TIDMMNDI
Mondi plc
(Incorporated in England and Wales)
(Registered number: 6209386)
LEI: 213800LOZA69QFDC9N34
LSE share code: MNDI ISIN: GB00B1CRLC47
JSE share code: MNP
4 August 2022
Results for the six months ended 30 June 2022
Highlights
* Strong performance across the business
* Margin expansion in all continuing businesses, supported by good selling
price realisation and solid operating performance in challenging conditions
* Key capital investments contributing to performance
* Underlying EBITDA from continuing operations (excluding Russian operations)
of ?942 million, up 66% year-on-year
* Total EBITDA including discontinued Russian operations (prior to special
items) of ?1,170 million, up 65% year-on-year
* Around ?1 billion of expansionary projects underway, approved or under
advanced evaluation - capturing growth in our packaging markets, building
on our leading market positions and adding to our strong track record of
disciplined capital allocation
* Completed sale of the Personal Care Components business for an enterprise
value of ?615 million, delivering greater focus
* Process to dispose Russian operations ongoing - now reported as
discontinued operations held for sale
* Continued progress on sustainability roadmap, Mondi Action Plan 2030
(MAP2030)
* Balance sheet at 0.8x net debt to underlying EBITDA (continuing operations)
* Interim dividend declared of 21.67 euro cents per share, up 8% year-on-year
* Well-positioned for the future, with unique portfolio of leading
sustainable packaging solutions, cost-advantaged asset base, culture of
continuous improvement and strong financial position
Financial summary
As at 30 June 2022, the Group's operations in Russia are reported as
discontinued operations held for sale.
? million, except for percentages and per share measures Six months Six months Six months
ended ended ended
30 June 2022 30 June 2021 31 December
2021
From continuing operations (excluding Russian
operations)
Group revenue 4,505 3,283 3,691
Underlying EBITDA1 942 566 591
Profit before tax 933 354 358
Cash generated from operations 519 407 594
Basic underlying earnings per share1 (euro cents) 98.7 53.4 56.7
Basic earnings per share (euro cents) 148.4 54.4 57.6
Interim dividend per share (euro cents) 21.67 20.00
Underlying EBITDA margin1 20.9% 17.2% 16.0%
Return on capital employed (ROCE)1 19.2% 12.8% 13.9%
Net debt1 1,220 1,926 1,689
From continuing and discontinued operations (including
Russian operations)
Total EBITDA (prior to special items)1 1,170 709 794
Basic total earnings per share (prior to special items)1 129.3 70.7 83.3
(euro cents)
Return on capital employed (ROCE)1 22.5% 14.8% 16.9%
Note:
1 The Group presents certain measures of financial performance, position or
cash flows that are not defined or specified according to International
Financial Reporting Standards (IFRS). These measures, referred to as
Alternative Performance Measures (APMs), are defined at the end of this
document and where relevant, are reconciled to IFRS measures in the notes to
the condensed consolidated financial statements.
Andrew King, Mondi Group Chief Executive Officer, said:
"Performance was strong across the Group in the first half of 2022, with
underlying EBITDA from continuing operations of ?942 million, up 66%
year-on-year. Our vertical integration, the agility of our organisation and
strong collaboration with our customers ensured we delivered at a time when
supply chains continued to be disrupted around the world. We achieved strong
price realisation while maintaining tight cost control against a backdrop of
strong inflationary pressures.
My sincere thanks goes to the teams across Mondi for their dedication and
ongoing commitment, delivering so strongly in these challenging times.
Sustainable packaging continues to be a key priority for our customers and
wider society. We are well placed to support our customers to achieve their
environmental goals with circular driven solutions that are sustainable by
design, a unique product portfolio, superior technical know-how, expertise in
understanding the best material choices and leading innovation capabilities.
Our capital investments continue to generate value-accretive growth, enhance
our cost competitiveness and drive sustainability benefits. We have an
ambitious expansionary capital investment programme to further capture growth
in our packaging markets, building on our leading market positions and long
track record of disciplined capital allocation. Our pipeline currently includes
around ?1 billion of expansionary projects in our continuing operations already
approved or under advanced evaluation, which we anticipate will generate
mid-teen returns when in full operation. We continue to actively consider
further capital investments for growth in the packaging markets in which we
operate.
We are pleased to have completed the sale of the Personal Care Components
business to Nitto ahead of schedule. This enables us to simplify our portfolio
and focus on our strategic priority to grow in sustainable packaging.
Looking forward, pricing remains strong going into the second half, although we
do anticipate continued inflationary pressures on our cost base and ongoing
supply chain challenges. While significant geopolitical and macroeconomic
uncertainties remain, we expect a year of good progress.
Mondi remains well-placed to deliver sustainably into the future, underpinned
by our integrated cost advantaged asset base, culture of continuous
improvement, portfolio of sustainable packaging solutions and the strategic
flexibility offered by our strong cash generation and financial position."
Group performance review
Mondi performed strongly in the first half of 2022. Underlying EBITDA from
continuing operations of ?942 million was up 66% compared to the first half of
2021, and up 59% compared to the second half of 2021 ('sequentially').
Including the Russian operations, total EBITDA (prior to special items) of ?
1,170 million was up 65% year-on-year.
The commentary below refers to the Group's continuing operations (which exclude
the Russian operations) unless otherwise stated.
Our packaging businesses continued to demonstrate the benefits of our
integrated value chain, our unique portfolio of innovative and sustainable
packaging solutions and our attention to quality and service. Uncoated Fine
Paper performance recovered strongly, benefiting from the successful
commissioning of the rebuilt recovery boiler in Richards Bay (South Africa) in
early 2022 and good price momentum in all markets. Our customers recognise the
stability of a long-term supplier, the sustained quality of our products and
our reliable and consistent service.
Revenue was up 37% on the comparable prior year period reflecting the benefit
of the implemented selling price increases. Input costs were significantly up
on the first half of 2021 and sequentially, due to materially higher energy,
wood, resins, transport, chemical and paper for recycling costs. Energy costs
were driven by sharp increases in the price of European gas and electricity.
Our pulp and paper mills generate most of their energy needs internally, with
biomass sources accounting for around 80% of the fuels used in this process,
thereby mitigating the impact of the significant surge in external fuel costs.
Wood costs in Central and Eastern Europe were materially higher on the
comparable prior year period and sequentially. Increasing demand for firewood
as an alternative energy source to fossil fuels, coupled with reduced supply
due to less calamity wood on the market and the impact of sanctions on Russian
and Belarusian timber, have contributed to the tightness in Central European
wood markets impacting both cost and availability.
Cash fixed costs were slightly higher, with inflationary cost pressures
mitigated by ongoing cost reduction initiatives. The non-cash forestry fair
value gain of ?30 million in the first half was up ?22 million on the prior
year period.
The impact of planned maintenance shuts on underlying EBITDA during the period
was around ?40 million (2021: ?25 million). Based on prevailing market prices,
we estimate the full year impact on underlying EBITDA of the Group's planned
maintenance shuts at around ?100 million (2021: ?140 million).
Currency movements had a net positive effect on underlying EBITDA versus the
comparable prior year period as a result of the positive impact on certain of
our export-oriented businesses of a stronger US dollar, partly offset by
translation losses from a materially weaker Turkish lira relative to the euro.
Depreciation and amortisation charges were slightly up year-on-year as a result
of our ongoing capital investment programme.
We are pleased to have completed the disposal of the Personal Care Components
business ('PCC') at the end of June 2022 for an enterprise value of ?615
million, allowing for greater focus on our strategic priority to grow in
sustainable packaging. As a result of the sale, we recognised a pre-tax gain on
disposal of ?246 million.
As announced on 4 May 2022, having assessed all options for the Group's
interests in Russia and recognising the Group's corporate values and
stakeholder responsibilities, the Board decided to divest the Group's Russian
assets. As at 30 June 2022, these operations have been classified as held for
sale and presented as discontinued operations. The divestment process is
underway. The disposal of such significant assets is operationally and
structurally complex and it is being undertaken in an evolving political and
regulatory environment.
Profit before tax was ?933 million, up 164% on the comparable prior year
period. Basic underlying earnings were 98.7 euro cents per share, up 85%
year-on-year. After taking the effect of special items into account, basic
earnings from continuing operations were 148.4 euro cents per share, up 173%
compared to the prior year period.
An interim dividend of 21.67 euro cents per share has been declared, up 8%
year-on-year. The Group has a strong financial position, with net debt to
underlying EBITDA of 0.8 times at 30 June 2022, providing the strategic
flexibility to pursue further organic growth projects, M&A opportunities and/or
additional shareholder distributions, in line with our long-established capital
allocation framework.
Mondi Action Plan 2030 (MAP2030)
Sustainability is at the centre of our purpose, strategy and culture. We
recognise the importance of working with others across the value chain to drive
positive change, and believe that being part of the solution to global
sustainability challenges will secure the long-term success of our business and
benefit our stakeholders.
Our sustainability framework, MAP2030, launched in 2021, builds on the strong
progress we have made to date and sets out the actions we need to take over the
next decade to achieve our ambitious goals. MAP2030 focuses on the areas where
we can have the most impact - circular driven solutions, created by empowered
people, taking action on climate. Each of these action areas has three
high-level commitments underpinned by more detailed targets. The framework is
founded on responsible business practices spanning business ethics and
governance, human rights, communities, procurement and environmental impact.
Demand for sustainable products continues to grow, with brands and consumers
wanting to contribute to a low carbon, circular economy. Our conversations with
customers focus on how to design solutions that are efficient, fit-for-purpose
and help to convey and deliver their sustainability commitments. Our unique
product portfolio, expertise in understanding the best material choices and
customer-focused innovation capabilities, mean we can create packaging
solutions that are sustainable by design. This helps us to eliminate
unsustainable packaging, lead the transition to a circular economy and grow our
customer base of forward-thinking brands.
Building on almost two decades of progress, including science-based targets
approved by the Science Based Targets initiative (SBTi) in 2019, we have
accelerated our climate plans by committing to transition to Net-Zero by 2050.
Our Net-Zero commitment has been developed to align with the SBTi's new
Net-Zero Standard and commits Mondi to reducing greenhouse gas emissions across
Scopes 1, 2 and 3 in line with a 1.5°C scenario. We are working with the SBTi
to validate our new targets, while we continue to take action today to achieve
our 2025 milestones.
For more details on our sustainability performance, please refer to our 2021
Sustainable Development report. You can find more details on our approach to
sustainability and MAP2030 in a video with the Group CEO and other senior
leaders at www.mondigroup.com/en/sustainability/approach.
Capital investments
Our disciplined approach to investigating, approving and executing capital
projects is one of our key strengths and plays an important role in
successfully delivering strong returns. Medium and long-term growth in the
packaging markets we serve is underpinned by the structural drivers of
eCommerce and the demand for more sustainable packaging. The Group's capital
investment programme is focused on driving organic growth, enhancing our
product offering, quality and service to customers, strengthening our cost
competitiveness and improving our environmental footprint.
During the first half of the year, we invested ?218 million (2021: ?
239 million) in our continuing operations' property, plant and equipment. In
addition, investment in our South African forestry assets amounted to ?
25 million (2021: ?23 million).
Our capital investment programme continues to deliver. We are seeing strong
contributions from capital projects completed in 2021, such as the new 300,000
tonne per annum kraft top white machine at Ruzomberok (Slovakia), the converted
speciality kraft paper machine at Steti (Czech Republic) and several other
projects. The incremental underlying EBITDA contribution from capital
investment projects from continuing operations in 2022 is expected to be around
?60 million.
Looking forward, we continue to see the opportunity to accelerate growth across
our packaging businesses supporting our customers and strengthening our leading
market positions in our growing markets. We have an ambitious expansionary
capital investment programme to support this growth. In this context, our
pipeline currently includes around ?1 billion of expansionary projects in our
continuing operations already approved or under advanced evaluation, that we
anticipate will generate mid-teen returns when in full operation. These
investments, which include the projects below, will deliver volume growth,
lower our cost base and enhance our environmental footprint.
In Corrugated Packaging we are investing ?125 million in our Kuopio mill
(Finland) to increase semi-chemical fluting capacity by around 55,000 tonnes,
enhance product quality, drive cost competitiveness and strengthen the mill's
environmental performance, with start-up expected in the fourth quarter of
2023. We are also investing ?95 million to debottleneck kraftliner production
by 55,000 tonnes at our Swiecie mill (Poland), with commissioning expected
during 2024.
To strengthen our leading market position, support growth in eCommerce and
enhance our product and service offering, we are investing around ?185 million
across our Central and Eastern European Corrugated Solutions plant network.
In Flexible Packaging, to meet growing demand for sustainable paper-based
flexible packaging, we are well advanced in the evaluation of an investment in
a new 200,000 tonne kraft paper machine at Steti for an anticipated total of
around ?350 million. We expect to be in a position to make a final decision on
the investment in the second half of 2022.
We continue to expand the global reach of our leading Paper Bags business,
ramping up production at our new plant in Cartagena (Colombia), growing
capacity in Egypt, investing in a new plant in Morocco, upgrading the
capabilities in our North American plants and expanding our capacity of
paper-based flexible packaging solutions for eCommerce across Europe and the
US.
We are investing ?65 million in our consumer flexibles plants, cementing our
leading position in the fast growing pet food packaging market. We also plan to
invest around ?50 million to enhance our coating capabilities and meet our
customers' growing demand for innovative, sustainable paper-based packaging
with the necessary barrier properties.
On the back of this programme, total capital expenditure for the Group's
continuing operations is expected to be around ?500-600 million in 2022 and
around ?750-850 million in 2023.
We continue to evaluate further capital investment projects for growth in the
packaging markets where we operate, leveraging our high-quality,
cost-advantaged asset base.
Corrugated Packaging (continuing operations)
? million Six months Six months Six months
ended ended ended
30 June 2022 30 June 2021 31 December
2021
Segment revenue 1,564 1,037 1,312
Underlying EBITDA 375 218 325
Underlying EBITDA margin
24.0% 21.0% 24.8%
Underlying operating profit 308 164 262
Capital expenditure cash payments 86 89 100
Operating segment net assets 2,284 2,060 2,018
ROCE
28.9% 20.8% 24.3%
Corrugated Packaging delivered strongly in the first half, with underlying
EBITDA of ?375 million up 72% on the comparable prior year period, driven by
significantly higher average selling prices achieved and the contribution from
acquisitions and capital investment projects previously completed.
Containerboard sales volumes were up on the comparable prior year period
supported by our broad, high-quality product offering and recently completed
investments. Corrugated Solutions box volumes were up on the prior year
including the effect of acquisitions and lower on a like-for-like basis. We
continue to see the benefits of our innovative product portfolio, our strong
customer proposition, disciplined pricing policy and the ongoing investment in
the business. Generally softer demand in Central Europe and Turkey, when
compared with the strong volume growth delivered in the prior year period,
impacted volumes in these regions.
Selling prices were significantly higher than the comparable prior year period
and higher sequentially, on the back of a series of price increases implemented
in 2021 and the first half of 2022. Average benchmark European selling prices
for unbleached kraftliner were up around 40% on the prior year period and 15%
on the second half of 2021, while average benchmark European selling prices for
recycled containerboard were up around 50% on the first half of 2021 and 20%
sequentially. European benchmark semi-chemical fluting and white top kraftliner
prices were up 20% to 25% on the comparable prior year period and around 10%
sequentially. We were successful in passing on higher input paper costs through
box price increases during the period.
Input costs were materially higher when compared to the prior year period, as
well as sequentially, with higher energy, wood, transport, paper for recycling
and chemicals costs. Our strong cost control focus mitigated fixed cost
inflationary effects.
We completed planned maintenance shuts at Kuopio and Richards Bay during the
first half. Maintenance shuts at Swiecie and Ruzomberok are planned for the
second half.
Flexible Packaging (continuing operations)
? million Six months Six months Six months
ended ended ended
30 June 2022 30 June 2021 31 December
2021
Segment revenue 2,082 1,594 1,698
Underlying EBITDA 416 295 272
Underlying EBITDA margin
20.0% 18.5% 16.0%
Underlying operating profit 328 212 187
Special items before tax - 5 2
Capital expenditure cash payments 85 98 84
Operating segment net assets 3,053 2,770 2,822
ROCE
18.7% 14.8% 15.2%
Volume growth, significantly higher average selling prices and good cost
control drove Flexible Packaging's underlying EBITDA up 41% on the comparable
prior year period to ?416 million.
Volume growth was supported by our innovative and sustainable packaging
portfolio. We grew our volumes in retail applications, in particular
paper-based shopping and eCommerce bags, as well as consumer applications, such
as food and pet food, where we have leading market positions. Demand for
building materials, construction and other specialised applications was also
positive during the period. Functional paper and films (FPF) benefited from
increased demand for sustainable packaging solutions although volumes were
slightly lower mainly due to restructuring initiatives in the prior year.
Pricing across the paper value chain was significantly higher compared to the
prior year period following price increases implemented in 2021 and the first
half of 2022. On the back of strong order books and tight markets, further
price increases were implemented early in the second half of the year across
our range of kraft papers, paper bags and functional paper and films, where not
fixed by annual or semi-annual contracts.
Input costs were materially up year-on-year and sequentially, with higher
plastic resins, energy, wood, transport and chemical costs. While cash fixed
costs were higher due to inflationary effects, this was mitigated by our strong
cost control initiatives.
The majority of planned mill maintenance shuts are scheduled for the second
half of the year.
We continue to drive innovation to support our customers' transition to more
sustainable packaging, and to partner along the value chain to create products
for a circular economy, incorporating paper where possible, leveraging our
coating capabilities and developing recyclable, flexible plastic-based
packaging solutions and increasing recycled content in our packaging.
Uncoated Fine Paper (continuing operations)
? million Six months Six months Six months
ended ended ended
30 June 2022 30 June 2021 31 December
2021
Segment revenue 793 590 604
Underlying EBITDA 171 58 (3)
Underlying EBITDA margin
21.6% 9.8% (0.5%)
Underlying operating profit/(loss) 135 22 (39)
Capital expenditure cash payments 38 38 47
Operating segment net assets 1,234 1,196 1,119
ROCE
9.8% 0.9% (1.7%)
Uncoated Fine Paper delivered a good performance, with underlying EBITDA of ?
171 million, up 195% on the prior year period. This was driven by our strong
customer offering, significantly higher average uncoated fine paper and pulp
prices, good operational performance following the successful commissioning of
the rebuilt recovery boiler in Richards Bay in early 2022, and focused cost
control.
The European uncoated fine paper market remains tight due to solid demand and
recent capacity reductions. We grew our share of the European market, with our
customers valuing us as a supplier of choice while capacity leaves the market,
and recognising the strength of our strategic position, underpinned by a broad
product portfolio and excellent service. Uncoated fine paper volumes in South
Africa were lower than the prior year period, due to severe floods around the
city of Durban in mid-April affecting production for most of the second
quarter. Production has now resumed and we are working with our customers to
restart deliveries. Pulp sales volumes were up sequentially following the start
up of the rebuilt recovery boiler at Richards Bay.
Average benchmark European uncoated fine paper selling prices were up around
35% on the comparable prior year period and 30% up sequentially. Average
benchmark European bleached hardwood pulp prices were up 50% compared with the
prior year period and up 10% sequentially.
Input costs were up significantly with higher energy, chemical, wood and
transport costs. Cash fixed costs were higher, mitigated by our cost control
initiatives.
Higher export timber prices during the period resulted in a non-cash forestry
fair value gain of ?30 million in the first half, up ?22 million on the prior
year period. Based on current market conditions, we expect a similar level of
forestry fair value gain in the second half.
A maintenance shut at Ruzomberok is planned for the second half.
H1 2022 EBITDA reconciliation between prior and current reporting segments
? million Corrugated Flexible Engineered Uncoated PCC Corporate Group Discontinued
Packaging Packaging Materials Fine (divested) operations
Paper (Russian
operations)
Underlying EBITDA per 451 380 36 324 (21) 1,170
prior reported
segments
Reorganisation of FPF 35 (36) 1
following PCC disposal
Reclassification of (76) 1 (153) (228) 228
Russian operations
Underlying EBITDA per 375 416 171 1 (21) 942 228
segment (continuing
operations) and EBITDA
from discontinued
operations
Post-tax profit from 777 148
continuing /
discontinued
operations
Russian operations (discontinued operations)
As announced on 4 May 2022, having assessed all options for the Group's
interests in Russia and recognising the Group's corporate values and
stakeholder responsibilities, the Board decided to divest the Group's Russian
assets. As at 30 June 2022, these operations have been classified as held for
sale and presented as discontinued operations.
The divestment process is underway. The disposal of such significant assets is
operationally and structurally complex and it is being undertaken in an
evolving political and regulatory environment.
The Russian operations generated EBITDA of ?228 million in the first half of
the year (H1 2021: ?143 million), of which around a third relates to corrugated
packaging-related products and two thirds to uncoated fine papers. The
Syktyvkar mill supplies the domestic uncoated fine paper market and has managed
supply chain and operational constraints during the period. The mill also
supplies white top kraftliner, a speciality containerboard product, to the
local market and some export destinations. Sales of containerboard to Europe,
which represented around a third of Syktyvkar's containerboard sales volumes in
2021, were stopped towards the end of the first quarter.
The Russian operations' profit after tax for the period amounted to ?148
million.
Syktyvkar's planned maintenance shut is scheduled for the second half of the
year.
As announced on 4 May 2022, all significant capital expenditure projects in
Russia are suspended.
Please refer to note 16 for further information.
Special items
Special items during the period amounted to a net income of ?241 million after
tax as a result of the gain on disposal of PCC (2021: ?5 million net income).
Tax
The underlying effective tax rate from continuing operations in the first half
was 22% (2021: 22%), in line with our expectation.
Cash flow
Cash generated from continuing operations of ?519 million (2021: ?407 million),
including the impact of an increase in working capital, reflects the continued
strong cash generating capacity of the Group.
Working capital at 30 June 2022 was 14.5% of annualised revenue, below the
prior year's level (30 June 2021: 15.0%). This reflects the normal seasonal
increase in the first half of the year together with significantly higher
selling prices.
Tax paid of ?97 million in the first half (2021: ?67 million) was higher mainly
due to higher profitability, coupled with the timing of tax payments. Interest
paid was ?52 million (2021: ?55 million).
We completed the disposal of PCC for an enterprise value of ?615 million at the
end of June 2022. Capital expenditure due to our ongoing capital expenditure
programme amounted to ?218 million (2021: ?239 million).
We paid the 2021 final dividend to shareholders of ?218 million.
Treasury and borrowings
The Group has a strong financial position. Continuing operations' net debt at
30 June 2022 was ?1,220 million, down from ?1,689 million at 31 December 2021,
reflecting the Group's strong cash generation capacity, the disposal of PCC as
well as the ongoing investment in the business, including the increase in
working capital. Net debt to underlying EBITDA was 0.8 times.
At 30 June 2022, the Group's continuing operations have a strong liquidity
position of around ?1.6 billion, comprising ?757 million of undrawn committed
debt facilities and net cash of ?870 million. The weighted average maturity of
our committed debt facilities is 3.8 years. The Group's financing agreements do
not contain financial covenants.
Net finance costs of ?66 million were above those of the comparable prior year
period (?40 million). This was driven by higher interest rates in Central and
Eastern Europe, in particular in the Czech Republic and Poland, and currency
mix effects.
The Group's credit is rated by Standard & Poor's and Moody's Investors Service
at BBB+ (stable outlook) and Baa1 (negative outlook), respectively.
Dividend
The Board aims to offer shareholders long-term ordinary dividend growth within
a targeted dividend cover range of two to three times on average over the
cycle.
An interim dividend of 21.67 euro cents per share, up 8% year-on-year, has been
declared by the directors. The interim dividend will be paid on Thursday
29 September 2022 to those shareholders on the register of Mondi plc on Friday
26 August 2022. The dividend will be paid from distributable reserves.
Outlook
Looking forward, pricing remains strong going into the second half, although we
do anticipate continued inflationary pressures on our cost base and ongoing
supply chain challenges. While significant geopolitical and macroeconomic
uncertainties remain, we expect a year of good progress.
Mondi remains well-placed to deliver sustainably into the future, underpinned
by our integrated cost advantaged asset base, culture of continuous
improvement, portfolio of sustainable packaging solutions and the strategic
flexibility offered by our strong cash generation and financial position.
Principal risks and uncertainties
The Board is responsible for the effectiveness of the Group's risk management
activities and internal control processes. It has put procedures in place for
identifying, evaluating, and managing the significant risks that the Group
faces. In combination with the Audit Committee, at the beginning of 2022, the
Board conducted a robust assessment of the principal and emerging risks to
which Mondi is exposed and it is satisfied that the Group has effective systems
and controls in place to manage its key risks within the risk tolerance levels
established.
The Group's Integrated report and financial statements 2021 set out our
principal risks on pages 86 to 97. To the extent there is a change in the
assessment of those principal risks, it is reported below.
Risk management is by nature a dynamic and ongoing process. Our approach is
flexible to ensure that it remains relevant at all levels of the business, and
dynamic to ensure we can be responsive to changing business conditions. This is
particularly important given the diversity of the Group's locations, markets
and production processes. Our internal control environment is designed to
safeguard the assets of the Group and to provide reasonable assurance that the
Group's business objectives will be achieved.
Pandemic risk (COVID-19)
COVID-19 continues to impact the way we do business due to various health,
social and economic measures implemented by authorities around the world to
combat the pandemic. The health, safety and welfare of the Group's employees
and our communities remain our top priority.
The Executive Committee and Board continue to monitor our exposure and the
impact of COVID-19 on the Group and evaluate actions to mitigate the risk, and
where possible, identify opportunities that have arisen. In future, these
actions and other monitoring techniques which we have developed, will enable
the Group to be dynamic in its reaction to the risk of a pandemic as it
emerges.
Strategic risks
The industries and geographies in which we operate expose us to specific
long-term risks which are accepted by the Board as a consequence of the Group's
chosen strategy and operating footprint.
We have significant operations in Russia, including our integrated pulp,
packaging paper and uncoated fine paper mill located in Syktyvkar (Komi
Republic). The Group also has three converting plants in Russia. All these
facilities primarily serve the domestic market and have continued to operate
through the six months ended 30 June 2022. As announced on 4 May 2022, having
assessed all options for the Group's interests in Russia and recognising the
Group's corporate values and stakeholder responsibilities, the Board decided to
divest the Group's Russian assets. Further information is provided under the
heading 'Russian operations (discontinued operations)' above.
In Ukraine, Mondi has one paper bag plant located in Lviv, west of the country,
where production was temporarily suspended until it resumed gradually starting
in the second quarter. We are actively monitoring the war, the international
response and the implications for the Group.
We continue to track capacity announcements, demand developments and how
consumers are demanding more sustainable packaging. We continue to increase our
understanding of climate change-related risks and its impact whilst continuing
to improve our disclosures and develop our responses.
The Executive Committee and Board monitor our exposure to these risks and
evaluate investment decisions against our overall exposures so that our
strategic capital allocation takes advantage of the opportunities arising from
our deliberate exposure to such risks.
Our principal strategic risks relate to the following:
* Industry productive capacity
* Product substitution
* Fluctuations and variability in selling prices or gross margins
* Country risk
* Climate change-related risk
Financial risks
We aim to maintain an appropriate capital structure and to manage our financial
risk exposures in compliance with all laws and regulations.
An attentive approach to financial risk management remains in response to
continued scrutiny of the tax affairs of multinational companies and ongoing
short-term currency volatility.
Our principal financial risks relate to the following:
* Capital structure
* Currency risk
* Tax risk
Operational risks
As a Group we focus on operational excellence and investment in our people and
are committed to the responsible use of resources.
Our investments to improve our energy efficiency, engineer out our most
significant safety risks and improve operating efficiencies continues to reduce
the likelihood of operational risk events. Physical and transitional risks
arising due to climate change are anticipated to have an operational impact on
the Group, particularly on supply of wood fibre and energy within the EU.
The risk of energy security and higher energy costs has heightened during the
period. Our pulp and paper mills generate most of their energy needs
internally, with biomass sources accounting for around 80% of the fuels used in
this process, thereby mitigating the impact of the significant surge in
external fuel costs. However, certain Group operations are reliant on gas
supply - we continue to actively monitor the supply situation, invest to
diversify our fuels sources and drive energy efficiency.
Our principal operational risks relate to the following:
* Cost and availability of raw materials
* Energy security and related input costs
* Technical integrity of our operating assets
* Environmental impact
* Employee and contractor health and safety
* Attraction and retention of key skills and talent
* Cyber security risk
Compliance risk
We have a zero tolerance approach to our compliance risk. Our strong culture
and values, emphasised in every part of our business, with a focus on
integrity, honesty, and transparency, underpin our approach.
Our principal compliance risk relates to Reputational risk.
Going concern
The directors have reviewed the Group's current financial position and
performance expectations for the period until 30 June 2024, including
consideration of the principal risks which may impact the Group's performance
in the near term. The going concern assessment has been based on the Group's
continuing operations (which exclude the Russian operations) unless otherwise
stated.
The Group has a strong balance sheet. Continuing operations' net debt at
30 June 2022 was ?1,220 million, down from ?1,689 million at 31 December 2021
reflecting the Group's strong cash generation capacity, the disposal of PCC as
well as the ongoing investment in the business, including the increase in
working capital. Net debt to underlying EBITDA was 0.8 times. At 30 June 2022,
the Group has a strong liquidity position of around ?1.6 billion, comprising ?
757 million of undrawn committed debt facilities and net cash of ?870 million.
The weighted average maturity of our committed debt facilities is 3.8 years.
The Group has prepared a base case forecast for the Group's continuing
operations (which exclude the Russian operations) reflecting recent trading
performance in the first half of the year and expectations for market
developments over the period to 30 June 2024. The base case forecasts were
sensitised to reflect a severe but plausible downside scenario including
possible future impacts of the principal risks on Group performance. In the
severe but plausible downside scenario there remains significant liquidity
headroom.
In addition to its modelled downside going concern scenario, the Board has
reverse stress tested the model to determine the extent of downturn which would
result in no liquidity headroom. A decline of around 75% to the planned
underlying EBITDA in the period until 30 June 2024, well in excess of that
contemplated in the plausible downside scenario, would need to persist
throughout the observed period to result in no liquidity headroom, which is
considered very unlikely. This stress test also does not incorporate mitigating
actions like reductions and deferrals of capital and operational expenditure or
cash preservation responses, which the Group would implement in the event of a
severe and extended revenue decline.
Following its assessment, the directors have formed a judgement, at the time of
approving the condensed consolidated financial statements, that there are no
material uncertainties that cast doubt on the Group's going concern status and
that it is a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. For this reason,
the Group continues to adopt the going concern basis in preparing the condensed
consolidated financial statements for 30 June 2022.
Enquiries
Investors/analysts:
Clara
Valera
+44 193 282 6357
Mondi Group Head of Strategy and Investor Relations
Media:
Kerry
Cooper
+44 788 145 5806
Mondi Group Communication Director
Richard Mountain (FTI Consulting)
+44 790 968 4466
Audiocast and dial-in conference call details
Please see below details for the audiocast and conference call that will be
held at 09:00 (BST) and 10:00 (CEST/SAST) today.
Audiocast:
An audiocast of the presentation will be accessible via https://
www.mondigroup.com/en/investors/
A PDF of the slides will be available to download from the above website 30
minutes before the audiocast commences. Written questions can be submitted via
the audiocast platform. If you wish to ask a question verbally, please connect
via the dial-in conference call (details below).
For queries regarding access to the audiocast please e-mail
group.communication@mondigroup.com.
A recording of the presentation will be available on Mondi's website during the
afternoon of 4 August 2022.
Dial-in conference call:
To access the facility please register your name and contact details: https://
register.vevent.com/register/BI4efd3654616e47ad918c2020a236e0f9
Directors' responsibility statement
The directors confirm that to the best of their knowledge:
* the condensed consolidated financial statements of the Group have been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted for use in the United Kingdom and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority;
* the half-year results announcement includes a fair review of the
significant events during the six months ended 30 June 2022 and a
description of the principal risks and uncertainties for the remaining six
months of the year ending 31 December 2022;
* there have been no significant individual related party transactions during
the first six months of the financial year; and
* there have been no significant changes in the Group's related party
relationships from those reported in the Integrated report and financial
statements 2021.
The Group's condensed consolidated financial statements, and related notes,
were approved by the Board and authorised for issue on 3 August 2022 and were
signed on its behalf by:
Andrew
King
Mike Powell
Director
Director
3 August 2022
Independent review report to Mondi plc
Report on the condensed consolidated financial statements
Our conclusion
We have reviewed Mondi plc's condensed consolidated financial statements (the
"interim financial statements") in the half year results announcement of Mondi
plc for the six month period ended 30 June 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all material
respects, in accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
* the condensed consolidated statement of financial position as at
30 June 2022;
* the condensed consolidated income statement and the condensed consolidated
statement of comprehensive income for the period then ended;
* the condensed consolidated statement of cash flows for the period then
ended;
* the condensed consolidated statement of changes in equity for the period
then ended; and
* the explanatory notes to the interim financial statements.
The interim financial statements included in the half year results announcement
of Mondi plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
We have read the other information contained in the half year results
announcement and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim financial
statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern that
are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The half year results announcement, including the interim financial statements,
is the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the half year results announcement in accordance
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. In preparing the half year results
announcement, including the interim financial statements the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the half year results announcement based on our review. Our
conclusion, including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority and for no other purpose. We do
not, in giving this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
3 August 2022
Condensed consolidated income statement
for the six months ended 30 June 2022
Restated1 Restated1
Six months ended Six months ended Year ended 31 December 2021
30 June 2022 30 June 2021
? million Notes Underlying Special Total Underlying Special Total Underlying Special Total
items items items
(Note (Note (Note 5)
5) 5)
From continuing
operations
Group revenue 4 4,505 - 4,505 3,283 - 3,283 6,974 - 6,974
Materials, energy and (2,370) - (2,370) (1,688) - (1,688) (3,663) - (3,663)
consumables used
Variable selling (362) - (362) (267) - (267) (547) - (547)
expenses
Gross margin 1,773 - 1,773 1,328 - 1,328 2,764 - 2,764
Maintenance and other (155) - (155) (137) - (137) (328) - (328)
indirect expenses
Personnel costs (549) - (549) (512) 3 (509) (1,025) 5 (1,020)
Other net operating (127) - (127) (113) - (113) (254) (2) (256)
expenses
Gain on disposal of 17 - 246 246 - - - - - -
business, net of related
transaction costs
EBITDA 4 942 246 1,188 566 3 569 1,157 3 1,160
Depreciation, (194) - (194) (181) 3 (178) (375) 4 (371)
amortisation and
impairments
Operating profit 4 748 246 994 385 6 391 782 7 789
Net profit from joint 3 - 3 3 - 3 6 - 6
ventures
Net monetary gain 2 2 - 2 - - - - - -
arising from
hyperinflationary
economies
Investment income 7 2 - 2 1 - 1 5 - 5
Foreign currency losses 7 (2) - (2) - - - (2) - (2)
Finance costs 7 (66) - (66) (41) - (41) (86) - (86)
Profit before tax 687 246 933 348 6 354 705 7 712
Tax (charge)/credit 8 (151) (5) (156) (76) (1) (77) (154) 2 (152)
Profit from continuing 536 241 777 272 5 277 551 9 560
operations
From discontinued
operations
Profit from discontinued 16 148 84 213
operations
Profit for the period 925 361 773
Attributable to:
Non-controlling 57 13 17
interests
Shareholders 868 348 756
Earnings per share (EPS)
attributable to
shareholders
euro cents
From continuing
operations
Basic EPS 9 148.4 54.4 112.0
Diluted EPS 9 148.4 54.4 111.9
Basic underlying EPS 9 98.7 53.4 110.1
Diluted underlying EPS 9 98.7 53.4 110.0
From continuing and
discontinued operations
Basic EPS 9 178.9 71.8 155.9
Diluted EPS 9 178.9 71.7 155.8
Basic total EPS (prior 9 129.3 70.7 154.0
to special items)
Diluted total EPS (prior 9 129.2 70.7 153.9
to special items)
Note:
1 The Group's operations in Russia are presented as held for sale as at 30 June
2022 and classified as discontinued operations for the period then ended.
Accordingly, in accordance with IFRS 5, 'Non-current Assets Held for Sale and
Discontinued Operations', the comparative figures for the periods ended 31
December 2021 and 30 June 2021 were restated to separate the net profit and
cash flows associated with the Russian operations. APMs, as defined at the end
of this document, were accordingly restated to exclude the effect of the
Russian operations. Refer to notes 1, 2 and 16 for further details.
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2022
Restated Restated
? million Notes Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Profit for the period 925 361 773
Items that may subsequently be reclassified to the
condensed consolidated income statement
Fair value gains/(losses) arising from cash flow 1 (1) (1)
hedges of continuing operations
Fair value gains arising from cash flow hedges of 16 5 - -
discontinued operations
Exchange differences on translation of foreign 165 59 (16)
continuing operations
Exchange differences on translation of foreign 16 417 33 42
discontinued operations
Reclassification of foreign currency translation 17 (4) - -
reserve to the condensed consolidated income
statement on disposal of business
Share of other comprehensive income of joint - - 1
ventures
Items that will not subsequently be reclassified to
the condensed consolidated income statement
Remeasurements of retirement benefits plans of 5 5 11
continuing operations
Remeasurements of retirement benefits plans of 16 2 - 1
discontinued operations
Tax effect thereof (2) (2) (4)
Other comprehensive income for the period 589 94 34
Total comprehensive income for the period 1,514 455 807
Attributable to:
Non-controlling interests 77 11 13
Shareholders 1,437 444 794
Total comprehensive income for the period
attributable to shareholders
arises from:
Continuing operations 865 327 538
Discontinued operations 572 117 256
Condensed consolidated statement of financial position
as at 30 June 2022
? million Notes As at As at As at 31
30 June 2022 30 June 2021 December
2021
Property, plant and equipment 4,083 4,822 4,870
Goodwill 11 788 929 926
Intangible assets 67 77 76
Forestry assets 12 389 387 348
Investments in joint ventures 20 15 17
Financial instruments 32 31 33
Deferred tax assets 37 33 43
Net retirement benefits asset 15 11 22 26
Other non-current assets 11 - 1
Total non-current assets 5,438 6,316 6,340
Inventories 1,191 1,007 1,099
Trade and other receivables 1,553 1,322 1,333
Current tax assets 4 8 12
Financial instruments 9 8 4
Cash and cash equivalents 18b 916 288 473
3,673 2,633 2,921
Assets held for sale 16 1,695 1 -
Total current assets 5,368 2,634 2,921
Total assets 10,806 8,950 9,261
Short-term borrowings 14 (162) (175) (124)
Trade and other payables (1,434) (1,313) (1,444)
Current tax liabilities (153) (92) (116)
Provisions (20) (40) (33)
Financial instruments (15) (7) (18)
(1,784) (1,627) (1,735)
Liabilities directly associated with assets held for 16 (391) - -
sale
Total current liabilities (2,175) (1,627) (1,735)
Medium and long-term borrowings 14 (1,975) (2,121) (2,104)
Net retirement benefits liability 15 (167) (213) (197)
Deferred tax liabilities (270) (302) (283)
Provisions (31) (35) (35)
Other non-current liabilities (12) (16) (18)
Total non-current liabilities (2,455) (2,687) (2,637)
Total liabilities (4,630) (4,314) (4,372)
Net assets 6,176 4,636 4,889
Equity
Share capital 97 97 97
Own shares (14) (16) (18)
Retained earnings 5,411 4,449 4,760
Other reserves 223 (288) (341)
Total attributable to shareholders 5,717 4,242 4,498
Non-controlling interests in equity 459 394 391
Total equity 6,176 4,636 4,889
The Group's condensed consolidated financial statements, and related notes 1 to
23, were approved by the Board and authorised for issue on 3 August 2022 and
were signed on its behalf by:
Andrew King
Mike Powell
Director
Director
Mondi plc company registered number:
6209386
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2022
? million Equity Non-controlling Total
attributable interests equity
to
shareholders
At 1 January 2021 4,002 380 4,382
Total comprehensive income for the period 444 11 455
Dividends (201) (4) (205)
Purchases of own shares (5) - (5)
Acquisition of business - 7 7
Other 2 - 2
At 30 June 2021 4,242 394 4,636
Total comprehensive income for the period 350 2 352
Dividends (97) (2) (99)
Purchases of own shares (2) - (2)
Other 5 (3) 2
At 31 December 2021 4,498 391 4,889
Hyperinflation monetary adjustment (see note 2) (12) (5) (17)
Restated balance at 1 January 2022 4,486 386 4,872
Total comprehensive income for the period 1,437 77 1,514
Dividends (218) (4) (222)
Purchases of own shares (4) - (4)
Hyperinflation monetary adjustment (see note 2) 15 - 15
Other 1 - 1
At 30 June 2022 5,717 459 6,176
Equity attributable to shareholders
? million As at As at As at 31
30 June 2022 30 June 2021 December
2021
Share capital 97 97 97
Own shares (14) (16) (18)
Retained earnings 5,411 4,449 4,760
Cumulative translation adjustment reserve (454) (944) (1,007)
Post-retirement benefits reserve (34) (48) (43)
Share-based payment reserve 12 11 16
Cash flow hedge reserve 5 - (1)
Merger reserve 667 667 667
Other sundry reserves 27 26 27
Total 5,717 4,242 4,498
Condensed consolidated statement of cash flows
for the six months ended 30 June 2022
Restated Restated
? million Notes Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Cash flows from operating activities
Cash generated from continuing operations 18a 519 407 1,001
Dividends received from other investments - - 1
Income tax paid (97) (67) (138)
Net cash generated from operating activities from 16 193 132 286
discontinued operations
Net cash generated from operating activities 615 472 1,150
Cash flows from investing activities
Investment in property, plant and equipment (218) (239) (481)
Investment in intangible assets (4) (8) (16)
Investment in forestry assets 12 (25) (23) (45)
Investment in joint ventures - (1) (1)
Proceeds from the disposal of property, plant and 4 19 21
equipment
Proceeds from the disposal of business, net of cash 17 646 - -
and cash equivalents
Acquisition of businesses, net of cash and cash - (63) (63)
equivalents
Loans advanced to related and external parties - - (1)
Interest received 1 1 3
Other investing activities 8 - 4
Net cash used in investing activities from 16 (33) (47) (91)
discontinued operations
Net cash generated from/(used in) investing 379 (361) (670)
activities
Cash flows from financing activities
Proceeds from other medium and long-term borrowings 18c - 63 59
Repayment of other medium and long-term borrowings 18c (49) - -
Net proceeds from/(repayment) of short-term 18c 12 11 (4)
borrowings
Repayment of lease liabilities 18c (11) (10) (21)
Interest paid (52) (55) (67)
Dividends paid to shareholders 10 (218) (201) (298)
Dividends paid to non-controlling interests (4) (4) (6)
Purchases of own shares (4) (5) (7)
Non-controlling interests bought out - - (3)
Net cash outflow from debt-related derivative (65) (14) (12)
financial instruments
Other financing activities - 1 -
Net cash used in financing activities from 16 (11) (7) (13)
discontinued operations
Net cash used in financing activities (402) (221) (372)
Net increase/(decrease) in cash and cash equivalents 592 (110) 108
Cash and cash equivalents at beginning of period 455 348 348
Cash movement in the period 18c 592 (110) 108
Effects of changes in foreign exchange rates 18c 98 (1) (1)
Cash and cash equivalents at end of period 18b 1,145 237 455
Notes to the condensed consolidated financial statements
for the six months ended 30 June 2022
1 Basis of preparation
These condensed consolidated financial statements as at and for the six months
ended 30 June 2022 comprise Mondi plc and its subsidiaries (referred to as the
'Group'), and the Group's share of the results and net assets of its associates
and joint ventures.
The Group's condensed consolidated financial statements have been prepared in
accordance with International Accounting Standard 34, 'Interim Financial
Reporting' as adopted for use in the United Kingdom (UK) and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. They should be read in conjunction with the Group's
Integrated report and financial statements 2021, prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
The condensed consolidated financial statements have been prepared on a going
concern basis as discussed in the commentary under the heading 'Going concern',
which is incorporated by reference into these condensed consolidated financial
statements.
The financial information set out above does not constitute statutory accounts
as defined by section 434 of the Companies Act 2006. A copy of the statutory
accounts for the year ended 31 December 2021 has been delivered to the
Registrar of Companies. The auditors have reported on those accounts; their
report was (i) unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006. The financial information set out above has been
reviewed, not audited.
These condensed consolidated financial statements have been prepared on the
historical cost basis, as modified by forestry assets, pension assets,
financial assets and financial liabilities held at fair value through profit
and loss and accounting in hyperinflationary economies.
No changes in the provisional amounts of the fair value of the assets acquired
and liabilities assumed for the acquisition of Olmuksan International Paper
Ambalaj Sanayi ve Ticaret A.S on 31 May 2021 have been recognised during the
six months ended 30 June 2022. Accounting for the transaction is finalised.
The preparation of these condensed consolidated financial statements includes
the use of estimates and assumptions. Although the estimates used are based on
management's best information about current circumstances and future events and
actions, actual results may differ from these estimates.
In preparing these condensed consolidated financial statements, the critical
accounting judgements made by management in applying the Group's accounting
policies and significant accounting estimates as identified in the Group's
Integrated report and financial statements 2021 were largely the same, with the
exception of the judgements applied in relation to the Group's Russian
operations as to whether the Group should continue to consolidate its Russian
businesses, if and when the businesses satisfied the requirements to be
classified as held for sale, and whether the Russian businesses should be
presented as discontinued operations, and significant estimates and assumptions
in the valuation of its Russian assets (see note 16).
2 Accounting policies
The same accounting policies, methods of computation and presentation have been
followed in the preparation of the condensed consolidated financial statements
for the six months ended 30 June 2022 as were applied in the preparation of the
Group's annual financial statements for the year ended 31 December 2021, except
as follows:
* Non-current assets held for sale and discontinued operations
Non-current assets, and disposal groups, are classified as held for sale if
their carrying amount will be recovered through a sale transaction rather than
through continuing use. Non-current assets, and disposal groups, classified as
held for sale are measured at the lower of carrying amount and fair value less
costs to sell from the date on which these conditions are met.
Any resulting impairment is reported through the condensed consolidated income
statement. On classification as held for sale, the assets are no longer
depreciated or amortised. Comparative amounts in the condensed consolidated
statement of financial position are not adjusted.
Discontinued operations are either a separate major line of business or
geographical area of operations that have been disposed of or are part of a
single coordinated plan for disposal. Once an operation has been identified as
discontinued, its net profit or loss, other comprehensive income or expense and
cash flows are presented separately in the condensed consolidated income
statement, the condensed consolidated statement of comprehensive income and the
condensed consolidated statement of cash flows, including related notes to
these statements, and comparative information is restated. The Group's assets
and liabilities related to comparative periods are not separated between
continuing and discontinued operations in the condensed consolidated statement
of financial position.
* Hyperinflation accounting
Effective from 1 January 2022, the Group has applied IAS 29, Financial
Reporting in Hyperinflationary Economies, for its subsidiaries in Turkey, whose
functional currencies have experienced a cumulative inflation rate of more than
100% over the past three years. Assets, liabilities, the financial position and
results of foreign operations in hyperinflationary economies are translated to
Euro at the exchange rates prevailing on the reporting date. The exchange
differences are recognised directly in other comprehensive income, and
accumulated in the currency translation adjustment reserve in equity. Such
translation differences are reclassified to profit or loss only on disposal or
partial disposal of the overseas operation.
Prior to translating the financial statements of foreign operations, the
non-monetary assets and liabilities stated at historical cost are restated to
account for changes in the general purchasing power of the local currencies
based on the consumer price index (TUFE, 2003=100) published by the Turkish
Statistical Institute (TURKSTAT). The consumer price index for the six months
ended 30 June 2022 increased by 42% from 687 at 31 December 2021 to 978 at
30 June 2022. On the date of first-time application, being 1 January 2022, the
adjustment of the carrying amounts of non-monetary assets and liabilities was
recognised in retained earnings in equity as presented in the condensed
consolidated statement of changes in equity. The subsequent gains or losses
resulting from the restatement of non-monetary assets and liabilities are
recorded in the condensed consolidated income statement.
For the six months ended 30 June 2022, the adjustments from hyperinflationary
accounting have resulted in an increase in total assets of ?107 million, an
increase in Group revenue of ?47 million, a decrease in underlying EBITDA of ?
28 million and a net monetary gain of ?2 million. Comparative amounts presented
in Euro were not restated for subsequent changes in the price level or exchange
rates.
The Group also operates a paper bags plant in Lebanon, which became a
hyperinflationary economy in September 2020. IAS 29 has not been applied for
this subsidiary as the impact from hyperinflation accounting is considered
immaterial.
* A number of amendments to IFRS became effective for the financial period
beginning on 1 January 2022, but the Group did not have to change its
accounting policies or make any retrospective adjustments as a result of
adopting these amendments.
* Consistent with previous half year reports, taxes on income in the interim
period are accrued using the tax rate that would be applicable to expected
total annual profits or losses.
Alternative Performance Measures
The Group presents certain measures of financial performance, position or cash
flows in the condensed consolidated financial statements that are not defined
or specified according to IFRS. These measures, referred to as APMs, are
defined at the end of this document and where relevant reconciled to IFRS.
As at 30 June 2022, the Group's operations in Russia are presented as held for
sale and classified as discontinued operations for the period then ended. For
comparability purposes, the APMs based on amounts recognised in the condensed
consolidated statement of financial position have been adjusted for the Russian
assets and liabilities as described at the end of this document. Note, no
restatement of the IFRS condensed consolidated statement of financial position
has been made for such items. APMs measuring the profitability of the Group are
presented for continuing operations (i.e. excluding the results for the Russian
discontinued operations) and comparatives are presented on the same basis,
consistent with the presentation of the IFRS condensed consolidated income
statement. Where these changes have impacted the APMs for comparative periods
as presented previously, these have been described as restated.
3 Seasonality
The seasonality of the Group's operations had no significant impact on the
condensed consolidated financial statements.
4 Operating segments
The Group's operating segments are reported in a manner consistent with the
internal reporting provided to the Executive Committee, the chief operating
decision-making body. The operating segments are managed based on the nature of
the underlying products produced by those businesses and comprise three (2021:
four) distinct segments.
Each of the operating segments represents a reportable segment and derives its
income from the sale of manufactured products.
The Group's operations in Russia, comprising its high-margin, cost-competitive,
integrated pulp, packaging paper and uncoated fine paper mill in Syktyvkar
(Komi Republic) and three converting plants, are reported as discontinued
operations for the period ended 30 June 2022. The discontinued operations' net
profit and cash flows are presented separately in the condensed consolidated
income statement and condensed consolidated statement of cash flows for all
periods presented. Financial information relating to the discontinued
operations is provided in note 16.
Effective from 30 June 2022 and following the completion of the sale of the
Personal Care Components (PCC) business, the Group reorganised its operating
segments. Functional Paper and Films, previously part of the Engineered
Materials operating segment, was moved to Flexible Packaging to strengthen
integration along the kraft paper value chain and further support the
development of innovative functional papers with barrier properties, fulfilling
customers' needs for sustainable packaging. The remaining part of the
previously reported Engineered Materials operating segment, namely the disposed
PCC business (see note 17), has been reported in the Personal Care Components
(divested) operating segment up to the date of disposal.
Accordingly, the Group has restated the previously reported segment information
to present the Group's operations under the new organisational structure.
Six months ended 30 June 2022
? million, unless otherwise stated Corrugated Flexible Uncoated Corporate Personal Intersegment Total Discontinued Intersegment Total
Packaging Packaging Fine Care elimination Continuing operations1 elimination Group
Paper Components operations
(divested)
Segment revenue 1,564 2,082 793 - 181 (76) 4,544 (39) 4,505
Internal revenue (35) (25) (43) - (12) 76 (39) 39 -
External revenue 1,529 2,057 750 - 169 - 4,505 - 4,505
Underlying EBITDA 375 416 171 (21) 1 - 942 - 942
Depreciation and impairments (64) (84) (35) - (3) - (186) - (186)
Amortisation (3) (4) (1) - - - (8) - (8)
Underlying operating profit/(loss) 308 328 135 (21) (2) - 748 - 748
Special items before tax - - - - 246 - 246 - 246
Profit from discontinued operations 148 148
Operating segment assets 2,624 3,809 1,562 9 - (70) 7,934 (29) 7,905
Operating segment net assets 2,284 3,053 1,234 5 - - 6,576 (16) 6,560
Trailing 12-month average capital 1,969 2,782 983 (90) 345 - 5,989 773 - 6,762
employed
Additions to non-current non-financial 91 93 59 - 9 - 252 - 252
assets
Capital expenditure cash payments 86 85 38 - 9 - 218 - 218
Underlying EBITDA margin (%) 24.0 20.0 21.6 - 0.6 - 20.9 - 20.9
Return on capital employed (%) 28.9 18.7 9.8 - 1.1 - 19.2 - 22.5
Average number of employees 6.3 11.4 3.0 0.1 0.9 - 21.7 5.3 - 27.0
(thousands)2
Notes:
1 The Group's assets and liabilities in Russia are classified as held for
sale as at 30 June 2022 and its operations are reported as discontinued
operations for the period then ended. The discontinued operations' net profit
and cash flows are presented separately in the condensed consolidated income
statement and condensed consolidated statement of cash flows and comparative
information has been restated. The assets and liabilities related to
comparative periods are not separated between continuing and discontinued
operations in the condensed consolidated statement of financial position (see
note 2)
2 Presented on a full time employee equivalent basis
Six months ended 30 June 2021 (restated)
? million, unless otherwise stated Corrugated Flexible Uncoated Corporate Personal Intersegment Total Discontinued Intersegment Total
Packaging Packaging Fine Care elimination Continuing operations1 elimination Group
Paper Components operations
(divested)
Segment revenue 1,037 1,594 590 - 160 (72) 3,309 (26) 3,283
Internal revenue (27) (25) (32) - (14) 72 (26) 26 -
External revenue 1,010 1,569 558 - 146 - 3,283 - 3,283
Underlying EBITDA 218 295 58 (17) 12 - 566 - 566
Depreciation and impairments (52) (79) (35) - (8) - (174) - (174)
Amortisation (2) (4) (1) - - - (7) - (7)
Underlying operating profit/(loss) 164 212 22 (17) 4 - 385 - 385
Special items before tax - 5 - - 1 - 6 - 6
Profit from discontinued operations 84 84
Operating segment assets 2,406 3,346 1,454 4 424 (68) 7,566 918 (50) 8,434
Operating segment net assets 2,060 2,770 1,196 - 381 - 6,407 784 - 7,191
Trailing 12-month average capital 1,560 2,620 998 (97) 356 - 5,437 640 - 6,077
employed
Additions to non-current non-financial 157 78 55 - 15 - 305 - 305
assets
Capital expenditure cash payments 89 98 38 - 14 - 239 - 239
Underlying EBITDA margin (%) 21.0 18.5 9.8 - 7.5 - 17.2 - 17.2
Return on capital employed (%) 20.8 14.8 0.9 - 2.5 - 12.8 - 14.8
Average number of employees 5.5 11.2 3.0 0.1 1.0 - 20.8 5.2 - 26.0
(thousands)2
Notes:
1 The Group's assets and liabilities in Russia are classified as held for
sale as at 30 June 2022 and its operations are reported as discontinued
operations for the period then ended. The discontinued operations' net profit
and cash flows are presented separately in the condensed consolidated income
statement and condensed consolidated statement of cash flows and comparative
information has been restated. The assets and liabilities related to
comparative periods are not separated between continuing and discontinued
operations in the condensed consolidated statement of financial position (see
note 2)
2 Presented on a full time employee equivalent basis
Year ended 31 December 2021 (restated)
? million, unless otherwise stated Corrugated Flexible Uncoated Corporate Personal Intersegment Total Discontinued Intersegment Total
Packaging Packaging Fine Care elimination Continuing operations1 elimination Group
Paper Components operations
(divested)
Segment revenue 2,349 3,292 1,194 - 335 (133) 7,037 (63) 6,974
Internal revenue (56) (53) (59) - (28) 133 (63) 63 -
External revenue 2,293 3,239 1,135 - 307 - 6,974 - 6,974
Underlying EBITDA 543 567 55 (34) 26 - 1,157 - 1,157
Depreciation and impairments (112) (160) (70) (1) (16) - (359) - (359)
Amortisation (5) (8) (2) - (1) - (16) - (16)
Underlying operating profit/(loss) 426 399 (17) (35) 9 - 782 - 782
Special items before tax - 7 - - - - 7 - 7
Profit from discontinued operations 213 213
Operating segment assets 2,394 3,456 1,415 7 440 (89) 7,623 989 (87) 8,525
Operating segment net assets 2,018 2,822 1,119 (1) 394 - 6,352 844 - 7,196
Trailing 12-month average capital 1,754 2,667 983 (91) 359 - 5,672 677 - 6,349
employed
Additions to non-current non-financial 258 174 133 6 24 - 595 - 595
assets
Capital expenditure cash payments 189 182 85 2 23 - 481 - 481
Underlying EBITDA margin (%) 23.1 17.2 4.6 - 7.8 - 16.6 - 16.6
Return on capital employed (%) 24.3 15.2 (1.7) - 2.5 - 13.9 - 16.9
Average number of employees 5.9 11.2 3.0 0.1 1.0 - 21.2 5.2 - 26.4
(thousands)2
Notes:
1 The Group's assets and liabilities in Russia are classified as held for
sale as at 30 June 2022 and its operations are reported as discontinued
operations for the period then ended. The discontinued operations' net profit
and cash flows are presented separately in the condensed consolidated income
statement and condensed consolidated statement of cash flows and comparative
information has been restated. The assets and liabilities related to
comparative periods are not separated between continuing and discontinued
operations in the condensed consolidated statement of financial position (see
note 2)
2 Presented on a full time employee equivalent basis
External revenue by location of production and by location of customer1
External revenue by location of External revenue by location of
production customer
Restated Restated Restated Restated
? million Six months Six months Year ended Six months Six months Year ended
ended ended 31 December ended ended 31 December
30 June 2022 30 June 2021 2021 30 June 2022 30 June 2021 2021
Africa
South Africa 229 235 451 207 192 394
Rest of Africa 39 28 56 191 131 272
Africa total 268 263 507 398 323 666
Western Europe
Austria 874 641 1,280 105 75 159
Germany 486 420 877 618 467 996
United Kingdom 2 2 3 120 87 191
Rest of western Europe 411 317 699 1,024 742 1,511
Western Europe total 1,773 1,380 2,859 1,867 1,371 2,857
Emerging Europe
Czech Republic 409 290 602 146 107 223
Poland 775 554 1,242 435 318 707
Turkey 331 171 434 404 202 512
Rest of emerging Europe2 582 353 764 333 248 515
Emerging Europe total 2,097 1,368 3,042 1,318 875 1,957
Russia - - - 14 17 34
North America 313 233 480 506 374 804
South America 1 - - 85 56 128
Asia and Australia 53 39 86 317 267 528
Group total 4,505 3,283 6,974 4,505 3,283 6,974
Notes:
1 Excludes external revenue generated by the discontinued operations (see
note 16)
2 External revenue for Rest of emerging Europe by location of production
and customer has been further analysed to separately show revenue for Turkey.
Reconciliation of operating segment assets
As at 30 June 2022 As at 30 June 2021 As at 31 December
2021
? million Segment Segment Segment Segment Segment Segment
assets net assets net assets net
assets assets assets
Group total 7,905 6,560 8,434 7,191 8,525 7,196
Unallocated
Assets held for sale (see note 1,695 1,304 - - - -
16)
Investments in joint ventures 20 20 15 15 17 17
Deferred tax assets/ 37 (233) 33 (269) 43 (240)
(liabilities)
Other non-operating assets/ 226 (255) 173 (297) 201 (321)
(liabilities)
Group capital employed 9,883 7,396 8,655 6,640 8,786 6,652
Financial instruments/(net 923 (1,220) 295 (2,004) 475 (1,763)
debt)
Total assets/equity 10,806 6,176 8,950 4,636 9,261 4,889
Other non-operating assets/(liabilities) include non-current financial
instruments, current tax assets/(liabilities), provisions for restructuring
costs, employee related and other provisions, derivative financial instruments
and other non-operating receivables/(payables).
5 Special items
The Group separately discloses special items, an APM as defined at the end of
this document, on the face of the condensed consolidated income statement to
assist its stakeholders in understanding the underlying financial performance
achieved by the Group on a basis that is comparable from year to year.
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Operating special items
Reversal of impairment of assets - 3 4
Restructuring and closure costs:
Personnel costs - 3 5
Other restructuring and closure costs - - (2)
Gain on disposal of business, net of related transaction 246 - -
costs (see note 17)
Total special items before tax 246 6 7
Tax (charge)/credit (see note 8) (5) (1) 2
Total special items 241 5 9
The operating special items resulted in a cash outflow from operating
activities for the six months ended 30 June 2022 of ?8 million (six months
ended 30 June 2021: ?13 million; year ended 31 December 2021: ?15 million). The
net cash received from the sale of the Personal Care Components business
totalled ?646 million and is presented within cash flows from investing
activities.
To 30 June 2022 (Reviewed)
The special items during the period comprised:
* Personal Care Components (divested)
* ?246 million gain on the sale of the Personal Care Components business to
Nitto Denko Corporation. Transaction costs of ?6 million were recognised in
the prior year and were not treated as a special item. Further detail is
provided in note 17.
To 31 December 2021 (Audited)
The special items during the year ended 31 December 2021 comprised:
* Flexible Packaging
* Release of restructuring and closure provision of ?2 million and partial
reversal of impairment of assets of ?3 million were recognised relating to
the closure of a functional paper and films plant in the US. The credits
are linked to a special item from the prior year, of which total costs
accumulated to ?9 million.
* Release of restructuring and closure provision of ?2 million, partly offset
by additional restructuring costs of ?1 million, and reversal of impairment
of assets of ?1 million were recognised. All credit/(charges) related to
special items from prior years.
6 Write-down of inventories to net realisable value
Restated Restated
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Write-down of inventories to net realisable value (47) (24) (42)
Aggregate reversal of previous write-downs of inventories 29 19 30
7 Net finance costs
Restated Restated
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Investment income 2 1 5
Net foreign currency losses (2) - (2)
Finance costs
Interest expense
Interest on bank overdrafts and loans (59) (35) (75)
Interest expense from lease liability (4) (3) (7)
Net interest expense on net retirement benefits liability (3) (3) (4)
Total interest expense (66) (41) (86)
Total finance costs (66) (41) (86)
Net finance costs (66) (40) (83)
Net interest expense, an APM as defined at the end of this document, for the
six months ended 30 June 2022 was ?61 million (six months ended 30 June 2021
(restated): ?37 million; year ended 31 December 2021 (restated): ?77 million).
8 Tax charge
The Group's effective tax rate before special items, an APM as defined at the
end of this document, was 22% for the six months ended 30 June 2022 (six months
ended 30 June 2021: 22%; year ended 31 December 2021: 22%).
Restated Restated
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
UK corporation tax at 19% (2021: 19%) - 1 -
Overseas tax 149 69 160
Current tax in respect of prior periods (5) - 4
Current tax 144 70 164
Deferred tax in respect of the current period 15 9 (6)
Deferred tax in respect of prior periods (4) (3) (4)
Deferred tax attributable to a change in the (4) - -
rate of domestic income tax
Tax charge before special items 151 76 154
Current tax on special items 5 - (1)
Deferred tax on special items - 1 (1)
Tax charge/(credit) on special items (see note 5) 5 1 (2)
Tax charge for the period 156 77 152
Current tax charge 149 70 163
Deferred tax charge/(credit) 7 7 (11)
9 Earnings per share (EPS)
EPS attributable to shareholders
euro cents Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
From continuing operations
Basic EPS 148.4 54.4 112.0
Diluted EPS 148.4 54.4 111.9
Basic underlying EPS 98.7 53.4 110.1
Diluted underlying EPS 98.7 53.4 110.0
From discontinued operations
Basic EPS 30.5 17.3 43.9
Diluted EPS 30.5 17.3 43.9
From continuing and discontinued operations
Basic EPS 178.9 71.8 155.9
Diluted EPS 178.9 71.7 155.8
Basic total EPS (prior to special items) 129.3 70.7 154.0
Diluted total EPS (prior to special items) 129.2 70.7 153.9
Basic headline EPS 129.0 70.7 155.3
Diluted headline EPS 129.0 70.7 155.2
The calculation of basic and diluted EPS, basic and diluted total EPS (prior to
special items) and basic and diluted headline EPS is based on the following
data:
Earnings
Restated Restated
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Profit for the period attributable to shareholders 868 348 756
Arises from:
Continuing operations 720 264 543
Discontinued operations1 148 84 213
Special items (see note 5) (246) (6) (7)
Related tax (see note 5) 5 1 (2)
Total earnings for the period (prior to special items) 627 343 747
Arises from:
Continuing operations 479 259 534
Discontinued operations1 148 84 213
Special items not excluded from headline earnings - 3 3
(Gain)/loss on disposal of property, plant and equipment (2) (1) 1
Related tax 1 (2) 2
Headline earnings for the period 626 343 753
Note:
1 Profit from discontinued operations are wholly attributable to
shareholders.
Underlying earnings, total earnings (prior to special items) and headline
earnings represent APMs which are defined at the end of this document.
Weighted average number of shares
million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Basic number of ordinary shares outstanding 485.1 485.0 485.0
Effect of dilutive potential ordinary shares 0.2 0.2 0.3
Diluted number of ordinary shares outstanding 485.3 485.2 485.3
10 Dividends
The interim dividend for the year ending 31 December 2022 of 21.67 euro cents
per ordinary share will be paid on Thursday 29 September 2022 to those
shareholders on the register of Mondi plc on Friday 26 August 2022. The
dividend will be paid from distributable reserves of Mondi plc, as presented in
the annual financial statements for the year ended 31 December 2021. The
interim dividend is not recognised as a liability at 30 June 2022.
Six months ended Year ended
30 June 2022 31 December 2021
euro ? million euro ? million
cents cents
per share per share
Final dividend in respect of prior year 45.00 218 41.00 201
Interim dividend in respect of current year 21.67 105 20.00 97
The interim dividend declared for the year ended 31 December 2021 of 20 euro
cents per ordinary share was paid in September 2021.
Dividend timetable
The interim dividend for the year ending 31 December 2022 will be paid in
accordance with the following timetable:
Last date to trade shares cum-dividend
JSE Limited Tuesday 23 August
2022
London Stock Exchange Wednesday 24 August
2022
Shares commence trading ex-dividend
JSE Limited Wednesday 24 August
2022
London Stock Exchange Thursday 25 August
2022
Record date Friday 26 August 2022
Last date for receipt of Dividend Reinvestment Plan (DRIP) Thursday 1 September
elections by Central Securities Depository Participants 2022
Last date for DRIP elections to UK Registrar and South African
Transfer Secretaries:
South African Register Friday 2 September
2022
UK Register Monday 12 September
2022
Payment Date Thursday 29 September
2022
DRIP purchase settlement dates (subject to market conditions and
the purchase of shares in the open market):
UK Register Monday 3 October 2022
South African Register Wednesday 5 October
2022
Currency conversion dates
ZAR/euro Thursday 4 August
2022
Euro/sterling Friday 16 September
2022
Share certificates on Mondi plc's South African register may not be
dematerialised or rematerialised between Wednesday 24 August 2022 and Friday 26
August 2022, both dates inclusive, nor may transfers between the UK and South
African registers of Mondi plc take place between Wednesday 17 August 2022 and
Friday 26 August 2022, both dates inclusive.
Information relating to the dividend tax to be withheld from Mondi plc
shareholders on the South African branch register will be announced separately,
together with the ZAR/euro exchange rate to be applied, on or shortly after
Thursday 4 August 2022.
11 Goodwill
? million As at As at As at 31
30 June 2022 30 June 2021 December
2021
Net carrying value
At 1 January 926 923 923
Hyperinflation monetary adjustment (see note 2) 11 - -
Restated balance at 1 January 937 923 923
Acquired through business combinations - 2 -
Disposal of business (see note 17) (141) - -
Reclassification to assets held for sale (see note 16) (34) - -
Hyperinflation monetary adjustment (see note 2) 8 - -
Currency movements 18 4 3
At 30 June / 31 December 788 929 926
12 Forestry assets
? million As at As at As at 31
30 June 2022 30 June 2021 December
2021
At 1 January 348 372 372
Investment in forestry assets 25 23 45
Fair value gains/(losses) 30 8 (7)
Felling costs (34) (37) (62)
Currency movements 20 21 -
At 30 June / 31 December 389 387 348
The fair value of forestry assets is a level 3 measure in terms of the fair
value measurement hierarchy (see note 21), consistent with prior years. The
fair value of forestry assets continues to be determined using a market-based
approach. The valuation process and key observable inputs were largely
consistent with those applied for the year ended 31 December 2021, as described
in note 14 of the Group's Integrated report and financial statements 2021. The
main reason for the fair value gain for the six months ended 30 June 2022 was
higher net selling prices during the period.
13 Leases
The Group has entered into various lease agreements. The Group's right-of-use
assets were ?120 million as at 30 June 2022 (?179 million as at 30 June 2021; ?
177 million as at 31 December 2021) and the related depreciation charge was ?12
million for the six months ended 30 June 2022 (six months ended 30 June 2021
(restated): ?11 million; year ended 31 December 2021 (restated): ?22 million).
The decrease in the right-of-use assets is mainly driven by the Russian
forestry leases, which have been reclassified to assets held for sale in June
2022.
14 Borrowings
Financing facilities
Group liquidity is provided through a range of committed debt facilities. The
principal loan arrangements in place are the following:
? million Maturity Interest rate % As at As at As at 31
30 June 2022 30 June 2021 December
2021
Financing facilities
Syndicated Revolving June 2027 EURIBOR + margin 750 750 750
Credit Facility
?500 million Eurobond April 2024 1.500% 500 500 500
?600 million Eurobond April 2026 1.625% 600 600 600
?750 million Eurobond April 2028 2.375% 750 750 750
European Investment Bank June 2025 EURIBOR + margin - 38 33
Facility
Long Term Facility December EURIBOR + margin 30 70 70
Agreement 2026
Other Various Various 9 56 57
Total committed facilities 2,639 2,764 2,760
Drawn (1,882) (1,966) (1,957)
Total committed facilities 757 798 803
available
The effective interest rate, an APM as defined at the end of this document, was
5.8% for the trailing 12-month period to 30 June 2022 (30 June 2021 (restated):
4.0%; 31 December 2021 (restated): 4.3%). The Group's Eurobonds incur a fixed
rate of interest but swapping this EUR debt into other currencies to fund
subsidiaries exposes the Group to floating interest rates.
Mondi currently has investment grade credit ratings from both Moody's Investors
Service (Baa1, outlook negative) and Standard & Poor's (BBB+, outlook stable).
As at 30 June 2022 As at 30 June 2021 As at 31 December 2021
? million Current Non-current Total Current Non-current Total Current Non-current Total
Secured
Bank loans and 1 1 2 3 2 5 2 1 3
overdrafts
Lease 19 111 130 20 184 204 20 184 204
liabilities
Secured 20 112 132 23 186 209 22 185 207
Unsecured
Bonds - 1,842 1,842 - 1,839 1,839 - 1,840 1,840
Bank loans and 138 21 159 125 96 221 77 79 156
overdrafts
Other loans 4 - 4 27 - 27 25 - 25
Total unsecured 142 1,863 2,005 152 1,935 2,087 102 1,919 2,021
Total 162 1,975 2,137 175 2,121 2,296 124 2,104 2,228
borrowings
Committed 1,882 1,966 1,957
facilities
drawn
Uncommitted 255 330 271
facilities
drawn
The decrease in the lease liabilities is mainly driven by the Russian forestry
leases, which have been reclassified to liabilities held for sale in June 2022.
15 Retirement benefits
All assumptions related to the Group's material defined benefit schemes and
post-retirement medical plan liabilities were re-assessed individually and the
remaining defined benefit schemes and unfunded statutory retirement obligations
were re-assessed in aggregate for the six months ended 30 June 2022. The net
retirement benefits liability decreased by ?30 million to ?167 million as at
30 June 2022 (31 December 2021: ?197 million) due to changes in assumptions,
exchange rate movements and the reclassification of the liability in Russia to
total liabilities directly associated with assets classified as held for sale
(see note 16). The net retirement benefits asset decreased by ?15 million to ?
11 million as at 30 June 2022 (31 December 2021: ?26 million) which was caused
by changes in assumptions and exchange rate movements. The assets backing the
defined benefit scheme liabilities reflect their market values as at
30 June 2022. The net remeasurement gains of the continuing operations'
retirement benefit plans, which arose from changes in assumptions, amounted to
?5 million before tax and have been recognised in the condensed consolidated
statement of comprehensive income.
16 Russian operations (discontinued operations)
The Group has significant operations in Russia, which generated segment revenue
of ?604 million, an EBITDA of ?228 million and a profit from discontinued
operations of ?148 million for the six months ended 30 June 2022.
The most significant facility is a wholly owned integrated pulp, packaging
paper and uncoated fine paper mill located in Syktyvkar (Komi Republic). The
Group also has three converting plants in Russia. All these facilities
primarily serve the domestic market and have continued to operate throughout
the six months ended 30 June 2022.
The Russian businesses have, to date, managed supply chain constraints.
However, the situation remains fluid, with interruptions to pulp and paper
production possible going forward. All significant capital expenditure projects
in Russia are suspended.
On 4 May 2022, recognising its corporate values and wider stakeholder
responsibilities, the Group decided to divest the Group's Russian assets. The
divestment process for the Russian businesses is operationally and structurally
complex and is being undertaken in an evolving political and regulatory
environment. Accordingly, there can be no certainty when a transaction will be
completed or as to the structure of any possible transaction.
In the context of an increased level of uncertainty, the Group has exercised
critical judgements in applying its accounting policies as follows and as
further described below:
* Control assessment: whether the Group should continue to consolidate its
Russian businesses; and
* Held for sale and discontinued operation: if and when the businesses
satisfied the requirements to be classified as held for sale, and whether
the Russian businesses should be presented as discontinued operations.
In addition, the Group has also applied significant estimates and assumptions
in the valuation of its Russian assets, as described below.
Impairment
The Syktyvkar mill and three converting plants each individually represent
separate cash generating units (CGUs) for impairment assessment purposes. The
Group has assessed whether each Russian CGU is impaired as a direct or indirect
result of the war in Ukraine and the severe economic sanctions imposed by
international and Russian governments.
Effective 24 February 2022, when the war in Ukraine started, the Group
performed an impairment trigger assessment. Given the temporary deterioration
of the Russian rouble and the sharp increase in interest rates, together with
the increased uncertainty relating to the operational and financial performance
of its businesses due to sanctions imposed by international governments and
countermeasures implemented by the Russian state, management concluded that an
impairment trigger existed and tested its CGUs in Russia for impairment using
value-in-use calculations in accordance with IAS 36, Impairment of Assets.
The key assumptions reflected in the cash flow forecasts included sales
volumes, sales prices and variable input cost assumptions derived from a
combination of economic and industry forecasts for individual product lines and
the latest internal management projections approved by the Board. The cash flow
projections were prepared in Russian roubles and a post-tax discount rate of
15% (equivalent to a pre-tax rate of 18%) was used for impairment testing. Due
to the increased uncertainty, no growth rate was assumed for the terminal
value. At this time (at 24 February 2022), the carrying value of the Russian
CGUs totalled RUB 66 billion (?677 million, at an exchange rate of 97.47
Russian rouble versus euro).
Due to the increased level of uncertainty resulting from the war in Ukraine,
management determined the recoverable amount of the CGUs based on three
probability-weighted scenarios. Aside from the base scenario derived from the
then latest internal management projections, management included a more
optimistic and a pessimistic scenario in the calculation of the recoverable
amount to address the uncertainty associated with the cash flow forecasts. The
impairment calculation is sensitive to changes in key assumptions, in
particular in relation to cash flow forecasts and the probability-weighting of
scenarios. Sensitivity analyses were performed by increasing the weighting of
the pessimistic case and at the same time reducing the weighting of the
optimistic case. At 24 February 2022, no impairment was identified.
Given, as described below, that in June the Board determined that the Russian
assets satisfied the criteria to be classified as held for sale, a further
impairment test had to be performed. At this time (mid June 2022), the carrying
value of the Russian CGUs totalled RUB 66 billion (?1,079 million, at an
exchange rate of 61.16 Russian rouble versus euro). This impairment test was
again performed using three probability weighted scenarios under a value-in-use
calculation based on similar assumptions as described above for the test
performed effective 24 February 2022. No impairment had arisen.
Upon classification as held for sale in mid-June 2022, management also assessed
the fair value less costs to dispose of the businesses, as required by IFRS 5,
'Non-current Assets Held for Sale and Discontinued Operations.' The fair value
less costs to dispose was reassessed at the balance sheet date.
As at 30 June 2022, while dialogue was ongoing with a number of potential
buyers, no committed offers had been received for the Russian operations. On
that basis, management had to estimate the fair value of the businesses. In
determining an appropriate fair value, management considered indicative offers
received to date, its value-in-use calculations of recoverable amount (as
described above) and typical, historical multiples of EBITDA to enterprise
value for similar businesses, and the extent to which these value-in-use
calculations and historical multipliers should be discounted, given the current
situation in Russia, to derive an approximate fair value. While the estimates
show a wide range of fair values, the estimates indicated that the carrying
value of the Group's Russian businesses can be supported and hence no
impairment was required.
The situation in Russia is highly complex and continues to evolve. For this
reason, determination of fair value is particularly challenging, and the range
of potential fair values is wide. In addition, depending on the structure of
any disposal, it is likely that approval will be required by the Russian
authorities, both of the disposal itself and the associated price. Furthermore,
the Russian rouble to EUR foreign exchange rate has been volatile in recent
months, which impacts both the EUR carrying value of the associated Russian net
assets at any given time, and may also impact the disposal price that is
achieved in EUR terms if it is determined in roubles.
For these reasons, there can be no certainty that the price ultimately achieved
on disposal of the Russian businesses will be sufficient to support the
carrying value.
Control assessment
The Group has applied judgement in regards to whether the Group continues to
control its Russian subsidiaries due to the restrictions imposed by the Russian
government or any other authority. Control exists when the Group is exposed, or
has rights, to variable returns from its involvement with the subsidiary and
has the ability to affect those returns through its power over the subsidiary.
The Russian government introduced various sanctions in recent months, including
restrictions on the payment of dividends to "unfriendly states" that require
consent from the Ministry of Finance of Russia. Since the Group continued to
direct the operations and the Russian regulations currently do not prohibit the
declaration and payment of dividends, the Group has taken the view that it has
retained control through the six months ended 30 June 2022. Were the Group to
conclude that it no longer retains control, the Russian operations would be
treated as if they had been disposed of, with the associated assets and
liabilities derecognised.
Held for sale and discontinued operation
On 4 May 2022, the Group decided to divest its Syktyvkar mill and three
converting plants in Russia. Given progress with the divestment process, the
Board subsequently concluded, in June 2022, that the Russian operations
satisfied the criteria to be classified as held for sale and that they should
also be classified as discontinued operations as at 30 June 2022 and for the
six months then ended.
The Group has applied judgement as to whether the operations in Russia meet the
held for sale presentation criteria at 30 June 2022 and whether these need to
be reported as discontinued operations.
Assets are held for sale if their carrying amounts will be recovered
principally through a sale transaction rather than through continuing use
provided the assets are available for immediate sale in their present condition
and a sale is highly probable. The divestment process is operationally and
structurally complex and is being undertaken in an evolving political and
regulatory environment. There is uncertainty as to when a transaction will be
completed and as to the structure of any possible transaction. However, the
Group is committed to dispose of its Russian operations and has allocated
relevant resources to complete a sale in due course, which is why the Group has
determined that a sale is highly probable within the next 12 months and that,
therefore, it is appropriate to adopt the held for sale presentation for the
Group's assets and liabilities in Russia as at 30 June 2022.
From the point at which this classification was first applied, in mid-June
2022, depreciation on these Russian assets ceased. Notwithstanding that the
Board has concluded that it considers a sale is highly probable, the evolving
political and regulatory environment means that there can be no certainty as to
whether a transaction will be concluded successfully, or what form any
transaction might take. If the Board had concluded that a sale was not highly
probable, the assets and liabilities would have continued to be consolidated on
a line-by-line basis, as they had been historically, rather than presented
separately as assets held for sale and liabilities directly associated with
assets held for sale.
As the assets and liabilities of the Russian operations have been classified as
held for sale, the Group has to separately consider whether these businesses
also represent a discontinued operation, being a component of an entity that
either has been disposed of, or is classified as held for sale, and represents
a separate major line of business or geographical area of operations, is part
of a single coordinated plan to dispose of a separate major line of business or
geographical area of operations or is a subsidiary acquired exclusively with a
view to resale. The Russian operations represented around 12% of the Group's
revenue by location of production in 2021 and generated around 20% of the
Group's underlying EBITDA over the last three years. Taking into account its
financial significance, the Group views the Russian operations as a distinct
major geographical area of operations that, therefore, qualify for
classification as discontinued operations. Hence, in accordance with IFRS 5,
the Group has reported its Russian businesses as discontinued operations as at
30 June 2022 and for the six months then ended, with the comparative income
statement and cash flow statement periods represented. Had the Group concluded
that the businesses were not discontinued operations they would instead have
continued to be reported as part of continuing operations.
The financial performance of the discontinued operations is set out below:
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Segment revenue 604 439 961
Internal revenue (86) (95) (212)
External revenue 518 344 749
Operating expenses (290) (201) (403)
EBITDA 228 143 346
Depreciation and amortisation1 (29) (31) (64)
Operating profit 199 112 282
Net finance costs (11) (5) (11)
Profit before tax 188 107 271
Related tax charge (40) (23) (58)
Profit for the period from discontinued operations 148 84 213
attributable to shareholders
Fair value gains arising from cash flow hedges of 5 - -
discontinued operations
Exchange differences on translation of discontinued 417 33 42
operations
Remeasurements of retirement benefits plans of 2 - 1
discontinued operations
Other comprehensive income from discontinued operations 424 33 43
attributable
to shareholders
Total comprehensive income from discontinued operations 572 117 256
attributable
to shareholders
Note:
1 On classification as held for sale, property, plant and equipment and
intangible assets are no longer depreciated or amortised. Depreciation and
amortisation for the six months ended 30 June 2022 covers the period until the
classification as held for sale in mid-June 2022.
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Net cash generated from operating activities 193 132 286
Net cash used in investing activities (33) (47) (91)
Net cash used in financing activities (11) (7) (13)
Net increase in cash and cash equivalents from 149 78 182
discontinued operations
The following assets and liabilities were reclassified as held for sale in
relation to the discontinued operations as at 30 June 2022:
? million As at
30 June 2022
Property, plant and equipment 1,117
Goodwill (see note 11) 34
Intangible assets 9
Deferred tax assets 1
Inventories 142
Trade and other receivables 115
Financial instruments 2
Cash and cash equivalents 275
Total assets held for sale 1,695
Borrowings (123)
Trade and other payables (174)
Current tax liabilities (6)
Provisions (17)
Financial instruments (2)
Net retirement benefits liability (16)
Deferred tax liabilities (53)
Total liabilities directly associated with assets classified as held for (391)
sale
The cumulative foreign exchange gain recognised in other comprehensive income
in relation to the discontinued operations as at 30 June 2022 was ?25 million
and will be recycled through the income statement on the date of disposal.
17 Disposal of business
On 30 June 2022, the Group sold its Personal Care Components business (PCC) to
Nitto Denko Corporation for an enterprise value of ?615 million. The sale
enables the Group to simplify its portfolio and focus on its strategic priority
to grow in sustainable packaging. PCC, previously part of the Group's
Engineered Materials operating segment, manufactured a range of components for
personal and home care products needed in everyday life such as diapers,
feminine care, adult incontinence and wipes.
? million Six months
ended
30 June 2022
Proceeds from the disposal of business per the condensed consolidated 646
statement of cash flows
Cash and cash equivalents disposed 15
Consideration in cash 661
Carrying amount of net assets disposed (412)
Gain on reclassification of foreign currency translation reserve 4
Related transaction costs1 (7)
Gain on disposal of business, net of related transaction costs 246
Tax charge (5)
Gain on disposal of business, net of related tax 241
Note:
1 Excludes transaction costs of ?6 million recognised in the prior year,
which were not treated as a special item
The carrying amounts of assets and liabilities as at the date of sale (30 June
2022) were:
? million Six months
ended
30 June 2022
Property, plant and equipment 174
Goodwill 141
Intangible assets 2
Inventories 58
Trade and other receivables 88
Cash and cash equivalents 15
Total assets 478
Trade and other payables (49)
Net retirement benefits liability (4)
Deferred tax liabilities (8)
Other liabilities (5)
Total liabilities (66)
Carrying amount of net assets disposed 412
The carrying amount of net assets disposed include an appropriate allocation of
the goodwill previously allocated to the Engineered Materials operating segment
between the value of the PCC business that was disposed of and the retained
functional paper and films business.
18 Consolidated cash flow analysis
(a) Reconciliation of profit before tax from continuing operations to cash
generated from continuing operations
Restated Restated
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Profit before tax from continuing operations 933 354 712
Depreciation, amortisation and underlying impairments 194 181 375
Share-based payments 5 4 9
Net pre-tax cash flow effect of current and prior period (257) (19) (22)
special items
Net finance costs 66 40 83
Net monetary gain arising from hyperinflationary (2) - -
economies
Net profit from joint ventures (3) (3) (6)
Decrease in provisions (1) - (7)
Decrease in net retirement benefits (5) (6) (15)
Movement in working capital (403) (172) (195)
Increase in inventories (201) (120) (232)
Increase in operating receivables (403) (237) (310)
Increase in operating payables 201 185 347
Fair value (gains)/losses on forestry assets (30) (8) 7
Felling costs 34 37 62
Gain on disposal of property, plant and equipment - (2) -
Proceeds from insurance reimbursements for property (8) - -
damages
Other adjustments (4) 1 (2)
Cash generated from continuing operations 519 407 1,001
(b) Cash and cash equivalents
? million As at As at As at 31
30 June 2022 30 June 2021 December
2021
Cash and cash equivalents per condensed consolidated 916 288 473
statement of financial position
Cash and cash equivalents classified as assets held for 275 - -
sale (see note 16)
Bank overdrafts included in short-term borrowings (46) (51) (18)
Cash and cash equivalents per condensed consolidated 1,145 237 455
statement of cash flows
The cash and cash equivalents of ?916 million (as at 30 June 2021: ?288
million; as at 31 December 2021: ?473 million) include money market funds of ?
559 million (as at 30 June 2021: ?135 million; as at 31 December 2021: ?340
million) valued at fair value through profit and loss, with the remaining
balance carried at amortised cost.
The cash and cash equivalents classified as assets held for sale as per table
above are held by the Group's Russian operations. These deposits are subject to
regulatory restrictions, and therefore may not be available for general use by
the other entities within the Group.
The fair value of cash and cash equivalents carried at amortised cost
approximate their carrying values presented.
(c) Movement in net debt
The Group's net debt position is as follows:
? million Cash and Current Total Debt Debt Debt-related Total Total
cash financial assets due due derivative debt net
equivalents asset within after financial debt
investments one one instruments
year year
At 1 January 2021 348 1 349 (94) (2,050) 4 (2,140) (1,791)
Cash flow (110) - (110) - (63) - (63) (173)
Additions to lease - - - (18) (5) - (23) (23)
liabilities
Disposal of lease - - - 2 - - 2 2
liabilities
Acquired through - - - (16) (1) - (17) (17)
business combinations
Movement in unamortised - - - - (1) - (1) (1)
loan costs
Net movement in fair - - - - - (1) (1) (1)
value of derivative
financial instruments
Reclassification - - - (5) 5 - - -
Currency movements (1) - (1) 7 (6) - 1 -
At 30 June 2021 237 1 238 (124) (2,121) 3 (2,242) (2,004)
Cash flow 218 - 218 27 4 12 43 261
Additions to lease - - - 9 (21) - (12) (12)
liabilities
Disposal of lease - - - (1) 1 - - -
liabilities
Movement in unamortised - - - - (1) - (1) (1)
loan costs
Net movement in fair - - - - - (24) (24) (24)
value of derivative
financial instruments
Reclassification - - - (34) 34 - - -
Currency movements - - - 17 - - 17 17
At 31 December 2021 455 1 456 (106) (2,104) (9) (2,219) (1,763)
Cash flow 592 - 592 - 49 65 114 706
Additions to lease - - - (7) (13) - (20) (20)
liabilities
Disposal of lease - - - 1 1 - 2 2
liabilities
Movement in unamortised - - - - (1) - (1) (1)
loan costs
Net movement in fair - - - - - (55) (55) (55)
value of derivative
financial instruments
Reclassification - - - (16) 16 - - -
Currency movements 98 (1) 97 8 (42) - (34) 63
At 30 June 2022 1,145 - 1,145 (120) (2,094) 1 (2,213) (1,068)
Reclassifications to (275) - (275) 4 119 - 123 (152)
assets and liabilities
classified held for
sale (see note 16)
Net debt of continuing 870 - 870 (116) (1,975) 1 (2,090) (1,220)
operations at 30 June
2022
Bank overdrafts of ?46 million (as at 30 June 2021: ?51 million; as at
31 December 2021: ?18 million), presented in short-term borrowings in the
condensed consolidated statement of financial position, are included in cash
and cash equivalents (see note 18b).
Cash flow of cash and cash equivalents of ?592 million include cash and cash
equivalents disposed of ?15 million (see note 17).
The Group expensed interest of ?63 million relating to its bank overdrafts,
loans and lease liabilities (six months ended 30 June 2021 (restated): ?38
million; year ended 31 December 2021 (restated): ?82 million) and paid interest
of ?52 million (six months ended 30 June 2021 (restated): ?55 million; year
ended 31 December 2021 (restated): ?67 million).
19 Capital commitments
The continuing operations' capital expenditure contracted for at the end of the
reporting period but not recognised as liabilities is ?460 million (as at
31 December 2021: ?274 million).
20 Contingent liabilities
Contingent liabilities comprise aggregate amounts as at 30 June 2022 of ?
7 million (as at 30 June 2021: ?3 million; as at 31 December 2021: ?8 million)
in respect of loans and guarantees given to banks and other third parties.
21 Fair value measurement
Assets and liabilities that are measured at fair value, or where the fair value
of financial instruments has been disclosed in the notes to the condensed
consolidated financial statements, are based on the following fair value
measurement hierarchy:
* level 1 - quoted prices (unadjusted) in active markets for identical assets
or liabilities;
* level 2 - inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices); and
* level 3 - inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
The assets measured at fair value on level 3 of the fair value measurement
hierarchy are the Group's forestry assets as set out in note 12.
As at 30 June 2022, the fair value of level 2 derivative financial assets is ?9
million (as at 30 June 2021: ?7 million; as at 31 December 2021: ?4 million),
whereas the fair value of level 2 derivative financial liabilities is ?15
million (as at 30 June 2021: ?7 million; as at 31 December 2021: ?18 million).
Cash and cash equivalents include money market funds measured at fair value
through profit and loss, with the remaining balance carried at amortised cost.
As at 30 June 2022, the fair value of level 1 cash and cash equivalents is ?559
million (as at 30 June 2021: ?135 million; as at 31 December 2021: ?340
million).
The Group did not measure any financial assets or financial liabilities at fair
value on a non-recurring basis as at 30 June 2022.
There have been no transfers of assets or liabilities between levels of the
fair value hierarchy during the period.
The fair values of financial instruments that are not traded in an active
market (for example, over-the-counter derivatives) are determined using
generally accepted valuation techniques. These valuation techniques maximise
the use of observable market data and rely as little as possible on Group
specific estimates.
Specific valuation methodologies used to value financial instruments include:
* the fair values of foreign exchange contracts are calculated as the present
value of expected future cash flows based on observable yield curves and
exchange rates; and
* other techniques, including discounted cash flow analysis, are used to
determine the fair values of other financial instruments.
Except as detailed below, the directors consider that the carrying values of
financial assets and financial liabilities recorded at amortised cost in the
condensed consolidated financial statements are approximately equal to their
fair values.
Carrying amount Fair value
? million As at As at As at 31 As at As at As at 31
30 June 2022 30 June 2021 December 30 June 2022 30 June 2021 December
2021 2021
Financial liabilities
Borrowings 2,137 2,296 2,228 2,008 2,450 2,353
22 Related party transactions
The Group and its subsidiaries, in the ordinary course of business, enter into
various sale, purchase and service transactions with associated undertakings in
which the Group has a material interest. The related party transactions entered
into by the Group have been contracted on an arms-length basis and, in total,
are not considered to be significant. The level of these transactions is
consistent with prior year.
Transactions between Mondi plc and its subsidiaries, which are related parties,
and transactions between its subsidiaries have been eliminated on
consolidation. There have been no significant changes to the nature of its
related party transactions as disclosed in note 30 of the Group's Integrated
report and financial statements 2021.
23 Events occurring after 30 June 2022
Aside from the interim dividend declared for the six months ended 30 June 2022
(see note 10), there have been no material reportable events since
30 June 2022.
Production statistics
Restated Restated
Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Continuing operations
Containerboard 000 tonnes 1,209 1,169 2,375
Kraft paper 000 tonnes 669 627 1,253
Uncoated fine paper 000 tonnes 487 550 1,068
Pulp 000 tonnes 1,816 1,798 3,398
Internal consumption 000 tonnes 1,626 1,562 3,007
Market pulp 000 tonnes 190 236 391
Corrugated solutions million m² 1,000 943 2,052
Paper bags million 3,083 2,971 5,928
units
Consumer flexibles million m² 1,098 1,041 2,057
Functional paper and films million m² 1,729 1,752 3,383
Personal care components million m2 801 914 1,746
Note:
The production statistics have been restated for comparability purposes to
reflect the Group's new segment structure and to exclude the Russian
discontinued operations (see note 4)
Exchange rates
Average Closing
versus euro Six months Six months Year ended Six months Six months Year ended
ended ended 31 December ended ended 31 December
30 June 2022 30 June 2021 2021 30 June 2022 30 June 2021 2021
South African rand 16.85 17.52 17.48 17.01 17.01 18.06
Czech koruna 24.65 25.85 25.64 24.74 25.49 24.86
Polish zloty 4.64 4.54 4.57 4.69 4.52 4.60
Pounds sterling 0.84 0.87 0.86 0.86 0.86 0.84
Russian rouble 85.55 89.55 87.15 56.55 86.77 85.30
Turkish lira1 16.26 9.52 10.51 17.32 10.32 15.23
US dollar 1.09 1.21 1.18 1.04 1.19 1.13
Note:
1 Hyperinflation accounting was adopted in 2022 to report the Group's
operations in Turkey (see note 2)
Alternative Performance Measures (APMs)
The Group presents certain measures of financial performance, position or cash
flows in the condensed consolidated financial statements that are not defined
or specified according to IFRS in order to provide additional
performance-related measures to its stakeholders. These measures, referred to
as Alternative Performance Measures (APMs), are prepared on a consistent basis
for all periods presented in this report.
By their nature, the APMs used by the Group are not necessarily uniformly
applied by peer companies and therefore may not be comparable with similarly
defined measures and disclosures applied by other companies. Such measures
should not be viewed in isolation or as a substitute to the equivalent IFRS
measure.
Internally, the Group and its operating segments apply the same APMs in a
consistent manner in planning and reporting on performance to management, the
Executive Committee and the Board. Two of the Group's APMs (total EBITDA and
ROCE of continuing and discontinued operations) form part of the executive
directors and senior management remuneration targets. The Group has not
adjusted its APMs for the impact of the COVID-19 pandemic.
As at 30 June 2022, the Group's operations in Russia are presented as held for
sale and classified as discontinued operations for the period then ended. For
comparability purposes, the APMs based on amounts recognised in the condensed
consolidated statement of financial position have been adjusted for the Russian
assets and liabilities as described below. Note, no restatement of the IFRS
condensed consolidated statement of financial position has been made for such
items. APMs measuring the profitability of the Group are presented for
continuing operations (i.e. excluding the results for the Russian discontinued
operations) and comparatives are presented on the same basis, consistent with
the presentation of the IFRS condensed consolidated income statement. Where
these changes have impacted the APMs for comparative periods as presented
previously, these have been described as restated.
The most significant APMs used by the Group are described below, together with
a reconciliation to the equivalent IFRS measure. The reconciliations are based
on Group figures. The reporting segment equivalent APMs are measured in a
consistent manner.
APM description and purpose Financial Closest IFRS
statement equivalent
reference measure
Special items
Special items are generally material, non-recurring Note 5 None
items that exceed ?10 million. The Audit Committee
regularly assesses the monetary threshold of ?10 million
and considers the threshold in the context of both the
Group as a whole and individual operating segment
performance.
The Group separately discloses special items on the face
of the condensed consolidated income statement to assist
its stakeholders in understanding the underlying
financial performance achieved by the Group on a basis
that is comparable from year to year.
Subsequent adjustments to items previously recognised as
special items continue to be reflected as special items
in future periods even if they do not exceed the
quantitative reporting threshold.
Underlying EBITDA
Operating profit before special items, depreciation, Condensed Operating
amortisation and impairments not recorded as special consolidated profit
items provides a measure of the cash generating ability income
of the Group's continuing operations that is comparable statement
from year to year.
Underlying EBITDA margin from continuing operations
Underlying EBITDA expressed as a percentage of Group None
revenue (segment revenue for operating segments)
provides a measure of the cash generating ability
relative to revenue.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Underlying EBITDA (see condensed consolidated income 942 566 1,157
statement)
Group revenue from continuing operations (see condensed 4,505 3,283 6,974
consolidated income statement)
Underlying EBITDA margin from continuing operations (%) 20.9 17.2 16.6
Total EBITDA (prior to special items)
Operating profit before special items, depreciation,
amortisation and impairments not recorded as special
items provides a measure of the cash generating ability
of the business that is comparable from year to year.
Total EBITDA from continuing and discontinued operations
prior to special items is calculated to show as if the
EBITDA of the Russian operations was not separately
disclosed as arising from discontinued operations.
APM calculation:
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
EBITDA from continuing operations 1,188 569 1,160
EBITDA from discontinued operations 228 143 346
Special items (246) (3) (3)
Total EBITDA (prior to special items) 1,170 709 1,503
Underlying operating profit
Operating profit from continuing operations before Condensed Operating
special items provides a measure of operating consolidated profit
performance that is comparable from year to year. income
statement
Underlying operating profit margin from continuing operations
Underlying operating profit expressed as a percentage of None
Group revenue (segment revenue for operating segments)
provides a measure of the profitability of the
operations relative to revenue.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Underlying operating profit (see condensed consolidated 748 385 782
income statement)
Group revenue from continuing operations (see condensed 4,505 3,283 6,974
consolidated income statement)
Underlying operating profit margin from continuing 16.6 11.7 11.2
operations (%)
Net interest expense
Net interest expense comprises interest expense on bank None
overdrafts, loans and lease liabilities net of
investment income.
Net interest expense provides an absolute measure of the
net cost of borrowings.
APM calculation:
Restated Restated
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Investment income (see note 7) 2 1 5
Interest on bank overdrafts and loans (see note 7) (59) (35) (75)
Interest on lease liabilities (see note 7) (4) (3) (7)
Net interest expense (61) (37) (77)
Effective interest rate
Trailing 12-month net interest expense expressed as a None
percentage of trailing 12-month average net debt over
the period.
Effective interest rate provides a measure of the net
cost of borrowings.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Trailing 12-month net interest expense (see above) 101 74 77
Trailing 12-month average net debt of continuing 1,755 1,830 1,804
operations
Effective interest rate (%) 5.8 4.0 4.3
Underlying profit before tax
Profit before tax and special items for continuing Condensed Profit
operations. Underlying profit before tax provides a consolidated before tax
measure of the Group's profitability before tax that is income
comparable from year to year. statement
Effective tax rate
Underlying tax charge expressed as a percentage of None
underlying profit before tax.
A measure of the Group's tax charge relative to its
profit before tax expressed on an underlying basis.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Tax charge before special items (see note 8) 151 76 154
Underlying profit before tax (see condensed consolidated 687 348 705
income statement)
Effective tax rate (%) 22 22 22
Underlying earnings (and per share measure)
Net profit after tax attributable to shareholders from Note 9 Profit for
continuing operations, before special items. the period
attributable
to
shareholders
(and per
share
measure)
Total earnings (prior to special items) (and per share measure)
Net profit after tax attributable to shareholders, Note 9 Profit for
before special items, from continuing operations and the period
discontinued operations. attributable
to
Total earnings (and the related per share measure based shareholders
on the basic, weighted average number of ordinary shares (and per
outstanding), provides a measure of the Group's share
earnings. measure)
Headline earnings (and per share measure)
The presentation of headline earnings (and the related Note 9 Profit for
per share measure based on the basic, weighted average the period
number of ordinary shares outstanding) is mandated under attributable
the Listings Requirements of the JSE Limited and is to
calculated in accordance with Circular 1/2021, 'Headline shareholders
Earnings', as issued by the South African Institute of (and per
Chartered Accountants. share
measure)
Dividend cover
Basic underlying EPS from continuing operations divided None None
by total ordinary dividend per share paid and proposed
provides a measure of the Group's earnings relative to
ordinary dividend payments.
Capital employed (and related trailing 12-month average capital employed)
Capital employed comprises total equity and net debt. Note 4 Total equity
Trailing 12-month average capital employed is the
average monthly capital employed over the last 12 months
adjusted for spend on major capital expenditure projects
which are not yet in production.
These measures provide the level of invested capital in
the business. Trailing 12-month average capital employed
is used in the calculation of return on capital
employed.
Return on capital employed (ROCE)
Trailing 12-month underlying operating profit, including None
share of associate's and joint ventures' net profit/
(loss), divided by trailing 12-month average capital
employed. ROCE provides a measure of the efficient and
effective use of capital in the business and is
presented on the basis of continuing operations for
comparability.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Trailing 12-month underlying operating profit (see 1,145 693 782
condensed consolidated income statement)
Trailing 12-month underlying net profit from joint 6 1 6
ventures (see condensed consolidated income statement)
Trailing 12-month underlying profit from operations and 1,151 694 788
joint ventures
Trailing 12-month average capital employed of continuing 5,989 5,437 5,672
operations (see note 4)
ROCE (%) from continuing operations 19.2 12.8 13.9
The ROCE from continuing and discontinued operations is
calculated to show as if the net profit of the Russian
operations was not separately disclosed as arising from
discontinued operations.
APM calculation:
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Trailing 12-month underlying profit from operations and 1,151 694 788
joint ventures
Trailing 12-month operating profit of discontinued 369 205 282
operations (see note 16)
Trailing 12-month profit from operations and joint 1,520 899 1,070
ventures of the Group before special items (incl.
discontinued operations)
Trailing 12-month average capital employed of the Group 6,762 6,077 6,349
(incl. discontinued operations) (see note 4)
ROCE (%) from continuing and discontinued operations 22.5 14.8 16.9
Net debt (and related trailing 12-month average net debt)
A measure comprising short, medium, and long-term Note 18c None
interest-bearing borrowings and the fair value of
debt-related derivatives less cash and cash equivalents,
net of overdrafts, and current financial asset
investments. Trailing 12-month average net debt is the
average monthly net debt over the last 12 months. Net
debt of continuing operations and trailing 12-month
average net debt has been adjusted for net debt of the
discontinued operations for comparability.
Net debt provides a measure of the Group's net
indebtedness or overall leverage.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Net debt (see note 18c) 1,068 2,004 1,763
Net (cash)/debt of discontinued operations (152) 78 74
Net debt of continuing operations 1,220 1,926 1,689
Net debt to underlying EBITDA
Net debt of continuing operations divided by trailing None
12-month underlying EBITDA. A measure of the Group's net
indebtedness relative to its cash-generating ability.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Net debt of continuing operations 1,220 1,926 1,689
Trailing 12-month underlying EBITDA (see condensed 1,533 1,058 1,157
consolidated income statement)
Net debt to underlying EBITDA (times) 0.8 1.8 1.5
Operating segment assets and operating segment net assets
Operating segment assets and operating segment net Note 4 Total assets
assets comprise total assets (excluding financial Net assets
instruments) and capital employed respectively but
exclude assets and liabilities held for sale,
investments in associates and joint ventures, deferred
tax assets and liabilities and other non-operating
assets and liabilities.
Operating segment assets and operating segment net
assets provide a measure of the assets and net assets
required in the daily operation of the business.
Working capital as a percentage of revenue
Working capital, defined as the sum of trade and other None
receivables and inventories less trade and other
payables, expressed as a percentage of annualised Group
revenue, which is calculated based on an extrapolation
of average monthly year-to-date revenue. A measure of
the Group's effective use of working capital relative to
revenue. Working capital has been adjusted for working
capital of the discontinued operations in comparative
periods for comparability purposes.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Inventories (see condensed consolidated statement of 1,191 1,007 1,099
financial position)
Trade and other receivables (see condensed consolidated 1,553 1,322 1,333
statement of financial position)
Trade and other payables (see condensed consolidated (1,434) (1,313) (1,444)
statement of financial position)
Working capital 1,310 1,016 988
Working capital of discontinued operations - 31 44
Working capital of continuing operations 1,310 985 944
Annualised Group revenue (see condensed consolidated 9,010 6,566 6,974
income statement)
Working capital as a percentage of revenue 14.5 15.0 13.5
Gearing
Net debt expressed as a percentage of capital employed None
provides a measure of the financial leverage of the
Group. Net debt and capital employed is adjusted for the
discontinued operations for comparability.
APM calculation:
Restated Restated
? million, unless otherwise stated Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Net debt of continuing operations 1,220 1,926 1,689
Capital employed of continuing operations (see note 4) 6,111 5,934 5,892
Gearing (%) 20.0 32.5 28.7
Cash flow generation
A measure of the Group's cash generation before Net increase
considering deployment of cash towards investment in /(decrease)
property, plant and equipment ('capex' or 'capital in cash and
expenditure'), acquisitions and disposals of businesses, cash
investment in associates and joint ventures, payment of equivalents
dividends to shareholders, acquisition or sale of
non-controlling interests in a subsidiary and proceeds
from and repayment of borrowings. Cash flow generation
is a measure of the Group's ability to generate cash
through-the-cycle before considering deployment of such
cash.
The cash flow generation is adjusted for the cash flows
from the discontinued operations for comparability and
has been re-presented for the effect from
non-controlling interests bought out of ?3 million for
the year ended 31 December 2021.
APM calculation:
Restated Restated
? million Six months Six months Year ended
ended ended 31 December
30 June 2022 30 June 2021 2021
Net increase/(decrease) in cash and cash equivalents 592 (110) 108
Net increase in cash and cash equivalents from (149) (78) (182)
discontinued operations
Investment in property, plant and equipment 218 239 481
Acquisition of businesses, net of cash and cash - 63 63
equivalents
Proceeds from the disposal of business, net of cash and (646) - -
cash equivalents
Investment in joint ventures - 1 1
Dividends paid to shareholders 218 201 298
Non-controlling interests bought out - - 3
Net repayment of/(proceeds from) borrowings 48 (64) (34)
Proceeds from other medium and long-term borrowings - (63) (59)
Repayment of other medium and long-term borrowings 49 - -
Net (proceeds from)/repayment of short-term borrowings (12) (11) 4
Repayment of lease liabilities 11 10 21
Cash flow generation from continuing operations 281 252 738
Forward-looking statements
This document includes forward-looking statements. All statements other than
statements of historical facts included herein, including, without limitation,
those regarding Mondi's financial position, business strategy, market growth
and developments, expectations of growth and profitability and plans and
objectives of management for future operations, are forward-looking statements.
Forward-looking statements are sometimes identified by the use of
forward-looking terminology such as "believe", "expects", "may", "will",
"could", "should", "shall", "risk", "intends", "estimates", "aims", "plans",
"predicts", "continues", "assumes", "positioned" or "anticipates" or the
negative thereof, other variations thereon or comparable terminology. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of Mondi, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements and other
statements contained in this document regarding matters that are not historical
facts involve predictions and are based on numerous assumptions regarding
Mondi's present and future business strategies and the environment in which
Mondi will operate in the future. These forward-looking statements speak only
as of the date on which they are made.
No assurance can be given that such future results will be achieved; various
factors could cause actual future results, performance or events to differ
materially from those described in these statements. Such factors include in
particular but without any limitation: (1) operating factors, such as continued
success of manufacturing activities and the achievement of efficiencies
therein, continued success of product development plans and targets, changes in
the degree of protection created by Mondi's patents and other intellectual
property rights and the availability of capital on acceptable terms; (2)
industry conditions, such as strength of product demand, intensity of
competition, prevailing and future global market prices for Mondi's products
and raw materials and the pricing pressures thereto, financial condition of the
customers, suppliers and the competitors of Mondi and potential introduction of
competing products and technologies by competitors; and (3) general economic
conditions, such as rates of economic growth in Mondi's principal geographical
markets or fluctuations of exchange rates and interest rates.
Mondi expressly disclaims a) any warranty or liability as to accuracy or
completeness of the information provided herein; and b) any obligation or
undertaking to review or confirm analysts' expectations or estimates or to
update any forward-looking statements to reflect any change in Mondi's
expectations or any events that occur or circumstances that arise after the
date of making any forward-looking statements, unless required to do so by the
Disclosure Guidance and Transparency Rules, the UK Market Abuse Regulation or
applicable law or any regulatory body applicable to Mondi, including the JSE
Limited, the FCA and the LSE.
Any reference to future financial performance included in this announcement has
not been reviewed or reported on by the Group's auditors.
Editors' notes
Mondi is a global leader in packaging and paper, contributing to a better world
by making innovative solutions that are sustainable by design. Our business is
integrated across the value chain - from managing forests and producing pulp,
paper and films, to developing and manufacturing sustainable consumer and
industrial packaging solutions using paper where possible, plastic when useful.
Sustainability is at the centre of our strategy, with our ambitious commitments
to 2030 focused on circular driven solutions, created by empowered people,
taking action on climate.
In 2021, Mondi had revenues of ?7.0 billion and underlying EBITDA of ?1.2
billion from continuing operations, and employed 21,000 people worldwide. Mondi
has a premium listing on the London Stock Exchange (MNDI), where the Group is a
FTSE100 constituent, and also has a secondary listing on the JSE Limited (MNP).
mondigroup.com
Sponsor in South Africa: Merrill Lynch South Africa Proprietary Limited t/a
BofA Securities.
END
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