed strategic capital investments, together with the benefits from downstream integration in key packaging segments,enabled the Group to offset the impact of lower prices in a number of paper grades. We have continued to invest in the business for future growth. Highlights for the period included the successful commissioning of the 155,000 tonne bleached kraft paper machine at the Steti mill in the Czech Republic and the acquisition of Graphic Packaging's bags operations and kraft paper mill in the United States. Together with the Group's ongoing capital expenditure programme, including significant projects at our Ruzomberok, Swiecie and Syktyvkar operations, we are confident that these investments will deliver strongly into the future. In the near term, anticipated price increases in some of our packaging paper grades should provide positive momentum. As in prior years, the second half of the year will be impacted by the planned annual mill maintenance shuts. Market fundamentals remain sound, which, coupled with a continued economic recovery, should prove positive for further growth in the packaging businesses. Overall, we remain confident that Mondi will continue to deliver an industry leading performance." Contact details Mondi Group David Hathorn +27 11 994 5418 Andrew King +27 11 994 5415 Lora Rossler +27 83 627 0292 FTI Consulting Richard Mountain +44 20 3727 1374 Sophie McMillan +44 20 3727 1359 Bheki Mpofu +27 83 552 2109 Conference call dial-in and audio cast details Please see below details of our dial-in conference call and audio cast that will be held at 10:00 (UK) and 11:00 (SA). The conference call dial-in numbers are: South Africa 0800 200 648 (toll-free) UK 0808 162 4061 (toll-free) Europe & Other +800 246 78 700 (toll-free) or +27 11 535 3600 An online audio cast facility will be available via: www.mondigroup.com/ HYResults14. The presentation will be available online via the above website address an hour before the audio cast commences. Questions can be submitted via the dial-in conference call or by e-mail via the audio cast. Should you have any issues on the day with accessing the dial-in conference call, please call +27 11 535 3600. Should you have any issues on the day with accessing the audio cast, please e-mail mondi@kraftwerk.co.at and you will be contacted immediately. An audio recording of the presentation will be available on Mondi's website during the afternoon of 7 August 2014. Editors' notes Mondi is an international packaging and paper Group, employing around 26,000 people in production facilities across 31 countries. In 2013, Mondi had revenues of â‚¬6.5 billion and a ROCE of 15.3%. The Group's key operations are located in central Europe, Russia, the Americas and South Africa. The Mondi Group is fully integrated across the packaging and paper value chain - from the management of its own forests and the production of pulp and paper (packaging paper and uncoated fine paper), to the conversion of packaging paper into corrugated packaging, industrial bags, extrusion coatings and release liner. Mondi is also a supplier of innovative consumer packaging solutions, advanced films and hygiene products components. Mondi has a dual listed company structure, with a primary listing on the JSE Limited for Mondi Limited under the ticker code MND and a premium listing on the London Stock Exchange for Mondi plc, under the ticker code MNDI. The Group's performance, and the responsible approach it takes to good business practice, has been recognised by its inclusion in the FTSE4Good Global, European and UK Index Series (since 2008) and the JSE's Socially Responsible Investment (SRI) Index since 2007. Forward-looking statements This document includes forward-looking statements. All statements other than statements of historical facts included herein, including, without limitation, those regarding Mondi's financial position, business strategy, market growth and developments, expectations of growth and profitability and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believe", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Mondi, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements and other statements contained in this document regarding matters that are not historical facts involve predictions and are based on numerous assumptions regarding Mondi's present and future business strategies and the environment in which Mondi will operate in the future. These forward-looking statements speak only as of the date on which they are made. No assurance can be given that such future results will be achieved; various factors could cause actual future results, performance or events to differ materially from those described in these statements. Such factors include in particular but without any limitation: (1) operating factors, such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development plans and targets, changes in the degree of protection created by Mondi's patents and other intellectual property rights and the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for Mondi's products and raw materials and the pricing pressures thereto, financial condition of the customers, suppliers and the competitors of Mondi and potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in Mondi's principal geographical markets or fluctuations of exchange rates and interest rates. Mondi expressly disclaims a) any warranty or liability as to accuracy or completeness of the information provided herein; and b) any obligation or undertaking to review or confirm analysts' expectations or estimates or to update any forward-looking statements to reflect any change in Mondi's expectations or any events that occur or circumstances that arise after the date of making any forward-looking statements, unless required to do so by applicable law or any regulatory body applicable to Mondi, including the JSE Limited and the LSE. Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group's auditors. Group performance review The Group's underlying operating profit of â‚¬377 million was 3% above that of the first half of the previous year and 13% above the second half of 2013. This reflects a strong performance from Packaging Paper, Fibre Packaging and the South Africa Division, offset in part by weaker results from Uncoated Fine Paper and Consumer Packaging. On a like-for-like basis, excluding currency movements and disposal effects, revenue was in line with the comparable prior year period. Sales volumes in most of the Group's key paper grades remained largely unchanged from the levels of the previous year, reflecting the continued slow economic recovery in Europe. As anticipated, except for recycled containerboard, average benchmark selling prices across the Group's key paper grades were lower than those of the previous year. Average benchmark recycled containerboard prices were 10% above those of the first half of 2013 and 2% above the levels of the second half of 2013. Certain of the downstream packaging businesses, most notably Corrugated Packaging and Consumer Packaging, saw an increase in average price levels on the back of higher input costs. Wood costs were higher in most European operations, while in Russia the weaker rouble offset higher domestic wood costs. Average paper for recycling costs were similar to the comparable prior year period although some reduction in benchmark prices was observed in the second quarter, with prices at the end of the quarter 5% lower than the average for the half-year. The Group benefited from lower energy costs in the period as a consequence of the effects of both the recently commissioned energy related capital expenditure projects and a reduction in European natural gas prices. Annual maintenance shuts took place at the Group's Swiecie mill in Poland and Richards Bay mill in South Africa during June 2014. The balance of the annual maintenance shuts are scheduled for the second half of the year. Consistent with the previous year, and based on prevailing market prices, the impact on underlying operating profit of the Group's maintenance shuts is estimated at around â‚¬50 million to â‚¬60 million, of which the first half effect was around â‚¬10 million. The South Africa Division benefited from the weakening of the rand against both the euro and the US dollar during the period. The Fibre Packaging and Uncoated Fine Paper business units were negatively impacted by the weakening of the US dollar, Turkish lira and Russian rouble against the euro. The remaining currencies in which the Group operates continued to trade in a relatively narrow band. The net effect of currency movements only had a marginal impact on the Group's underlying operating profit when compared to the first half of the prior year. The Group continues to monitor the political developments in Russia and the Ukraine. To date there has been no material impact on the Group's operations. Underlying earnings per share increased by 5% over the comparable prior year period to 51.9 euro cents per share, with lower net finance charges offset in part by an increase in the effective tax rate from 18% in the prior year to 19% in the first half of 2014. The Group remains strongly cash generative with cash generated from operations of â‚¬439 million similar to that of the comparable prior year period. Working capital at 30 June 2014 was 13% of revenue (excluding the working capital attributable to the recently acquired Graphic Packaging operations), consistent with 30 June 2013 but up on the December 2013 ratio of 11%, reflecting the normal seasonal uptick in the first half of the year. On 30 June 2014, Mondi acquired the bags and kraft paper business of Graphic Packaging for a total consideration of US$105 million (â‚¬76 million) on a debt and cash-free basis. The business is a leading player in the production and distribution of kraft paper and bags in the United States. The production base comprises an integrated kraft paper mill located in Pine Bluff, Arkansas, with production capacity of 135,000 tonnes per annum, and nine bags plants across the US. The combination of these operations with Mondi's creates a leading player in the North American bags market and further expands the Group's growing global footprint in this market. During the period, â‚¬249 million was incurred on capital expenditure. A number of the previously announced strategic projects have been completed and are contributing positively to the Group's performance. The remaining large projects remain on schedule and on budget. On 10 June 2014, Mondi announced its intention to redeem the 9.75% â‚¬280 million Eurobond which was assumed as part of the acquisition of Nordenia in October 2012. The notes were redeemed on 15 July 2014 at a premium of â‚¬14 million, utilising proceeds from the Group's existing borrowing facilities. Net debt of â‚¬1,751 million at 30 June 2014 increased by â‚¬130 million from 31 December 2013. This reflects the ramp-up of capital expenditure on major capital projects, the impact of the Graphic Packaging acquisition, seasonally higher working capital levels at 30 June 2014 and the bias of the Group's financing outflows towards the first half of the year. In the absence of further strategic acquisitions, strong de-leveraging in the second half is anticipated. An interim dividend of 13.23 euro cents per share, up 39% on the prior year interim dividend of 9.55 euro cents per share, has been declared. Europe & International - Packaging Paper â‚¬ million, unless otherwise stated Six Six Six months months months ended 30 ended 30 ended 31 June June December 2014 2013 2013 Segment revenue 982 1,043 957 Underlying EBITDA 209 195 199 Underlying operating profit 162 148 150 % margin 16.5% 14.2% 15.7% Capital expenditure 115 55 84 Operating net segment assets 1,558 1,441 1,484 ROCE 22.6% 20.1% 21.9% Underlying operating profit of â‚¬162 million was 9% above that of the comparable prior year period despite lower average virgin containerboard and kraft paper prices. The business benefited from higher green energy revenues, higher average recycled containerboard prices, lower energy costs and generally strong cost control. European containerboard demand is estimated to be up around 2% year on year, reflecting the modest economic growth seen across Europe. This demand growth has been balanced by new capacity in the recycled grades. Demand for sack kraft paper remains strong in both European and export markets, with growth in Europe supported by the mild winter. Sales prices for virgin containerboard grades came under pressure in the early part of the year before stabilising in the second quarter. Average benchmark selling prices for the period under review were 5% lower than the comparable prior year period. Average benchmark selling prices for recycled containerboard were 10% higher than the comparable prior year period, benefiting from the implementation of price increases in the second half of the prior year. Prices came under some pressure in the second quarter due to increased supply from newly installed capacity. Given good demand and low inventory levels, price increases of â‚¬60/tonne for recycled containerboard and â‚¬40/tonne for unbleached kraftliner and semi-chemical fluting have been announced in Europe with effect from August and September 2014, respectively. As anticipated, in kraft paper average selling prices were around 5% down on the comparable prior year period and 4% down on the second half of 2013. On the back of a strong pick-up in demand, selling price increases for unbleached sack kraft paper are currently being implemented. In the first half of 2013, the carrying value of the Group's green energy credits was written down by â‚¬11 million. Green energy prices in Poland have since recovered somewhat, although the uncertainties in the regulatory environment surrounding green energy in Poland remain. The annual maintenance shut at the Swiecie mill took place at the end of June 2014 and was completed in the early part of July. The remaining annual maintenance shuts are scheduled for the second half of the year. Europe & International - Fibre Packaging â‚¬ million, unless otherwise stated Six Six Six months months months ended 30 ended 30 ended 31 June June December 2014 2013 2013 Segment revenue 1,003 1,002 965 Underlying EBITDA 88 83 80 Underlying operating profit 53 48 45 % margin 5.3% 4.8% 4.7% Capital expenditure 34 35 43 Operating net segment assets 942 982 903 ROCE 11.6% 12.0% 10.8% Operating profit increased by 10% to â‚¬53 million with a positive year-on-year contribution from all business segments, reflecting generally higher volumes, higher selling prices in the Corrugated Packaging segment, and lower input costs in Industrial Bags and Coatings, partially offset by foreign exchange losses. Corrugated Packaging's results improved through volume growth, selling price increases and improved margins. The segment achieved good volume growth in central Europe, particularly in Poland and the Czech Republic, while volumes in Turkey were impacted by the decision to rationalise production capacity in the prior year. The business was negatively impacted by currency translation losses in its Turkish business due to the sharp devaluation of the Turkish lira. Industrial Bags had a very positive start to the year, with strong order books and a significant increase in sales volumes versus the comparable prior year period, particularly in the building segment. As anticipated, average selling prices were down on the comparable prior year period due to the pass through of the reduction in paper prices seen towards the end of the previous year. In line with the acquisition business plan, the US industrial bags plants acquired at the end of June are not expected to contribute significantly to underlying operating profit this year. However, as the synergies from the combination are realised and the Group's expertise as the global market leader in this segment is applied, it is expected that the investment will make a solid contribution in the future. The Coatings business benefited from lower input costs and a reduction in fixed costs. Sales volumes increased in some of the high value-add products, more than offset by declines in the industrial sector. Europe & International - Consumer Packaging â‚¬ million, unless otherwise stated Six Six Six months months months ended 30 ended 30 ended 31 June June December 2014 2013 2013 Segment revenue 550 582 571 Underlying EBITDA 60 66 63 Underlying operating profit 34 39 35 % margin 6.2% 6.7% 6.1% Capital expenditure 32 24 32 Operating net segment assets 870 875 855 ROCE 8.5% 7.8% 9.1% Operating profit of â‚¬34 million was 13% below that of the comparable prior year period, largely due to volume declines in the mature markets of Europe and North America. Constant currency revenue reduced by 4.8%. While steps have been taken to pro-actively phase out lower value-added mature products, these volumes are not currently being adequately replaced by sales into higher value-added segments due to the ongoing weak trading conditions. The business continues to enjoy good growth in the higher growth central and eastern European markets. On 31 July, the acquisition of a consumer packaging plant in Poland from Printpack Inc, for US$23 million (â‚¬17 million) on a cash and debt free basis, was completed, adding to the Group's production capacity in that region. The structural growth drivers remain in place and steps are being implemented to address the current challenges faced by the business. However, in the short term, performance is not expected to improve significantly given the ongoing difficult trading environment. Europe & International - Uncoated Fine Paper â‚¬ million, unless otherwise stated Six Six Six months months months ended 30 ended 30 ended 31 June June December 2014 2013 2013 Segment revenue 674 740 648 Underlying EBITDA 133 157 120 Underlying operating profit 85 102 70 % margin 12.6% 13.8% 10.8% Capital expenditure 59 36 44 Operating net segment assets 1,157 1,176 1,135 ROCE 15.8% 17.4% 16.2% Uncoated Fine Paper generated underlying operating profit of â‚¬85 million, down on the comparable prior year period as a result of lower selling prices in Europe and the weaker Russian rouble, partly offset by good cost control and operational improvements, notably at the restructured Neusiedler mill in Austria. Average European benchmark selling prices were 3% lower than the comparable prior year period and 1% lower than the second half of 2013. Price increases were implemented in Russia in the first quarter on the back of the weaker rouble with further increases announced for the second half of the year in certain grades. Sales volumes were lower than the comparable prior year period following the restructuring in Austria, although industry demand across Europe was modestly up. Demand in Russia remained stable. In line with the previous year, the second half will be impacted by annual maintenance shuts at all key facilities. South Africa Division â‚¬ million, unless otherwise stated Six Six Six months months months ended 30 ended 30 ended 31 June June December 2014 2013 2013 Segment revenue 284 325 299 Underlying EBITDA 78 67 68 Underlying operating profit 58 44 49 % margin 20.4% 13.5% 16.4% Capital expenditure 9 14 38 Operating net segment assets 608 687 622 ROCE 20.5% 12.8% 16.0% The South Africa Division continued to perform well and benefited from a weaker South African rand and fair value gains on its forestry assets, delivering operating profit of â‚¬58 million, 32% above the comparable prior year period. The maintenance shut in Richards Bay was brought forward to June, compared to October in the previous year, resulting in lower sales volumes of pulp and white-top containerboard versus the comparable prior year period. Sales volumes for uncoated fine paper were in line with the prior year. Average domestic selling prices were above both the comparable prior year period and the second half of the previous year across all product grades. Export selling prices for white-top containerboard were unchanged, while export prices for hardwood pulp declined, with international US dollar benchmark hardwood pulp prices 5% lower than the comparable prior year period. Higher domestic input costs, impacted by inflationary increases and the weaker rand, were partially offset by the sale of energy from the new steam turbine in Richards Bay, commissioned at the end of 2013. Wood prices increased during the period, with the Division recognising a â‚¬20 million fair value gain in respect of its forestry assets, â‚¬10 million higher than the gain recognised in the comparable prior year period. Financial review Tax The Group's underlying effective tax rate of 19% is 1% higher than the comparable prior year period, reflecting a small shift in the underlying profit mix and a reduction in the benefit from investment related incentives. Special items The net special item charge of â‚¬16 million before tax is attributable to: * â‚¬7 million charge for restructuring activities in the Group's Coatings business; * â‚¬4 million gain in respect of the release of a provision for transaction costs attributable to the Nordenia acquisition; and * â‚¬13 million net charge on early redemption of the â‚¬280 million Eurobond. Cash flow Cash generated from operations of â‚¬439 million, including the impact of the seasonal increase in working capital of â‚¬106 million, reflects the continued strong cash generating capacity of the Group. Net cash outflows from financing activities of â‚¬165 million include the payment of dividends to holders of non-controlling interests, the payment of the final 2013 dividend in May 2014 and payment of the 5.75% coupon on the â‚¬500 million 2017 Eurobond. Capital expenditure Capital expenditure for the period amounted to â‚¬249 million. The Group's significant energy related investments completed in the second half of 2013 are all operating according to schedule. In April 2014, the 155,000 tonne bleached kraft paper machine at the Steti mill in the Czech Republic was successfully started up and production is being ramped up according to schedule. The â‚¬128 million recovery boiler project in Ruzomberok and â‚¬30 million pulp dryer project in Syktyvkar are expected to be commissioned towards the end of the third quarter, while the â‚¬166 million Swiecie recovery boiler project remains on schedule for completion towards the end of 2015. The Group has committed a further â‚¬60 million capital expenditure to its Kraft Paper and Corrugated Packaging business units, bringing forward some planned future expenditure in order to further improve its competitive position in these markets and take advantage of growth opportunities. All projects are running on schedule and on budget. The impact of the accelerated capital expenditure programmes in Kraft Paper and Corrugated Packaging, together with the capital expenditure related to the newly acquired Graphic Packaging assets in the United States, gives rise to a modest increase in the capital expenditure targets for the 2014/2015 period from around â‚¬500 million per year as previously indicated, to around â‚¬550 million per year, in the absence of any further major strategic capital investments. Treasury and borrowings Net debt at 30 June 2014 was â‚¬1,751 million, an increase of â‚¬130 million from 31 December 2013. The net debt to 12 month trailing EBITDA ratio was 1.6 times and gearing at 30 June 2014 was 38%. On 10 June 2014, Mondi announced the redemption of the â‚¬280 million Eurobond which was assumed as part of the acquisition of Nordenia in October 2012. The notes were redeemed on 15 July 2014 at a premium of â‚¬14 million, funded from the Group's existing borrowing facilities. The net charge on redemption of â‚¬13 million was recognised as a special item at 30 June 2014. On 14 July 2014, Mondi announced that it had extended the maturity of its â‚¬750 million revolving credit facility from 2016 to 2019. At 30 June 2014, the Group had â‚¬2.5 billion of committed facilities of which â‚¬745 million were undrawn. Following the subsequent redemption of the Nordenia bond and extension of the Group's revolving credit facility, the weighted average maturity of the Eurobonds and committed debt facilities is approximately 4.3 years. The Group's long-term investment grade credit ratings of Baa3 (Moody's Investor Services) and BBB- (Standard and Poor's) were reaffirmed during the period. Standard and Poor's has put their rating on a positive outlook. Finance charges of â‚¬50 million were below those of the comparable prior year period, reflecting the lower average net debt for the period. The effective interest rate of 5.5% was unchanged from the comparable prior year period. Dividend An interim dividend of 13.23 euro cents per share has been declared by the directors and will be paid on 16 September 2014 to those shareholders on the register of Mondi plc on 22 August 2014. An equivalent South African rand interim dividend will be paid on 16 September 2014 to shareholders on the register of Mondi Limited on 22 August 2014. The dividend will be paid from distributable reserves of Mondi Limited and of Mondi plc, as presented in the respective company annual financial statements for the year ended 31 December 2013. Outlook In the near term, anticipated price increases in some of the Group's packaging paper grades should provide positive momentum. As in prior years, the second half of the year will be impacted by the planned annual mill maintenance shuts. Market fundamentals remain sound, which, coupled with a continued economic recovery, should prove positive for further growth in the packaging businesses. Overall, management remains confident that Mondi will continue to deliver an industry leading performance. Supplementary information Principal risks and uncertainties It is in the nature of Mondi's business that the Group is exposed to risks and uncertainties which may have an impact on future performance and financial results, as well as on its ability to meet certain social and environmental objectives. The executive committee, mandated by the Boards, has established a Group-wide system of internal control to manage Group risks. The Group-wide system, which complies with corporate governance codes in South Africa and the UK, supports the Boards in discharging their responsibility for ensuring that the wide range of risks associated with Mondi's diverse international operations is effectively managed. Continuous monitoring of risk and control processes across all key risk areas provides the basis for regular reports to management, the executive committee and the Boards. On an annual basis, the executive committee, the audit committee and the Boards conduct a formal systematic review of the Group's most significant risks and uncertainties and the monitoring of and response to those risks. These risks are assessed against pre-determined risk tolerance limits, established by the Boards, taking both the likelihood and severity of the risk factors into consideration. The risk management framework addresses all significant strategic, sustainability, financial, operational and compliance-related risks which could undermine the Group's ability to achieve its business objectives in a sustainable manner. The risk management framework is designed to be flexible, to ensure that it remains relevant at all levels of the business given the diversity of the Group's locations, markets and production processes; and dynamic, to ensure that it remains current and responsive to changing business conditions. The directors are satisfied that the Group has effective systems and controls in place to manage its key risks within the risk tolerance levels established by the Boards. There have been no significant changes in the Group's risk profile since the year end. Competitive environment in which Mondi operates The industry in which Mondi operates is highly competitive and selling prices are subject to significant volatility. New capacity additions are usually in large increments which, combined with product substitution towards lighter weight products, electronic substitution, alternative packaging solutions and increasing environmental considerations, have a significant impact on the supply-demand balance and hence on market prices. The Group monitors industry developments in terms of changes in capacity as well as trends and developments in its product markets and potential substitutes. Mondi's strategic focus on low-cost production in growing markets with consistent investment in its operating capacity ensures that the Group remains competitive. Mondi invests in research and development activities to improve existing processes and to identify new markets and new products. The locations in which the Group operates The Group operates in a number of geographical locations in countries with differing levels of political, economic and legal systems. The Group continues to actively monitor and adapt to changes in the environments in which it operates. Management engages in regular formal and informal interaction with the authorities to ensure they remain abreast of new developments. Thorough country risk assessments are conducted and return requirements adjusted to take country risk into consideration. The Group's geographical diversity and decentralised management structure, utilising local resources in countries in which it operates, reduces exposure to any specific jurisdiction. The Boards have established limits on exposure to any particular geographic environment and new investments are subject to rigorous strategic and commercial evaluation. Mondi has around 15% of its capital employed in Russia and a limited presence in the Ukraine. The US, the European Union and a number of other countries have recently imposed economic sanctions and certain other measures on persons and corporate entities in Russia and the Ukraine. Possible additional sanctions and /or other measures on Russia could have a material adverse effect on Mondi's business, financial condition and/or results of operations. To date the measures imposed have had no material impact on the Group's operations. Capital intensive operations Mondi operates large facilities, often in remote locations. The ongoing safety and sustainable operation of all its facilities is critical to the success of the Group. The management systems in place ensure ongoing monitoring of all operations to ensure they meet the requisite standards and performance requirements. The Group has adequate insurance in place to cover material property damage, business interruption and liability risks. A structured maintenance programme is in place under the auspices of the Group technical director. Emergency preparedness and response procedures are in place and subject to periodic drills. Cost and availability of a sustainable supply of fibre Paper for recycling and wood account for approximately one third of input costs. It is the Group's objective to acquire fibre from sustainable sources and to avoid the use of any illegal or controversial supply. International market prices are constantly monitored and, where appropriate, cost pass through mechanisms are in place with customers. The Group maintains strong forestry management teams in Russia and South Africa to actively monitor environmental influences impacting its owned sources of fibre. Mondi's relatively high levels of integration and access to own FSCTM certified wood in Russia and South Africa serve to mitigate this risk. All the Group's mills have chain-of-custody certificates in place ensuring that wood procured is from non-controversial sources. Cost of energy and related input costs Energy and related input costs comprise approximately a third of the Group's variable costs. Increasing energy costs, and the consequential impact thereof on both chemical and transport costs, may impact profit margins. Energy usage levels, emission levels and usage of renewable energy are monitored and energy costs are benchmarked against external sources. The Group continues to invest in energy infrastructure at its key operating facilities in order to improve energy efficiency and electricity self-sufficiency as well as to reduce its environmental footprint. Attraction and retention of key skills and talent The complexity of operations and geographic diversity of the Group is such that high-quality, experienced employees are required in all locations. The Group monitors its staff turnover levels, diversity and training activities and conducts regular employee surveys. Appropriate reward and retention strategies are in place to attract and retain talent across the organisation. At more senior levels, these include a share based incentive scheme. Employee and contractor safety The Group's employees work in potentially dangerous environments where hazards are ever-present and must be managed. The Group engages in extensive safety communication sessions, involving employees and contractors, at all operations. The Nine Safety Rules to Live By, applied across the Group, are integral to the safety strategy. Operations conduct statutory safety committee meetings where management and employees are represented. A risk-based approach underpins all safety and health programmes. All business units and operations are required to have safety improvement plans in place. Governance risks The Group operates in a number of legal jurisdictions and non-compliance with legal and governance requirements in these jurisdictions could expose the Group to significant risk if not adequately managed. The Group operates a comprehensive training and compliance programme, supported by regular self-certification and reporting as well as its confidential reporting hotline for all stakeholders, Speakout. Financial risks Mondi's trading and financing activities expose the Group to financial risks that, if left unmanaged, could adversely impact current or future earnings. These risks relate to the currencies in which the Group conducts its activities, interest rate and liquidity risks as well as exposure to customer credit risk. Going concern The Group's business activities, together with the factors likely to affect its future development, performance and position, the most significant risks and the Group's related management and mitigating actions are set out above. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the condensed financial statements. Mondi's geographical spread, product diversity and large customer base mitigate potential risks of customer or supplier liquidity issues. Ongoing initiatives by management in implementing profit improvement initiatives which include continued investment in its operations, plant optimisation, cost-cutting, and restructuring and rationalisation activities have consolidated the Group's leading cost position in its chosen markets. Working capital levels and capital expenditure programmes are strictly monitored and controlled. The Group meets its funding requirements from a variety of sources. The availability of some of these facilities is dependent on the Group meeting certain financial covenants all of which have been complied with. Mondi had â‚¬745 million of undrawn committed debt facilities as at 30 June 2014 which should provide sufficient liquidity in the medium term. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, including an assessment of the current macroeconomic environment, indicate that the Group should be able to operate well within the level of its current facilities and related covenants. The directors have reviewed the overall Group strategy, the most recent forecast for 2014 and subsequent years, considered the assumptions contained therein and reviewed the critical risks which may impact the Group's performance. After making such enquiries, the directors are satisfied that the Group remains solvent and has adequate liquidity in order to meet its obligations and continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing this report. Related parties As set out in the condensed combined and consolidated financial statements for the six months ended 30 June 2014, there have been no significant individual related party transactions during the first six months of the financial year and there have been no significant changes to the Group's related party relationships as disclosed in note 36 of the Group's annual financial statements for the year ended 31 December 2013. Directors' responsibility statement The directors confirm that to the best of their knowledge: * the condensed combined and consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and in particular with International Accounting Standard 34, `Interim Financial Reporting'; * the half-yearly report includes a fair review of the significant events during the six months ended 30 June 2014 and a description of the principal risks and uncertainties for the remaining six months of the year ending 31 December 2014; * there have been no significant individual related party transactions during the first six months of the financial year; and * there have been no significant changes in the Group's related party relationships. David Hathorn Andrew King Director Director 6 August 2014 Independent auditor's review report on interim financial information to the shareholders of Mondi Limited We have reviewed the condensed combined and consolidated financial statements of Mondi Limited contained in the accompanying interim report, which comprise the condensed combined and consolidated statement of financial position as at 30 June 2014 and the condensed combined and consolidated statement of comprehensive income, condensed combined and consolidated statement of changes in equity, condensed combined and consolidated statement of cash flows for the six months then ended, and selected explanatory notes. Directors' responsibility for the interim financial statements The directors are responsible for the preparation and presentation of these interim financial statements in accordance with International Accounting Standard (IAS) 34,`Interim Financial Reporting', the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of interim financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express a conclusion on these interim financial statements. We conducted our review in accordance with International Standard on Review Engagements (ISRE) 2410, `Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. ISRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the interim financial statements are not prepared in all material respects in accordance with the applicable financial reporting framework. This standard also requires us to comply with relevant ethical requirements. A review of interim financial statements in accordance with ISRE 2410 is a limited assurance engagement. We perform procedures, primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying analytical procedures and evaluate the evidence obtained. The procedures performed in a review are substantially less than and differ in nature from those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these financial statements. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed combined and consolidated financial statements of Mondi Limited for the six months ended 30 June 2014 are not prepared, in all material respects, in accordance with IAS 34,'Interim Financial Reporting', the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. Deloitte & Touche Registered Auditor Per: Bronwyn Kilpatrick Partner 6 August 2014 Buildings 1 and 2, Deloitte Place, The Woodlands, Woodlands Drive, Woodmead, Sandton, Republic of South Africa National Executive: LL Bam Chief Executive AE Swiegers Chief Operating Officer GM Pinnock Audit DL Kennedy Risk Advisory NB Kader Tax TP Pillay Consulting K Black Clients & Industries JK Mazzocco Talent & Transformation MJ Jarvis Finance M Jordan Strategy S Gwala Managed Services TJ Brown Chairman of the Board MJ Comber Deputy Chairman of the Board. A full list of partners and directors is available on request. B-BBEE rating: Level 2 contributor in terms of the Chartered Accountancy Profession Sector Code Member of Deloitte Touche Tohmatsu Limited Independent review report to Mondi plc We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014, which comprises the condensed combined and consolidated income statement, the condensed combined and consolidated statement of comprehensive income, the condensed combined and consolidated statement of financial position, the condensed combined and consolidated statement of cash flows, the condensed combined and consolidated statement of changes in equity and the related notes 1 to 18. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410,'Review of Interim Financial Information Performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34,`Interim Financial Reporting', as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410,'Review of Interim Financial Information Performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. Deloitte LLP Chartered Accountants and Statutory Auditor London, United Kingdom 6 August 2014 Condensed combined and consolidated income statement for the six months ended 30 June 2014 (Reviewed) (Reviewed) (Audited) Six months ended 30 June Six months ended 30 June Year ended 31 December 2014 2013 2013 â‚¬ million Notes Before Special After Before Special After Before Special After special items special special items special special items special items (note 6) items items (note 6) items items (note 6) items Group revenue 3,148 - 3,148 3,342 - 3,342 6,476 - 6,476 Materials, (1,654) - (1,654) (1,758) - (1,758) (3,391) - (3,391) energy and consumables used Variable (251) - (251) (282) - (282) (523) - (523) selling expenses Gross margin 1,243 - 1,243 1,302 - 1,302 2,562 - 2,562 Maintenance and (120) - (120) (122) - (122) (278) - (278) other indirect expenses Personnel costs (456) (7) (463) (484) (16) (500) (940) (17) (957) Other net (114) 4 (110) (142) (10) (152) (276) (10) (286) operating expenses Depreciation, (176) - (176) (188) (55) (243) (369) (67) (436) amortisation and impairments Operating 377 (3) 374 366 (81) 285 699 (94) 605 profit/(loss) Non-operating 6 - - - - - - - 7 7 special items Net profit from 1 - 1 1 - 1 2 - 2 associates Total profit/ 378 (3) 375 367 (81) 286 701 (87) 614 (loss) from operations and associates Net finance (50) (13) (63) (57) - (57) (115) - (115) costs Investment 1 - 1 2 - 2 3 - 3 income Foreign (1) - (1) (1) - (1) (1) - (1) currency losses Finance costs (50) (13) (63) (58) - (58) (117) - (117) Profit/(loss) 328 (16) 312 310 (81) 229 586 (87) 499 before tax Tax (charge)/ 7 (62) - (62) (56) 13 (43) (98) 13 (85) credit Profit/(loss) 266 (16) 250 254 (68) 186 488 (74) 414 for the period Attributable to: Non-controlling 15 15 28 interests Shareholders 235 171 386 Earnings per share (EPS) for profit attributable to shareholders Basic EPS (â‚¬ 8 48.6 35.3 79.8 cents) Diluted EPS (â‚¬ 8 48.5 35.3 79.6 cents) Basic 8 51.9 49.4 95.0 underlying EPS (â‚¬ cents) Diluted 8 51.8 49.3 94.8 underlying EPS (â‚¬ cents) Basic headline 8 48.3 45.7 91.3 EPS (â‚¬ cents) Diluted 8 48.2 45.6 91.1 headline EPS (â‚¬ cents) Condensed combined and consolidated statement of comprehensive income for the six months ended 30 June 2014 (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended ended 30 June ended 30 June 31 December 2014 2013 2013 Profit for the period 250 186 414 Other comprehensive (expense)/income: Items that may subsequently be reclassified to the condensed combined and consolidated income statement: Effect of cash flow hedges - - (2) Gains on available-for-sale investments - - 2 Exchange differences on translation of (23) (145) (233) foreign operations Share of other comprehensive income of - (1) (1) associates Tax effect thereof - - - Items that will not subsequently be reclassified to the condensed combined and consolidated income statement: Remeasurements on retirement benefits plans (16) 18 21 Asset ceiling movement 2 (1) (2) Tax effect thereof 3 (4) (6) Other comprehensive expense for the period, (34) (133) (221) net of tax Total comprehensive income for the period 216 53 193 Attributable to: Non-controlling interests 16 9 17 Shareholders 200 44 176 Condensed combined and consolidated statement of financial position as at 30 June 2014 (Reviewed) (Reviewed) (Audited) â‚¬ million Notes As at 30 As at 30 As at 31 June 2014 June 2013 December 2013 Intangible assets 670 684 675 Property, plant and equipment 3,505 3,446 3,428 Forestry assets 10 233 257 233 Net retirement benefits asset 11 - 2 - Other non-current assets 37 39 38 Total non-current assets 4,445 4,428 4,374 Inventories 834 767 746 Trade and other receivables 1,058 1,112 954 Cash and cash equivalents 13b 49 84 130 Other current assets 22 27 36 Total current assets 1,963 1,990 1,866 Total assets 6,408 6,418 6,240 Short-term borrowings (458) (265) (181) Trade and other payables (1,028) (1,008) (989) Other current liabilities (142) (148) (126) Total current liabilities (1,628) (1,421) (1,296) Medium and long-term borrowings 13c (1,343) (1,664) (1,571) Net retirement benefits liability 11 (226) (225) (211) Deferred tax liabilities (254) (291) (264) Other non-current liabilities (52) (53) (52) Total non-current liabilities (1,875) (2,233) (2,098) Total liabilities (3,503) (3,654) (3,394) Net assets 2,905 2,764 2,846 Equity Share capital and stated capital 542 542 542 Retained earnings and other reserves 2,103 1,963 2,049 Total attributable to shareholders 2,645 2,505 2,591 Non-controlling interests in equity 260 259 255 Total equity 2,905 2,764 2,846 The Group's condensed combined and consolidated financial statements, and related notes 1 to 18, were approved by the Boards and authorised for issue on 6 August 2014 and were signed on their behalf by: David Hathorn Andrew King Director Director Mondi Limited company registration number: 1967/013038/06 Mondi plc company registered number: 6209386 Condensed combined and consolidated statement of cash flows for the six months ended 30 June 2014 (Reviewed) (Reviewed) (Audited) â‚¬ million Notes Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 Cash flows from operating activities Cash generated from operations 13a 439 431 1,036 Dividends from associates - - 1 Income tax paid (49) (75) (126) Net cash generated from operating 390 356 911 activities Cash flows from investing activities Investment in property, plant and equipment (249) (164) (405) Investment in forestry assets (18) (20) (41) Proceeds from the disposal of tangible and 27 21 36 intangible assets Acquisition of subsidiaries, net of cash 12 (47) - - and cash equivalents Other investing activities (1) 2 (3) Net cash used in investing activities (288) (161) (413) Cash flows from financing activities Repayment of short-term borrowings 13c (45) (19) (77) Proceeds from medium and long-term 13c 95 108 107 borrowings Repayment of medium and long-term 13c - (52) (117) borrowings Interest paid (64) (68) (124) Dividends paid to shareholders 9 (129) (92) (138) Purchases of treasury shares (22) (23) (30) Dividends paid to non-controlling interests 9 (11) (50) (60) Other financing activities 11 18 28 Net cash used in financing activities (165) (178) (411) Net (decrease)/increase in cash and cash (63) 17 87 equivalents Cash and cash equivalents at beginning of 64 (37) (37) period Cash movement in the period 13c (63) 17 87 Effects of changes in foreign exchange 13c - 11 14 rates Cash and cash equivalents at end of period 13b 1 (9) 64 Condensed combined and consolidated statement of changes in equity for the six months ended 30 June 2014 â‚¬ million Equity Non- attributable controlling Total to shareholders interests equity At 1 January 2013 2,572 301 2,873 Total comprehensive income for 44 9 53 the period Dividends paid (92) (50) (142) Purchase of treasury shares (23) - (23) Other 4 (1) 3 At 30 June 2013 2,505 259 2,764 Total comprehensive income for 132 8 140 the period Dividends paid (46) (10) (56) Purchase of treasury shares (7) - (7) Other 7 (2) 5 At 31 December 2013 2,591 255 2,846 Total comprehensive income for 200 16 216 the period Dividends paid (129) (11) (140) Purchase of treasury shares (22) - (22) Other 5 - 5 At 30 June 2014 2,645 260 2,905 Equity attributable to shareholders (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 Combined share capital and stated capital 542 542 542 Retained earnings 2,302 2,044 2,209 Share-based payment reserve 14 13 18 Cumulative translation adjustment reserve (398) (291) (374) Cash flow hedge reserve (2) - (2) Post-retirement benefit reserve (68) (56) (57) Merger reserve 259 259 259 Other sundry reserves (4) (6) (4) Total 2,645 2,505 2,591 Notes to the condensed combined and consolidated financial statements for the six months ended 30 June 2014 1 Basis of preparation 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 International Financial Reporting Standards (IFRS). The condensed combined and consolidated half-yearly financial information for the six months ended 30 June 2014 has been prepared in accordance with IAS 34, `Interim Financial Reporting'. It should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2013, prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB). There are no differences for the Group in applying IFRS as issued by the IASB and IFRS as adopted by the European Union (EU) and the Group also complies with Article 4 of the EU IAS Regulation. The Group has also complied with the South African Institute of Chartered Accountants Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Reporting Standards Council of South Africa. The condensed combined and consolidated financial statements have been prepared on a going concern basis as discussed in the Group performance review, under the heading `Going concern'. The information for the year ended 31 December 2013 does not constitute statutory accounts as defined by section 434 of the UK Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the UK Companies Act 2006. The condensed combined and consolidated financial statements have been prepared on the historical cost basis, except for the fair valuing of financial instruments and forestry assets. These financial statements have been prepared under the supervision of the Group chief financial officer, Andrew King CA (SA). 2 Accounting policies The same accounting policies, methods of computation and presentation have been followed in the preparation of the condensed combined and consolidated financial statements for the six months ended 30 June 2014 as were applied in the preparation of the Group's annual financial statements for the year ended 31 December 2013. 3 Seasonality The seasonality of the Group's operations has no significant impact on the condensed combined and consolidated financial statements. 4 Operating segments Six months ended 30 June 2014 (Reviewed) Europe & International South Corporate Intersegment Segments Africa & other elimination total Division â‚¬ million, unless Packaging Fibre Consumer Uncoated otherwise stated Paper Packaging Packaging Fine Paper Segment revenue 982 1,003 550 674 284 - (345) 3,148 Internal revenue (272) (15) (2) (8) (48) - 345 - External revenue 710 988 548 666 236 - - 3,148 EBITDA 209 88 60 133 78 (15) - 553 Depreciation, (47) (35) (26) (48) (20) - - (176) amortisation and impairments Underlying operating 162 53 34 85 58 (15) - 377 profit/(loss) Special items - (7) 4 - - (13) - (16) Operating segment assets 1,895 1,235 1,004 1,357 728 6 (177) 6,048 Operating net segment 1,558 942 870 1,157 608 7 - 5,142 assets Additions to non-current 116 32 30 67 29 23 - 297 non-financial assets Capital expenditure cash 115 34 32 59 9 - - 249 payments Operating margin (%) 16.5 5.3 6.2 12.6 20.4 - - 12.0 Return on capital 22.6 11.6 8.5 15.8 20.5 - - 16.0 employed (%) Six months ended 30 June 2013 (Reviewed) Europe & International South Corporate Intersegment Segments Africa & other elimination total Division â‚¬ million, unless Packaging Fibre Consumer Uncoated otherwise stated Paper Packaging Packaging Fine Paper Segment revenue 1,043 1,002 582 740 325 - (350) 3,342 Internal revenue (267) (17) (2) (8) (56) - 350 - External revenue 776 985 580 732 269 - - 3,342 EBITDA 195 83 66 157 67 (14) - 554 Depreciation, (47) (35) (27) (55) (23) (1) - (188) amortisation and impairments1 Underlying operating 148 48 39 102 44 (15) - 366 profit/(loss) Special items - - (13) (50) (18) - - (81) Operating segment assets 1,793 1,239 1,018 1,366 810 7 (129) 6,104 Operating net segment 1,441 982 875 1,176 687 7 - 5,168 assets Additions to non-current 57 25 25 33 34 - - 174 non-financial assets Capital expenditure cash 55 35 24 36 14 - - 164 payments Operating margin (%) 14.2 4.8 6.7 13.8 13.5 - - 11.0 Return on capital 20.1 12.0 7.8 17.4 12.8 - - 14.8 employed (%) Note: 1 Excluding impairments included in special items (see note 6). Year ended 31 December 2013 (Audited) Europe & International South Corporate Intersegment Segments Africa & other elimination total Division â‚¬ million, unless Packaging Fibre Consumer Uncoated otherwise stated Paper Packaging Packaging Fine Paper Segment revenue 2,000 1,967 1,153 1,388 624 - (656) 6,476 Internal revenue (503) (33) (5) (14) (101) - 656 - External revenue 1,497 1,934 1,148 1,374 523 - - 6,476 EBITDA 394 163 129 277 135 (30) - 1,068 Depreciation, (96) (70) (55) (105) (42) (1) - (369) amortisation and impairments1 Underlying operating 298 93 74 172 93 (31) - 699 profit/(loss) Special items - (3) (13) (60) (11) - - (87) Operating segment 1,837 1,156 993 1,311 731 2 (140) 5,890 assets Operating net segment 1,484 903 855 1,135 622 1 - 5,000 assets Additions to 155 72 60 94 93 - - 474 non-current non-financial assets Capital expenditure 139 78 56 80 52 - - 405 cash payments Operating margin (%) 14.9 4.7 6.4 12.4 14.9 - - 10.8 Return on capital 21.9 10.8 9.1 16.2 16.0 - - 15.3 employed (%) Note: 1 Excluding impairments included in special items (see note 6). The description of each business segment reflects the nature of the main products they sell. In certain instances the business segments sell minor volumes of other products and due to this reason the external segment revenues will not necessarily reconcile to the external revenues by product type presented below. External revenue by product type (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 Products Fibre packaging products 970 963 1,891 Packaging paper products 716 766 1,482 Uncoated fine paper 611 669 1,284 Consumer packaging products 548 580 1,148 Pulp 114 133 269 Newsprint 75 97 177 Other 114 134 225 Group total 3,148 3,342 6,476 External revenue by External revenue by location of customer location of production (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year Six months Six months Year ended 30 ended 30 ended ended 30 ended 30 ended June 2014 June 2013 31 June 2014 June 2013 31 December December 2013 2013 Revenue Africa South Africa 192 217 432 284 325 623 Rest of Africa 111 129 231 6 5 11 Africa total 303 346 663 290 330 634 Western Europe Austria 79 83 161 494 506 958 Germany 505 509 1,003 463 496 993 United Kingdom 118 137 262 18 28 48 Rest of western 690 730 1,390 348 372 720 Europe Western Europe total 1,392 1,459 2,816 1,323 1,402 2,719 Emerging Europe Poland 242 227 450 440 448 877 Rest of emerging 434 457 893 582 595 1,168 Europe Emerging Europe total 676 684 1,343 1,022 1,043 2,045 Russia 282 314 608 350 389 741 North America 174 181 349 135 143 274 South America 32 29 57 - - - Asia and Australia 289 329 640 28 35 63 Group total 3,148 3,342 6,476 3,148 3,342 6,476 There are no external customers which account for more than 10% of the Group's total external revenue. Reconciliation of operating profit before special items (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended 31 June 2014 June 2013 December 2013 Operating profit before special items 377 366 699 Special items (see note 6) (16) (81) (87) Net profit from associates 1 1 2 Net finance costs (excluding financing special (50) (57) (115) item) Group profit before tax 312 229 499 Reconciliation of operating segment assets (Reviewed) (Reviewed) (Audited) As at 30 June As at 30 June As at 31 December 2014 2013 2013 â‚¬ million Segment Net Segment Net Segment Net assets segment assets segment assets segment assets assets assets Segments total 6,048 5,142 6,104 5,168 5,890 5,000 Unallocated: Acquisition (see note 12)1 108 76 - - - - Investments in associates 6 6 6 6 6 6 Deferred tax assets/ 4 (249) 8 (283) 4 (260) (liabilities) Other non-operating 166 (345) 190 (308) 182 (306) assets/(liabilities) Group capital employed 6,332 4,630 6,308 4,583 6,082 4,440 Financial asset 26 26 25 25 27 27 investments (non-current) Cash and current 50 (1,751) 85 (1,844) 131 (1,621) financial asset investments/(net debt) Total assets/equity 6,408 2,905 6,418 2,764 6,240 2,846 Note: 1Acquisition took place on 30 June 2014, and will be incorporated into Packaging Paper and Fibre Packaging business units in future reporting. 5 Write-down of inventories to net realisable value (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 Write-down of inventories to net realisable (9) (12) (21) value Aggregate reversal of previous write-down of 4 4 12 inventories 6 Special items (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 Operating special items Asset impairments - (55) (67) Restructuring and closure costs: Restructuring and closure costs excluding - (10) (10) related personnel costs Personnel costs relating to restructuring (7) (16) (17) Reversal of provision for transaction costs 4 - - attributable to Nordenia acquisition Total operating special items (3) (81) (94) Non-operating special item Gain on sale of land - - 7 Total non-operating special item - - 7 Financing special item Net charge on early redemption of â‚¬280 million (13) - - Eurobond Total financing special item (13) - - Total special items before tax and (16) (81) (87) non-controlling interests Tax - 13 13 Total special items attributable to shareholders (16) (68) (74) Operating special items In May 2014, the Group announced plans to restructure certain operations in the Coatings segment of the Fibre Packaging business unit. Restructuring costs of â‚¬7 million were recognised. A provision of â‚¬4 million in respect of transaction costs attributable to the Nordenia acquisition was reversed. Financing special item On 10 June 2014, the Group announced the intention to redeem the 9.75% â‚¬280 million Eurobond assumed as part of the acquisition of Nordenia in 2012. The net charge on redemption of â‚¬13 million was recognised. 7 Tax charge (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 UK corporation tax at 21.5% (2013: 23.25%) - 1 1 SA corporation tax at 28% (2013: 28%) 16 13 21 Overseas tax 56 65 105 Current tax 72 79 127 Deferred tax (10) (23) (29) Total tax charge before special items 62 56 98 Current tax on special items - (6) (5) Deferred tax on special items - (7) (8) Total tax credit on special items - (13) (13) Total tax charge 62 43 85 The Group's effective rate of tax before special items for the six months ended 30 June 2014, calculated on profit before tax before special items and including net profit from associates, is 19% (six months ended 30 June 2013: 18%; year ended 31 December 2013: 17%). 8 Earnings per share (Reviewed) (Reviewed) (Audited) â‚¬ cents per share Six months Six months Year ended 30 ended 30 ended 31 June 2014 June 2013 December 2013 Profit for the period attributable to shareholders Basic EPS 48.6 35.3 79.8 Diluted EPS 48.5 35.3 79.6 Underlying earnings for the period Basic underlying EPS 51.9 49.4 95.0 Diluted underlying EPS 51.8 49.3 94.8 Headline earnings for the period Basic headline EPS 48.3 45.7 91.3 Diluted headline EPS 48.2 45.6 91.1 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 (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 Profit for the period attributable to 235 171 386 shareholders Special items (see note 6) 16 81 87 Related tax (see note 6) - (13) (13) Underlying earnings for the period 251 239 460 Special items: restructuring and closure costs (7) (26) (27) Special items: reversal of provision for 4 - - transaction costs attributable to Nordenia acquisition Financing special item (13) - - Profit on disposal of tangible and intangible (1) - (2) assets Impairments not included in special items - 1 4 Related tax - 7 7 Headline earnings for the period 234 221 442 Weighted average number of shares (Reviewed) (Reviewed) (Audited) million As at 30 As at 30 As at 31 June 2014 June 2013 December 2013 Basic number of ordinary shares outstanding 484 484 484 Effect of dilutive potential ordinary shares 1 1 1 Diluted number of ordinary shares outstanding 485 485 485 9 Dividends The interim dividend for the year ending 31 December 2014 of 13.23 euro cents per ordinary share will be paid on 16 September 2014 to those shareholders on the register of Mondi plc on 22 August 2014. An equivalent South African rand interim dividend will be paid on 16 September 2014 to shareholders on the register of Mondi Limited on 22 August 2014. The dividend will be paid from distributable reserves of Mondi Limited and of Mondi plc, as presented in the respective company annual financial statements for the year ended 31 December 2013. The interim dividend for the year ending 31 December 2014 will be paid in accordance with the following timetable: Mondi Limited Mondi plc Last date to trade shares cum-dividend JSE Limited 15 August 2014 15 August 2014 London Stock Exchange Not applicable 19 August 2014 Shares commence trading ex-dividend JSE Limited 18 August 2014 18 August 2014 London Stock Exchange Not applicable 20 August 2014 Record date JSE Limited 22 August 2014 22 August 2014 London Stock Exchange Not applicable 22 August 2014 Last date for receipt of Dividend 28 August 2014 28 August 2014 Reinvestment Plan (DRIP) elections by Central Securities Depository Participants Last date for DRIP elections to UK 29 August 2014 22 August 2014* Registrar and South African Transfer Secretaries by shareholders of Mondi Limited and Mondi plc Payment Date South African Register 16 September 2014 16 September 2014 UK Register Not applicable 16 September 2014 DRIP purchase settlement dates 25 September 2014 19 September 2014** Currency conversion dates ZAR/euro 7 August 2014 7 August 2014 Euro/sterling Not applicable 29 August 2014 * 29 August 2014 for Mondi plc South African branch register shareholders ** 25 September 2014 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 18 August 2014 and 24 August 2014, both dates inclusive, nor may transfers between the UK and South African registers of Mondi plc take place between 13 August 2014 and 24 August 2014, both dates inclusive. Information relating to the dividend tax to be withheld from Mondi Limited shareholders and Mondi plc shareholders on the South African branch register will be announced separately, together with the ZAR/euro exchange rate to be applied, on or shortly after 7 August 2014. 10 Forestry assets (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 At 1 January 233 311 311 Capitalised expenditure 17 19 39 Acquisition of assets 1 1 2 Fair value gains 20 10 17 Disposal of assets (13) (9) (9) Felling costs (27) (30) (55) Currency movements 2 (45) (72) Closing balance 233 257 233 The fair value of forestry assets is a level 3 measure in terms of the fair value measurement hierarchy (see note 17) and this category is consistent with prior periods. The fair value of forestry assets is calculated on the basis of future expected net cash flows arising on the Group's owned forestry assets, discounted using a discount rate relevant in the local country, based on a pre tax real yield on long-term bonds over the last five years. All fair value gains originate from South Africa. 11 Retirement benefits All assumptions related to the Group's material defined benefit schemes and post-retirement medical plan liabilities were re-assessed individually and the remaining Group defined benefit schemes and unfunded statutory retirement obligations were re-assessed in aggregate for the six months ended 30 June 2014. The net retirement benefit obligation increased by â‚¬15 million mainly due to changes in assumptions. The assets backing the defined benefit scheme liabilities reflect their market values as at 30 June 2014. Any movements in the assumptions have been recognised as a remeasurement in the condensed combined and consolidated statement of comprehensive income. 12 Business combinations Acquisition of bags and kraft paper business of Graphic Packaging International Inc On 30 June 2014, Mondi acquired the bags and kraft paper business of Graphic Packaging International Inc, a wholly-owned subsidiary of Graphic Packaging Holding Company, for a total consideration of US$105 million (â‚¬76 million) on a debt and cash-free basis. The production base comprises an integrated kraft paper mill, with production capacity of 135,000 tonnes per annum, and nine bags plants. The combination of the business with Mondi's existing network will create a leading bags player in North America and expand the Group's growing global footprint in this market. The business' revenue for the six months ended 30 June 2014 was â‚¬178 million with a loss after tax of â‚¬6 million. Details of the net assets acquired, as adjusted from book to fair value, are as follows: â‚¬ million Book Revaluation Fair value value Net assets acquired: Intangible assets 62 (60) 2 Property, plant and equipment 76 (55) 21 Inventories 60 1 61 Trade and other receivables 24 - 24 Total assets 222 (114) 108 Trade and other payables (28) - (28) Net retirement benefits liability (3) - (3) Deferred tax liabilities - (1) (1) Total liabilities (excluding debt) (31) (1) (32) Short-term borrowings (30) - (30) Net assets acquired 161 (115) 46 Transaction costs expensed 1 Net cash paid per condensed combined and 47 consolidated statement of cash flows The fair value accounting is provisional in nature. The nature of this business is such that further adjustments to the carrying values of acquired assets and/ or liabilities are possible as the detail of the acquired business is evaluated post acquisition. If necessary, any adjustments will be made within 12 months of the acquisition date. In respect of trade and other receivables, the gross contractual amounts receivable and the best estimate at the acquisition date of the contractual cash flows not expected to be collected approximate the book value and the revaluation amount respectively as presented. There were no major acquisitions made during the year ended 31 December 2013. 13 Consolidatedcash flow analysis (a) Reconciliation of profit before tax to cash generated from operations (Reviewed) (Reviewed) (Audited) â‚¬ million Six months Six months Year ended 30 ended 30 ended June 2014 June 2013 31 December 2013 Profit before tax 312 229 499 Depreciation and amortisation 176 187 365 Impairment of tangible and intangible assets - 1 4 (not included in special items) Share-based payments 5 5 11 Non-cash effect of special items 6 71 60 Net finance costs (excluding financing special 50 57 115 item) Net profit from associates (1) (1) (2) Decrease in provisions and net retirement (9) (12) (25) benefits Increase in inventories (30) (9) (7) Increase in operating receivables (82) (138) (14) Increase/(decrease) in operating payables 6 18 (6) Fair value gains on forestry assets (20) (10) (17) Felling costs 27 30 55 Profit on disposal of tangible and intangible (1) - (2) assets Other adjustments - 3 - Cash generated from operations 439 431 1,036 (b) Cash and cash equivalents (Reviewed) (Reviewed) (Audited) â‚¬ million As at 30 As at 30 As at 31 June 2014 June 2013 December 2013 Cash and cash equivalents per condensed 49 84 130 combined and consolidated statement of financial position Bank overdrafts included in short-term (48) (93) (66) borrowings Cash and cash equivalents per condensed 1 (9) 64 combined and consolidated statement of cash flows (c) Movement in net debt The Group's net debt position is as follows: â‚¬ million Cash and Debt due Debt Current Total cash within due financial net equivalents1 one after asset debt year one investments year At 1 January 2013 (Audited) (37) (188) (1,648) 1 (1,872) Cash flow 17 19 (56) - (20) Movement in unamortised loan - - 7 - 7 costs Reclassification - (20) 20 - - Currency movements 11 17 13 - 41 At 30 June 2013 (Reviewed) (9) (172) (1,664) 1 (1,844) Cash flow 70 58 66 - 194 Movement in unamortised loan - - 11 - 11 costs Reclassification - (14) 14 - - Currency movements 3 13 2 - 18 At 31 December 2013 (Audited) 64 (115) (1,571) 1 (1,621) Cash flow (63) 45 (95) - (113) Movement in unamortised loan - - 13 - 13 costs Acquisition of business - (30) - - (30) Reclassification - (306) 306 - - Currency movements - (4) 4 - - At 30 June 2014 (Reviewed) 1 (410) (1,343) 1 (1,751) Note: 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. The following table shows the amounts available to draw down on the Group's committed loan facilities: (Reviewed) (Reviewed) (Audited) â‚¬ million As at 30 As at 30 As at 31 June 2014 June 2013 December 2013 Expiry date In one year or less 88 56 42 In more than one year 657 687 750 Total credit available 745 743 792 Redemption of â‚¬280 million Eurobond On 10 June 2014, the Group announced the intention to redeem the â‚¬280 million Eurobond on 15 July 2014. The bond, including the related purchase premium and bond transaction costs were reclassified from long-term debt to short-term debt on date of announcement. 14 Capital commitments (Reviewed) (Reviewed) (Audited) â‚¬ million As at 30 As at 30 As at 31 June 2014 June 2013 December 2013 Contracted for but not provided 426 271 366 Approved, not yet contracted for 304 361 625 These capital commitments relate to the following categories of non-current non-financial assets: (Reviewed) (Reviewed) (Audited) â‚¬ million As at 30 As at 30 As at 31 June 2014 June 2013 December 2013 Intangible assets 4 6 4 Property, plant and equipment 726 626 987 Total capital commitments 730 632 991 The expected maturity of these capital commitments is: (Reviewed) (Reviewed) (Audited) â‚¬ million As at 30 As at 30 As at 31 June 2014 June 2013 December 2013 Within one year 549 438 544 One to two years 121 146 392 Two to five years 60 48 55 Total capital commitments 730 632 991 Capital commitments are based on capital projects approved to date and the budget approved by the Boards. Major capital projects still require further approval before they commence. These capital commitments are expected to be financed from existing cash resources and borrowing facilities. 15 Contingent liabilities and contingent assets Contingent liabilities comprise aggregate amounts as at 30 June 2014 of â‚¬26 million (as at 30 June 2013: â‚¬14 million; as at 31 December 2013: â‚¬25 million) in respect of loans and guarantees given to banks and other third parties. No acquired contingent liabilities have been recorded in the Group's condensed combined and consolidated statement of financial position for all periods presented. 16 Related party transactions The Group and its subsidiaries, in the ordinary course of business, enter into various sale, purchase and service transactions with equity accounted investees 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, and in total, are not considered to be significant. Transactions between Mondi Limited, Mondi plc and their respective subsidiaries, which are related parties, have been eliminated on consolidation. There have been no significant changes to the related parties as disclosed in note 36 of the Group's annual financial statements for the year ended 31 December 2013. 17 Fair value disclosures Financial instruments that are measured in the condensed combined and consolidated statement of financial position at fair value or where the fair value of financial instruments have been disclosed in notes to the condensed combined and consolidated financial statements require disclosure of fair value measurements by level based on the following fair value measurement hierarchy: * level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; * level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and * level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). The fair values of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) are determined using standard valuation techniques. These valuation techniques maximise the use of observable market data where available and rely as little as possible on Group specific estimates. The significant inputs required to value all of the Group's financial instruments are either quoted prices or are observable. The Group only holds level 1 and 2 financial instruments and therefore does not hold any financial instruments categorised as level 3 financial instruments. There have also been no transfers of assets or liabilities between levels of the fair value hierarchy during the six months ended 30 June 2014. Specific valuation methodologies used to value financial instruments include: * the fair values of interest rate swaps and foreign exchange contracts are calculated as the present value of expected future cash flows based on observable yield curves and exchange rates; * the Group's commodity price derivatives are valued by independent third parties, who in turn calculate the fair values as the present value of expected future cash flows based on observable market data; and * other techniques, including discounted cash flow analysis, are used to determine the fair values of other financial instruments. The only assets or liabilities measured at fair value on level 3 of the fair value measurement hierarchy are the Group's forestry assets as set out in note 10. Except as detailed below, the directors consider that the carrying values of financial assets and financial liabilities recorded at amortised cost in the condensed combined and consolidated financial statements are approximately equal to their fair values. Carrying amount Fair value (Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited) â‚¬ million As at 30 As at 30 As at 31 As at 30 As at 30 As at 31 June 2014 June 2013 December 2013 June 2014 June 2013 December 2013 Financial liabilities Borrowings 1,801 1,929 1,752 1,920 2,013 1,836 18 Events occurring after 30 June 2014 With the exception of the interim dividend of 13.23 euro cents per share, as set out in note 9, there have been no material reportable events since 30 June 2014. Production statistics Six Six Year months months ended 31 ended 30 ended 30 December June 2014 June 2013 2013 Europe & International Containerboard Tonnes 1,075,226 1,077,702 2,138,714 Kraft paper Tonnes 531,040 515,822 1,010,885 Softwood pulp Tonnes 1,025,692 1,014,483 2,007,959 Internal consumption Tonnes 950,545 942,445 1,859,597 External Tonnes 75,147 72,038 148,362 Corrugated board and boxes MmÂ² 672 678 1,344 Industrial bags M units 2,115 2,017 3,997 Coating and release liners MmÂ² 1,692 1,718 3,348 Consumer packaging Tonnes 141,467 146,763 283,161 Uncoated fine paper Tonnes 684,678 708,880 1,381,141 Newsprint Tonnes 104,574 103,620 207,228 Hardwood pulp Tonnes 567,432 547,819 1,087,615 Internal consumption Tonnes 529,482 513,366 1,013,790 External Tonnes 37,950 34,453 73,825 South Africa Division Containerboard Tonnes 124,157 132,077 254,714 Uncoated fine paper Tonnes 126,907 131,741 258,751 Hardwood pulp Tonnes 311,914 326,981 645,611 Internal consumption Tonnes 164,112 169,935 331,928 External Tonnes 147,802 157,046 313,683 Softwood pulp - internal consumption Tonnes 75,675 102,987 166,101 Newsprint Tonnes 58,859 87,088 145,498 Exchange rates Six Six Year months months ended 31 ended 30 ended 30 December June June 2013 2014 2013 Closing rates against the euro South African rand 14.46 13.07 14.57 Czech koruna 27.45 25.95 27.43 Polish zloty 4.16 4.34 4.15 Pounds sterling 0.80 0.86 0.83 Russian rouble 46.38 42.84 45.32 Turkish lira 2.90 2.52 2.96 US dollar 1.37 1.31 1.38 Average rates for the period against the euro South African rand 14.67 12.10 12.83 Czech koruna 27.44 25.70 25.99 Polish zloty 4.18 4.18 4.20 Pounds sterling 0.82 0.85 0.85 Russian rouble 48.01 40.73 42.32 Turkish lira 2.97 2.38 2.53 US dollar 1.37 1.31 1.33 Sponsor in South Africa: UBS South Africa (Pty) Ltd

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