Mondi plc   

(Incorporated in England and Wales)  ISIN: GB00BMWC6P49

(Registered number: 6209386) LSE share code: MNDI  

LEI: 213800LOZA69QFDC9N34  JSE share code: MNP

 

1 August 2024

Results for the six months ended 30 June 2024

Mondi, a global leader in the production of sustainable packaging and paper, today announces its results for the six months to 30 June 2024 ("first half" or "H1 2024").

H1 2024 - key points

•          Robust performance with underlying EBITDA of €565 million - trading in line with our expectations

•          Second quarter underlying EBITDA benefitted from rescheduled maintenance shuts and a higher than expected forestry fair value gain, together totalling approx. €40 million

•          Continued progress delivering organic growth investments - on track and on budget

•          Supporting shareholder distributions through ordinary and special dividends

Andrew King, Mondi Group Chief Executive Officer, commented:

"Our underlying EBITDA of €565 million in the first six months, although lower than the comparable period last year, reflected an encouraging performance, supported by improving market conditions resulting in stronger order books and higher sales volumes. This enabled us to implement a number of price increases across our paper grades. Alongside lower input costs, we delivered a sequential improvement in underlying EBITDA when compared to the second half of 2023. The benefit of the price increases will continue into the second half of the year. The second half is expected to be impacted by higher planned maintenance shuts and a likely forestry fair value loss.

“We continue to invest through-cycle to grow our business, enhancing our unique packaging and paper platform and broad product offering. Of our €1.2 billion organic growth investments, we will have invested around 80% by the end of this year, with operations currently ramping up following the modernisation of our Kuopio mill, the debottlenecking of our Swiecie mill and the two expanded box plants in Poland. Overall, our organic growth investments are expected to deliver a meaningful EBITDA contribution from 2025."

€ million, except where noted

Six months ended 30 June 2024

Six months ended 30 June 2023

Six months ended 31 December 2023

From continuing operations

 

 

 

Group revenue

3,739

3,881

3,449

Underlying EBITDA1

565

680

521

Underlying EBITDA margin1

15.1%

17.5%

15.1%

 

 

 

 

Profit before tax

296

418

264

 

 

 

 

Basic underlying earnings per share (euro cents)1, 2

50.5

67.0

40.8

Basic earnings per share (euro cents)2

44.5

63.7

39.8

 

 

 

 

Interim dividend per share (euro cents)2

23.33

23.33

 

Special dividend per share (euro cents)2

160.00

 

 

 

 

 

 

Cash generated from operations

372

554

758

Net debt to underlying EBITDA (times)1

1.5

0.8

0.3

 

 

 

 

Return on capital employed (ROCE)1

10.8%

19.1%

12.8%

Notes:

1 The Group presents certain measures that are not defined or specified according to International Financial Reporting Standards. Refer to the Alternative Performance Measures (APMs) section at the end of this document for further detail.

2 Per share metrics for the six months ended 30 June 2024 (except for the special dividend) include the impact of the share consolidation effective in January 2024. Refer to notes 7, 8 and 10 in the condensed consolidated financial statements for further information.

 

Mondi delivered a robust performance in the first half of 2024 on the back of improving market conditions. This performance was supported by our continued focus on quality, reliability and offering our customers a broad range of sustainable packaging and paper solutions.

Underlying EBITDA of €565 million with margin of 15.1% was below the comparable period (H1 2023: €680 million, 17.5%) primarily due to lower average selling prices and inflationary personnel and operating cost pressures despite the improvement in sales volumes and the reduction in input costs.

Whilst improving market demand and customer restocking led to an increase in our volumes in the first half of the year, prices were, on average, lower than the first half of 2023 as a result of the substantial price declines seen throughout 2023. However, the improving market conditions enabled a number of price increases to be implemented across all our paper grades over the course of the first half of the year. The full benefit of these increases are expected to come through in the second half of this year.

Overall, input costs were lower in the period compared to the first half of 2023, mostly due to lower wood and energy prices. As we enter the second half of 2024, overall input costs are stable despite recent increases in paper for recycling prices.

Return on capital employed was lower at 10.8% (31 December 2023: 12.8%), calculated on a rolling 12-months basis.

The Group continues to generate good cash flows and maintains a strong financial position, which provides the platform to continue investing in the business through-cycle alongside paying dividends to shareholders. Cash generated from operations of €372 million was lower than the prior year (H1 2023: €554 million) mainly due to an increase in working capital in line with the improving market environment.

Net debt to underlying EBITDA at 30 June 2024 was 1.5 times due to ongoing investment in the business and payment of a special dividend.

An interim dividend of 23.33 euro cents per share has been declared (H1 2023: 23.33 euro cents per share).

Further progress on delivering our strategy

Mondi has a clear strategy to deliver value accretive growth, sustainably. This includes extending our market leadership positions and scale in our key packaging markets. For Flexible Packaging, our focus is on leveraging our unique platform by building on our global leadership positions in kraft paper and paper bags and developing our niche positions in consumer flexibles, while bringing together the capabilities from across the platform to deliver innovative, sustainable packaging solutions. For Corrugated Packaging, our focus remains on growing in Europe and adjacent markets given our strong and integrated positions in these regions. In Uncoated Fine Paper we continue to optimise our existing assets and market leading positions in selected regional markets.

We continue to invest in upstream and downstream assets to deliver organic growth, enhance cost competitiveness, improve environmental performance and drive synergistic benefits of our integrated business model. This enables us to further strengthen our broad range of innovative sustainable solutions, and partner with customers to contribute to a circular economy. Our people are at the heart of our business, and we are committed to fostering a safe, motivating and inclusive work environment, aligned with our values of Performance, Care and Integrity.

Delivering organic growth investments - on track and on budget

We seek to invest through-cycle, by leveraging our strong financial position, leading market positions and confidence in the long-term structural growth of the packaging markets we operate in.

We are making good progress on our organic growth investments. Our €1.2 billion of organic growth investments remain on track and on budget. These projects are diversified across our value chain, products and geographic reach and comprise €0.6 billion of investments in Corrugated Packaging and €0.6 billion of investments in Flexible Packaging. By the end of 2024, we will have invested around 80% of the €1.2 billion.

Our projects are expected to take two to three years to achieve full production following their start-up, and deliver mid-teen returns through-cycle when fully operational. We expect these projects to deliver a meaningful EBITDA contribution from 2025.

Advancing our sustainability performance through the Mondi Action Plan 2030

We have a long track record of delivering sustainably and continue to be recognised as a leader in sustainable practices. During the period, we maintained our top ‘A’ scores for forestry and water security and an ‘A-’ score in climate change in CDP’s 2023 disclosures. We also achieved Platinum status in EcoVadis’ Corporate Social Responsibility (CSR) ratings, placing us among the top 1% of global companies assessed for the eighth consecutive year. These achievements, alongside other awards and recognitions, underscore our continued dedication to sustainable practices and transparent reporting towards achieving our ambitious commitments set out in the Mondi Action Plan 2030 (MAP2030).

We are making good progress delivering circular solutions to our customers as we continue to develop innovative packaging and paper products that are sustainable by design. For example, we developed TrayWrap, a secondary paper packaging solution made with Mondi's kraft paper that replaces plastic shrink film for wrapping bundles of food and drinks. This new solution is being used by a coffee brand to securely transport its coffee packages across Sweden. Another innovation includes FlexiBag Reinforced, a recyclable and cost-effective mono-material plastic packaging solution incorporating post-consumer recycled content offering high barrier protection, making it the ideal solution for German pet food producer mera's ‘pure green’ dry pet food packaging range.

Our relentless focus on employee safety, wellbeing and personal development continues to be a top priority for the Group. Our initiatives support and provide opportunities for our people to build skills that support long-term employability, empower decision making and provide purposeful employment in a diverse and inclusive workplace.

We continue to take action on climate and make good progress towards achieving our 2030 milestone in support of our Net-Zero commitment by 2050. Our investments to reduce our reliance on fossil fuels and make our operations more energy efficient are progressing well, most notably the modernisation investment at our Dynas mill (Sweden) and the installation of a power boiler at our Richards Bay mill (South Africa).

Business unit review

Corrugated Packaging

Mondi is a leading producer of corrugated packaging with a cost-competitive asset base and strong customer offering focused on quality and reliability. We are the leading virgin containerboard producer in Europe and the largest containerboard producer in emerging Europe. Our virgin containerboard is a high-quality product with excellent properties for specialised end-use applications, ideal to meet our customers' needs around the globe.

We are also a leading corrugated solutions producer across central and emerging Europe. We leverage our integrated production network and partner with our customers to create fully recyclable corrugated boxes and packaging.

€ million, except for percentages

Six months ended 30 June 2024

Six months ended 30 June 2023

Six months ended 31 December 2023

Segment revenue

1,103

1,187

1,093

Underlying EBITDA

143

188

122

Underlying EBITDA margin

13.0%

15.8%

11.2%

ROCE

5.2%

15.8%

7.7%

 

Corrugated Packaging delivered underlying EBITDA of €143 million with a margin of 13.0%. This was down on the prior year (H1 2023: €188 million, 15.8%) mainly due to lower average containerboard selling prices and inflationary personnel and operating cost pressures exceeding the benefit of lower input costs. Corrugated Solutions delivered a stable financial performance.

In Containerboard, our sales volumes were broadly flat compared to the comparable prior year period as the business continued to deliver its strong customer offering with its broad range of high-quality paper grades. Selling price increases were successfully achieved during the period across all paper grades. Average prices for the period were however below average prices in the first half of 2023 and at similar levels to the second half of 2023. As we enter the second half of the year, prices are now higher than the first half of 2024.

Corrugated Solutions achieved 3% box volume growth compared to H1 2023 supported by the growing demand for eCommerce and sustainable packaging solutions, together with improving demand in consumer end-use applications. We anticipate recent paper price increases to be passed through our converting operations as we progress through the second half of the year.

We continue to invest through-cycle in our high-quality asset base. In Containerboard, we are ramping up capacity following the completion of our €125 million modernisation investment at our Kuopio mill (Finland). This project will increase semi-chemical fluting capacity by 55,000 tonnes while enhancing efficiency and improving environmental performance. We have also recently completed the €95 million debottlenecking project at our Swiecie mill (Poland) which will increase kraftliner capacity by 55,000 tonnes. Our €200 million investment at our Duino mill (Italy) to convert the existing paper machine into a high-quality, cost-competitive recycled containerboard machine with an annual capacity of 420,000 tonnes is ongoing. Start-up of the machine is expected in the first half of 2025.

In our Corrugated Solutions' converting operations, we recently started up the investments at our Simet and Warsaw plants in Poland, transforming these sites into state-of-the-art corrugated packaging facilities tailored to serve the specialised needs of our customers in Poland and beyond.

Flexible Packaging

We are a global flexible packaging producer, integrated across the value chain with a unique portfolio of solutions. As a global leader in the production of kraft paper and paper bags, our well-invested mills produce high-quality kraft paper that is converted into strong, lightweight paper-based packaging. With our high level of integration across the value chain, our customers come to us for scale, security of supply and global reach.

We are also a leading producer of consumer flexible packaging in Europe and have broad coating capabilities which together provide an extensive and unique range of paper, plastic and hybrid packaging solutions.

€ million, except for percentages

Six months ended 30 June 2024

Six months ended 30 June 2023

Six months ended 31 December 2023

Segment revenue

2,024

2,062

1,804

Underlying EBITDA

276

343

294

Underlying EBITDA margin

13.6%

16.6%

16.3%

ROCE

12.1%

17.2%

14.4%

 

Flexible Packaging's underlying EBITDA was €276 million with margin of 13.6% (H1 2023: €343 million, 16.6%) as higher sales volumes and reduced input costs were offset by lower average selling prices, inflationary personnel and operating cost pressures and a €32 million one-off currency loss from the devaluation of the Egyptian pound in the period, as previously reported.

In Kraft Paper, improvements in market demand and our continued focus on innovative solutions supporting our customers seeking sustainable packaging solutions, led to higher sales volumes compared to H1 2023. As a response to stronger order books, the business successfully achieved selling price increases during the period. As we enter the second half of the year, prices are now higher than the first half of 2024.

In Paper Bags, sales volumes were at similar levels to the prior year but improved as we progressed over the period. Average pricing was however lower compared to H1 2023 mainly as a result of lower paper input costs. We anticipate recent paper price increases will be passed through our converting operations as we progress through the second half of the year.

Consumer Flexibles and Functional Paper and Films delivered good performances with improved margins compared to the H1 2023, continuing to offer customers a broad range of innovative packaging solutions.

We are making good progress on our organic growth investments across our platform. Our €400 million investment in a new 210,000 tonne per annum kraft paper machine and pulp mill upgrade at our Steti mill (Czech Republic) is progressing well, with ramp up expected from the first half of 2025. We also have a number of investments across our converting plant network including expanding and upgrading the global reach of our paper bag network, investments to consolidate our leading position in European pet food packaging, and projects to enhance our European coating capabilities.

During the period we completed the acquisition of the Hinton Pulp mill in Alberta (Canada) for USD 5 million and have a strong leadership team in place focused on optimising the pulp mill and undertaking feasibility studies for a kraft paper machine. The mill has the capacity to produce around 250,000 tonnes of pulp per annum and provides the Group with access to local, high-quality fibre from a well-established wood basket.