Mondi plc

Hello and welcome to Mondi Group's full year results with Andrew King, CEO and Mike Powell, CFO. Automated subtitles are available and you can turn this feature on or off within your Zoom app settings. But please note this is an automated service and transcription errors sometimes occur. If you'd like to ask a question, you can do so by pressing the raised hand button on the Zoom app and we'll bring you into the meeting to ask your question verbally. So please be ready to unmute yourself at that point. I'm now going to hand over to your host, Andrew King, CEO. Andrew, please go ahead.

Good morning all and welcome to our full year results presentation. I'll provide some of the highlights before passing on to Mike for an overview of our financial performance. I'll then move on to an update on our business units and some thoughts on our current trading environment before providing detail on various of the important strategic steps we have taken over the past year to drive value accretive growth. After that, Mike and I look forward to taking your questions. Before reviewing the past year, maybe some reflections on what we mean by the title of this presentation is strong platform for growth. Firstly, and most importantly, we are exposed to structurally growing markets. Across our packaging businesses, we remain very confident in the structural growth drivers in the markets that we serve. While clearly demand has been weak for the better part of the last two and a half years, we firmly believe these are cyclical rather than structural pressures. Packaging demand will always be correlated to economic output, but the long-term growth drivers around sustainability, e-commerce, convenience, et cetera, have not gone away and we are investing behind them. Where we do choose to play, we have great market leadership positions. In flexibles, we are the global number one player in the craft paper and bags value chain. In corrugated, we have leading positions in niche container board applications and very strong positions as an integrated player in the regional corrugated markets that we serve. In unco-defined paper, we enjoy market leadership in the two main regions we serve, which are Central Europe and Southern Africa. We pride ourselves in working with our customers to provide innovative and reliable solutions that are sustainable by design. Our range of products and in-depth knowledge of different packaging types and materials gives us a unique platform to be a trusted one-stop shop for our customers. I think this is no more evident than our e-commerce offering, which spans everything from boxes through hybrid coated paper applications for inline packaging to paper bags and mailers. We are working hard to bring this complete offering and the innovation potential it provides to our customers. We have well invested in an integrated asset base. We have consistently followed the approach of investing through cycle to ensure our assets are appropriately invested for the markets that they serve. I'll speak about it more later, but I'm very excited by the growth opportunities afforded to us by the recently completed investments. We have a great track record of delivering these big, complex CapEx projects on time and budget. We can't do this and all the other things required to deliver for our stakeholders without our fantastic and dedicated people. I would like to take this opportunity to acknowledge all those in our organisation who who go the extra mile every day. We do all of this with a steadfast commitment to drive long-term value creation sustainably. So then move on to what we delivered in 2024. You'll see the year was once again characterized by difficult trading conditions with ongoing soft demand, albeit with some improvements on the prior year and a generally weak pricing environment. In this context, we delivered a resilient performance with stable profitability, excluding some one-off effects, which Mike will explain shortly. In terms of our strategic development, I'm very happy with the progress made. We started up five major projects. On these, the focus now shifts from project delivery to operational and commercial ramp-up to ensure we deliver the promised returns. We completed the acquisition of the Hinson pulp mill in Canada, providing us access to a very cost-effective wood basket and the opportunity for forward integration into our North American bags network through investment in a new paper machine. A further important strategic step was the agreement to acquire Schumacher's Packaging's Western European assets, expanding the geographic coverage of our corrugated packaging network and providing strong integration opportunities with our established and growing container board production base. Finally, with ongoing strong cash generation, a strong balance sheet and continued confidence in the future of the business, the board continues to prioritise returns to shareholders. I now then hand over to Mike to provide more colour on both this and the financial performance for 2024. Mike?

Andrew, thank you very much and good morning to everybody. I will just say our performance in 2024 reflected the resilience of our business model, highlighting our cost competitive, strategically located and integrated assets, alongside our ability to adapt with agility to market uncertainties. EBITDA. Earnings per share and return on capital measures were all affected by the significant reduction in the forestry fair value gain and one-off loss associated with the Egyptian currency devaluation. The business continued to generate good cash and will continue to do so. The Board have recommended holding the full-year dividend at €0.70 per share, reflecting the Board's continued confidence in the future of the business. You can see the resilience of our performance on this slide, and I've shown this with the items in the orange dotted box equating to a flat performance year on year, even with the soft demand in our markets. We successfully increased our sales volumes when compared to the prior year, particularly across our flexible packaging businesses, where we're seeing an increase in demand for our innovative paper and packaging products. Sales prices in 2024 were on average lower than 2023. Most of the price bar here is the average year on year movement in flexible packaging. And as you'll recall, when we met this time last year, 2024 started with some encouraging signs of recovery with restocking and price increases across all paper grades. As the year progressed, however, the market recovery faltered Many of our key markets face subdued demand, leading to an initial stabilisation in those prices, followed by a gradual decrease as we approached the year end. Overall costs were €254 million lower in 2024 than 2023. We remain focused on cost control, driving efficiency improvements and taking decisive restructuring actions where necessary to mitigate the impact of pressures on our cost base. Simply put, it's at the heart of what we do, day in, day out. Some great work with respect to input costs by the teams, mostly driven by lower wood costs in Central Europe, as well as energy and chemical costs. Looking into 2025, input costs are broadly stable and similar to the average levels seen in 2024. We did experience some fixed cost increases, primarily due to the inclusion of Hinton's cost base following the acquisition that Andrews talked about. There were also some salary inflation costs and some insurance incomes in financial year 2023, as already previously reported. On forestry fair value, remember it's a non-cash item, we had a €7 million gain in the year. That's significantly lower than the €128 million gain recorded in 2023. If you take one number from the other, you see the delta on this slide being the €121 million year-on-year movement in the bridge. And lastly, as reported at Q1, we incurred a 32 million one-off currency loss from the devaluation of the Egyptian pound, adding up all those results in an underlying EBITDA of 1049 million euros for the year. Let me now take you through the movement in net debt. You'll recall the first three bars from our half-year results in August. We started the year with net debt of 419 million euros, which included the disposal proceeds received in 2023 from the group's previously owned Russian operations. These were subsequently distributed to shareholders in February 2024, resulting in a pro forma net debt of 1.2 billion euros with leverage of one times. Cash generated from operations, made up of the next two items that you see, the EBITDA contribution that I've just taken you through, together with 108 million investment in working capital. And you remember at the half year that the working capital outflow was somewhat higher than the 108 million euros that you see here, which tells you that we drove a good release of working capital in the second half, as I said we would at the time. We continue to invest through the cycle, more than 900 million euros of capital expenditure in the year. This investment represents our continued investment into the major expansionary projects alongside investing to improve efficiency, reduce environmental impacts and increase energy self-sufficiency. Interest, tax and ordinary dividend payments complete the picture, leaving the group with a net debt at the end of the year of 1.7 billion euros and a leverage of 1.7 times. Our capital allocation framework and discipline has not changed. We maintain a strong and flexible balance sheet and continue to generate strong cash flows, which enables the group to invest in the business alongside paying dividends to shareholders. In a minute, Andrew will take you through the progress we've made on growing the business, both organically and through M&A. On dividends, the board has held the ordinary dividend flat and in line with last year at €0.70 per share, despite the decline in earnings. Whilst this dividend gives a spot dividend cover that is below our through cycle cover range of two to three times, we acknowledge the importance of paying dividends to shareholders as well as reflecting the board's continued confidence in the future of the business. On to technical guidance briefly for 2025. We are expecting capital expenditure to be in the 750 to 850 million euro range. which in addition to the regular stay in business capital expenditure includes the final payments associated with our 1.2 billion euro capital expenditure programme and the ongoing investments to replace the boilers at both Richards Bay in South Africa and our Dinas Mill in Sweden. Appreciation and amortisation charges expected in the range of the 450 to 475 million euros are effective tax rates around 23% with net finance costs expected at around €90 million. And finally, just to note and be clear, all of these guidance figures exclude any effects of a Schumacher acquisition, which we expect to complete in the first half of 2025. So let me wrap up. In the face of difficult trading conditions, we've demonstrated the resilience of our business model whilst investing for the future. We have a strong and flexible balance sheet and we are in a truly super place to deliver in the current market environment and really benefit when the cycle turns. With that, I'll hand over back to yourself, Andrew.