REG-Mondi PLC: Trading Update

MondiAnnouncement

11/10/2018 07:05

Mondi Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/013038/06)
JSE share code: MND     ISIN: ZAE000156550

Mondi plc
(Incorporated in England and Wales)
(Registered number: 6209386)

LEI: 213800LOZA69QFDC9N34
JSE share code: MNP     ISIN: GB00B1CRLC47
LSE share code: MNDI

As part of the dual listed company structure, Mondi Limited and Mondi plc
(together ‘Mondi Group’ or ‘Mondi’) notify both the JSE Limited and
the London Stock Exchange of matters required to be disclosed under the
Listings Requirements of the JSE Limited and/or the Disclosure Guidance and
Transparency and Listing Rules of the United Kingdom Listing Authority.

Mondi Group: Trading update 11 October 2018

This trading update provides an overview of our financial performance and
financial position since the half year ended 30 June 2018, based on management
information up to 30 September 2018. These results have not been audited or
reviewed by Mondi’s external auditors.

Except as discussed in this update, there have been no significant events or
transactions impacting either the financial performance or financial position
of the Group since 30 June 2018 up to the date of this statement.

Group performance overview

The Group delivered a strong performance in the third quarter, benefiting from
higher average selling prices across Fibre Packaging and Uncoated Fine Paper,
a very strong operational performance, good cost containment and contributions
from recent acquisitions. Underlying EBITDA for the third quarter of 2018 of
€466 million was 30% up on the comparable prior year period (€359 million
– restated(1)) and 4% up on the second quarter of 2018 (€447 million).

Like-for-like sales volumes for the quarter were up on the comparable prior
year period due to good growth in the Fibre Packaging value chain. Selling
prices for the Group’s key paper grades were significantly up on the
comparable prior year period and marginally up on the second quarter.

We continue to see manageable upward pressure on our cost base with input
costs up on the comparable prior year period and more moderately up when
compared to the second quarter. The notable exception was paper for recycling
costs, where average benchmark European prices were down 42% on the prior year
period and stable sequentially. Cash fixed costs were higher as a result of
the impact of mill maintenance shuts and inflationary cost pressures,
mitigated by ongoing cost reduction initiatives.

Planned mill maintenance shuts during the quarter had an estimated impact on
underlying EBITDA of around €30 million (2017: €30 million). Based on
prevailing market prices, we continue to estimate that the impact of
maintenance shuts on underlying EBITDA for 2018 will be around €115 million
(2017: €95 million).

Currency movements had a modest net negative impact on a sequential basis,
with the strength of the US dollar and weakness of the South African rand
relative to the euro during the period largely offsetting the negative impact
from a weaker Russian rouble and Turkish lira.

Business unit overview

In Fibre Packaging, good containerboard and kraft paper demand coupled with
limited industry capacity additions continued to support pricing. Average
selling prices for the quarter were higher than the comparable prior year
period and modestly up on the second quarter. Selling prices remain generally
stable going into the fourth quarter, with price changes limited to modest
increases implemented early in the fourth quarter in selected containerboard
markets.

Going into the annual price negotiations in the fourth quarter, we see strong
demand for kraft paper. This is supported in part by the drive to replace
plastic carrier bags with paper-based alternatives and increasing demand for
sustainable paper-based flexible packaging.

We saw good sales volume growth in Corrugated Packaging and Industrial Bags
during the period, with Industrial Bags benefiting from strong sales volume
growth in emerging Europe, Middle East and west Africa, partly offset by
continued weakness in US markets. During the seasonally weaker fourth quarter,
Industrial Bags will take further measures to optimise its mature market
production footprint.

The €335 million modernisation of our Steti mill is progressing according to
plan and commissioning is expected during the fourth quarter of the year. We
are pleased with the progress achieved to date in the integration of
Powerflute and its positive contribution during the quarter. The integration
of the two plants recently acquired in Egypt, to build on our presence in the
growing Middle East industrial bags market, is progressing well.

Consumer Packaging benefited from previously announced restructuring
initiatives, product mix improvements and recently completed investments,
although overall performance continues to be held back by declining volumes in
personal care components. We continue to work actively with our customers,
suppliers and other stakeholders to find innovative solutions that improve the
sustainability of plastic packaging, based on circular economy principles. We
are seeking opportunities to leverage our product know-how and customer
relationships across our packaging businesses, as a leading producer of both
plastic and paper based solutions.

Uncoated Fine Paper continues to perform strongly with higher average selling
prices during the quarter offsetting higher input costs and negative currency
effects. Further inflation-linked selling price increases  were recently
implemented in Europe and Russia. High pulp prices continue to put pressure on
our unintegrated production in Europe.

Cash flow and financing activities

Strong cash generation from operating activities more than offset the cash
outflows related to our capital expenditure programme and financing
activities, resulting in a positive cash flow during the quarter.

Finance charges were marginally up on the second quarter, as a consequence of
higher average net debt, primarily due to the significant cash outflows during
the first half of 2018 relating to the completion of acquisitions (€415
million) and the payment of a special dividend (€484 million).

There have been no significant changes in the Group’s borrowing facilities
since 30 June 2018.

Outlook

Going into the fourth quarter, we continue to benefit from stable pricing in
key fibre based product segments. However, as expected, the quarter will be
impacted by the large project related shut and ramp-up at our Steti mill,
restructuring initiatives in Industrial Bags and continued pressure on the
cost base across the Group, mitigated by our ongoing proactive and
comprehensive cost reduction programmes.

With our robust business model and culture of driving performance, we remain
confident of continuing to deliver an industry leading performance, and
sustaining our track record of delivering value accretive growth.
1.
Restated following the implementation of the early-adopted new “Leases”
accounting standard, IFRS 16.

Contact details:

 Mondi Group                                                                   
 Andrew King Group CFO                                       +44 193 282 6321  
 Clara Valera Group Head of Strategy and Investor Relations  +44 193 282 6357  
 Kerry Cooper Senior Manager – External Communication        +44 193 282 6323  
 FTI Consulting                                                                
 Richard Mountain                                            +44 790 968 4466  

Conference call dial-in details

Please see below details of the dial-in conference call that will be held on
11 October 2018 at 8:00 (UK) and 9:00 (SA).

The conference call dial-in numbers are:

South Africa                0800 980 520

UK                               0800 279 7204

Other                           +44 330 336 9411

Conference code:       4702938

Should you have any issues on the day with accessing the dial-in conference
call, please call +44 330 336 9411.

A replay facility will be available until 31 October 2018 (Pin number:
4702938). The dial in details are:

South Africa                0800 980 995

United Kingdom          0808 101 1153

Other                           +44 207 660 0134

About Mondi

Mondi is a global leader in packaging and paper, delighting its customers and
consumers with innovative and sustainable packaging and paper solutions. Mondi
is fully integrated across the packaging and paper value chain - from managing
forests and producing pulp, paper and plastic films, to developing and
manufacturing effective industrial and consumer packaging solutions.
Sustainability is embedded in everything Mondi does. In 2017, Mondi had
revenues of €7.10 billion and underlying EBITDA of €1.48 billion.

Mondi has a dual listed company structure, with a primary listing on the JSE
Limited for Mondi Limited under the ticker MND, and a premium listing on the
London Stock Exchange for Mondi plc, under the ticker MNDI. 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.



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