Mondi plc

Good day, and thank you for joining us, Mondi, a leader in sustainable packaging and paper solutions with results for the six months ended 30th June 2025, presented by Andrew King and Mike Powell. There will be time for Q&A. At the end of the presentation, we'd ask you to use the raise hand function, and you'll be invited to unmute and put your question live. And our handover to host today, Andrew King. Andrew, over to you, please. Andrew, over to you, please.

Good morning all and welcome to Mondi's results presentation. I'm Andrew King, your group CEO, and I'm joined by Mike Powell, our CFO. I'll be providing some highlights before I pass on to Mike for an overview of the financial performance. I'll then finish with a progress update on some of the important strategic initiatives we are taking to drive sustainable value creation. After that, Mike and I look forward to taking your questions. In summary, I think we believe we delivered a solid performance in the period in what are and will continue to be, in our view, challenging market conditions. Ongoing geopolitical and macroeconomic uncertainties continue to undermine consumer confidence and business confidence, impact trade flows and affect relative competitiveness. In this context, it was pleasing to see that we could achieve volume gains in key categories supported by our recent investment program and some modest price gains in our packaging paper grades over the course of the first half. Our focus on margin management, cost containment and productivity gains helped mitigate ongoing labour cost pressures and currency headwinds, largely related to US dollar weakness. Pleasingly, cash generation was strong, a reflection of the inherent resilience of the business and our focus on tight cash flow management. We will continue to prioritise these initiatives in the second half in the face of the anticipated continuation of challenging trading conditions. Importantly, while ensuring we focus on the near-term controllables, we remain intent on positioning the business for long-term value accretive growth. In this regard, I'm very happy with the progress we have made on our key strategic initiatives. All our major capacity expansion projects are operational, with the Arduino Recycled Container Board Mill being the most recent to start up in April, as planned. The focus is now very much on ramping up and optimising production and sales to ensure we deliver the promised performance. The acquisition of Schumacher completed in March and we are pleased to welcome our new colleagues from sites across Germany, the Netherlands and the UK. While early in the process, integration is well on track. The trading environment is currently dominated by cyclical headwinds. However, I remain very excited by the long-term structural growth drivers in the packaging markets that we serve. With our great market positions, long-standing customer relationships, and high-quality integrated and well-invested asset base, we remain very well-placed to deliver value accretive growth for our stakeholders. I'll now hand over to Michael to provide more colour on the 2025 financial performance to date.

Thanks, Andrew. Good morning, everybody. And let me take you through the group's financial results. Our half warm 2025 results reflect a solid performance in a challenging macroeconomic environment. Underlying EBITDA of €564 million was in line with half warm 2024, but with increased cash generation supported by good cash flow management. The Group's ROSI was impacted by the start-up of our major capacity expansion projects, with a larger capital employed base and higher depreciation, more than offsetting the earnings generated from these projects as they are in ramp-up phase. Basic underlying earnings per share were also lower than the last year due to the associated higher depreciation charges along with higher net finance costs. The board has declared an interim dividend per share of 23.33 euro cents. This is in line with last year's interim dividend and equates to our usual practice being one third of last year's total ordinary dividend. Underlying EBITDA was comparable with that prior year. Sales volume and sales prices were both up compared to half one 2024. However, the movements seen across each business unit do vary, and I'll come on to that on the next slide. But before I do so, just on costs and other items, they were a touch higher, shown by the 11 million that you see on the chart. This includes some expected start-up costs with the commissioning of the paper machine at Arduino Mill in Italy, which we were pleased to successfully start up in April this year. On fixed costs, we demonstrated really good cost control to drive operating expenses lower, which offset the impact of labour cost inflation. Input costs were broadly stable overall compared to the prior year, supported by our cost saving initiatives. And as we enter the second half of the year, I would expect some modest input cost relief as we continue to drive efficient procurement practices across the group. From a currency perspective, you'll recall that we had a one-off loss in half one 2024 from the devaluation of the Egyptian pound. The non-recurrence of this in 2025 was partially offset by currency headwinds. Our largest non-euro currency exposure is the US dollar, and that weakened during the second quarter and into the third. And lastly, the forestry fair value gain was lower this year, the absolute in the half of €18 million compared to the €49 million of last year, giving you the delta that you see on the chart of €31 million. Adding all that up results in an underlying EBITDA of €564 million for half one 2025. If I now look at each of the business performances in turn, Corrugated packaging delivered an improved performance, underlying EBITDA up 42% to €203 million. This included a small contribution from Schumacher in the second quarter. In container board, the business delivered strong volume growth, supported by the ramp-up of capacity from recently completed projects. This includes the de-bottlenecking project at Switchi in Poland, the modernization project at Cupio in Finland, and most recently, as I mentioned, Duino in Italy. On pricing, container board selling prices were higher than half on 2024 average pricing following the implementation of price increases during the period. These increases largely reversed the price erosion that we saw at the back end of 2024 and were partly driven by cost support from increasing paper for recycling prices in the period. Since June, we have started to see some pricing pressure on our recycled grades with cost support diminishing as paper for recycling prices reduce. In corrugated solutions, box volumes excluding Schumacher were up on the prior year, driven by our customer relationships and improved demand for sustainable packaging solutions for consumer and e-commerce end-use applications. Turning to flexibles, flexible packaging business delivered an EBITDA of €302 million, which was in line with half one 2024 after you take account of prior periods one-off loss from the devaluation of the Egyptian pound recorded last year. Craft paper sales volumes were lower year on year as the volumes produced at our new paper machine at Stettie did not fully replace the previously produced volumes at the Stambolinski mill which we closed in the second half of 2024. On pricing, craft paper prices were higher on average compared to the prior year. The year started with reduced prices following some erosion at the back end of 2024. This was followed by the implementation of price increases during the half year in Europe, while pricing in other regions was relatively stable. In paper bags, we achieved good sales volume growth across all regions, supported by the growing demand for traditional building material and cement applications, as well as increasing demand for e-commerce solutions. And in uncoated fine paper on the right hand side, although market conditions remain muted, we do continue to gain market share supported by our strong customer offering, delivering stable sales volumes in the period compared to the prior year. Uncoated fine paper selling prices were lower compared to the prior period due to a combination of entering the year at reduced levels following price erosion over the second half of 2024. coupled with further price reductions in half one 2025. These reductions were due to softer market demand and weakened cost support from pull price movements, which increased modestly during the period before reducing towards the end of the half year period. And lastly, as previously mentioned and separated out here, the business recorded a lower forestry fair value gain compared to half one 2024. Let me now take you through the movement in net debt. We started the year with net debt of 1732 million. Cash generated from ops is made up of the next two items you see. That's the EBITDA contribution I've just taken you through of 564 million. together with a $130 million investment into working capital, which was mainly a result of higher trade receivable balances at 30th June following those price increases achieved during the period. I'd expect working capital inflow in the second half of the year, supported by our tight working capital management. We continue to invest through the cycle, nearly €350 million of capital expenditure in the period. This includes the investment into our major expansionary capacity projects, alongside investing to enhance the competitive advantage of our operations. And Andrew will touch on this a little later. Interest tax and ordinary dividend payments, €167 million and €202 million respectively, as you see on the slide. And lastly, we completed the acquisition of Schumacher on 31st March 2025. Really excited by this opportunity it brings to the group and although we've only owned the business for a few months now, we already see the benefits of being able to offer our customers a broader product portfolio as well as increased integration across the value chain. So to conclude, all of this leaves the group with a net debt balance at the end of the half year of around 2.6 billion, leverage of 2.5 times. The expected business performance and cash generation in the second half should lead us to a lower leverage by the end of this financial year. On capital allocation, framework has not changed, discipline has not changed. We maintain a strong and flexible balance sheet. We continue to generate cash, enabling the group to invest in the business alongside paying ordinary dividends to shareholders. And as evidenced by the recent acquisition of Schumacher, we always evaluate M&A. Our focus now is very much on delivery from our current asset base. And my last slide on technical guidance, where relevant, we've updated the technical guidance for 2025, reflecting the inclusion of Schumacher. As you'll recall, our previous guidance published in February excluded that effect as we had not acquired the Schumacher business at the time. Our capital expenditure expectation for 2025 remains at 750 to 850 million euros as we can cope with any Schumacher spend within the previously guided range. The depreciation and amortisation range has increased by €25 million to €475 to €500 million and our effective tax rate is unchanged at around 23%. Net finance costs expected to be higher due to higher debt levels post the debt funded M&A. We previously guided to the incremental EBITDA contribution from major capacity expansion projects to be in the range of 50 to 100 million euros in 2025, with the upper end of the range representing mid-cycle pricing levels. Based on current prevailing prices and the fact that we're halfway through the year already, I would now guide to 50 to 75 million euros for the year. About one third of that has already been delivered in the first half year numbers. There is clearly no change in our confidence that these major expansion capacity projects, when fully ramped, will deliver meeting returns on capital through cycle. With that, let me hand you back to Andrew. Thank you.