RISI International Containerboard Conference| 2018 - The European Containerboard Market - Events
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RISI International Containerboard Conference| 2018 The European Containerboard Market Florian Stockert November 2018
Mondi is a global leader in packaging and paper
26,000 employees
Over 100 operations across more than 30 countries
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More than 100,000 solutions for our customers
2.4M hectares of forest managed
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Group offices in Johannesburg, London and Vienna
Primary listing on the JSE
Limited for Mondi Limited
Premium listing on the London
Stock Exchange for Mondi plc
FTSE4Good Index Series
JSE’s Socially Responsible Investment Index
1
Mondi at a glance
Fibre Packaging2 Consumer Packaging Uncoated Fine Paper
€3,735m €1,646m €1,832m
2017
revenue1 25%
& 52%
underlying 23%
EBITDA
margin3
22.3% 13.5% 25.3%
Products
1 Segment revenues, before elimination of inter-segment revenues
2 Packaging Paper and Fibre Packaging were replaced by a single business unit called Fibre Packaging effective from 1 August 2018
3 The Group early adopted the new 'Leases' accounting standard, IFRS 16. All 2017 comparative figures in this presentation have been restated where applicable. 2
2017 production statistics
Total market pulp and paper = 5,976 k tonnes
Containerboard Corrugated board and boxes
2,297 k tonnes 1,650 million m2
Kraft paper Industrial bags
1,206 k tonnes 4,952 million units
Uncoated fine paper Extrusion coatings
1,644 k tonnes 1,281 million m2
Market pulp Consumer packaging
552 k tonnes 7,437 million m2
Newsprint
277 k tonnes
3
Leading market positions
Global Europe Emerging Europe South Africa
Kraft paper Virgin Uncoated Containerboard Uncoated
containerboard fine paper fine paper
Industrial
#1 bags
Commercial
release liner
Consumer flexible Corrugated
packaging packaging
#3
Please see sources and definitions at the end of this document
4
Some issues have not changed since 2010
Agenda (from 2010)
Economic crisis Sustainability
Decreased paper consumption Climate Change and
Recovered fibre tight supply Environmental Impact
Exchange rate Demographics
Short Medium Long
Term Term Term
Substitution
Substance reduction
Wide deckle trend
Recovered fibre avialability
Shift of capacity
Increasing marketing role
of packaging (WT)
How these trends have been
developing in Europe? What
possibly comes next?
Source: Mondi
5
Drivers for containerboard growth 2013-2018
Containerboard market overview
Recycled containerboard
Kraft Top Liner
Kraftliner
White liners
Semi-chemical Fluting
6
Strong fundamentals driving containerboard consumption in Europe
15% EU containerboard demand and its drivers
9.9%
10%
5% 4.3%
3.2%
2.5% 2.4%
1.4%
0%
Demand Real GDP Manufacturing Consumer Retail Sales E-commerce
Spending
2010 2013 2017 2012 2013 2017
Source: Numera Analytics 7
E-commerce growth is pulling corrugated
EU e-commerce retail sales Global e-commerce packaging by type
(2017)
200 90% 81%
160 75%
60%
120
45%
80
30%
15%
40 15%
4% 1%
Index, 2010 = 100
0 0%
08 09 10 11 12 13 14 15 16 17 Corrugated Flexibles Protective Protective mailers
packaging
80% of packaging in e-commerce is corrugated
e-commerce growth needs corrugated to grow with it
This one exceptionally strong increase is partly due to change in reporting standards of Amazon in 2016
Source: Eurostat, Numera Analytics, Mondi corrugated e-commerce study 8
Central / Eastern Europe with further growth potential
Containerboard consumption per capita
80
Average consumption in
70 Western Europe
60
50
Annual kg / capita
40
30
20
10
0
Germany Austria Poland Italy Cz. France Croatia UK Turkey Bulgaria Hungary Romania Russia
Republic
2010 2016 Western European Avg
Source: Containerboard consumption according to RISI, population from public sources 9Drivers for containerboard growth 2013-2018
Containerboard market overview
Recycled containerboard
Kraft Top Liner
Kraftliner
White liners
Semi-chemical Fluting
10In the last five years, RCB growth in Europe has exceeded new
capacity
● Europe growth according to CEPI / RISI:
RCB demand growth in Europe (CEPI) 1
○ 2017 RCB consumption: 26-27 mt
30,000 10%
○ Average market growth for 2013 – 2018:
9% - 3.5-4% per annum
25,000
8%
- ~4.5mt (~900ktpa)
7%
20,000
● New RCB capacity in Europe absorbed due to strong
Market demand (kt)
5.9%
6%
15,000 5% domestic demand, especially in 2017
4.4%
3.9% 3.9%
4% ● Over the last 5 years (2013-2018), demand has
10,000
3%
2.3% outstripped new capacity by 1.1mt:
1.6% 2%
5,000
1% 4.8
5.0
0 0% 4.0 3.7
Million tonnes
2013 2014 2015 2016 2017 2018
Aug YTD 3.0
Growth rate RCB Europe 2.0
1.0
0.0
Demand Capacity
Source: RISI (2013), CEPI (2014-2018). 2018 based on extrapolated H1 2018 growth. Based on current available information.
11
1. Europe excluding RussiaStrong increase in average containerboard prices since January 2017
800
Kraftliner PIX
700
600
TL3 PIX
500
EUR /t
400
300
200
100
0
1/1/2010 7/1/2010 1/1/2011 7/1/2011 1/1/2012 7/1/2012 1/1/2013 7/1/2013 1/1/2014 7/1/2014 1/1/2015 7/1/2015 1/1/2016 7/1/2016 1/1/2017 7/1/2017 1/1/2018 7/1/2018
Source: FOEX PIX 12Looking ahead…
● We expect European recycled containerboard to grow at ~3% per annum in the medium term
● We expect demand to be in line supply over the next couple of years
● Post 2020, variables:
○ European demand growth and structural drivers (e-commerce, exports)
○ Execution of new capacity. Projects may be further delayed or cancelled
○ China OCC ban will affect global tradeflows - underpin for net exports from Europe
2018 – 2020 2021 – 2023
4.0 4.0
4.0
Range of possible
3.5 3.5
1.2 outcomes depending
3.0 3.0 on timing capacities
Million tonnes
Million tonnes materialise
2.5 2.5
2.0 2.0 4.0
3.5
1.5 3.1 1.5 2.9
2.7 2.8
1.0 1.8 1.0 2.0
0.5 0.5
0.0 0.0
Base -1% Base Base +1% Capacity Base -1% Base Base +1% Capacity
Demand Demand 13Drivers for containerboard growth 2013-2018
Containerboard market overview
Recycled containerboard
Kraft Top Liner
Kraftliner
White liners
Semi-chemical Fluting
14Strong substitutional shift towards Kraft Top Liner
Kraft Top Liner production in Europe
1400
1200 625
1 119 1 111
1000
972
925
Produced Volume
800 844
Definition Kraft Top Liner:
Recycled fibre based paper
600
601 with a top layer predominantly
made from virgin fibre
400
200
0
2013 2014 2015 2016 2017 2018 *
Source: Cepi Containerboard until H1 2018. H2 2018 based on historic growth 15Strength, printability, appearance: Kraft Top White
16Drivers for containerboard growth 2013-2018
Containerboard market overview
Recycled containerboard
Kraft Top Liner
Kraftliner
White liners
Semi-chemical Fluting
17Kraftliner historic demand growth in Europe and new capacity
Kraftliner1 deliveries to Europe2 (CEPI)
● Europe growth according to CEPI / RISI:
10%
○ 2017 kraftliner consumption: 5.2mt
5,000
8% ○ Average market growth for 2013 – 2018:
4,000 6% - 2.1-2.7% per annum
4.7%
Market demand (kt)
4.0%
3,000
4% - 500-650 kt (~120ktpa)
2.5%
1.6% 2% ● There is no new significant capacity expected in
2,000
0%
Europe over the next 2-3 years with 3 potential new
1,000
-0.5% Stora Varkaus machines that could come on stream from 2021 on:
startup -2%
-2.3% ○ SCA Obbola (400kt)
0 -4%
2013 2014 2015 2016 2017 2018
Aug YTD
○ Stora Enso Oulu (400kt)
Growth rate KL Europe
○ Ilim Ust Ilimsk (400kt) – mostly destined for Chinese
Supply
limitations market
Source: CEPI (2015-2018) and RISI (2013-2014). 2018 based on extrapolated H1 2018 growth. Based on current available information.
1. Kraftliner includes all kraftliner including white but excludes kraft top liner 18
2. Europe excludes RussiaEurope is a importer of unbleached kraftliner, predominantly
from the US
Historical development of US unbleached KL exports to Europe
1,400 1.6
1.47
1.39 1.39
1.37
1.33 1.33 1.33 1.4
1,200 1.29
1.24 1.25 1.26
1,053 1.19
1.13 1.13 1.2
1.11 1.11
1,000 953
921
867
844 0.92 0.94 837 1
0.90 803 801 811
776 777
800
732 - 4.2% (34 kt)
EUR/USD
695
'000 TONNES
643 642 655 0.8
584 602
600
535
514
493 0.6
446
387 405
375 380
400
1% of European
0.4
demand
200
0.2
0 0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Aug
YTD
2017 US imports were lower than 2016, but in the range of recent years
Source: US Census, FX rates publicly available 19Drivers for containerboard growth 2013-2018
Containerboard market overview
Recycled containerboard
Kraft Top Liner
Kraftliner
White liners
Semi-chemical Fluting
20White liners continue to grow in Europe
European production per
containerboard grade European white liners growth
White top
Semi-chemical +5.3%
kraftliner +5.1% +5.1%
fluting 5% White
4% Recycled +4.5%
Liners
11%
Brown +2.5%
kraftliner
9% +1.9%
White Rec. Liners WT Kraftliners Total Brown Grades
Recycled
containerboard 2016 2017
72%
Coated grades represent 10% of white top testliners and 23% of white top kraftliners.
Source: CEPI Containerboard 21Drivers for containerboard growth 2013-2018
Containerboard market overview
Recycled containerboard
Kraft Top Liner
Kraftliner
White liners
Semi-chemical Fluting
22European semi-chemical fluting and Nordic semi-chemical
fluting sales
European shipments
800
700 672 kt 659 kt
600
500
438 kt
Volume in kt
400 372 kt
300
312 kt 323 kt
200
100
0
2011 2012 2013 2014 2015 2016 2017
Western Europe Eastern Europe Exports
The European market is mature – all growth coming from export markets
Source: CEPI Containerboard, Annual Production Statistics 23Wrap Up
● Strong economy
● Strong growth in Eastern Europe
Trends and ● E-commerce
Demand Drivers
● China
● Plastic ban and demand for paper based solutions
● Strong demand growth
Recycled
● Capacity in line with demand in med. term
● Smaller growth, no significant capacity in mid-term
Kraftliner
● Some meaningful projects under investigation
● Growing market for white liners in Europe
White Top liners
● Stable market for semi-chemical fluting in Europe
Semi-chemical
Fluting ● Continuous potential for exports globally based on high
quality
24Market position sources and definitions
Mondi region definitions
Europe – Europe including Russia and Turkey
Emerging Europe – Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Georgia, Hungary,
Latvia, Lithuania, Macedonia, Malta, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey, Ukraine
North America – Canada, Mexico, USA
Sources for market position estimates
Virgin containerboard (Europe) and Containerboard (emerging Europe) based on capacity (including kraft top liner) – Source: RISI European Paper Packaging
Capacity Report and Mondi estimates
Kraft paper (Global) based on capacity – Source: RISI European Paper Packaging Capacity Report, RISI Mill Asset Database, Pöyry Smart Terminal Service and
Mondi estimates
Corrugated packaging (emerging Europe) based on production – Source: Henry Poole Consulting and Mondi estimates
Industrial bags (Global) based on sales volume – Source: Eurosac, Freedonia World Industrial Bags 2016 study and Mondi estimates
Consumer flexible packaging (Europe) based on sales – Source: PCI Wood Mackenzie – Flexible Packaging, European Supply/Demand report, 2017
Commercial release liner (Europe) based on sales volumes – Source: AWA European Release Liner Market Study and Mondi estimates
Uncoated Fine Paper (Europe) based on sales volumes (Ilim JV considered separate from IP) – Source: Euro-Graph delivery statistics, EMGE Woodfree
Forecast, EMGE World Graphic Papers, RISI Mill Asset Database, Eastconsult and Mondi estimates
Uncoated Fine Paper (South Africa) based on Mondi estimates
25Forward-looking statements disclaimer
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 applicable law or any regulatory body applicable to Mondi, including the JSE Limited and the LSE.
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