1st Aug 2007 07:16
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2007
Financial Summary
¢â€š¬ million, except for percentages and per 6 months 6 months Half yearshare measures June 2007 June 2006 change % Group revenue 3,052 2,857 +7 EBITDA (1) 421 343 +23 Underlying operating profit (2) 243 166
+46
Underlying profit before tax (3) 203 125 +62 Reported profit before tax 250 64
Basic pro forma earnings per share (¢â€š¬ cents 31.9 2.7
per share) (4) Underlying pro forma earnings per share (¢â€š¬ 22.6 11.9 +90cents per share) (4),(5) Headline pro forma earnings per share (¢â€š¬ 17.3 12.1 +43cents per share) (4), (5) Interim dividend per share (¢â€š¬ cents per 7.3 N/A N/Ashare) Cash inflow from operations 356 229 +55 Group ROCE (6) 10.0% 8.2% +22Highlights: * Group revenue up 7% at ¢â€š¬3.1 billion * EBITDA up 23% at ¢â€š¬421 million
* Underlying operating profit up 46% at ¢â€š¬243 million driven by an improved
operating performance across the Group, and significant pick up in the
trading environment in Mondi Packaging and a major turnaround in the South
African operations within Mondi Business Paper * Successful listing of the Mondi Group on the JSE and LSE on 3 July 2007 completes demerger from Anglo American plc
David Hathorn, Mondi Group Chief Executive, said:
"I am very pleased that Mondi's first set of results as an independent Group shows a substantial recovery in operating profits and reflects an improved operating performance and trading environment across all business areas.
In the second half we expect to see continued pressure from rising input costs and weakness of the US dollar. However, the positive trends in Mondi's key business segments are expected to continue and the Board is confident of achieving good progress for the year as a whole."
_________________________________________________________________________________
(*1)EBITDA is operating profit of subsidiaries and joint ventures before special items, depreciation and amortisation.
(2) Underlying operating profit is operating profit of subsidiaries and joint ventures before special items.
(3 Underlying profit before tax is reported profit before tax before special items.
(4) The calculation of basic earnings, underlying earnings and headline earnings per share has been based on the actual number of shares issued on admission to the Johannesburg and London stock exchanges of 514,137,127 shares.
(5) The Group has presented underlying earnings per share to exclude the impactof special items, in order to present an additional comparison for the periodsshown in the combined condensed and consolidated financial statement, andheadline earnings per share to exclude the impact of special items apart fromdemerger costs that have been reflected as special items.(6) Group return on capital employed (ROCE) is an annualised measure based onunderlying operating profit plus share of associates net earnings divided byaverage trading capital employed.
Contact details:
Mondi Group On 1 August 2007, please contact Financial Dynamics on the numbers below.
Thereafter, please call:
David Hathorn +27 11 638 4586
Paul Hollingworth +44 (0)1932 826 326
Financial Dynamics
Richard Mountain +44 (0)20 7269 7121 / +44 (0)7909 684 466
Louise Brugman +27 11 214 2415 / +27 83 504 1196
Presentation dial in facility:
A listen only dial in facility will be available for analysts and investors to listen to the presentation live at 10:30 (SA) and 09:30 (UK).
The dial in numbers are below. Please quote conference ID reference 760473
UK: +44 (0)20 7162 0025 SA: 0800 9914 68
Slides to accompany the results presentation will be available for download on www.mondigroup.com prior to the results presentation.
An audio recording of the presentation will be available on Mondi's website from around midday on 1 August 2007.
Editors' notes:
Mondi is an integrated paper and packaging group founded in South Africa in1967. In 2006 it had revenues of ¢â€š¬5,751 million. Its key operations andinterests are in Western Europe, Emerging Europe (including Russia) and SouthAfrica. Mondi is principally involved in the manufacture of packaging paper,converted packaging products (including corrugated packaging, bags and flexiblepackaging) and office paper.Mondi is integrated across the paper and packaging production process from thegrowing of wood for pulp production and the manufacture of pulp and paper tothe conversion of packaging papers into corrugated packaging and industrialbags. It also has a growing flexibles business focused on the production ofrelease liner, extrusion coating and consumer flexibles products.
Mondi employs approximately 33,000 people and has production operations in 113 locations across 35 countries. Group Performance Overview
The Group experienced a substantial improvement in operating performance in thefirst half of 2007, with underlying operating profit of ¢â€š¬243 million up ¢â€š¬77million or 46% on the first half of 2006. We saw an improved operatingperformance across the Group and a significant pick up in the tradingenvironment in Mondi Packaging, with price increases achieved across all majorpaper grades. Mondi Business Paper also benefited from the improved operabilityof the PM31 paper machine in Merebank, South Africa, as well as modestincreases in uncoated woodfree paper pricing. These positive developments werepartially offset by significant inflation in fibre costs (wood, pulp andrecycled fibre) as a result of strong Chinese fibre demand and alternative usesfor wood in Europe.Mondi Packaging's underlying operating profit increased by ¢â€š¬48 million, up 49%,with the Corrugated Business benefiting from higher containerboard prices,coupled with some improvement in the converting operations and betterperformances in both the Bag and Flexibles Businesses. Mondi Business Paper'sunderlying operating profit increased by ¢â€š¬34 million, or 74%, principallybecause of a significant turnaround in the South Africa operations. This wasdue to a restructuring of the business resulting in the improved operatingperformance of PM31 paper machine in Merebank following the rebuild in 2005 andcost reductions throughout the business. Mondi Packaging South Africa'sunderlying operating profit was in line with the prior year (rand exchange rateadversely impacted translation of results into euros), but was up 25% in localcurrency on the back of improved pricing and demand. Corporate costs werehigher as a result of establishing Mondi's own corporate presence through thedemerger from Anglo American plc.Underlying operating margin was 8.0% (2006: 5.8%) reflecting the good operatingperformance and improvement in pricing, which was partially offset by inputcost pressures. The Group achieved ¢â€š¬73 million in cost savings and profitimprovement initiatives in the first half of 2007, partly compensating forhigher fibre and other input costs. The improved operating performance andlower capital employed in the current period meant that the Group's return onaverage capital employed to June 2007 was 10.0% versus 8.2% in the prior year.Underlying pro forma earnings per share, calculated based on the combinednumber of ordinary shares for Mondi Limited and Mondi plc in issue on Admissionto the Johannesburg and London stock exchanges for the period, were 22.6 eurocents per share, up 90% on the first half of 2006. The Group will pay a maideninterim dividend of 7.3 euro cents per share.Mondi Packaging¢â€š¬ million 6 months 6 months Half year June 2007 June 2006 change % Segment revenue 1,736 1,550 +12 - of which inter-segment revenue 19 23 EBITDA 237 191 +24 Underlying operating profit 146 98 +49 Corrugated Business 66 39 +69 Bag Business 64 49 +31 Flexibles Business 16 10 +60 Capital expenditure 60 106 -43 Net segment assets 2,551 2,412 +6 Return on net segment assets (%) (7) 11.0% 9.0%
+22
(7) Return on net segment assets is an annualised measure based on underlying operating profit divided by average net segment assets.
Mondi Packaging results benefited from record production, ongoing productivityand efficiency gains, an improved trading environment and the restructuringactions taken in 2006. This was mitigated by increased wood and recycled papercosts which were up 27% and 26% respectively on the comparable period.Within the Corrugated Business, the positive containerboard price trends anddemand growth which were seen in 2006 have continued into 2007. Kraftlinerprices were almost flat compared to end of 2006, but up by some 15%1 comparedto the first half of 2006 with white top kraftliner up 4%1. Corrugated boxprices increased reflecting the passing on of containerboard price increases,however, profit margins remain at an unsatisfactory level and further box priceincreases are required. The increase in profits was supported by therestructuring of the downstream corrugated packaging operations in 2006.The Bag Business recorded improved kraft paper prices and volumes and isfurther benefiting from the acquisition of Stambolijski in the second half of2006. The Bag Business downstream converting operations also saw a strongimprovement in demand in the first half, mainly from the construction industry,leading to an unusually high sales volume increase of 4%.
Improvement in the Flexibles Businesses was mainly driven by price increases and efficiency enhancements and also includes the benefit from acquisitions made in the second half of 2006.
Mondi Packaging delivered ¢â€š¬33 million of profit improvements and cost savings in the period. A record packaging paper production output was achieved (production volumes up 5%) with 5 out of 13 paper mills achieving new production records in the period. In addition the Swiecie mill successfully completed the major rebuild of PM1.
During the period, the 40% associate equity stake in Bischof + Klein GmbH wasdisposed of for ¢â€š¬57 million resulting in a profit on sale of ¢â€š¬19 million. Inaddition, to avoid a mandatory offer for the minority interests in MondiPackaging Paper Swiecie S.A following Mondi's demerger from Anglo American plc,a 5.3% stake in Swiecie was disposed of for ¢â€š¬66 million resulting in a profiton sale of ¢â€š¬57 million (Mondi's ownership post disposal is 66%).On 6 July 2007 Mondi Packaging announced the acquisition of 53.56% of TireKutsan, a Turkish corrugated packaging company and 100% of the Austrian basedUnterland flexible packaging operations, both subject to regulatory approval.The debt free enterprise valuation of these acquisitions is ¢â€š¬190 million and ¢â€š¬74 million respectively. Both these acquisitions are exciting additions to theMondi Group and strengthen our packaging division in two of its key segments ofcorrugated and flexibles.Finalisation of the level of available support from the Polish authorities forthe approved ¢â€š¬350 million 470,000 tonne lightweight recycled containerboardmachine and new 250 million m2 per annum corrugated box plant at the MondiPackaging Paper Swiecie mill in Poland is progressing well. The completion dateis estimated to be mid to late 2009.
(1) Source FOEX: PIX Packaging Europe Index History
Mondi Business Paper¢â€š¬ million 6 months 6 months Half year June 2007 June 2006 change % Segment revenue 966 958 +1 - of which inter-segment revenue 86 75 EBITDA 149 114 +31 Underlying operating profit 80 46 +74 Capital expenditure 52 84 -38 Net segment assets 2,180 2,157 +1 Return on net segment assets (%) 7 6.4% 5.0%
+28
The increase in underlying operating profit was largely driven by thesignificant improvement in the South African operations. The operationaldifficulties experienced in the first half of 2006, following the 2005 rebuildof PM31 in Merebank, have now largely been addressed. The overall restructuringof the South African operations is progressing well.Uncoated woodfree production was 7.2% higher (continuing operations) than thefirst half of 2006 supported by good performances at our Slovakian and Russianmills. Total pulp production was up 10%, with the Richards Bay RB720 pulp lineoperating at improved rates following commissioning in 2005.The average uncoated woodfree paper price improvements of 5-6% since thebeginning of the year were mostly offset by higher pulp input costs at thenon-integrated mills, and higher purchased wood costs. The overall fibre costincrease has been mitigated by our own low cost wood resources in South Africaand Russia. Cost savings and profit improvement initiatives contributed ¢â€š¬37million during the period.Further increases in paper prices are required for returns to reach acceptablelevels. Whilst industry mill operating rates have improved to over 90% (buttraditionally soften as we move into the European summer) we do expect to seefurther improvement in operating rates post the European summer, helped by someindustry plant closure announcements, and the normal post summer pick up indemand.
Mondi Business Paper will be taking usual downtime in the second half for planned maintenance shuts at its major mills. In addition the headbox at the PM31 paper machine will be further modified to ensure optimum performance, which is scheduled to take up to 3 weeks. This will in total result in a capacity reduction of 35,000 tonnes in the second half.
Mondi Business Paper is making good progress in obtaining the necessaryoperating permits and agreement of governmental support for the approved ¢â€š¬525million modernisation and expansion at the Syktyvkar mill in Russia. Planningfor the project is progressing well with completion expected by mid 2010.Mondi Packaging South Africa¢â€š¬ million 6 months 6 months Half year June 2007 June 2006 change % Segment revenue 173 185 -6 - of which inter-segment revenue 17 13 EBITDA 21 21 - Underlying operating profit 15 15 - Capital expenditure 14 16 -13 Net segment assets 208 202 +3 Return on net segment assets (%) 7 17.1% 19.1%
-10
Demand across all business segments has been strong largely due to an increasein local consumption and a good agricultural season. Underlying operatingprofit was 25% higher in local currency versus the first half of 2006 alsobenefiting from a good operational performance. However, as a result of thesignificantly weaker rand exchange rate, this improved result is flat year onyear on translation into euro.The Springs mill optimisation project costing ¢â€š¬12 million is on track forcommissioning in August 2007. The Felixton optimisation project costing ¢â€š¬25million, which is due for commissioning in March 2008, is progressing well andwill, when complete, enable Felixton to produce lighter weight paper andincrease production by 50,000 tonnes of fluting.
Regulatory approval was received on 4 July 2007 for the ¢â€š¬100 million acquisition of Lenco, a rigid plastics business. Lenco will be consolidated from the beginning of the second half of 2007.
Merchant and Newsprint businesses
¢â€š¬ million 6 months 6 months Half year June 2007 June 2006 change % Segment revenue 286 260 +10 - of which inter-segment revenue 1 - EBITDA 27 22 +23 Underlying operating profit 16 12 +33 Capital expenditure 8 2 +300 Net segment assets 284 251 +13 Return on net segment assets (%) 7 12.3% 7.7%
+60
Merchant and Newsprint underlying operating profit at ¢â€š¬16 million is up 33% onthe first half of 2006. This is due to improved pricing and volumes atEuropapier and improved prices and lower input costs at Aylesford. MondiShanduka Newsprint underlying profit was higher in local currency but lower ineuros as a result of the weaker rand.
Corporate and other businesses
Corporate costs were ¢â€š¬9 million higher than in the first half of 2006 due to Mondi establishing itself as an independent business with certain functions previously performed by Anglo American plc now being resourced by the Mondi Group.
Operating special items
The pre-tax charge of ¢â€š¬8 million is fully described in note 4 to the accountsand is mainly made up of an asset impairment and charges relating to retentionarrangements.Net profit on disposalsNet profit on disposal includes the sale of Bischof + Klein GmbH (¢â€š¬19 millionprofit), the sale of a 5.3% stake in Mondi Packaging Paper Swiecie S.A. (¢â€š¬57million profit), and the sale of various Corrugating converting operations (¢â€š¬8million profit), and have been separately identified given their materiality.The Corrugated converting operations, which were held for sale at the end of2006, were disposed of as part of a restructuring programme to improve theCorrugated results.
Special finance charges
As part of the demerger from Anglo American plc, certain long term loans inSouth Africa were closed out at a cost of ¢â€š¬29 million, representing largely theinterest foregone on the settlement of the loans. Given the materiality of thisamount, the Board believe that it is more appropriate to disclose thisseparately on the income statement.
Net finance costs
Net finance costs of ¢â€š¬42 million, before special financing items, are ¢â€š¬3million lower than 2006 (¢â€š¬45 million) following the debt restructuring in SouthAfrica with Anglo American plc. It should be noted that, going forward, financecosts will reflect Mondi's new capital structure.
Taxation
The effective tax rate at 30% was 3.6% lower than in 2006 due to the higher level of non deductible expenditure in 2006 and fewer prior year adjustments.
Minority interests
Minority interests were ¢â€š¬4 million higher than the first half of 2006 withhigher earnings at the main non-wholly owned subsidiaries of Mondi PackagingSwiecie and Mondi Business Paper (Ruzomberok) partly offset by the benefit in2006 of higher income on green energy credits and CO2 emission sales at bothSwiecie and Ruzomberok.
Underlying pro forma earnings per share
Underlying pro forma earnings per share have been calculated based on the number of ordinary shares in issue on admission to the Johannesburg and London stock exchanges on 3 July 2007. The potential dilutive impact of the share schemes' awards coming into effect on or after 3 July 2007 will only be assessed in the Group's 2007 annual financial statements.
On a pro forma basis, underlying earnings per share were up 90% following the improved operating result.
Interim dividend
A maiden interim dividend of 7.3 euro cents per share will be paid on 17 September 2007 to those shareholders on the register of Mondi plc on 31 August 2007.
An equivalent interim dividend will be paid in South African rand on 17September 2007 to shareholders on the register of Mondi Limited on 31 August2007. Holders of Mondi Limited Depositary Interests who hold their intereststhrough Lloyds TSB Registrars Corporate Nominee Limited will receive theirdividend in UK sterling on 12 October 2007.
The Board intend that the final and interim dividends will be paid in approximate proportions of two thirds (final) and one third (interim).
Cash flow and borrowings
Cash inflows from operations of ¢â€š¬356 million were ¢â€š¬127 million up on thecomparable period, benefiting from improved trading and tighter control ofworking capital. Capital expenditure in the period of ¢â€š¬139 million was ¢â€š¬39million lower than depreciation. Capital expenditure is expected to increase inthe second half as several capital projects are scheduled to take place, when anumber of the large paper mills take maintenance downtime during the secondhalf.Mondi has now entered into new borrowing facilities and repaid the intercompanydebt owed to its former parent Anglo American plc. As at 30 June 2007, Mondihad committed debt facilities of ¢â€š¬2,648 million (at an average maturity of 3.7years) of which ¢â€š¬1,473 million was undrawn.
Current year outlook
In the second half we expect to see continued pressure from rising input costs and weakness of the US dollar. However the positive trends in Mondi's key business segments are expected to continue and the Board is confident of achieving good progress for the year as a whole.
INDEPENDENT REVIEW REPORT TO MONDI LIMITED
Introduction
We have been instructed by the company to review the financial information ofthe Mondi Group for the six months ended 30 June 2007 which comprises acombined condensed consolidated income statement, a combined condensedconsolidated balance sheet, a combined condensed consolidated cash flowstatement, a combined condensed consolidated statement of total recognisedincome and expense and notes 1 to 16. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the basisof preparation set out in Note 1, the JSE Listing Requirements and therequirements of IAS 34 which require that the accounting policies andpresentation applied to the interim figures are consistent with those appliedin preparing the preceding audited financial information except where anychanges, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained inInternational Standards on Review Engagements 2410 - "Review of InterimFinancial Information performed by Independent Auditors of the Entity" issuedby the IASB. A review consists principally of making enquiries of groupmanagement and applying analytical procedures to the financial information andunderlying financial data and, based thereon, assessing whether the accountingpolicies and presentation have been consistently applied unless otherwisedisclosed. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit performed in accordance with International Standards onAuditing and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2007.
Deloitte & TouchePer C SagarPartner1 August 2007Note: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but nocontrol procedures can provide absolute assurance in this area.
INDEPENDENT REVIEW REPORT TO MONDI PLC
Introduction
We have been instructed by the company to review the financial information ofthe Mondi Group for the six months ended 30 June 2007 which comprises acombined condensed consolidated income statement, a combined condensedconsolidated balance sheet, a combined condensed consolidated cash flowstatement, a combined condensed consolidated statement of total recognisedincome and expense and notes 1 to 16. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information.This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so thatwe might state to the company those matters we are required to state to them inan independent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone otherthan the company, for our review work, for this report, or for the conclusionswe have formed.Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the basisof preparation set out in Note 1, the Listing Rules of the Financial ServicesAuthority and the requirements of IAS 34 which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding audited financial information exceptwhere any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management andapplying analytical procedures to the financial information and underlyingfinancial data and, based thereon, assessing whether the accounting policiesand presentation have been consistently applied unless otherwise disclosed.
A
review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope thanan audit performed in accordance with International Standards on Auditing (UKand Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2007.
Deloitte & Touche LLPChartered Accountants London1 August 2007Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but nocontrol procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.
Combined condensed consolidated income statementFor the six months ended 30 June 2007 Reviewed Reviewed Audited Six months ended 30 June Six months ended 30 June Year ended 31 December 2007 2006 2006 Before Special Before Special Before Special special items special items special items ¢â€š¬ million Note items (note 4) items (note 4) items (note 4) Group revenue 3 3,052 - 3,052 2,857 - 2,857 5,751 - 5,751 Materials, energy (1,577) - (1,577) (1,458) - (1,458) (2,960) - (2,960)and consumables used Variable selling (280) - (280) (278) - (278)
(558) - (558)expenses Gross margin 1,195 - 1,195 1,121 - 1,121 2,233 - 2,233 Maintenance and (130) - (130) (134) - (134) (287) - (287)other indirect expenses Personnel costs (446) - (446) (447) - (447)
(874) - (874)
Other net operating (198) (8) (206) (197) (57) (254)
(346) (78) (424)expenses Depreciation and (178) - (178) (177) - (177) (349) - (349)amortisation Operating profit/ 3 243 (8) 235 166 (57) 109
377 (78) 299(loss) from subsidiaries and joint ventures Net profit/(loss) 4 - 84 84 - (4) (4) - (4) (4)on disposals Net income from 3 2 - 2 4 - 4 5 - 5associates
Total profit/(loss) 245 76 321 170 (61) 109
382 (82) 300from operations and associates Investment income 21 - 21 35 - 35
70 - 70
Interest expense (63) (29) (92) (80) - (80)
(147) - (147)
Net finance costs 5 (42) (29) (71) (45) - (45)
(77) - (77) Profit/(loss) 203 47 250 125 (61) 64 305 (82) 223before tax
Taxation (charge)/ 6 (61) 1 (60) (42) 14 (28)
(115) 21 (94)credit Profit/(loss) for 142 48 190 83 (47) 36 190 (61) 129the financial period/year Attributable to: Minority interests 26 - 26 22 - 22
51 - 51
Shareholders of the 116 48 164 61 (47) 14
139 (61) 78parent company Pro forma earnings per share (EPS) for profit attributable to equity holders Basic EPS (¢â€š¬ cents) 7 31.9 2.7 15.2 Headline EPS (¢â€š¬ 7 17.3 12.1 28.2cents) Underlying EPS (¢â€š¬ 7 22.6 11.9 27.0cents) Combined condensed consolidated balance sheetAs at 30 June 2007 Reviewed Reviewed Audited As at 30 As at 30 As at 31 June June December ¢â€š¬ million Note 2007 2006 2006 Intangible assets 381 366 381 Property, plant and equipment 3,594 3,534 3,659 Forestry assets 220 215 221 Investments in associates 7 42 7 Financial asset investments 25 48 39 Deferred tax assets 40 35 35 Retirement benefit surplus 25 1 35 Total non-current assets 4,292 4,241 4,377 Inventories 710 657 656 Trade and other receivables 1,355 1,257 1,268 Current tax assets 33 19 34 Cash and cash equivalents 9 176 421 415 Other current financial assets 7 15 11(derivatives) Total current assets 2,281 2,369 2,384 Assets held for sale 2 20 106 Total assets 6,575 6,630 6,867 Short-term borrowings 9 (311) (1,167) (1,238) Trade and other payables (1,016) (961) (935) Current tax liabilities (87) (24) (71) Provisions (9) (3) (8) Other current financial (2) (3) (2)liabilities (derivatives) Total current liabilities (1,425) (2,158) (2,254)
Medium and long-term borrowings 9 (1,200) (672) (656)
Retirement benefit obligations (212) (229) (220) Deferred tax liabilities (322) (309) (325) Provisions (42) (50) (40) Other non-current liabilities (15) (14)
(16)
Total non-current liabilities (1,791) (1,274)
(1,257)
Liabilities directly associated - -
(39)
with assets classified as held for sale Total liabilities (3,216) (3,432) (3,550) Net assets 3,359 3,198 3,317 Equity Equity attributable to equity 3,007 2,913 2,986holders Minority interests 352 285 331 Total equity 3,359 3,198 3,317 Pro forma net asset value per 6.53 6.22 6.45share (¢â€š¬ per share)
Combined condensed consolidated cash flow statement For the six months ended 30 June 2007
Reviewed Reviewed Audited Six months Six months Year ended ended ended 31 December 30 June 30 June ¢â€š¬ million Note 2007 2006 2006 Cash inflows from operations 356 229 657 Dividends from associates 1 1 1 Dividends from financial - - 1investments Income tax paid (40) (34) (71) Net cash inflows from operating 317 196 588activities Cash flows from investing activities Acquisition of subsidiaries, (7) (68) (113)associates and joint ventures, net of cash and cash equivalents Investment in associates - - (2) Disposal of subsidiaries, 157 29 34associates and joint ventures, net of cash and cash equivalents Purchases of property, plant and 10 (139) (209) (460)equipment Proceeds from the disposal of 4 9 16property, plant and equipment Investment in forestry assets (19) (26) (50) Purchases of financial/fixed asset - (1) (1)investments Purchase of intangible assets (2) - (6) Proceeds from the sale of - 1 3financial/fixed asset investments Loan repayments from related 11 14 9parties Interest received 9 22 51 Other investing activities (1) (7) (5) Net cash generated from/(used in) 13 (236) (524)investing activities Cash flows from financing activities Repayment of short-term borrowings (889) (393)
(355)
Proceeds from medium and long-term 548 24 70borrowings Interest paid (88) (77) (130) Dividends paid to minority (21) (29) (38)interests Dividends paid to Anglo American (202) (22) (75)group companies Proceeds from current asset - (1) -investments Increase in invested capital 105 294 289 Other financing activities 5 6 5 Net cash used in financing (542) (198) (234)activities Net decrease in cash and cash (212) (238) (170)equivalents(1) Cash and cash equivalents(1) at 358 574 574start of period Cash movements in the period (212) (238) (170) Reclassifications (3) - (3) Effects of changes in foreign (7) (37) (43)exchange rates Cash and cash equivalents(1) at 136 299 358end of period Note: (1) Includes overdrafts and cash balances in disposal groups.
Combined consolidated statement of recognised income and expense For the six months ended 30 June 2007
Reviewed Reviewed Audited Six months Six months Year ended ended 30 June ended 30 June 31 December ¢â€š¬ million 2007 2006 2006 (Loss)/gain on cash flow hedges (6) 12 8 Actuarial (losses)/gains on (8) 5 60post-retirement benefit schemes Related deferred tax credit/(charge) 3 (4)
(21)
Exchange losses on translation of (35) (179) (137)foreign operations Other movements 2 (5) 3 Net expense recognised directly in (44) (171) (87)reserves Profit for the period 190 36 129 Total recognised income and expense 146 (135) 42for the period/year Attributable to: Minority interests 32 10 65 Shareholders of the parent company 114 (145)
(23)
Notes to the financial information
1 Basis of preparation
The combined condensed interim financial information for the six months ended30 June 2007 presents the financial record of those businesses held by MondiLimited and Mondi plc at the date of Admission of their shares on theJohannesburg Securities Exchange ("JSE") and the London Stock Exchange ("LSE")respectively. The combined condensed interim financial information thereforecomprises an aggregation of amounts included in the financial statements ofMondi entities and former Anglo American entities (together "the Group").During the period and the prior periods presented, the Group did not form aseparate legal group and therefore it is not meaningful to show the sharecapital or an analysis of reserves within the combined condensed interimfinancial information, although the non-adjusting effects of the dual listingare analysed as part of a review of post balance sheet events. Instead the"Equity attributable to equity holders" is presented, which represents theaggregated share capital, share premiums and reserves of the Group's entities,and debtor and creditor balances between Anglo American and the Group, whichare considered to be equity funding in nature. Any interest accruing on suchbalances is classified as a "dividend in specie" and recorded separatelythrough reserves, not through the income statement.The combined condensed interim financial statements for the six months ended 30June 2007, which were approved by the Board on 1 August 2007, do not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985of the United Kingdom. This interim financial information has been prepared inaccordance with IAS 34, `Interim Financial Reporting' and should be read inconjunction with the financial information for the year ended 31 December 2006included within Part VIII: "Financial information", of the Prospectus dated 1June 2007.2 Accounting policiesThe same accounting policies, presentation and measurement principles have beenfollowed in the condensed set of interim financial statements as applied in theGroup's audited financial information for the year ended 31 December 2006included within Part VIII: "Financial information", of the Prospectus dated 1June 2007.3 Segmental information
Primary reporting format - by business segment
Primary segment disclosures for revenues are as follows:
Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Inter- Inter- Inter- Segment segment Group Segment segment Group Segment segment Group¢â€š¬ million revenue revenue revenue revenue revenue revenue revenue revenue revenue Subsidiaries and joint ventures Mondi Packaging Corrugated 768 (33) 735 731 (40) 691 1,497 (86) 1,411Business Bag Business 634 (21) 613 561 (16) 545 1,162 (31) 1,131 Flexibles Business 384 (15) 369 304 (13) 291 607 (28) 579 Intra-group sales (50) 50 - (46) 46 - (99) 99 - 1,736 (19) 1,717 1,550 (23) 1,527 3,167 (46) 3,121 Mondi Business 966 (86) 880 958 (75) 883 1,889 (163) 1,726Paper Mondi Packaging 173 (17) 156 185 (13) 172 360 (25) 335South Africa Merchant and 286 (1) 285 260 - 260 539 (1) 538Newsprint businesses Corporate and 14 - 14 15 - 15 31 - 31other businesses Elimination of (123) 123 - (111) 111 - (235) 235 -inter-segment revenue Total subsidiaries 3,052 - 3,052 2,857 - 2,857 5,751 - 5,751and joint ventures Associates Mondi Packaging 8 - 8 102 - 102 168 - 168 Mondi Business 25 - 25 21 - 21 40 - 40Paper Mondi Packaging 3 - 3 1 - 1 8 - 8South Africa Total associates 36 - 36 124 - 124 216 - 216 Total Group 3,088 - 3,088 2,981 - 2,981 5,967 - 5,967operations
Primary segment disclosures for profits are as follows:
Segment operating profit Segment operating profit after before special items special items (1) Six Six Six Six months months Year ended months months Year ¢â€š¬ million ended 30 ended 30 31 ended 30 ended 30 ended June 2007 June 2006 December June June 31 2006 2007 2006 December 2006 Subsidiaries and joint ventures Mondi Packaging Corrugated 66 39 120 66 (10) 71Business Bag Business 64 49 97 64 41 89 Flexibles Business 16 10 9 16 9 4 146 98 226 146 40 164 Mondi Business 80 46 104 76 47 88Paper Mondi Packaging 15 15 35 16 15 35South Africa Merchant and 16 12 29 16 12 29Newsprint businesses Corporate and (14) (5) (17) (19) (5) (17)other businesses Total subsidiaries 243 166 377 235 109 299and joint ventures Net income from associates Mondi Packaging 1 4 4 1 4 4 Mondi Business 1 - 1 1 - 1Paper Total associates 2 4 5 2 4 5 Total Group 245 170 382 237 113 304operations including net income from associates Net profit/(loss) - - - 84 (4) (4)on disposals Total profit from 245 170 382 321 109 300operations and associates Note: (1) Special items are set out in note 4.
Primary segment disclosures for segment assets and liabilities are as follows:
As at 30 June 2007 As at 30 June 2006 As at 31 December 2006 Segment Segment Segment Segment liabilities Net Segment liabilities Net Segment liabilities Net¢â€š¬ million assets segment assets segment assets segment assets assets assets (1) (1) (1) Subsidiaries and joint ventures Mondi Packaging Corrugated Business 1,244 (217) 1,027 1,220 (230) 990 1,263 (233) 1,030 Bag Business 1,311 (175) 1,136 1,270 (168) 1,102 1,265 (175) 1,090 Flexibles Business 467 (79) 388 390 (70) 320 432 (58) 374 3,022 (471) 2,551 2,880 (468) 2,412 2,960 (466) 2,494 Mondi Business Paper 2,440 (260) 2,180 2,415 (258) 2,157 2,484 (253) 2,231 Mondi Packaging 261 (53) 208 230 (28) 202 247 (52) 195South Africa Merchant and 348 (64) 284 314 (63) 251 317 (65) 252Newsprint businesses Corporate and other 26 (5) 21 26 (6) 20 34 (7) 27businesses 6,097 (853) 5,244 5,865 (823) 5,042 6,042 (843) 5,199 Unallocated: Investment in 7 - 7 42 - 42 7 - 7associates Deferred tax assets/ 40 (322) (282) 35 (309) (274) 35 (325) (290)(liabilities) Other non-operating 230 (530) (300) 219 (461) (242) 329 (488) (159)assets/ (liabilities) Trading capital 6,374 (1,705) 4,669 6,161 (1,593) 4,568 6,413 (1,656) 4,757employed Financial 25 - 25 48 - 48 39 - 39investments Net debt 176 (1,511) (1,335) 421 (1,839) (1,418) 415 (1,894) (1,479) Net assets 6,575 (3,216) 3,359 6,630 (3,432) 3,198 6,867 (3,550) 3,317Note:
1. Net segment assets are operating assets less operating liabilities.
Operating assets are intangible assets, tangible assets, forestry assets,
retirement benefit surplus, inventories and operating receivables. Operating liabilities are non-interest bearing current liabilities, restoration and decommissioning provisions and provisions for post-retirement benefits.
Secondary reporting format - by geographical segment
Secondary segmental information of revenue by customer location is as follows: Revenue Six months Six months ended 30 ended 30 Year ended¢â€š¬ million June June 31 December 2007 2006 2006 Subsidiaries and joint ventures South Africa 291 307 592 Rest of Africa 93 95 186 Western Europe 1,587 1,470 2,932 Eastern Europe 492 424 856 Russia 258 220 453 North America 98 105 215 South America 10 9 26 Asia and Australia 223 227 491 Total subsidiaries and joint ventures 3,052 2,857 5,751 Associates South Africa 3 1 8 Rest of Africa 6 4 4 Western Europe - 82 136 Eastern Europe 27 30 55 North America - 3 6 South America - 1 1 Asia and Australia - 3 6 Total associates 36 124 216 Total Group operations including 3,088 2,981
5,967
associates Additional disclosure of secondary segmental information of revenue by originis as follows: Revenue Six months Six months ended 30 ended 30 Year ended¢â€š¬ million June June 31 December 2007 2006 2006 Subsidiaries and joint ventures South Africa 469 499 982 Rest of Africa 5 6 14 Western Europe 1,376 1,274 2,582 Eastern Europe 797 703 1,417 Russia 270 237 482 North America 61 62 121 Asia and Australia 74 76 153 Total subsidiaries and joint ventures 3,052 2,857 5,751 Associates South Africa 3 1 8 Rest of Africa 6 4 4 Western Europe - 96 161 Eastern Europe 27 23 43 Total associates 36 124 216 Total Group operations including 3,088 2,981
5,967
associates
The Group's geographical analysis of segment assets and liabilities, allocated based on where assets and liabilities are located, is:
As at 30 June 2007 As at 30 June 2006 As at 31 December 2006 Segment Segment Segment Segment liabilities Net Segment liabilities Net Segment liabilities Net¢â€š¬ million assets segment assets segment assets segment assets assets assets Subsidiaries and joint ventures South Africa 1,428 (183) 1,245 1,368 (131) 1,237 1,500 (203) 1,297 Rest of Africa 11 (6) 5 13 (6) 7 15 (7) 8 Western Europe 2,310 (378) 1,932 2,316 (438) 1,878 2,231 (357) 1,874 Eastern Europe 1,676 (196) 1,480 1,504 (156) 1,348 1,633 (181) 1,452 Russia 446 (35) 411 437 (36) 401 436 (34) 402 North America 113 (16)) 97 111 (17) 94 121 (23) 98 Asia and Australia 113 (39) 74 116 (39) 77 106 (38) 68 Total subsidiaries 6,097 (853) 5,244 5,865 (823) 5,042 6,042 (843) 5,199and joint ventures 4 Special Items¢â€š¬ million Six months Six months Year ended ended 30 ended 30 31 December June June 2006 2007 2006 Subsidiaries and joint ventures Operating special items Mondi Packaging asset impairments - (58)
(62)
Mondi Business Paper asset impairments (4) 1 (19) Retention arrangements (5) - - Mondi Packaging South Africa negative 1 - -goodwill Mondi Business Paper negative goodwill - -
3
Total operating special items (8) (57)
(78)
Profit and (losses) on disposals Disposal of partial interest in Mondi 57 - -Packaging Paper Swiecie SA Disposal of interest in Bischof + Klein 19 - -GmbH Sale of assets and other items 8 (4)
(4)
Net profit/(loss) on disposal 84 (4) (4) Financing cost (29) - - Total non-operating special items 55 (4)
(4)
Total special items before tax and 47 (61) (82)minority interests Taxation 1 14 21 Total attributable to shareholders of the 48 (47)
(61)
parent company "Special items" are those items of financial performance that the Groupbelieves should be separately disclosed on the face of the income statement toassist in the understanding of the underlying financial performance achieved bythe Group and its businesses. Such items are material by nature or amount tothe financial period's/year's results and require separate disclosure inaccordance with IAS 1, "Presentation of Financial Statements". Special itemsthat relate to the operating performance of the Group are classified as specialoperating items and include impairment charges and reversals and otherexceptional items including material restructuring costs. Non-operating specialitems include profits and losses on disposals of investments and businesses.
Non-operating special items
The Group disposed of 5.3% of its interest in Mondi Packaging Paper Swiecie SA,a subsidiary in which the Group retains control, on 15 May 2007 forconsideration of ¢â€š¬66 million and a profit of ¢â€š¬57 million and its entireinterest in Bischof + Klein GmbH, formerly an associate entity of the Group, on22 February 2007 for consideration of ¢â€š¬54 million and a profit of ¢â€š¬19 million.Assets held for sale as at 31 December 2006 and representing the Group'scorrugated converting operations were disposed of in the six months ended 30June 2007. The profit on disposal of these operations was ¢â€š¬8 million. A one-offfinance cost of ¢â€š¬29 million resulted from a refinancing arrangement enteredinto in South Africa (see note 9).
Operating special items
An impairment of the carbonless plant held in South Africa, resulting from adecline in the market for carbonless paper, accounts for ¢â€š¬4 million of theoperating special charge. Senior management, principally equity-settled,retention arrangements of ¢â€š¬5 million represents the charge of a total cost ofapproximately ¢â€š¬24 million to be spread over the period until 3 July 2009. Thecost of these two special items has been partially offset by negative goodwillof ¢â€š¬1 million on an acquisition within the Mondi Packaging South Africabusiness segment.5 Net finance costs Six months Six months Year ended ended 30 ended 30 31 December June June ¢â€š¬ million 2007 2006 2006 Investment income Interest and other financial income 9 27
39
Expected return on defined benefit 10 10 18arrangements Foreign exchange gains/(losses) 2 (2)
12
Dividend income from financial/ - - 1fixed asset investments Total investment income 21 35 70 Interest expense Bank loans and overdrafts (41) (58) (102) Special items financing cost (note (29) - -4) Other loans (11) (9) (17) Interest on defined benefit (13) (14) (30)arrangements (94) (81) (149) Less: interest capitalised 2 1 2 Total interest expense (92) (80) (147) Net finance costs (71) (45) (77)Finance costs and foreign exchange gains/(losses) are presented net ofeffective cash flow hedges for respective interest bearing and foreign currencyborrowings.6 Income tax expense Six months Six months Year ended ended 30 ended 30 31 December¢â€š¬ million June June 2006 2007 2006 United Kingdom - (5) (7) Overseas 58 47 119 58 42 112 Deferred taxation 2 (14) (18) 60 28 94The Group's share of associated undertakings' taxation for the six months ended30 June 2007 was ¢â€š¬0.4 million (six months ended 30 June 2006: ¢â€š¬1 million, yearended 31 December 2006: ¢â€š¬1 million).The Group's effective tax rate before special items for the six months ended 30June 2007 is 30 per cent (six months ended 30 June 2006: 34 per cent). TheGroup's reported tax rate for the six months ended 30 June 2007 is 24 per cent(six months ended 30 June 2006: 44 per cent).7 Pro forma EPS Six months Six months Year ended ended 30 ended 30 31 December June June ¢â€š¬ cents per share 2007 2006 2006 Basic EPS 31.9 2.7 15.2 Headline EPS(1) 17.3 12.1 28.2 Underlying EPS(2) 22.6 11.9 27.0Notes:
1. Headline earnings has been calculated in accordance with Circular 7/2002,
`Headline Earnings', as issued by the South African Institute of Chartered
Accountants. See the reconciliation below.
2. The directors believe that underlying earnings provides a useful additional
measure of the Group's underlying performance. The calculation of basic EPS has been based on the profit for the six monthperiod/financial year, as shown below, and on 514,137,127 shares, whichrepresents the aggregate number of shares that were issued upon Admission on 3July 2007 (see note 16). The Group was not a stand-alone entity prior to thedemerger date. The number of shares in issue has therefore been retrospectivelyapplied to the comparative periods, so that a meaningful comparison can bemade.The Group has also presented underlying EPS and headline EPS. Underlying EPSexcludes the impact of special items, in order to present an additionalcomparison for the periods shown in the combined condensed consolidatedfinancial information. The presentation of headline EPS is mandated under theJSE Listing Requirements.The calculation of headline earnings and underlying earnings, based on basicearnings is as follows: Earnings Six Six Year months months ended ended ended 30 30 31 June June December ¢â€š¬ million 2007 2006 2006 Attributable profit 164 14 78for the financial year Special items: 8 57 78operating Special items: 29 - -financing costs Net (profit)/loss on (84) 4 4disposals Related tax (1) (14) (21) Underlying earnings 116 61 139 Special items: (29) - -financing costs Special items: (5) - -retention arrangements Loss on disposal of 1 1 8tangible fixed assets Related tax 6 - (2) Headline earnings 89 62 145Diluted EPS is not presented as there are no dilutive potential ordinary sharesin issue as at 30 June 2007. The potential dilutive impact of the Group's sharescheme awards, which become effective on 3 July 2007, will only be assessed inthe Group's 2007 Annual Report.8 Dividends Six months ended 30 June ¢â€š¬ 2007 million Interim 38 dividend The interim dividend for 2007 of 7.3 euro cents per ordinary share will be paidto equity holders, other than those holders within the Lloyds TSB CorporateNominee, on 17 September 2007 based on the shareholder registers on 31 August2007. The dividend will be paid from the distributable reserves of MondiLimited, as presented in the annual financial statements of Mondi Limited forthe year ended 31 December 2006 and from the distributable reserves of Mondiplc, as presented in the Initial Accounts for the period ended 2 July 2007.
The relevant dates for the payment of the dividends are:
Mondi Limited Mondi plc Currency conversion date Euro/sterling 1 August 2007 1 August 2007 ZAR/euro 1 August 2007 1 August 2007 Last date to trade shares cum-dividend JSE Limited 24 August 2007 24 August 2007 LSE Not applicable 28 August 2007 Shares commence trading ex-dividend JSE Limited 27 August 2007 27 August 2007 LSE Not applicable 29 August 2007 Record date JSE Limited 31 August 2007 31 August 2007 LSE Not applicable 31 August 2007 Last date for Dividend Reinvestment 5 September 2007 5 September Plan ("DRIP") elections by Central 2007 Securities Depositary Participants ("CSDPs") Last date for DRIP elections to UK 6 September 2007 6 September Registrar and South African 2007 Transfer Secretaries by shareholders of Mondi Limited, Mondi plc and by holders in the Corporate Nominee Payment date UK Register Not applicable 17 September 2007 South African Register 17 September 17 September 2007 2007 Depositary Interest Holders 17 September Not applicable (dematerialised DIs) 2007 Payment date for holders within 25 September Not applicable Lloyds TSB Corporate Nominee 2007 DRIP purchase settlement date 25 September 25 September 2007 2007 Share certificates on the South African registers of Mondi Limited and Mondiplc may not be dematerialised or rematerialised between 27 August 2007 and 2September 2007, both dates inclusive, nor may transfers between the UK andSouth African registers of Mondi plc take place between 1 August 2007 and 2September 2007, both dates inclusive.
9 Net debt
The Group's net debt position, excluding disposal groups for the relevantperiods is as follows:¢â€š¬ million Cash and Debt due Debt due Loans to Total net cash within after one related debt equivalents one year year parties (1) (2) Balance at 1 January 574 (1,490) (710) 14 (1,612)2006 Cash flow (238) 393 (24) (14) 117 Business combinations/ - (24) - - (24)disposal of business Currency movements (37) 76 62 - 101 Closing balance at 30 299 (1,045) (672) - (1,418)June 2006 Cash flow 68 (38) (46) - (16) Business combinations/ - (18) (8) - (26)disposal of business Transfer to disposal (3) - 4 - 1groups Reclassifications - (78) 78 - - Currency movements (6) (2) (12) - (20) Closing balance at 31 358 (1,181) (656) - (1,479)December 2006 Cash flow (212) 889 (548) - 129 Business combinations/ - 7 - - 7disposal of business Reclassifications (3) 3 - - - Currency movements (7) 11 4 - 8 Closing balance at 30 136 (271) (1,200) - (1,335)June 2007 Notes:
(1) The Group operates in certain countries (principally South Africa) where the existence of exchange controls may restrict the use of certain cash
balances. These restrictions are not expected to have any material effect on the Group's ability to meet its ongoing obligations.
(2) Excludes overdrafts, which are included as cash and cash equivalents. At 30June 2007, short-term borrowings on the balance sheet of ¢â€š¬311 million (30 June 2006: ¢â€š¬1,167 million, 31 December 2006: ¢â€š¬1,238 million) include ¢â€š¬40 million of overdrafts (30 June 2006: ¢â€š¬122 million, 31 December 2006: ¢â€š¬57 million). In order to provide for its ongoing capital needs, the Group entered into twoadditional external financing arrangements prior to the period end. The amountsdrawn down on these facilities have been used to refinance existing debtobligations outstanding to the Anglo American Group and other third parties.
¢â€š¬1.55 billion Syndicated Revolving Credit Facility (UKRCF)
The UKRCF is a five year multi-currency revolving credit facility which was signed on 22 June 2007. Interest is charged on the balance outstanding at a market-related rate linked to LIBOR.
ZAR 2 billion Term Loan Facility (SATF)
The SATF is a South African rand three year amortising term loan which was signed and drawn down on 4 May 2007. Interest is charged on the balance outstanding at a market-related rate linked to JIBAR.
10 Capital expenditure cash payments(1)
Six months Six months Year ended ended ended 31 December ¢â€š¬ million 30 June 30 June 2007 2006 2006 By business segment Mondi Packaging Corrugated Business 31 38 125 Bag Business 21 59 118 Flexibles Business 8 9 24 60 106 267 Mondi Business Paper 52 84 156 Mondi Packaging South Africa 14 16 27 Merchant and Newsprint businesses 8 2
9
Corporate and other businesses 5 1 1 Capital expenditure 139 209 460Note: (1) Excludes business combinations.
11 EBITDA
A reconciliation of cash inflows from operations to EBITDA is presented asfollows: Reviewed Reviewed Audited Six months Six months Year ended ended 30 June ended 30 June 31 December ¢â€š¬ million 2007 2006 2006 Cash inflows from operations 356 229 657 Share option expense (3) (3) (6) Fair value gains on forestry assets 13 16 37 Cost of felling (26) (32) (58) Decrease in provisions and 10 32 39post-employment benefits Increase in inventories 52 30 14 Increase in operating receivables 99 78
48
Increase/(decrease) in operating (92) (9) 20payables Other adjustments 12 2 (25) EBITDA(1) 421 343 726Note:
(1) EBITDA is operating profit before special items plus depreciation and
amortisation in subsidiaries and joint ventures.
EBITDA by primary business segment is presented as follows:
Six month Six months Year ended ended ended ¢â€š¬ million 30 June 30 June 31 December 2007 2006 2006 By business segment Mondi Packaging Corrugated Business 106 83 206 Bag Business 103 86 174 Flexibles Business 28 22 32 237 191 412 Mondi Business Paper 149 114 237 Mondi Packaging South Africa 21 21 46 Merchant and Newsprint businesses 27 22
48
Corporate and other businesses (13) (5) (17) EBITDA 421 343 726
EBITDA is stated before special items and is reconciled to "Total profit from operations and associates" as follows:
Six month Six months Year ended ended ended 31 December ¢â€š¬ million 30 June 30 June 2007 2006 2006 Total profit from operations and 321 109 300associates Operating special items (excluding 8 57 78associates) Net(profit)/loss on disposals (84) 4 4(excluding associates) Depreciation and amortisation: 178 177
349
subsidiaries and joint ventures Share of associates' net income (2) (4) (5) EBITDA 421 343 72612 Retirement benefitsMaterial schemesThe Group's material defined benefit scheme liabilities were actuariallyassessed on a roll-forward basis for the six months ended 30 June 2007. The netchange in actuarial assumptions from the year ended 31 December 2006 resultedin an immaterial impact on the present value of the scheme liabilities. Theassets backing these material scheme liabilities were updated to reflect theirmarket values as at 30 June 2007. Any difference between the expected return onassets and the actual return on assets has been recognised as an actuarialmovement in the combined condensed consolidated statement of recognised incomeand expense in accordance with the Group's accounting policy. The restrictionof the surplus on the South African schemes increased by ¢â€š¬12 million as aresult of a decrease in anticipated future employee contributions.
Other Group schemes
The other Group defined benefit schemes are calculated on a year-to-date basis,using the same assumptions as were used in the actuarial valuation carried outfor the year ended 31 December 2006. There have not been any significantfluctuations or one-off events in the period that would require adjustment tothese actuarial assumptions.13 Capital commitments As at 30 June As at 30 June As at 31 December¢â€š¬ million 2007 2006 2006 Contracted but not 79 40 37provided 14 Contingent Liabilities
Contingent liabilities comprise aggregate amounts at 30 June 2007 of ¢â€š¬17 million (30 June 2006: ¢â€š¬21 million, 31 December 2006: ¢â€š¬34 million) in respect of loans and guarantees given to banks and other third parties.
15 Related party transactions
The Group has a related party relationship with its associates and joint ventures.
The Group and its subsidiaries, in the ordinary course of business, enter intovarious sales, purchase and service transactions with joint ventures andassociates and others in which the Group has a material interest. Thesetransactions are under terms that are no less favourable than those arrangedwith third parties. These transactions, in total, are not considered to besignificant.Mr Ramaphosa, non-executive Joint Chairman of Mondi, has a 39.96% stake inShanduka Group (Pty) Limited, an entity that has controlling interests inShanduka (Pty) Limited and Shanduka Packaging (Pty) Limited and participatinginterests in Mondi Shanduka Newsprint (Pty) Limited, Kangra Coal (Pty) Limitedand Mondi Packaging South Africa (Pty) Limited. Fees of ¢â€š¬200,000 and ¢â€š¬345,000were paid to Shanduka (Pty) Limited and Shanduka Packaging (Pty) Limitedrespectively for management services provided to the Group in the six monthsended 30 June 2007. Shanduka Packaging (Pty) Limited has also provided financeto the Group. The balance outstanding as at 30 June 2007 was ¢â€š¬7 million. In thenormal course of business, and on an arm's length basis, the Group purchasedsupplies from Kangra Coal (Pty) Limited totalling ¢â€š¬8 million during the period.¢â€š¬1 million remains outstanding on these purchases as at 30 June 2007.Comparatives have not been disclosed because Mr Ramaphosa became a relatedparty on his appointment as non-executive Joint Chairman on 16 May 2007.Dividends received from associates for the six months ended 30 June 2007totalled ¢â€š¬1 million (six months ended 30 June 2006: ¢â€š¬1 million, 31 December2006: ¢â€š¬1 million), as disclosed in the combined condensed consolidated cashflow statement. Anglo Joint Ventures Associates American Group ¢â€š¬ million Six months ended 30 June 2007 Sales to related parties - - 1 Purchases from related parties (6) - (68) Net finance income/(costs) 2 (2) - Dividends paid to related parties (202) - - Dividends in specie (32) - - Receivables due from related parties - 1
-
Cash held by related parties - 2
-
Total borrowings from related parties (4) (7)
-
Six months ended 30 June 2006 Sales to related parties - - 3 Purchases from related parties - - (3) Net finance costs (21) - - Dividends paid to related parties (22) - - Dividends in specie (32) - - Loans to related parties - 35 - Receivables due from related parties 1 3 1 Cash held by related parties 329 - - Financial assets and liabilities 1 -
-
Total borrowings from related parties (836) - - Year ended 31 December 2006 Sales to related parties - 10 - Purchases from related parties - (2) - Net finance costs (31) - - Dividends (paid)/received to/from related (75) - 1parties Dividends in specie (68) - - Loans to related parties - 35 - Receivables due from related parties 4 3
1
Payables due to related parties (2) -
-
Cash held by related parties 286 -
-
Total borrowings from related parties (942) -
-
16 Events occurring after 30 June 2007
On 2 July 2007, the execution of the final demerger transaction resulted in theMondi companies successfully demerging from Anglo American plc and becoming theMondi Group ("the legal Group"). The legal Group has a dual listed structureand the shares of both Mondi Limited and Mondi plc, the ultimate holdingcompanies for the African and non-African assets respectively, were admitted tothe JSE and LSE on 3 July 2007.The sharing agreement between Mondi Limited and Mondi plc has the effect thattheir shareholders can be regarded as having the interests of a single economicgroup. Accordingly, the legal Group will present combined and consolidatedfinancial information representing the combined interests of both sets ofshareholders and encompass the businesses of Mondi Limited and Mondi plc andtheir respective subsidiaries, joint ventures and associates.
Share capital
The share capital of Mondi plc was created by way of a dividend in specie madeto Anglo American plc equity holders on a pro rata basis initially of one Mondiplc ordinary share for every one Anglo American plc ordinary share held. Theshare capital was then subsequently reduced by order of the United Kingdom HighCourt on 2 July 2007 in order to capitalise Mondi Limited and generatedistributable reserves for the ongoing needs of the Group and its shareholders. Number of ¢â€š¬ Ordinary Share Total shares million shares premium (1) (1) As at 30 June 2007(1) - - - - Shares issued on the JSE 146,896,322 3 540
543
Shares issued on the LSE 367,240,805 74 - 74 As at 2 July 2007(2) 514,137,127 77 540 617Notes: (1) No comparatives have been presented because the Group's shares were issued on Admission to the JSE and LSE on 3 July 2007. Prior to this date the Group was owned by Anglo American plc and presentation of this ownership interest is not considered to provide a meaningful comparison.
(2) In addition, there are special converting shares in issue in both Mondi
Limited of 367,240,805 (¢â€š¬8 million) and Mondi plc of 146,896,322 (¢â€š¬29 million) that are held on trust and do not carry voting or dividend rights. The special converting shares provide a mechanism for equality of treatment on termination for both Mondi Limited and Mondi plc ordinary equity holders. Mondi plc also issued 50,000 5% cumulative ‚£1 preference shares. The Group willclassify these preference shares as a liability, and not as equity instruments,since they contractually obligate the Group to make cumulative dividendpayments to the holders. These dividend payments will be treated as a financecost rather than distributions in subsequent reporting periods.Other reserves¢â€š¬ million Retained Share-based Cumulative Fair Minority Total earnings payment translation value interests reserve adjustment and reserve other reserves (1) As at 2 July 2007 2,166 17 (40) 242 352 2,737 Note:
(1) Including ¢â€š¬237 million in respect of the merger reserve created on demerger from Anglo American plc and in aggregating Mondi Limited and Mondi plc.
Acquisitions
Mondi Packaging South Africa received regulatory approval on 4 July 2007 forthe ¢â€š¬100 million acquisition of Lenco, a South African rigid plastics business.Following the successful completion of this acquisition, Lenco's results willbe consolidated from the second half of 2007.Production statistics Six months Year ended ended 30 Six months 31 December June ended 30 June 2007 2006 2006 Mondi Packaging Containerboard tonnes 1,035,932 1,009,005 2,044,391 Kraft paper tonnes 444,625 400,941 850,271 Corrugated board and boxes m m‚² 985 1,071 2,103 Industrial bags m units 1,910 1,799 3,606 Coating and release liners m m‚² 1,549 1,186 2,360 Pulp - external tonnes 91,834 89,025 180,166 Mondi Business Paper Uncoated wood free paper tonnes 1,039,145 1,015,481 2,012,295 Newsprint tonnes 99,738 92,056 187,100 Pulp - external tonnes 84,563 52,221 114,099 Wood chips Bone dry 362,089 475,665 886,612 tonnes Mondi Packaging South Africa Packaging papers tonnes 141,339 149,078 369,300 Corrugated board and boxes m m‚² 171 142 328 Newsprint Joint Ventures and other Newsprint (attributable tonnes 156,102 162,065 320,876share) Aylesford (attributable tonnes 94,354 100,272 196,864share) Shanduka (attributable tonnes 61,748 61,793 124,012share) Exchange rates Six months ended Six months Year ended ended 30 June 30 June 31 December Closing rates against the euro 2007 2006 2006 South African rand 9.53 9.13 9.22 Pounds sterling 0.67 0.69 0.67 Polish zloty 3.77 4.08 3.84 Russian rouble 34.83 34.32 34.68 Slovakian koruna 33.61 38.43 34.56 US dollar 1.35 1.28 1.32 Czech koruna 28.71 28.57 27.50 Average rates for the period against the euro South African rand 9.52 7.76 8.51 Pounds sterling 0.67 0.69 0.68 Polish zloty 3.84 3.89 3.90 Russian rouble 34.67 34.03 34.14 Slovakian koruna 34.05 37.59 37.25 US dollar 1.33 1.23 1.26 Czech koruna 28.16 28.52 28.37
MONDI PLCRelated Shares:
Mondi