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.
9 April 2020
COVID-19, Trading and AGM update
Mondi today provides an update regarding the impact COVID-19 has
had on the business, trading for the period since 31 December 2019 and logistics relating to its
AGM.
Protecting our people, communities and
partners
During these uncertain times, the safety and welfare of the
Group's employees and our communities remain our top priority. We
also have a responsibility to continue providing essential
materials and products to our customers, many of whom produce
food and hygiene products, as well as contributing to local
services such as energy and waste water treatment in our larger
operations. Our businesses have generally been designated as
providing essential services by governments in the countries in
which we operate, allowing the Group to play an important role in
responding to the COVID-19 pandemic.
All of our sites have implemented personal protection measures
and intensified hygiene and social distancing protocols that meet
or exceed local and international guidelines, and, where possible,
employees are working remotely.
A multi-function response team 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.
Trading update
The Group delivered a robust performance, in line with
expectations, during the first quarter of 2020. Underlying EBITDA
of €385 million was 18% below the comparable prior year period
(€471 million), driven mainly by lower pricing across our key paper
grades mitigated by lower input cost and our ongoing cost reduction
programmes. Underlying EBITDA was in line with the fourth quarter
of 2019 (€381 million).
Our order books held up well in the first quarter, strengthening
in consumer and e-commerce end-uses across our packaging and
Engineered Materials businesses as we continued to support our
customers. Towards the end of the quarter and into early April we
saw a deterioration in our uncoated fine paper order book in
Europe and South Africa as the effects of the various
lockdown measures took hold. We are taking downtime at our
Neusiedler mill (Austria) to
manage our inventory levels, while we have temporarily stopped
production at the Merebank mill (South
Africa; 270,000 tonnes of annual production capacity), in
line with government regulations. We will consider further such
measures as required. In Flexible Packaging, while we are seeing
strength in a number of consumer related applications, particularly
in food, beverage and personal and home care, we are seeing
somewhat weaker trading with our customers in building and
construction industries and a mixed picture in industrial and other
end-uses.
With the exception of the temporary closure of the Merebank
paper mill and temporary closures or other production interruptions
at a small number of our paper bags converting plants, all our
facilities have been in operation throughout the period. Similarly,
to date supply chain issues have been manageable, although we are
seeing delays and increased costs in logistics.
The potential impacts of COVID-19 remain very unclear and the
pace of change means any effect on operations and the Group’s
financial performance for the year are difficult to predict.
Update on capital expenditure,
maintenance shuts schedule and cost mitigation measures
We have moved quickly to protect profitability, liquidity and
cash flow while seeking to ensure we are well placed to benefit
when the recovery takes place. Furthermore, we have adjusted our
near term priorities to mitigate the health risks to our on-site
employees.
We have postponed non-essential capital expenditure and slowed
down some of our major capital projects, thereby both reducing near
term cash outflows and minimising contractors and other
non-operating people on our key sites. As a result, we now expect
capital expenditure of around €600 million (previously €700-800
million) in 2020. This is likely to cause limited delays to the
commissioning of certain of our capital investment projects. We
have also postponed annual mill maintenance shuts to the second
half of the year.
Discretionary spend has been stopped and we continue to actively
manage our cost base to mitigate any impacts.
Strong financial position
Mondi has a strong balance sheet, sector leading investment
grade credit ratings, good relationships with a broad group of
banks, and has recently demonstrated its access to the public bond
markets with the successful launch of a €750 million 8-year
Eurobond. As at 31 December 2019, the
net debt to underlying EBITDA ratio was 1.3 times, well below our
single bank debt covenant of 3.5x net debt to underlying EBITDA
(excluding the impact of IFRS16 adjustments).
Mondi currently has a strong liquidity position of around €1.5
billion, comprising €705 million undrawn committed debt facilities
and cash of approximately €800 million, being principally the
proceeds from the 8-year Eurobond issued on 1 April 2020 and other cash in hand.
Our core banks have recently agreed to extend the maturity date
of the €750 million Syndicated Revolving Credit Facility from
July 2021 to July 2022. The Group has a €500 million Eurobond
maturing in September 2020; there are
no other material maturities until 2024.
Dividend
Despite the Group’s strong balance sheet, the proactive measures
it is taking to manage the current risks and the robust trading
position to date, it is clear that the operating and trading
environment is one of significantly heightened uncertainty. After
due consideration, the Board has decided it is prudent to no longer
propose a final dividend for the year ended 31 December 2019 at the forthcoming AGM.
The Board recognises the importance of dividends to
shareholders. While it is its intention to pay a dividend, the
Board will consider the appropriateness, quantum and timing of an
additional interim dividend payment relating to the financial year
ended 31 December 2019 when it has a
clearer view of the effects of COVID-19 on the business and
outlook.
Commenting on today’s announcement,
Andrew King, Group CEO, said:
“Mondi is a resilient business offering packaging and other
products for daily consumer needs, and delivering essential
services to the communities around its larger operations. We
delivered a robust performance in the first quarter and in this
regard my thanks go to all our colleagues for their courage and
commitment during these challenging times. The Group is financially
strong with a robust liquidity position and capital structure.
However, in these unprecedented times we are taking appropriate
actions to ensure we remain well-placed to withstand an extended
period of uncertainty.”
Annual General Meeting (‘AGM’)
In light of the evolving circumstances, the AGM on 7 May 2020 will now be convened with the minimum
quorum of two shareholders facilitated by Mondi. Shareholders will
not be able to attend the AGM in person. Shareholders are
encouraged to submit their votes by proxy in accordance with the
instructions set out in the 2020 AGM Notice and to appoint the
‘Chair of the meeting’ as their proxy to vote on their behalf.
Proxy appointments must reach the registrar by no later than
10:30am (UK time) on Tuesday
5 May 2020. All valid proxy votes
will be included in the poll to be taken at the meeting, the
results of which will be announced as soon as practicable after the
conclusion of the AGM.
While shareholders will not be able to attend the AGM, we
recognise the importance of continuing engagement in the lead up to
the meeting. Questions relating to the business of the AGM may
therefore be submitted ahead of the meeting via our website by the
deadline set out above. Where appropriate, we will provide written
answers to questions and, will publish answers to frequently asked
questions on Mondi’s website. Any further changes to the meeting
arrangements will be notified via our website.
Notes
Financial metrics have not been audited or reviewed by Mondi’s
external auditors. Reviewed results for the half-year ending
30 June 2020 will be published on
6 August 2020.
Contact details:
Mondi Group
Investors/analysts:
Clara Valera
Group Head of Strategy & Investor Relations
+44 1932 826357
Media:
Kerry Cooper
Group Head of External Communications
+44 1932 826323
Richard Mountain (FTI
Consulting)
+44 790 968 4466
About Mondi
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 €7.27 billion and underlying EBITDA of €1.66
billion.
Mondi has a premium listing on the London Stock Exchange (MNDI),
and a secondary listing on the JSE Limited (MNP). The Group 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.