Mondi Group has published its full year results for the year ended 31 December 2012. While the first quarter was particularly difficult, characterised by a continuation of the weak order books seen towards the end of 2011, trading picked up as the year progressed. Sales volumes recovered into the second quarter and this, in turn, saw some price recovery in certain of Mondi Group’s major grades going into the second half of the year. The third quarter was impacted by the traditional European summer slowdown in trading, but a strong finish to the year, with good volumes and reasonable price levels in Europe, meant the Group was able to deliver full year underlying operating profit of €568 million, 9% down on the very strong prior year result.
Fundamentals for each of Mondi Group’s core businesses remain good, although recently announced capacity additions in segments that remain in oversupply are a concern. While the uncoated fine paper business remains in structural decline in the mature western European region, prices have remained stable due to continued supply side contraction in the face of poor profitability among the more marginal players. Such rationalisation will need to continue in order to ensure market stability. On the packaging side, fundamentals for growth in the medium term remain firmly in place with only the kraft paper/industrial bags value chain in western Europe suffering some secular demand decline, offset by strong export markets.
Mondi Group continued to be strongly cash generative with cash generated from operations of €845 million. Working capital levels were maintained within Mondi Group’s targeted level of 10-12% as a percentage of turnover, closing the year (based on the annualised sales of Nordenia) at 11.8%. During the year, capital expenditure amounted to €298 million.
David Hathorn, Mondi Group chief executive, comments on the report: “Mondi delivered a solid financial performance in what remains an uncertain economic environment. While the early part of the year was particularly challenging, trading picked up as the year progressed, culminating in a strong final quarter.
Continued strong profitability resulted in a return on capital employed (ROCE) of 13.7%, once again above our through-the-cycle target of 13%. Net debt finished the year at €1,864 million, largely due to the €1.2 billion of strategic acquisitions in higher growth packaging segments completed during the year. Our continued strong cash generation and underlying earnings per share of 69.6 euro cents per share has resulted in the directors recommending a final dividend of 19.1 euro cents per share, bringing the total dividend to 28.0 euro cents per share for the year, an increase of 8%.
Our focus in the near term is on the integration and optimisation of the recent acquisitions and successful delivery of the significant capital investment projects we have initiated over the course of the past year. I am very pleased to see the progress we have already made in integrating our recent acquisitions, exemplified by the fact we have revised upwards by 33% our estimate of expected synergies to €30 million per annum within two years.
