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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Mondi Plc | LSE:MNDI | London | Ordinary Share | GB00BMWC6P49 | ORD EUR 0.22 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 16.50 | 1.10% | 1,516.50 | 1,508.00 | 1,509.50 | 1,509.50 | 1,492.50 | 1,504.00 | 4,225,114 | 16:35:08 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Pkg Paper, Plastics Film | 8.04B | -153M | -0.3466 | -43.54 | 6.66B |
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TIDMMNDI
Mondi plc
(Incorporated in England and Wales)
(Registered number: 6209386)
LEI: 213800LOZA69QFDC9N34
LSE share code: MNDI ISIN: GB00B1CRLC47
JSE share code: MNP
This announcement contains inside information.
6 August 2020
Half-year results for the six months ended 30 June 2020
Highlights
* Robust financial performance in a challenging environment
+ Underlying EBITDA of EUR738 million with margin of 21.4%
+ Profit before tax of EUR466 million
+ Basic underlying earnings of 73.0 euro cents per share
+ Cash generated from operations of EUR602 million
+ Return on capital employed of 17.1%
+ Strong balance sheet with 1.4 times net debt to 12-month trailing
underlying EBITDA at 30 June 2020
* Decisive and effective COVID-19 response
+ Priority to protect our people, serve our customers and support our
communities and partners
+ Tight cost control
+ Postponed planned maintenance shuts to second half
+ Reduced 2020 capital investments, while maintaining our programme to
deliver growth through the cycle
+ Further strengthened liquidity, including issuing a EUR750 million 8-year
Eurobond
* Resuming dividend payments in line with policy
+ 29.75 euro cents per share dividend relating to 2019 financial year
declared
+ 19.00 euro cents per share 2020 interim ordinary dividend declared
* Well positioned for recovery with resilient business model, cost-advantaged
asset base, strong balance sheet and unique portfolio of sustainable
packaging solutions
Financial summary
EUR million, except for percentages and per share measures Six months Six months Six months
ended ended ended
30 June 2020 30 June 2019 31 December
2019
Group revenue 3,452 3,771 3,497
Underlying EBITDA1 738 894 764
Underlying operating profit1 524 679 544
Operating profit 518 679 542
Profit before tax 466 632 471
Basic underlying earnings per share1 (euro cents) 73.0 96.2 74.9
Basic earnings per share (euro cents) 72.0 95.8 71.8
Dividend relating to 2019 financial year per share (euro 29.75
cents)
Interim ordinary dividend per share (euro cents) 19.00 27.28
Cash generated from operations 602 737 898
Net debt1 2,039 2,358 2,207
Underlying EBITDA margin1 21.4% 23.7% 21.8%
Return on capital employed (ROCE)1 17.1% 23.2% 19.8%
Note:
1 The Group presents certain measures of financial performance, position or
cash flows that are not defined or specified according to International
Financial Reporting Standards (IFRS). These measures, referred to as
Alternative Performance Measures (APMs), are defined at the end of this
document and where relevant, reconciled to IFRS measures in the notes to the
condensed consolidated financial statements.
Andrew King, Mondi Group Chief Executive Officer, said:
"Mondi delivered a robust performance in the first half of 2020, with
underlying EBITDA of EUR738 million. This reflects the resilience of our business
model, achieved despite starting the year with significantly lower average
selling prices across our key pulp and paper grades and the challenges brought
by COVID-19.
We took decisive action in the early stages of the pandemic, moving quickly to
safeguard our people, support our communities and protect the profitability,
liquidity and cash flow of the business while seeking to ensure we are well
placed to benefit when the recovery comes.
Sustainable packaging continues to be a long-term priority for our customers
and wider society. As a leading producer of both paper and flexible
plastic-based packaging, we are in a unique position to support our customers'
environmental goals with packaging that is sustainable by design adhering to
our principle of paper where possible, plastic when useful.
The Board recognises the importance of dividends to shareholders. Having
delivered a robust trading performance in the first half of the year and given
our resilient business model and strong financial position, the Board has
revisited the decision taken in April to suspend the final 2019 dividend and is
pleased to resume the payment of dividends.
The Board has declared a dividend of 29.75 euro cents per share relating to
2019. Together with the 2019 interim ordinary dividend paid in September 2019,
this results in a total dividend of 57.03 euro cents per share relating to the
2019 financial year, covered three times by 2019 underlying earnings per share.
This is in line with our stated dividend policy of targeting a cover range on
average of two to three times underlying earnings over the business cycle.
Furthermore, the Board has declared a 2020 interim ordinary dividend of 19.00
euro cents per share, bringing the total dividend declared to 48.75 euro cents
per share.
Going into the second half of 2020, heightened macro-economic uncertainties
remain. Pricing across our key pulp and paper grades is below or in line with
the average of the first half. Demand for packaging daily essentials remains
robust while we continue to see weakness in certain industrial end-uses.
Uncoated fine paper order books have picked up from the lows seen in the second
quarter, albeit we do not expect a near-term recovery to pre-pandemic levels.
We have rescheduled planned mill maintenance shuts which will have an impact on
the second half of the year.
We are confident that the Group will continue to demonstrate its resilience in
the event of a prolonged macro-economic downturn, while remaining
well-positioned when the recovery takes place. This is underpinned by the
Group's integrated high-quality, cost-advantaged asset base, culture of
continuous improvement, portfolio of sustainable packaging solutions and the
strategic flexibility offered by our strong cash generation and financial
position.
I firmly believe that our embedded safety culture was key in facilitating a
fast and effective response to protect our people, communities and business
partners during this pandemic. I am incredibly proud of how our teams have
risen to the challenge and my thanks go to my colleagues for their endurance,
enterprise and ongoing commitment."
Protecting our people, serving our customers and supporting our communities and
partners
Our top priority has been the safety and well-being of the Group's employees
and our communities. All of our sites have implemented personal protection
measures and intensified social distancing and hygiene protocols that meet or
exceed local and international guidelines, and, where appropriate, employees
have been working remotely. We remain vigilant in our efforts to contain any
potential spread of the virus in our operations and communities.
Our businesses have generally been designated as providing essential services
by governments in the countries in which we operate, allowing us to play an
important role in responding to the COVID-19 pandemic. Throughout the period
under review we continued to provide essential materials and products to our
customers, many of whom produce food and personal and home care products, as
well as contributing to local services such as energy and waste water treatment
at our larger operations. Our facilities have been in operation throughout the
period, with the exception of the temporary closure of the Merebank paper mill
(South Africa) for approximately five weeks in line with government regulation,
and limited closures or other production interruptions at a small number of our
paper bags converting plants. We have managed supply chain disruptions well.
We escalated our initiatives to support local communities, going beyond our
existing programmes. We made significant financial and in-kind donations to
support the pandemic response and provided food, fresh water and other supplies
to people in need in the countries where we operate.
A multi-function response team continues to monitor the latest COVID-19
developments, assessing risks, providing guidance, and implementing
preventative policies in line with individual government regulations and
recommendations in the countries where we have a presence.
Group performance review
Underlying EBITDA for the half-year ended 30 June 2020 of EUR738 million was down
17% compared to the first half of 2019 and 3% compared to the second half of
2019 ('sequentially'), a robust performance in a challenging trading
environment, marked by generally softer pricing and exacerbated by the impact
of the COVID-19 pandemic and related lockdown measures implemented by
authorities across the regions in which we operate.
Revenue was down on the comparable prior year period due to lower average
selling prices across our key paper grades more than offsetting good volume
growth in Corrugated Packaging and Flexible Packaging. Uncoated fine paper
volumes were impacted by lower demand for commercial, professional and office
printing as a result of the widespread lockdown measures.
We saw a positive contribution from our previously completed capital investment
projects, while input costs were down on the comparable prior year period, with
lower average wood, energy, chemicals, paper for recycling and resin costs.
Cash fixed costs were stable with inflationary cost pressures offset by lower
maintenance costs and our cost mitigation programmes. A EUR33 million lower
forestry fair value gain was recognised versus the comparable prior year
period.
To protect our employees and suppliers and minimise execution risk, we
postponed most planned maintenance shuts to the second half of the year. Based
on prevailing market prices, we estimate the full year impact on underlying
EBITDA of the Group's planned maintenance shuts at around EUR100 million (2019: EUR
150 million), of which the first half effect was around EUR10 million (H1 2019: EUR
80 million).
Currency movements had a small positive impact on underlying EBITDA versus the
comparable prior year period. The net positive impact of a stronger US dollar
on sales of a number of the Group's globally traded products and the benefits
to our South African export oriented business of a weaker South African rand
were partly offset by translation losses from a weaker Turkish lira and Russian
rouble relative to the euro.
Depreciation and amortisation charges were stable during the period as the
impact of our capital investment programme was offset by currency effects.
Basic underlying earnings were 73.0 euro cents per share, down 24% on the
comparable prior year period. Including the effects of special items, which
relate to costs initially recognised in prior years amounting to a charge of EUR
5 million after tax in the first half (2019: EUR2 million charge), basic earnings
were 72.0 euro cents per share.
We have a strong balance sheet, sector leading investment grade credit ratings
and good relationships with a broad group of banks. We secured liquidity and
demonstrated our access to debt capital markets with the successful launch of a
EUR750 million 8-year Eurobond in April 2020 and the extension of our Syndicated
Revolving Credit Facility's maturity to July 2022 with our core banking group.
The Board recognises the importance of dividends to shareholders. Having
delivered a robust trading performance in the first half of the year and given
our resilient business model and strong financial position, the Board has
revisited the decision taken in April to suspend the final 2019 dividend and is
pleased to resume the payment of dividends.
The Board has declared a dividend of 29.75 euro cents per share relating to
2019. Together with the 2019 interim ordinary dividend paid in September 2019,
this results in a total dividend of 57.03 euro cents per share relating to the
2019 financial year, representing a dividend cover of three times 2019
underlying earnings per share and in line with our stated dividend policy of
targeting a cover range on average of two to three times underlying earnings
over the business cycle. Furthermore, the Board has declared a 2020 interim
ordinary dividend of 19.00 euro cents per share. Both dividends, amounting to a
total of 48.75 euro cents per share, will be paid as interim dividends in
September 2020 (total of around EUR236 million).
This decision is consistent with our stated cover policy, while ensuring we
retain the optionality for further value accretive growth provided by a strong
financial position. Our dividend policy remains unchanged.
Corrugated Packaging
EUR million Six months Six months Six months
ended ended ended
30 June 2020 30 June 2019 31 December
2019
Segment revenue 969 1,045 969
Underlying EBITDA 267 297 286
Underlying operating profit 207 235 224
Capital expenditure cash payments 124 93 164
Operating segment net assets 2,141 2,032 2,166
Underlying EBITDA margin 27.6% 28.4% 29.5%
ROCE 23.5% 30.2% 24.9%
Underlying EBITDA was down 10% on the comparable prior year period to EUR267
million. Sales volume growth and generally lower costs were more than offset by
significantly lower average selling prices.
Containerboard sales volumes were up on the comparable prior year period while
Corrugated Solutions achieved overall volume growth of 4% in the first half of
the year, with strong volumes in our core markets of Central and Eastern
Europe, testament to our innovative product portfolio and customer service
offering. Demand was good as we started the year, further strengthening in
March and early April as lockdown measures were implemented in Europe, before
softening towards the end of the first half. The height of the lockdown period
in Europe was characterised by strong demand in fast moving consumer goods and
e-commerce coupled with value chain stocking, while industrial end-uses
typically came under pressure. Encouragingly, we are seeing a pick-up in
containerboard exports to China, mitigating the lower demand in European
markets going into the second half of the year.
Overall, average selling prices during the first half were down on the prior
year period as well as sequentially. Average benchmark European selling prices
for unbleached kraftliner were down 15% on the comparable prior year period and
5% on the second half of 2019, while average benchmark European selling prices
for recycled containerboard were down 16% on the first half of 2019, and 5%
sequentially. Benchmark white top kraftliner and semi-chemical fluting prices
were down 8% to 9% on the comparable year and 3% to 5% on the preceding six
month period.
Input costs were on average lower year-on-year, with lower wood, energy and
chemical costs. Paper for recycling costs were also lower in the first half of
the year versus the comparable prior year period, although pricing increased
sharply during the second quarter as a result of disruption in collection
networks, peaking in June. Prices have since declined, as collection systems
returned to normal operation, and they are today 9% higher compared to the
average of the first half of the year. Mondi consumes annually approximately
1.3 million tonnes of paper for recycling. Cash fixed costs were slightly lower
with higher personnel costs offset by lower maintenance shuts and cost control
initiatives.
Planned maintenance shuts at all Corrugated Packaging mills are scheduled for
the second half of the year.
Flexible Packaging
EUR million Six months Six months Six months
ended ended ended
30 June 2020 30 June 2019 31 December
2019
Segment revenue 1,377 1,394 1,314
Underlying EBITDA 280 304 239
Underlying operating profit 202 229 160
Special items (6) - (4)
Capital expenditure cash payments 86 131 117
Operating segment net assets 2,547 2,589 2,603
Underlying EBITDA margin 20.3% 21.8% 18.2%
ROCE 14.3% 15.5% 15.7%
Underlying EBITDA of EUR280 million was down 8% on the comparable prior year
period. Higher sales volumes, the benefits of our integrated value chain, lower
input costs and cost control initiatives largely offset significantly lower
average selling prices. Kraft paper prices were down compared to the prior year
period, as a result of price reductions seen in the second half of 2019 and
into early 2020.
Kraft paper and paper bag demand remained resilient in Europe and North
America, with building materials applications holding up well, strong demand
from consumer and agricultural end-uses and weaker demand in industrial
applications. We saw softer demand in other markets where we serve
predominantly cement producers. Kraft paper sales volumes were up on the prior
year period with an improved product mix, benefiting from our product
development initiatives. Paper bags sales volumes were up 2% on the prior year.
The drive to replace plastic-based packaging with paper-based alternatives
where possible and consumer preferences for fibre-based primary packaging
continue to support demand across our range of speciality kraft papers and
paper bags. Consumer flexibles performed strongly during the period, benefiting
from increased demand in fast moving consumer goods applications driven by at
home consumption, an improved product mix and pricing discipline.
Flexible Packaging has continued to drive innovation to support our customers'
transition to more sustainable packaging, replacing less sustainable solutions
with paper packaging where possible and flexible plastic packaging when useful.
We continue to partner along the value chain to create products fit for a
circular economy, developing recyclable solutions and increasing recycled
content in our packaging.
Input costs were down year-on-year, with lower wood, energy, chemicals and
plastic resin costs. While cash fixed costs were higher due to increased costs
to service our customers and inflationary effects, this was mitigated by our
strong cost control initiatives.
Planned maintenance shuts at our kraft paper mills are scheduled for the second
half of the year.
Engineered Materials
EUR million Six months Six months Six months
ended ended ended
30 June 2020 30 June 2019 31 December
2019
Segment revenue 424 518 461
Underlying EBITDA 45 56 66
Underlying operating profit 27 38 48
Capital expenditure cash payments 46 12 20
Operating segment net assets 632 674 612
Underlying EBITDA margin 10.6% 10.8% 14.3%
ROCE 12.4% 11.4% 13.8%
Underlying EBITDA of EUR45 million was down 20% on the comparable prior year
period, and down on the second half of 2019 (which included a one-off gain on
disposal of a plant in Belgium of EUR9 million).
Engineered Materials saw good demand in consumer end-uses, in particular food,
hygiene and home care applications as lockdown measures implemented in Europe
and North America drove increased at home consumption and demand for cleaning
and hygiene products. We saw softer demand in industrial and specialised
end-uses, in particular in our release liner business, which serves a broad
range of applications including graphic arts, industrial and other. As
anticipated, volumes in personal care components were lower as a key product
matures and we implement certain technology changes. While we continue to
develop new products and innovative solutions to grow with our customers, we
expect this area to continue to face pressure from declining volumes in the
medium term.
Prices were lower on average, reflecting generally lower input costs, such as
resin and speciality kraft paper. Cost control was strong and the business
benefited from ongoing cost reduction programmes.
We are leveraging Engineered Materials' coating technologies together with
Flexible Packaging's speciality kraft paper portfolio, customer relationships
and converting capabilities to develop innovative sustainable packaging
solutions that offer an exciting opportunity to grow with our customers.
Uncoated Fine Paper
EUR million Six months Six months Six months
ended ended ended
30 June 2020 30 June 2019 31 December
2019
Segment revenue 774 913 845
Underlying EBITDA 164 254 190
Underlying operating profit 106 194 130
Special items - - 2
Capital expenditure cash payments 80 103 117
Operating segment net assets 1,621 1,663 1,758
Underlying EBITDA margin 21.2% 27.8% 22.5%
ROCE 17.7% 34.2% 25.1%
Underlying EBITDA of EUR164 million was down 35% on the comparable prior year
period, with lower average uncoated fine paper prices, significantly lower pulp
prices, lower uncoated fine paper volumes and a lower forestry fair value gain
more than offsetting lower input costs and the effect of limited maintenance
shuts.
Uncoated fine paper volumes were stable in the first quarter compared to the
prior year period. Towards the end of the first quarter we saw a rapid
deterioration in our uncoated fine paper order book as the effects of the
various lockdown measures took hold, resulting in less professional, commercial
and office printing. We temporarily stopped production at the Merebank mill
(South Africa; 270,000 tonnes of annual production capacity) for five weeks
following government regulation, restarting our operations in early May. To
manage stock levels in the face of the weaker order situation, we took machine
downtime or slowed down production at our other uncoated fine paper mills.
Order books improved in June and into July as lockdown measures in key markets
eased, albeit they remain below pre-pandemic levels. We remain strategically
well positioned in the context of the current market challenges given our cost
competitiveness, product diversification and geographic positioning. This is
recognised by our customers who value the stability of a long-term supplier in
this market.
Average benchmark European uncoated fine paper selling prices were down 6% on
the comparable prior year period and 4% down sequentially, following price
erosion during 2019 which continued in the first half of 2020. Average
benchmark European bleached hardwood pulp prices were down 28% compared with
the prior year period and down 9% sequentially. Including the pulp sales in our
packaging businesses, we estimate the Group's pulp net long position in 2020
will be around 450,000 tonnes.
Input costs were down due to lower wood, energy and chemicals costs. Fixed
costs were lower driven by our cost control programmes and reduced maintenance
costs as a result of limited maintenance shuts carried out in the period.
The forestry assets' fair value is dependent on a variety of external factors
over which we have limited control, the most significant being the export price
of timber, the exchange rate and domestic input costs. Stable export prices and
net volume increases during the period resulted in a forestry fair value gain
of EUR19 million, down EUR33 million on the prior year period and flat
sequentially. Based on current market conditions, we would expect a slightly
lower forestry fair value gain in the second half of the year.
Planned maintenance shuts at all uncoated fine paper mills are scheduled for
the second half of the year.
Tax
The underlying effective tax rate in the first half was 23% (2019: 23%), in
line with the comparable prior year period and our expectation as previously
disclosed.
Special items
Special items during the period amounted to a charge of EUR5 million after tax
and relate to costs initially recognised in prior years (2019: EUR2 million
charge).
Operating special items resulted in a cash outflow for the six months ended
30 June 2020 of EUR15 million (six months ended 30 June 2019: EUR15 million; year
ended 31 December 2019: EUR22 million).
Further detail is provided in note 5 of the condensed consolidated financial
statements.
Cash flow
Cash generated from operations of EUR602 million (2019: EUR737 million), reflects
the continued strong cash generating capacity of the Group.
Working capital at 30 June 2020 was 15.5% of annualised revenue (30 June 2019:
15.0%), reflecting the normal seasonal increase in the first half of the year
and mix effects, giving rise to a net cash outflow of EUR133 million in the
period (2019: EUR104 million).
Tax paid of EUR111 million (2019: EUR167 million) was lower than the comparable
prior year period as a result of lower profitability. Capital expenditure
amounted to EUR336 million (2019: EUR339 million), driven by our ongoing major
capital expenditure programme.
Due to the challenges brought by COVID-19 and to ensure we remain well-placed
to withstand an extended period of uncertainty, in April 2020, the Board
suspended the recommendation to pay a 2019 final ordinary dividend with a view
to revisiting the decision at a later date (dividend paid to ordinary
shareholders in the first half of 2019: EUR264 million). As noted earlier in this
announcement, the Board has now decided to resume dividend payments. Interest
paid of EUR45 million (2019: EUR42 million) was in line with the comparable prior
year period.
Capital investments
During the first half of the year we invested EUR336 million (2019: EUR339 million)
in our property, plant and equipment. In addition, investment in forestry
assets amounted to EUR22 million (2019: EUR23 million).
To both protect our employees by minimising non-operating people on-site during
the lockdown period, and reduce near-term cash outflows, while seeking to
ensure we are well placed to benefit when the recovery takes place, we have
re-prioritised our near-term capital expenditure programme. As a result, we
expect capital expenditure of around EUR600-650 million in 2020. This is likely
to stay at similar levels for 2021 in the absence of any material change in
trading conditions.
In the period, we benefited from the contribution from a number of our recently
completed capital projects, in particular the modernisation of the Steti mill
(Czech Republic) completed in late 2018 and the rebuild of Ruzomberok's pulp
mill (Slovakia) completed at the end of 2019. The incremental operating profit
contribution from capital investment projects in 2020 is expected to be around
EUR40 million.
We are progressing with our major capital expenditure programme:
* As a consequence of COVID-19, works were slowed down in the second quarter
on the new 300,000 tonne per annum kraft top white machine at Ruzomberok
and start-up is now expected in the first half of 2021. Due to the extended
project duration, scope modifications and higher than expected civil
construction and equipment costs, the total capital investment, including
the rebuild of the pulp mill completed in 2019, is now expected at EUR370
million (previously EUR340 million).
* The EUR67 million capital investment project to convert a containerboard
machine at Steti to be fully dedicated to the production of speciality
kraft paper with a mix of recycled and virgin fibre content for shopping
bags applications is progressing according to plan. Supported by the drive
to replace plastic carrier bags with paper-based alternatives, this project
will result in an additional 75,000 tonnes per annum of speciality kraft
paper capacity while reducing our containerboard capacity by around 30,000
tonnes per annum. Start-up is expected by the end of 2020.
* Our investment programme to upgrade Syktyvkar's (Russia) infrastructure,
debottleneck production and maintain the mill's competitiveness, and the
modernisation of our Richards Bay mill (South Africa), including upgrading
the energy and chemical plants to improve reliability and avoid unplanned
shutdowns, are both ongoing.
* We continue to invest in our packaging and Engineered Materials' converting
plants to grow with our customers, enhance our product and service offering
and reduce conversion costs.
Our recently completed and planned major capital projects in the Czech
Republic, Slovakia and Russia are expected to increase our current saleable
pulp and paper production by around 8% when in full operation.
Liquidity, treasury and borrowings
The Group has a strong balance sheet. Net debt at 30 June 2020 was EUR
2,039 million, down from EUR2,207 million at 31 December 2019 and the net debt to
12-month trailing underlying EBITDA ratio was 1.4 times, well below our single
bank debt covenant of 3.5 times (excluding the impact of IFRS16 adjustments).
In April 2020, we successfully issued a 2.375% EUR750 million 8-year Eurobond and
extended the maturity date of our Syndicated Revolving Credit Facility from
July 2021 to July 2022 with our core banking group.
At 30 June 2020, the Group has a strong liquidity position of around EUR1.4
billion, comprising EUR805 million of undrawn committed debt facilities and net
cash of EUR606 million. The weighted average maturity of our committed debt
facilities is 4.6 years. The Group has a EUR500 million Eurobond maturing in
September 2020. There are no other material short-term debt maturities.
Net finance costs of EUR51 million were above those of the comparable prior year
period (2019: EUR45 million before the impact of special items) mainly as a
result of higher average gross debt and currency mix effects.
The Group's credit ratings were reconfirmed by Standard & Poor's at BBB+
(stable outlook) and Moody's Investors Service at Baa1 (stable outlook).
Further detail is provided in notes 13 and 15c of the condensed consolidated
financial statements.
Dividend
The Board recognises the importance of dividends to shareholders. Having
delivered a robust trading performance in the first half of the year and given
our resilient business model and strong financial position, the Board has
revisited the decision taken in April to suspend the final 2019 dividend and is
pleased to resume the payment of dividends.
The Board has declared a dividend of 29.75 euro cents per share relating to
2019. Together with the 2019 interim ordinary dividend paid in September 2019,
this results in a total dividend of 57.03 euro cents per share relating to the
2019 financial year, representing a dividend cover of three times 2019
underlying earnings per share and in line with our stated dividend policy of
targeting a cover range on average of two to three times underlying earnings
over the business cycle. Furthermore, the Board has declared a 2020 interim
ordinary dividend of 19.00 euro cents per share. Both dividends, amounting to a
total of 48.75 euro cents per share (total of around EUR236 million), will be
paid as interim dividends on Tuesday 29 September 2020 to those shareholders on
the register of Mondi plc on Friday 21 August 2020. The dividends will be paid
from distributable reserves.
This decision is consistent with our stated cover policy, while ensuring we
retain the optionality for further value accretive growth provided by a strong
financial position. Our dividend policy remains unchanged.
Outlook
Going into the second half of 2020, heightened macro-economic uncertainties
remain. Pricing across our key pulp and paper grades is below or in line with
the average of the first half. Demand for packaging daily essentials remains
robust while we continue to see weakness in certain industrial end-uses.
Uncoated fine paper order books have picked up from the lows seen in the second
quarter, albeit we do not expect a near-term recovery to pre-pandemic levels.
We have rescheduled planned mill maintenance shuts which will have an impact on
the second half of the year.
We are confident that the Group will continue to demonstrate its resilience in
the event of a prolonged macro-economic downturn, while remaining
well-positioned when the recovery takes place. This is underpinned by the
Group's integrated high-quality, cost-advantaged asset base, culture of
continuous improvement, portfolio of sustainable packaging solutions and the
strategic flexibility offered by our strong cash generation and financial
position.
Principal risks and uncertainties
The Board is responsible for the effectiveness of the Group's risk management
activities and internal control processes. It has put procedures in place for
identifying, evaluating, and managing the significant risks that the Group
faces. In combination with the audit committee, at the beginning of 2020, the
Board conducted a robust assessment of the principal risks to which Mondi is
exposed and it is satisfied that the Group has effective systems and controls
in place to manage its key risks within the risk tolerance levels established.
Risk management is by nature a dynamic and ongoing process. Our approach is
flexible to ensure that it remains relevant at all levels of the business, and
dynamic to ensure we can be responsive to changing business conditions. This is
particularly important given the diversity of the Group's locations, markets
and production processes. Our internal control environment is designed to
safeguard the assets of the Group and to provide reasonable assurance that the
Group's business objectives will be achieved.
As we started 2020, and as indicated at the time of our 2019 full year results
announcement, the Board was closely monitoring the COVID-19 outbreak and its
impact on our business, global trade and the macro-economic outlook. While the
principal risks faced by the Group remain substantially the same as those
described on pages 52 to 60 of the Group's Integrated report and financial
statements 2019, the Board has identified the implications of a pandemic, and
in particular the COVID-19 pandemic as a new principal risk.
Pandemic risk (COVID-19)
A pandemic is unpredictable in nature and has the potential to affect our
people, markets and operations in various ways. The pervasive impact of a
pandemic means that it has the potential to affect various of our strategic,
financial, operational and compliance risks in the long-term depending on how
it evolves.
COVID-19, declared a global pandemic by the World Health Organisation in March
2020, has become a worldwide crisis and at the date of this report the
situation continues to evolve. The rapid spread of COVID-19 has resulted in
unprecedented health, social and economic measures implemented by authorities
around the world which have materially impacted the Group's business, as
described earlier in this announcement, and which should be read in conjunction
with this section.
Since the start of the COVID-19 pandemic, the safety and welfare of the Group's
employees and our communities has remained our top priority. The Group
continues to monitor the specific consequences of the COVID-19 pandemic and its
effect on the underlying principal strategic, financial, operational and
compliance risks managed by the business. As a consequence of COVID-19 and/or
the measures implemented by authorities to combat COVID-19, the Group may
experience material labour shortages, supply chain or operational
interruptions, higher input costs, increased cyber security attacks or changes
in demand for its products that, if experienced in the Group's major facilities
or on a widespread basis, could have a material adverse effect on the Group's
business.
The Group will continue to utilise monitoring and mitigating activities to
reduce the impact of this risk. For any new infectious diseases that are
flagged as critical and could be likely to develop into a pandemic, the Group
will employ its own internal monitoring and mitigating activities in line with
our safety protocols, government regulations and additional measures developed
during the current COVID-19 pandemic.
In response to COVID-19, the Group has developed various monitoring and
mitigating activities, including:
* a multi-function response team which closely monitors the latest
developments, assessing risks, providing guidance, and implementing
preventative policies in line with individual government regulations and
recommendations in the countries in which we operate;
* the implementation of personal protection measures at all of our sites and
intensified hygiene and social distancing protocols that meet or exceed
local and international guidelines, and, where possible, the option of
remote working for employees;
* raising employee awareness of the cyber security risks and implementing
additional security measures related to remote working;
* controlling costs and slowing down capex to protect cash flow and securing
robust liquidity;
* bolstering the Group's liquidity position; and
* monitoring the impact on business operations, such as the Group's supply
chain, credit risk events and business interruptions and implementing
prompt interventions when necessary.
Strategic risks
The industries and geographies in which we operate expose us to specific
long-term risks which are accepted by the Board as a consequence of the Group's
chosen strategy and operating footprint.
There have been no significant changes in our strategic risk exposure during
the year. We continue to monitor recent capacity announcements and demand
developments, how consumers are demanding more sustainable packaging, the
developments in the transition period after the UK ended its membership of the
European Union, the stability of the Eurozone and the increasing prevalence of
trade tariffs and economic sanctions. Furthermore, while we continue to
increase our understanding of climate change related risks and the impacts
become clearer, we will continue to improve our disclosures and develop our
responses.
The executive committee and Board monitor our exposure to these risks and
evaluate investment decisions against our overall exposures so that our
strategic capital investments and acquisitions take advantage of the
opportunities arising from our deliberate exposure to such risks.
Our principal strategic risks relate to the following:
* Industry productive capacity
* Product substitution
* Fluctuations and variability in selling prices or gross margins
* Country risk
* Climate change related risk
Financial risks
We aim to maintain an appropriate capital structure and to conservatively
manage our financial risk exposures in compliance with all laws and
regulations.
The Group continues to carefully manage its capital structure and react to
changes in capital markets whilst maintaining its strong and stable financial
position. Financial scenario planning continues to be an important tool in
monitoring and managing our financial risks. Despite ongoing short-term
currency volatility and increased scrutiny of the tax affairs of multinational
companies, our overall residual risk exposure remains similar to previous
years, reflecting our conservative approach to financial risk management.
Our principal financial risks relate to the following:
* Capital structure
* Currency risk
* Tax risk
Operational risks
A low residual risk tolerance is demonstrated through our focus on operational
excellence, investment in our people and commitment to the responsible use of
resources.
Our investments to improve our energy efficiency, engineer out our most
significant safety risks, improve operating efficiencies, and renew our
equipment continue to reduce the likelihood of operational risk events.
However, the potential impact of any such event remains unchanged.
Our principal operational risks relate to the following:
* Cost and availability of raw materials
* Energy security and related input costs
* Technical integrity of our operating assets
* Environmental impact
* Employee and contractor safety
* Attraction and retention of key skills and talent
Compliance risks
We have a zero tolerance approach to compliance risks. Our strong culture and
values, emphasised in every part of our business with a focus on integrity,
honesty, and transparency, underpins our approach.
Our principal compliance risks relate to the following:
* Reputational risk
* Information technology risk
Going concern
The directors have reviewed the Group's current financial position and
performance expectations for the next twelve months, including consideration of
the anticipated impact of the COVID-19 pandemic and the other principal risks
which may impact the Group's performance in the near term.
The Group's financial position, cash flows, liquidity position and borrowing
facilities are described in the financial statements. At 30 June 2020, Mondi
had EUR805 million of undrawn, committed debt facilities. The Group's debt
facilities have maturity dates of between less than 1 and 8 years, with a
weighted average maturity of 4.6 years. In addition, the Group has EUR606 million
of cash and cash equivalents available to fund its short-term needs.
The Group's single bank debt covenant ratio requires that its net debt to
12-month trailing underlying EBITDA ratio must not exceed 3.5 times. The ratio
at 30 June 2020 was substantially below the maximum covenant level at 1.4
times.
The current and plausible future impact of COVID-19 and related macroeconomic
environment on the Group's activities and performance has been considered by
the Board in preparing its going concern assessment. Whilst the situation is
uncertain and evolving, the Group has prepared a base case forecast reflecting
recent trading performance in the first half of the year and expectations for
market developments over the period to 31 December 2021. The base case
forecasts were sensitised to reflect a severe but plausible downside scenario
including worse than anticipated impacts of the COVID-19 pandemic on Group
performance. In the severe but plausible downside scenario, the Group remains
within its single bank debt covenant ratio.
In addition to its modelled downside going concern scenario, the Board has
reverse stress tested the model to determine the extent of downturn which would
result in a breach of its single bank debt covenant. A decline in underlying
EBITDA well in excess of that contemplated in the plausible downside scenario
would need to persist throughout the period to 31 December 2021 for a covenant
breach to occur, which is considered very unlikely. This stress test also does
not incorporate certain mitigating actions or cash preservation responses,
which the Group would implement in the event of a severe and extended revenue
decline.
Following its assessment, the directors have formed a judgement, at the time of
approving the condensed consolidated financial statements, that there are no
material uncertainties that cast doubt on the Group's going concern status and
that it is a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. For this reason,
the Group continues to adopt the going concern basis in preparing the condensed
consolidated financial statements.
Enquiries
Investors/analysts:
Clara Valera
+44
193 282 6357
Mondi Group Head of Strategy and Investor Relations
Media:
Kerry
Cooper
+44 193 282 6323
Mondi Group Head of External Communication
Richard Mountain (FTI consulting)
+44 790 968 4466
Conference call dial-in and webcast details
Please see below details for the conference call and webcast that will be held
at 09:00 (UK) and 10:00 (CET/SA) today.
The conference call dial-in numbers are:
UK 0800 2796 619
South Africa 0800 014 552
Other +44 2071 928 338
Conference ID 6253268
The webcast will be available via www.mondigroup.com/hyresults20
The presentation will be available to download from the above website around 30
minutes before the webcast commences. Written questions can be submitted via
the webcast. If you wish to ask a question verbally, please connect via the
dial-in conference call.
Should you have any issues on the day with accessing the dial-in conference
call facility, please call +44 2071 928 338. For queries regarding access to
the webcast, please e-mail group.communication@mondigroup.com and you will be
contacted as soon as possible. A video recording of the presentation will be
available on Mondi's website during the afternoon of 6 August 2020.
Directors' responsibility statement
The directors confirm that to the best of their knowledge:
* the condensed consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union and in particular with International
Accounting Standard 34, 'Interim Financial Reporting';
* the half-year results announcement includes a fair review of the
significant events during the six months ended 30 June 2020 and a
description of the principal risks and uncertainties for the remaining six
months of the year ending 31 December 2020;
* 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 from that reported in the Integrated report and financial
statements 2019.
The Group's condensed consolidated financial statements, and related notes,
were approved by the Board and authorised for issue on 5 August 2020 and were
signed on its behalf by:
Philip Yea
Andrew
King
Chair
Director
5 August 2020
Independent review report to Mondi plc
Report on the condensed consolidated financial statements
Our conclusion
We have reviewed Mondi plc's condensed consolidated financial statements (the
"interim financial statements") in the half-year results announcement of Mondi
plc for the 6 month period ended 30 June 2020. Based on our review, nothing 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
International Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
* the condensed consolidated statement of financial position as at
30 June 2020;
* the condensed consolidated income statement and the condensed consolidated
statement of comprehensive income for the period then ended;
* the condensed consolidated statement of cash flows for the period then
ended;
* the condensed consolidated statement of changes in equity for the period
then ended; and
* the explanatory notes to the interim financial statements.
The interim financial statements included in the half-year results announcement
have been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full annual
financial statements of the Group is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The half-year results announcement, including the interim financial statements,
is the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the half-year results announcement in
accordance with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the half-year results announcement based on our review. This
report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this conclusion,
accept or assume responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
What a review of interim financial statements involves
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 enquiries, 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, 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.
We have read the other information contained in the half-year results
announcement and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim financial
statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
5 August 2020
Condensed consolidated income statement
for the six months ended 30 June 2020
(Reviewed) (Reviewed) (Audited)
Six months ended Six months ended Year ended 31 December 2019
30 June 2020 30 June 2019
EUR million Notes Underlying Special Total Underlying Special Total Underlying Special Total
items items items
(Note (Note (Note 5)
5) 5)
Group revenue 4 3,452 - 3,452 3,771 - 3,771 7,268 - 7,268
Materials, energy and (1,592) - (1,592) (1,792) - (1,792) (3,449) - (3,449)
consumables used
Variable selling (294) - (294) (282) - (282) (549) - (549)
expenses
Gross margin 1,566 - 1,566 1,697 - 1,697 3,270 - 3,270
Maintenance and other (149) - (149) (171) - (171) (363) - (363)
indirect expenses
Personnel costs (548) (5) (553) (546) - (546) (1,072) 40 (1,032)
Other net operating (131) (2) (133) (86) - (86) (177) (1) (178)
expenses
EBITDA 738 (7) 731 894 - 894 1,658 39 1,697
Depreciation, (214) 1 (213) (215) - (215) (435) (41) (476)
amortisation and
impairments
Operating profit 524 (6) 518 679 - 679 1,223 (2) 1,221
Net loss from equity (1) - (1) - - - - - -
accounted investees
Investment income 7 3 - 3 4 - 4 8 - 8
Foreign currency 7 - - - (1) - (1) (3) - (3)
losses
Finance costs 7 (54) - (54) (48) (2) (50) (109) (14) (123)
Profit before tax 472 (6) 466 634 (2) 632 1,119 (16) 1,103
Tax (charge)/credit 8 (107) 1 (106) (146) - (146) (257) - (257)
Profit for the period 365 (5) 360 488 (2) 486 862 (16) 846
Attributable to:
Non-controlling 11 - 11 22 - 22 33 1 34
interests
Shareholders 354 (5) 349 466 (2) 464 829 (17) 812
Earnings per share
(EPS) attributable to
shareholders
euro cents
Basic EPS 9 72.0 95.8 167.6
Diluted EPS 9 72.0 95.7 167.6
Basic underlying EPS 9 73.0 96.2 171.1
Diluted underlying EPS 9 73.0 96.2 171.1
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2020
(Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Profit for the period 360 486 846
Items that have been or may subsequently be
reclassified to the condensed consolidated income
statement
Cash flow hedges 4 (4) (4)
Exchange differences on translation of foreign (290) 102 143
operations
Items that will not subsequently be reclassified to
the condensed consolidated income statement
Remeasurements of retirement benefits plans 1 (32) (21)
Tax effect thereof - 4 3
Other comprehensive (expense)/income for the period (285) 70 121
Total comprehensive income for the period 75 556 967
Attributable to:
Non-controlling interests 4 13 25
Shareholders 71 543 942
Condensed consolidated statement of financial position
as at 30 June 2020
(Reviewed) (Reviewed) (Audited)
EUR million Notes As at As at As at 31
30 June 2020 30 June 2019 December
2019
Property, plant and equipment 4,614 4,520 4,800
Goodwill 931 946 948
Intangible assets 72 82 81
Forestry assets 11 342 391 411
Other non-current assets 106 96 111
Total non-current assets 6,065 6,035 6,351
Inventories 971 1,035 984
Trade and other receivables 1,172 1,255 1,111
Cash and cash equivalents 15b 669 78 74
Other current assets 25 36 20
Total current assets 2,837 2,404 2,189
Total assets 8,902 8,439 8,540
Short-term borrowings 13 (660) (318) (780)
Trade and other payables (1,073) (1,159) (1,143)
Other current liabilities (119) (160) (157)
Total current liabilities (1,852) (1,637) (2,080)
Medium and long-term borrowings 13 (2,059) (2,101) (1,496)
Net retirement benefits liability 14 (213) (265) (225)
Deferred tax liabilities (269) (270) (301)
Other non-current liabilities (49) (58) (53)
Total non-current liabilities (2,590) (2,694) (2,075)
Total liabilities (4,442) (4,331) (4,155)
Net assets 4,460 4,108 4,385
Equity
Share capital 97 542 97
Retained earnings and other reserves 3,990 3,215 3,918
Total attributable to shareholders 4,087 3,757 4,015
Non-controlling interests in equity 373 351 370
Total equity 4,460 4,108 4,385
The Group's condensed consolidated financial statements, and related notes 1 to
20, were approved by the Board and authorised for issue on 5 August 2020 and
were signed on its behalf by:
Philip Yea
Andrew
King
Chair
Director
Mondi plc company registered number:
6209386
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2020
EUR million Equity Non-controlling Total
attributable interests equity
to
shareholders
At 1 January 2019 (Audited) 3,485 340 3,825
Total comprehensive income for the period 543 13 556
Dividends (264) (2) (266)
Purchases of treasury shares (12) - (12)
Other 5 - 5
At 30 June 2019 (Reviewed) 3,757 351 4,108
Total comprehensive income for the period 399 12 411
Dividends (132) (1) (133)
Issue of ordinary shares, net of expenses (6) - (6)
Other (3) 8 5
At 31 December 2019 (Audited) 4,015 370 4,385
Total comprehensive income for the period 71 4 75
Dividends - (1) (1)
Purchases of treasury shares (6) - (6)
Other 7 - 7
At 30 June 2020 (Reviewed) 4,087 373 4,460
Equity attributable to shareholders (Reviewed) (Reviewed) (Audited)
EUR million As at As at As at 31
30 June 2020 30 June 2019 December
2019
Share capital 97 542 97
Treasury shares (19) (21) (25)
Retained earnings 4,313 3,784 3,963
Cumulative translation adjustment reserve (963) (718) (680)
Post-retirement benefits reserve (51) (94) (52)
Merger reserve 667 259 667
Other reserves 43 5 45
Total 4,087 3,757 4,015
Condensed consolidated statement of cash flows
for the six months ended 30 June 2020
(Reviewed) (Reviewed) (Audited)
EUR million Notes Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Cash flows from operating activities
Cash generated from operations 15a 602 737 1,635
Dividends received from other investments - - 1
Income tax paid (111) (167) (248)
Net cash generated from operating activities 491 570 1,388
Cash flows from investing activities
Investment in property, plant and equipment (336) (339) (757)
Investment in forestry assets 11 (22) (23) (48)
Investment in equity accounted investees - (6) (5)
Proceeds from the disposal of businesses, net of - - 20
cash and cash equivalents
Other investing activities 1 (4) (4)
Net cash used in investing activities (357) (372) (794)
Cash flows from financing activities
Proceeds from Eurobonds 744 - -
Proceeds from medium and long-term borrowings - 98 -
Repayment of medium and long-term borrowings (100) - (48)
Net (repayment)/proceeds from short-term borrowings (129) 2 (20)
Repayment of lease liabilities (13) (11) (23)
Interest paid (45) (42) (96)
Transaction costs relating to the issue of share - - (6)
capital
Dividends paid to shareholders 10 - (264) (396)
Dividends paid to non-controlling interests (1) (2) (3)
Purchases of treasury shares (6) (12) (12)
Financing special item - (1) (14)
Net cash inflow from derivatives 34 - 3
Other financing activities 2 - 5
Net cash generated from/(used in) financing 486 (232) (610)
activities
Net increase/(decrease) in cash and cash equivalents 620 (34) (16)
Cash and cash equivalents at beginning of period (7) 8 8
Cash movement in the period 15c 620 (34) (16)
Effects of changes in foreign exchange rates 15c (7) - 1
Cash and cash equivalents at end of period 15b 606 (26) (7)
Notes to the condensed consolidated financial statements
for the six months ended 30 June 2020
1 Basis of preparation
These condensed consolidated financial statements as at and for the six months
ended 30 June 2020 comprise Mondi plc and its subsidiaries (referred to as the
'Group'), and the Group's share of the results and net assets of its associates
and joint ventures.
The Group's condensed consolidated financial statements have been prepared in
accordance with International Financial Reporting Standard IAS 34, 'Interim
Financial Reporting'. They should be read in conjunction with the Group's
Integrated report and financial statements 2019, prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union (EU) and Article 4 of the IAS Regulation, with no material difference to
IFRS as issued by the International Accounting Standards Board (IASB).
The condensed consolidated financial statements have been prepared on a going
concern basis as discussed in the commentary under the heading 'Going concern'.
The financial information set out above does not constitute statutory accounts
as defined by section 434 of the UK Companies Act 2006. A copy of the statutory
accounts for the year ended 31 December 2019 has been delivered to the
Registrar of Companies. The auditors have reported on those accounts; their
report was (i) unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2) or (3) of
the UK Companies Act 2006.
These condensed consolidated financial statements have been prepared on the
historical cost basis, except for the fair valuing of financial instruments,
forestry assets and post retirement benefit assets.
The preparation of these condensed consolidated financial statements includes
the use of estimates and assumptions. Although the estimates used are based on
management's best information about current circumstances and future events and
actions, actual results may differ from these estimates.
In preparing these condensed consolidated financial statements, the judgements
made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty were largely the same as those that applied
to the Group's Integrated report and financial statements 2019, with the
exception of changes in estimates that are required in determining the
provision for income taxes for an interim period.
Impact of COVID-19 on the condensed consolidated financial statements at
30 June 2020
Management has considered the impact of the COVID-19 pandemic on the judgements
and estimates it has to exercise in applying its accounting policies. This has
included its assessment of the risk of impairment of assets held by the Group
as a result of an increased level of macroeconomic uncertainty and the
associated impact on both recent and forecast trading performance.
Impairment tests of goodwill are performed at least annually and for other
assets when indications of impairment are identified. As required by IAS 36,
'Impairment of Assets', management assessed whether any indicators of
impairment existed as at 30 June 2020 in relation to either the Group's
goodwill or any of the Group's other assets, in particular property, plant and
equipment.
Given the results in the period and related macroeconomic uncertainty created
by COVID-19, indicators of impairment were identified and, therefore,
impairment tests were performed related to the goodwill associated with the
Engineered Materials and Uncoated Fine Paper business units, with goodwill
balances as at 30 June 2020 of EUR214 million and EUR31 million respectively. In
addition, a number of other impairment tests were performed at CGUs related to
the property, plant and equipment held at certain individual plants and mills.
The impairment tests were performed using value-in-use calculations for each
CGU in relation to property, plant and equipment or group of CGUs in relation
to goodwill. There has been no change in the identification of CGUs in the
period.
Discount rates and medium-term growth rates are key assumptions on which
management has based its cash flow projections in its impairment testing. The
pre-tax discount rates used for impairment testing of goodwill ranged from 8.4%
to 11.3% (31 December 2019: 9.1% to 11.4%).
The cash flow projections are derived from the latest management forecast
prepared in June 2020 and covering the period to 31 December 2022. The key
assumptions reflected in the cash flow forecasts include sales volumes, sales
prices and variable input cost assumptions derived from a combination of
economic forecasts for the regions in which the Group operates, industry
forecasts for individual product lines, internal management projections,
historical performance, and announced and expected industry capacity changes.
Cash flow projections for the next seven years beyond 31 December 2022 are
based on internal management projections taking into consideration industry
forecasts and growth rates in the regions in which the Group operates, and were
between 0.0% and 2.0% (31 December 2019: 0.0% and 1.6%) for impairment tests of
goodwill. Growth rates between 0.0% and 2.0% (31 December 2019: 0.0%) were
assumed thereafter into perpetuity.
No impairment was identified from the tests performed. The directors do not
believe that a reasonably possible change in key assumptions could result in an
impairment of goodwill or give rise to a significant risk of a material
adjustment to the carrying value of the non-financial assets of any individual
CGU in the next twelve months.
In addition, expected credit losses for the Group's trade debtors and the net
realisable value of inventory have been reassessed. No material adjustments
have been made in relation to these estimates in the six months ended
30 June 2020.
2 Accounting policies
The same accounting policies, methods of computation and presentation have been
followed in the preparation of the condensed consolidated financial statements
for the six months ended 30 June 2020 as were applied in the preparation of the
Group's annual financial statements for the year ended 31 December 2019, except
as follows:
* A number of amendments to IFRS became effective for the financial period
beginning on 1 January 2020, but the Group did not have to change its
accounting policies or make any retrospective adjustments as a result of
adopting these new standards.
* Consistent with previous half year reports, taxes on income in the interim
period are accrued using the tax rate that would be applicable to expected
total annual profits or losses.
Alternative Performance Measures
The Group presents certain measures of financial performance, position or cash
flows in the condensed consolidated financial statements that are not defined
or specified according to IFRS. These measures, referred to as APMs, are
defined at the end of this document and where relevant reconciled to IFRS in
the notes to the condensed consolidated financial statements, and are prepared
on a consistent basis for all periods presented.
3 Seasonality
The seasonality of the Group's operations had no significant impact on the
condensed consolidated financial statements.
4 Operating segments
The Group's operating segments are reported in a manner consistent with the
internal reporting provided to the executive committee, the chief operating
decision-making body. The operating segments are managed based on the nature of
the underlying products produced by those businesses and comprise four distinct
segments.
Each of the reportable segments derives its income from the sale of
manufactured products.
Six months ended 30 June 2020 (reviewed)
EUR million, unless otherwise Corrugated Flexible Engineered Uncoated Corporate Intersegment Total
stated Packaging Packaging Materials Fine elimination
Paper
Segment revenue 969 1,377 424 774 - (92) 3,452
Internal revenue (17) (35) (17) (23) - 92 -
External revenue 952 1,342 407 751 - - 3,452
Underlying EBITDA 267 280 45 164 (18) - 738
Depreciation and impairments (57) (73) (14) (57) - - (201)
Amortisation (3) (5) (4) (1) - - (13)
Underlying operating profit/ 207 202 27 106 (18) - 524
(loss)
Special items - (6) - - - - (6)
Operating segment assets 2,374 3,030 741 1,888 8 (80) 7,961
Operating segment net assets 2,141 2,547 632 1,621 6 - 6,947
Trailing 12-month average 1,835 2,528 603 1,337 (75) - 6,228
capital employed
Additions to non-current 118 66 43 88 - - 315
non-financial assets
Capital expenditure cash 124 86 46 80 - - 336
payments
Underlying EBITDA margin (%) 27.6 20.3 10.6 21.2 - - 21.4
Return on capital employed 23.5 14.3 12.4 17.7 - - 17.1
(%)
Average number of employees 6.7 10.4 2.2 6.3 0.1 - 25.7
(thousands)1
Note:
1 Presented on a full time employee equivalent basis
Six months ended 30 June 2019 (reviewed)
EUR million, unless otherwise Corrugated Flexible Engineered Uncoated Corporate Intersegment Total
stated Packaging Packaging Materials Fine elimination
Paper
Segment revenue 1,045 1,394 518 913 - (99) 3,771
Internal revenue (15) (36) (24) (24) - 99 -
External revenue 1,030 1,358 494 889 - - 3,771
Underlying EBITDA 297 304 56 254 (17) - 894
Depreciation and impairments (59) (69) (14) (59) - - (201)
Amortisation (3) (6) (4) (1) - - (14)
Underlying operating profit/ 235 229 38 194 (17) - 679
(loss)
Special items - - - - (2) - (2)
Operating segment assets 2,291 3,083 780 2,024 4 (82) 8,100
Operating segment net assets 2,032 2,589 674 1,663 1 - 6,959
Trailing 12-month average 1,834 2,286 637 1,229 (91) - 5,895
capital employed
Additions to non-current 81 123 11 110 - - 325
non-financial assets
Capital expenditure cash 93 131 12 103 - - 339
payments
Underlying EBITDA margin (%) 28.4 21.8 10.8 27.8 - - 23.7
Return on capital employed 30.2 15.5 11.4 34.2 - - 23.2
(%)
Average number of employees 6.7 10.5 2.4 6.3 0.1 - 26.0
(thousands)1
Note:
1 Presented on a full time employee equivalent basis
Year ended 31 December 2019 (audited)
EUR million, unless otherwise Corrugated Flexible Engineered Uncoated Corporate Intersegment Total
stated Packaging Packaging Materials Fine elimination
Paper
Segment revenue 2,014 2,708 979 1,758 - (191) 7,268
Internal revenue (30) (71) (45) (45) - 191 -
External revenue 1,984 2,637 934 1,713 - - 7,268
Underlying EBITDA 583 543 122 444 (34) - 1,658
Depreciation and impairments (118) (142) (28) (118) (1) - (407)
Amortisation (6) (12) (8) (2) - - (28)
Underlying operating profit/ 459 389 86 324 (35) - 1,223
(loss)
Special items - (4) - 2 (14) - (16)
Operating segment assets 2,407 3,094 723 2,082 7 (117) 8,196
Operating segment net assets 2,166 2,603 612 1,758 (7) - 7,132
Trailing 12-month average 1,846 2,485 622 1,290 (81) - 6,162
capital employed
Additions to non-current 275 256 37 310 - - 878
non-financial assets
Capital expenditure cash 257 248 32 220 - - 757
payments
Underlying EBITDA margin (%) 28.9 20.1 12.5 25.3 - - 22.8
Return on capital employed 24.9 15.7 13.8 25.1 - - 19.8
(%)
Average number of employees 6.7 10.4 2.4 6.3 0.1 - 25.9
(thousands)1
Note:
1 Presented on a full time employee equivalent basis
External revenue by location of External revenue by location of
production customer
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended Six months Six months Year ended
ended ended 31 December ended ended 31 December
30 June 2020 30 June 2019 2019 30 June 2020 30 June 2019 2019
Africa
South Africa 217 260 539 157 199 402
Rest of Africa 28 18 50 138 151 289
Africa total 245 278 589 295 350 691
Western Europe
Austria 555 588 1,097 72 78 150
Germany 391 444 856 447 494 939
United Kingdom 21 23 43 90 109 205
Rest of western Europe 335 381 720 715 759 1,437
Western Europe total 1,302 1,436 2,716 1,324 1,440 2,731
Emerging Europe
Czech Republic 276 289 536 90 94 184
Poland 492 554 1,059 277 315 599
Rest of emerging Europe 428 478 891 407 426 829
Emerging Europe total 1,196 1,321 2,486 774 835 1,612
Russia 422 445 889 324 362 707
North America 252 245 490 387 388 757
South America - - - 54 51 112
Asia and Australia 35 46 98 294 345 658
Group total 3,452 3,771 7,268 3,452 3,771 7,268
Reconciliation of operating segment assets
(Reviewed) (Reviewed) (Audited)
As at 30 June 2020 As at 30 June 2019 As at 31 December
2019
EUR million Segment Segment Segment Segment Segment Segment
assets net assets net assets net
assets assets assets
Group total 7,961 6,947 8,100 6,959 8,196 7,132
Unallocated
Investment in equity 12 12 14 14 14 14
accounted investees
Deferred tax assets/ 44 (225) 46 (224) 49 (252)
(liabilities)
Other non-operating assets/ 198 (235) 195 (283) 204 (302)
(liabilities)1
Group capital employed 8,215 6,499 8,355 6,466 8,463 6,592
Financial instruments/(net 687 (2,039) 84 (2,358) 77 (2,207)
debt)
Total assets/equity 8,902 4,460 8,439 4,108 8,540 4,385
Note:
1 Includes non-current financial instruments, current tax assets/
(liabilities), provisions for restructuring costs, employee related and other
provisions, derivative financial instruments and other non-operating
receivables/(payables)
The financial instruments segment assets as at 30 June 2020 include funds from
the EUR750 million Eurobond issued in April 2020 that have been placed on
short-term deposit.
5 Special items
(Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Operating special items
Impairment of assets - - (42)
Reversal of impairment of assets 1 - 1
Restructuring and closure costs:
Personnel costs (5) - (1)
Other restructuring and closure costs (1) - 4
Third party contribution relating to the Group's Austrian - - 41
health insurance fund
Provision relating to the 2012 Nordenia acquisition (1) - (5)
Total operating special items (6) - (2)
Financing special item
Simplification of corporate structure - (2) (14)
Total special items before tax (6) (2) (16)
Tax credit (see note 8) 1 - -
Total special items (5) (2) (16)
Attributable to:
Non-controlling interests - - 1
Shareholders (5) (2) (17)
The special items during the period comprised:
* Flexible Packaging
- Closure of two consumer flexibles plants in the UK.
Additional restructuring and closure costs of EUR6 million and related reversal
of impairment of assets of EUR1 million were recognised. These costs are a
continuation of the special item from prior year with total costs expected to
exceed EUR10 million.
- Additional costs of EUR1 million for the settlement of a claim
relating to the 2012 Nordenia acquisition were recognised. The costs relate to
a special item from prior years.
The operating special items resulted in a cash outflow for the six months ended
30 June 2020 of EUR15 million (six months ended 30 June 2019: EUR15 million; year
ended 31 December 2019: EUR22 million).
6 Write-down of inventories to net realisable value
(Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Write-down of inventories to net realisable value (31) (18) (37)
Aggregate reversal of previous write-downs of inventories 18 9 21
7 Net finance costs
(Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Investment income 3 4 8
Net foreign currency losses - (1) (3)
Finance costs
Interest expense
Interest on bank overdrafts and loans (45) (40) (90)
Interest expense from lease liability (6) (7) (13)
Net interest expense on net retirement benefits liability (3) (4) (9)
Total interest expense (54) (51) (112)
Less: Interest capitalised - 3 3
Total finance costs (54) (48) (109)
Net finance costs before special item (51) (45) (104)
Financing special item
Simplification of corporate structure - (2) (14)
Net finance costs after special item (51) (47) (118)
Net interest expense, as defined at the end of this document, for the six
months ended 30 June 2020 was EUR48 million (six months ended 30 June 2019: EUR43
million; year ended 31 December 2019: EUR95 million).
8 Tax charge
The Group's effective rate of tax before special items for the six months ended
30 June 2020 was 23% (six months ended 30 June 2019: 23%; year ended
31 December 2019: 23%).
(Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
UK corporation tax at 19% (2019: 19%) 1 1 1
Overseas tax 96 127 218
Current tax in respect of prior periods 1 (1) (1)
Current tax 98 127 218
Deferred tax in respect of the current period 12 19 47
Deferred tax in respect of prior periods (3) - (8)
Tax charge before special items 107 146 257
Current tax on special items - - (1)
Deferred tax on special items (1) - 1
Tax credit on special items (see note 5) (1) - -
Tax charge for the period 106 146 257
9 Earnings per share (EPS)
EPS attributable to shareholders
(Reviewed) (Reviewed) (Audited)
euro cents Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Basic EPS 72.0 95.8 167.6
Diluted EPS 72.0 95.7 167.6
Basic underlying EPS 73.0 96.2 171.1
Diluted underlying EPS 73.0 96.2 171.1
Basic headline EPS 71.6 95.6 172.5
Diluted headline EPS 71.6 95.5 172.5
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)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Profit for the period attributable to shareholders 349 464 812
Special items (see note 5) 6 2 17
Related tax (see note 5) (1) - -
Underlying earnings for the period 354 466 829
Special items not excluded from headline earnings (6) (2) 25
Gain from disposal of property, plant and equipment (2) (2) (2)
Net gain on disposal of businesses - - (9)
Impairments not included in special items - 1 2
Related tax 1 - (9)
Headline earnings for the period 347 463 836
Weighted average number of shares
(Reviewed) (Reviewed) (Audited)
million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Basic number of ordinary shares outstanding 484.8 484.5 484.6
Effect of dilutive potential ordinary shares - 0.1 -
Diluted number of ordinary shares outstanding 484.8 484.6 484.6
10 Dividends
The Board has declared a dividend of 29.75 euro cents per ordinary share
relating to 2019. Furthermore, the Board has declared a 2020 interim ordinary
dividend of 19.00 euro cents per ordinary share. Both dividends will be paid as
interim dividends on Tuesday 29 September 2020 to those shareholders on the
register of Mondi plc on Friday 21 August 2020. The dividends will be paid from
distributable reserves of Mondi plc, as presented in the annual financial
statements for the year ended 31 December 2019.
(Reviewed) (Reviewed) (Audited)
euro cents per share Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Final ordinary dividend paid (in respect of prior year) - 54.55 54.55
Interim ordinary dividend paid 27.28
Dividend relating to the 2019 financial year declared for 29.75
the six months ended 30 June
Interim ordinary dividend declared for the six months 19.00 27.28
ended 30 June
Subsequent to the release of the results for the year ended 31 December 2019
the Board decided to suspend the recommendation to pay a final dividend for the
year ended 31 December 2019 due to the uncertainty of the effects of COVID-19
on the Group's business and outlook.
(Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Final ordinary dividend paid (in respect of prior year) - 264 264
Interim ordinary dividend paid 132
Total ordinary dividends paid - 264 396
Dividend relating to the 2019 financial year declared for 144
the six months ended 30 June
Interim ordinary dividend declared for the six months 92 132
ended 30 June
Declared by Group companies to non-controlling interests 1 2 3
Dividend timetable
The dividend of 29.75 euro cents per ordinary share relating to 2019 and
the 2020 interim ordinary dividend of 19.00 euro cents per ordinary share, will
both be paid as interim dividends in accordance with the following timetable:
Last date to trade shares cum-dividend
JSE Limited Tuesday 18 August
2020
London Stock Exchange Wednesday 19 August
2020
Shares commence trading ex-dividend
JSE Limited Wednesday 19 August
2020
London Stock Exchange Thursday 20 August
2020
Record date Friday 21 August 2020
Last date for receipt of Dividend Reinvestment Plan (DRIP) Thursday 27 August
elections by Central Securities Depository Participants 2020
Last date for DRIP elections to UK Registrar and South African
Transfer Secretaries:
South African Register Friday 28 August 2020
UK Register Monday 7 September
2020
Payment Date Tuesday 29 September
2020
DRIP purchase settlement dates (subject to market conditions and
the purchase of shares in the open market):
UK Register Thursday 1 October
2020
South African Register Monday 5 October 2020
Currency conversion dates
ZAR/euro Thursday 6 August
2020
Euro/sterling Tuesday 15 September
2020
Share certificates on Mondi plc's South African register may not be
dematerialised or rematerialised between Wednesday 19 August 2020 and Friday
21 August 2020, both dates inclusive, nor may transfers between the UK and
South African registers of Mondi plc take place between Wednesday 12
August 2020 and Friday 21 August 2020, both dates inclusive.
Information relating to the dividend tax to be withheld from 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
Thursday 6 August 2020.
11 Forestry assets
(Reviewed) (Reviewed) (Audited)
EUR million As at As at As at 31
30 June 2020 30 June 2019 December
2019
At 1 January 411 340 340
Investment in forestry assets 22 23 48
Fair value gains 19 52 71
Felling costs (32) (31) (64)
Currency movements (78) 7 16
At 30 June / 31 December 342 391 411
The fair value of forestry assets is a level 3 measure in terms of the fair
value measurement hierarchy (see note 18), consistent with prior years. The
fair value of forestry assets continues to be determined using a market
approach.
12 Leases
The Group has entered into various lease agreements. The Group's right-of-use
assets were EUR166 million as at 30 June 2020 (EUR148 million as at 30 June 2019; EUR
184 million as at 31 December 2019) and the related depreciation charge was EUR12
million for the six months ended 30 June 2020 (six months ended 30 June 2019: EUR
13 million; year ended 31 December 2019: EUR25 million).
13 Borrowings
Financing facilities
Group liquidity is provided through a range of committed debt facilities. The
principal loan arrangements in place are the following:
(Reviewed) (Reviewed) (Audited)
EUR million Maturity Interest rate % As at As at As at 31
30 June 2020 30 June 2019 December
2019
Financing facilities
Syndicated Revolving July 2021/ EURIBOR/LIBOR + 750 750 750
Credit Facility 20221 margin
EUR500 million Eurobond September 3.375 % 500 500 500
2020
EUR500 million Eurobond April 2024 1.500 % 500 500 500
EUR600 million Eurobond April 2026 1.625 % 600 600 600
EUR750 million Eurobond April 2028 2.375 % 750 - -
European Investment Bank June 2025 EURIBOR + margin 48 57 52
Facility
Export Credit Agency June 2020 EURIBOR + margin - 5 2
Facility
Other Various Various 69 65 72
Total committed facilities 3,217 2,477 2,476
Drawn (2,412) (1,954) (1,816)
Total committed facilities 805 523 660
available
Note
1 EUR75 million of the Syndicated Revolving Credit Facility is due in July
2021
In February 2020 the Group entered into a EUR250 million debt facility maturing
in August 2021, which was subsequently cancelled upon the issuance of a EUR750
million Eurobond, as described below.
In April 2020 the Group issued a EUR750 million Eurobond maturing in 2028 at a
coupon rate of 2.375% per annum. The Eurobond has been issued under the Group's
Guaranteed Euro Medium Term Note Programme.
In April 2020 the Group extended the maturity of EUR675 million of the EUR750
million Syndicated Revolving Credit Facility by one year to July 2022.
The EUR500 million Eurobond maturing in 2020 contains a coupon step-up clause
whereby the coupon will be increased by 1.25% per annum if the Group fails to
maintain at least one investment grade credit rating from either Moody's
Investors Service or Standard & Poor's. Mondi currently has investment grade
credit ratings from both Moody's Investors Service (Baa1, outlook stable) and
Standard & Poor's (BBB+, outlook stable).
(Reviewed) (Reviewed) (Audited)
As at 30 June 2020 As at 30 June 2019 As at 31 December 2019
EUR million Current Non-current Total Current Non-current Total Current Non-current Total
Secured
Bank loans and 3 - 3 5 - 5 - - -
overdrafts
Lease 21 175 196 20 165 185 25 193 218
liabilities
Secured 24 175 199 25 165 190 25 193 218
Unsecured
Bonds 500 1,838 2,338 - 1,593 1,593 500 1,094 1,594
Bank loans and 134 40 174 286 337 623 250 204 454
overdrafts
Other loans 2 6 8 7 6 13 5 5 10
Total unsecured 636 1,884 2,520 293 1,936 2,229 755 1,303 2,058
Total 660 2,059 2,719 318 2,101 2,419 780 1,496 2,276
borrowings
Committed 2,412 1,954 1,816
facilities
drawn
Uncommitted 307 465 460
facilities
drawn
14 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 defined benefit schemes and unfunded statutory retirement obligations
were re-assessed in aggregate for the six months ended 30 June 2020. Due to
changes in assumptions and exchange rate movements, the net retirement benefits
liability decreased by EUR12 million to EUR213 million as at 30 June 2020
(31 December 2019: EUR225 million) and the net retirement benefits asset
increased by EUR3 million to EUR20 million as at 30 June 2020 (31 December 2019: EUR
17 million). The assets backing the defined benefit scheme liabilities reflect
their market values as at 30 June 2020. Net remeasurement gains arising from
changes in assumptions amounting to EUR1 million before tax have been recognised
in the condensed consolidated statement of comprehensive income.
15 Consolidated cash flow analysis
(a) Reconciliation of profit before tax to cash generated from operations
(Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Profit before tax 466 632 1,103
Depreciation and amortisation 214 214 433
Impairment of property, plant and equipment and - 1 2
intangible assets (not included in special items)
Net effect of current and prior period operating special (9) (13) (6)
items
Net finance costs after financing special item 51 47 104
Decrease in provisions and net retirement benefits (10) (19) (23)
Movement in working capital (133) (104) 35
Fair value gains on forestry assets (19) (52) (71)
Felling costs 32 31 64
Profit on disposal of property, plant and equipment (2) (2) (2)
Net gain on disposal of businesses - - (9)
Other adjustments 12 2 5
Cash generated from operations 602 737 1,635
(b) Cash and cash equivalents
(Reviewed) (Reviewed) (Audited)
EUR million As at As at As at 31
30 June 2020 30 June 2019 December
2019
Cash and cash equivalents per condensed consolidated 669 78 74
statement of financial position1
Bank overdrafts included in short-term borrowings (63) (104) (81)
Cash and cash equivalents per condensed consolidated 606 (26) (7)
statement of cash flows
Note:
1 Cash and cash equivalents as at 30 June 2020 include funds from the EUR750
million Eurobond issued in April 2020 that have been placed on short-term
deposit
(c) Movement in net debt
The Group's net debt position is as follows:
EUR million Cash and Current Debt due Debt due Debt-related Total net
cash financial within after one derivative debt
equivalents asset one year financial
investments year instruments
At 1 January 2019 (Audited) 8 1 (224) (2,002) (3) (2,220)
Cash flow (34) - 9 (98) - (123)
Additions to lease - - (3) (8) - (11)
liabilities
Disposal of lease - - 2 6 - 8
liabilities
Movement in unamortised loan - - - (1) - (1)
costs
Net movement in derivative - - - - (15) (15)
financial instruments
Reclassification - - (6) 6 - -
Currency movements - - 8 (4) - 4
At 30 June 2019 (Reviewed) (26) 1 (214) (2,101) (18) (2,358)
Cash flow 18 - 34 146 - 198
Additions to lease - - (7) (40) - (47)
liabilities
Disposal of lease - - - 3 - 3
liabilities
Disposal of businesses - - 1 - - 1
Movement in unamortised loan - - - (1) - (1)
costs
Net movement in derivative - - - - 12 12
financial instruments
Reclassification - - (511) 511 - -
Currency movements 1 - (2) (14) - (15)
At 31 December 2019 (7) 1 (699) (1,496) (6) (2,207)
(Audited)
Cash flow 620 - 142 (644) - 118
Additions to lease - - (2) (7) - (9)
liabilities
Disposal of lease - - 2 - - 2
liabilities
Movement in unamortised loan - - - (1) - (1)
costs
Net movement in derivative - - - - 16 16
financial instruments
Reclassification - - (49) 49 - -
Currency movements (7) - 9 40 - 42
At 30 June 2020 (Reviewed) 606 1 (597) (2,059) 10 (2,039)
(d) Cash flow generation
(Reviewed) (Reviewed) (Audited)
EUR million Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Net cash generated from operating activities 491 570 1,388
Investing activities (21) (25) (50)
Net cash used in investing activities (357) (372) (794)
Investment in property, plant and equipment 336 339 757
Investment in equity accounted investees - 6 5
Proceeds from the disposal of businesses, net of cash and - - (20)
cash equivalents
Acquisition of businesses, net of cash and cash - 2 2
equivalents
Financing activities (16) (57) (123)
Interest paid (45) (42) (96)
Dividends paid to non-controlling interests (1) (2) (3)
Purchases of treasury shares (6) (12) (12)
Transaction costs relating to the issue of share capital - - (6)
Financing special item - (1) (14)
Net cash inflow from derivatives 34 - 3
Other financing activities 2 - 5
Cash flow generation 454 488 1,215
16 Capital commitments
Capital commitments are based on capital projects approved to date and the
budget approved by the Board as adjusted by the recent review of capital
expenditures. Capital expenditure for 2020 is expected to be in the range of EUR
600-EUR650 million. These capital projects are expected to be financed from
existing cash resources and borrowing facilities.
17 Contingent liabilities
Contingent liabilities comprise aggregate amounts as at 30 June 2020 of EUR
3 million (as at 30 June 2019: EUR6 million; as at 31 December 2019: EUR3 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
consolidated statement of financial position for all periods presented.
The Group is subject to certain legal proceedings, claims, complaints and
investigations arising out of the ordinary course of business. Legal
proceedings may include, but are not limited to, alleged breach of contract and
alleged breach of environmental, competition, securities and health and safety
laws. The Group may not be insured fully, or at all, in respect of such risks.
The Group cannot predict the outcome of individual legal actions or claims or
complaints or investigations. The Group may settle litigation or regulatory
proceedings prior to a final judgment or determination of liability. The Group
may do so to avoid the cost, management efforts or negative business,
regulatory or reputational consequences of continuing to contest liability,
even when it considers it has valid defences to liability. The Group considers
that no material loss to the Group is expected to result from these legal
proceedings, claims, complaints and investigations. Provision is made for all
liabilities that are expected to materialise through legal and tax claims
against the Group.
18 Fair value measurement
Assets and liabilities that are measured at fair value, or where the fair value
of financial instruments has been disclosed in the notes to the condensed
consolidated financial statements, are 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 assets measured at fair value on level 3 of the fair value measurement
hierarchy are the Group's forestry assets as set out in note 11.
There have been no transfers of assets or liabilities between levels of the
fair value hierarchy during the period.
The fair values of financial instruments that are not traded in an active
market (for example, over-the-counter derivatives) are determined using
generally accepted valuation techniques. These valuation techniques maximise
the use of observable market data and rely as little as possible on Group
specific estimates.
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 fair values of the Group's commodity price derivatives are calculated
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.
Except as detailed below, the directors consider that the carrying values of
financial assets and financial liabilities recorded at amortised cost in the
condensed consolidated financial statements are approximately equal to their
fair values.
Carrying amount Fair value
(Reviewed) (Reviewed) (Audited) (Reviewed) (Reviewed) (Audited)
EUR million As at As at As at 31 As at As at As at 31
30 June 2020 30 June 2019 December 30 June 2020 30 June 2019 December
2019 2019
Financial liabilities
Borrowings 2,719 2,419 2,276 2,824 2,495 2,343
At 30 June 2020, the fair value of level 2 derivative financial assets is EUR19
million (as at 30 June 2019: EUR9 million; as at 31 December 2019: EUR5 million),
whereas the fair value of derivative financial liabilities is EUR6 million (as at
30 June 2019: EUR21 million; as at 31 December 2019: EUR9 million).
19 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.
The level of these transactions is consistent with prior year.
Transactions between Mondi plc and its subsidiaries, which are related parties,
and transactions between its subsidiaries have been eliminated on
consolidation. There have been no significant changes to the related parties as
disclosed in note 28 of the Group's Integrated report and financial statements
2019.
20 Events occurring after 30 June 2020
With the exception of the interim dividend declared for the six months ended
30 June 2020 (see note 10), there have been no material reportable events since
30 June 2020.
Production statistics
Six months Six months Year ended
ended ended 31 December
30 June 2020 30 June 2019 2019
Containerboard 000 tonnes 1,304 1,234 2,524
Kraft paper 000 tonnes 595 622 1,162
Uncoated fine paper 000 tonnes 706 770 1,526
Newsprint 000 tonnes 86 104 201
Pulp 000 tonnes 2,322 2,182 4,387
Internal consumption 000 tonnes 1,987 1,964 3,883
Market pulp 000 tonnes 335 218 504
Corrugated solutions million m² 855 816 1,653
Paper bags million 2,701 2,683 5,228
units
Consumer flexibles million m² 1,340 1,272 2,457
Engineered materials million m2 2,668 2,858 5,506
Exchange rates
Average Closing
versus euro Six months Six months Year ended Six months Six months Year ended
ended ended 31 December ended ended 31 December
30 June 2020 30 June 2019 2019 30 June 2020 30 June 2019 2019
South African rand 18.31 16.04 16.18 19.44 16.12 15.78
Czech koruna 26.33 25.68 25.67 26.74 25.45 25.41
Polish zloty 4.41 4.29 4.30 4.46 4.25 4.26
Pounds sterling 0.87 0.87 0.88 0.91 0.90 0.85
Russian rouble 76.67 73.75 72.45 79.63 71.60 69.96
Turkish lira 7.15 6.35 6.36 7.68 6.57 6.68
US dollar 1.10 1.13 1.12 1.12 1.14 1.12
Alternative Performance Measures (APMs)
The Group presents certain measures of financial performance, position or cash
flows in the condensed consolidated financial statements that are not defined
or specified according to IFRS. These measures, referred to as APMs, are
prepared on a consistent basis for all periods presented in this report.
The most significant APMs are:
Special items (note 5)
Those financial items which the Group considers should be separately disclosed
on the face of the condensed consolidated income statement to assist in
understanding the underlying financial performance achieved by the Group. Such
items are generally material by nature and exceed EUR10 million and the Group,
therefore, excludes these items when reporting underlying earnings and related
measures in order to provide a measure of the underlying performance of the
Group on a basis that is comparable from year to year. Subsequent adjustments
to items previously recognised as special items continue to be reflected as
special items in future periods even if they do not exceed the quantitative
reporting threshold.
Underlying EBITDA (condensed consolidated income statement)
Operating profit before special items, depreciation, amortisation and
impairments not recorded as special items. Underlying EBITDA provides a measure
of the cash generating ability of the business that is comparable from year to
year.
Underlying EBITDA margin (note 4)
Underlying EBITDA expressed as a percentage of revenue provides a measure of
the cash generating ability relative to revenue.
Underlying operating profit (condensed consolidated income statement)
Operating profit before special items. Underlying operating profit provides a
measure of operating performance that is comparable from year to year.
Underlying operating profit margin
Underlying operating profit expressed as a percentage of revenue provides a
measure of the profitability of the operations relative to revenue.
Underlying profit before tax (condensed consolidated income statement)
Profit before tax and special items. Underlying profit before tax provides a
measure of the Group's profitability before tax that is comparable from year to
year.
Underlying earnings (and per share measure) (note 9)
Net profit after tax attributable to shareholders, before special items.
Underlying earnings (and the related per share measure based on the basic,
weighted average number of ordinary shares outstanding), provides a measure of
the Group's earnings that is comparable from year to year.
Headline earnings (and per share measure) (note 9)
The presentation of headline earnings (and the related per share measure based
on the basic, weighted average number of ordinary shares outstanding) is
mandated under the Listings Requirements of the JSE Limited and is calculated
in accordance with Circular 1/2019, 'Headline Earnings', as issued by the South
African Institute of Chartered Accountants.
Return on capital employed (ROCE) (note 4)
Trailing 12-month underlying operating profit, including share of equity
accounted investees' net profit/(loss), divided by trailing 12-month average
capital employed. ROCE provides a measure of the efficient and effective use of
capital in the business.
Capital employed (and related trailing 12-month average capital employed) (note
4)
Capital employed comprises equity, non-controlling interests in equity and net
debt providing a measure of the level of invested capital in the business.
Trailing 12-month average capital employed is the average capital employed over
the last 12 months adjusted for spend on major capital expenditure projects
which are not yet in production.
Net debt (note 15c)
A measure comprising short, medium, and long-term interest-bearing borrowings
and the fair value of debt-related derivatives less cash and cash equivalents,
net of overdrafts, and current financial asset investments. Net debt provides a
measure of the Group's net indebtedness or overall leverage.
Operating segment assets and operating segment net assets (note 4)
Operating segment assets and operating segment net assets comprise total assets
(excluding financial instruments) and capital employed respectively but
excludes investments in equity accounted investees, deferred tax assets and
liabilities and other non-operating assets and liabilities, and provide a
measure of the operating assets in the business.
Working capital as a percentage of revenue
Working capital, defined as the sum of trade and other receivables and
inventories less trade and other payables, expressed as a percentage of
annualised Group revenue. A measure of the Group's effective use of working
capital relative to revenue.
Net interest expense (note 7)
Net interest expense comprises interest expense on bank overdrafts, loans and
lease liabilities net of investment income providing an absolute measure of the
cost of borrowings.
Effective interest rate
Annualised net interest expense expressed as a percentage of trailing average
net debt over the period provides a measure of the cost of borrowings.
Effective tax rate (note 8)
Underlying tax charge expressed as a percentage of underlying profit before
tax. A measure of the Group's tax charge relative to its profit before tax
expressed on an underlying basis.
Net debt to 12-month trailing underlying EBITDA
Net debt divided by trailing 12-month underlying EBITDA. A measure of the
Group's net indebtedness relative to its cash- generating ability.
Gearing
Net debt expressed as a percentage of capital employed provides a measure of
the financial leverage of the Group.
Ordinary dividend cover
Basic underlying EPS divided by total ordinary dividend per share paid and
proposed provides a measure of the Group's earnings relative to its deployment
towards ordinary dividend payments.
Cash flow generation (note 15d)
A measurement of the Group's cash generation before considering deployment of
cash towards investment in property, plant and equipment ('capex' or 'capital
expenditure'), acquisitions and disposals of businesses, investment in equity
accounted investees and payment of dividends to shareholders. Cash flow
generation is a measure of the Group's ability to generate cash through the
cycle before considering deployment of such cash.
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.
Editors' notes
Mondi is a global leader in packaging and paper, contributing to a better world
by making innovative packaging and paper solutions that are sustainable by
design. Our business is fully integrated across the value chain - from managing
forests and producing pulp, paper and plastic films, to developing and
manufacturing effective industrial and consumer packaging solutions.
Sustainability is at the centre of our strategy and intrinsic in the way we do
business. We lead the industry with our customer- centric approach,
EcoSolutions, where we ask the right questions to find the most sustainable
solution. In 2019, Mondi had revenues of EUR7.27 billion and underlying EBITDA of
EUR1.66 billion.
Mondi has a premium listing on the London Stock Exchange (MNDI), and a
secondary listing on the JSE Limited (MNP). Mondi is a FTSE 100 constituent,
and has been included in the FTSE4Good Index Series since 2008 and the FTSE/JSE
Responsible Investment Index Series since 2007.
Sponsor in South Africa: UBS South Africa Proprietary Limited.
END
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