Pulp & Paper News

Mondi FY 2013 results: underlying operating profit up 22% from year ago to Euro 699 million



JOHANNESBURG, South Africa , Feb. 28, 2014 (Press Release) - 

Full year results for the year ended 31 December 2013 Highlights Record financial performance Underlying operating profit of €699 million, up 22% Underlying earnings of 95 euro cents per share, up 37% ROCE of 15.3%, up 170 basis points 2012 packaging acquisitions integrated and synergies on track Strategic capital investments on track, with a number of projects completed Strong de-leveraging with net debt down by €251 million to €1,621 million Cash generated from operations exceeded €1 billion for the first time Total dividend proposed of 36 euro cents per share, up 29% Overview Mondi delivered a record financial performance in 2013, benefiting from a strong operating performance and the strategic acquisitions completed in the latter part of 2012. Underlying operating profit of €699 million was up 22% on that achieved in 2012. Excluding the effects of acquisitions made in the prior year, underlying operating profit was still up 11%, driven by particularly strong performances from Packaging Paper and the South Africa Division. Return on capital employed (ROCE), a key performance metric for the Group, was 15.3%, a record for the Group despite the dilutive effect of the acquisitions made in 2012. ROCE over the past three years, averaging 14.6%, has been consistently above the Group's through-the-cycle hurdle rate of 13%. The focus over the last year has been on integrating and optimising the significant acquisitions made towards the end of 2012 and delivering the major capital projects initiated over the past two years. Excellent progress has been made in this regard, with synergy targets delivered, a number of the capital projects having been completed in the latter part of 2013, and the remaining projects on track for completion within budget and on schedule over the next two years. The Packaging Paper business was the standout performer, benefiting from higher average pricing in all key grades and good volume growth. The downstream Fibre Packaging business was challenged by rising paper prices, but generally made good progress in recovering margins. The Uncoated Fine Paper business continued to deliver strong results despite the structural demand decline seen in mature western European markets, a testament to the business' superior cost and market positioning. The South Africa Division made very good progress during the year and is now delivering well in excess of the Group's 13% through-the-cycle hurdle rate. The Group benefited from currency weakness in certain of the emerging markets in which it operates, most significantly in the South Africa Division from the rand's devaluation relative to the euro and US dollar. The strong culture of continuous productivity improvement, relentless focus on cost management and the benefits of restructuring activities completed during the year ensured that fixed cost increases were contained to well below inflationary levels. The Group remains strongly cash generative with net debt reducing to €1,621 million, compared to €1,872 million at 31 December 2012, notwithstanding the €405 million (2012 : €294 million) invested in capital expenditure projects during the year. Cash generated from operating activities exceeded €1 billion for the first time. Underlying earnings of 95 euro cents per share grew 37% compared to 2012, with higher finance charges offset by a lower effective tax rate and reduced non-controlling interest charges. We continue to refine our product and geographic mix in line with our strategic focus. Our emphasis is on growing our packaging interests, which currently account for around 70% of the Group's revenues, while at the same time continuing to invest appropriately to maintain and improve the competitiveness of our uncoated fine paper business. Within the broader packaging sphere, we see greater opportunities to develop those segments offering exposure to consumer related packaging. This includes both our Consumer Packaging business, and the corrugated packaging value chain. We continue to develop our presence in emerging markets, which offer us inherent cost and growth benefits, while recognising in some areas, most notably Consumer Packaging, that there are also opportunities to develop and leverage our competencies in mature markets. Overall, approximately 62% of the Group's net operating assets and 51% of revenue by destination are currently in emerging markets. The Boards are recommending payment of a final dividend of 26.45 euro cents per share, bringing the total dividend for the year to 36 euro cents per share, an increase of 29% on 2012. Europe & International - Packaging Paper Packaging Paper benefited from positive trading conditions in all key paper grades and a strong operating performance, resulting in an underlying operating profit of €298 million, an increase of 31%, and ROCE of 21.9%. The average benchmark selling price for recycled containerboard was 4% higher than the comparable prior year period, and by December was 14% up on the same stage in the prior year, with increases being implemented at various stages throughout the year. Price increases were driven by reasonable demand growth supported by limited net capacity additions, with new capacity brought on stream during the year largely offset by closures. Selling prices for the virgin containerboard grades increased modestly over the first half of the year before coming under some pressure during the second half. At year-end benchmark selling prices were around 2% lower than the average levels during the year. The price weakness in the second half was seen as a reaction to increased substitution towards recycled grades due to the abnormally high price differential that developed between virgin and recycled containerboard grades, competition from imports due to the weaker US dollar and an increase in supply as producers converted production from less profitable grades. The price differential has now reduced to levels towards the lower half of the historic trading range, typically seen as supportive of virgin containerboard pricing. With improving demand seen in early 2014, discussions are underway with customers around price increases in unbleached kraftliner grades. Kraft paper prices were relatively stable for much of the year while volumes were up on the prior year, supported by stable European markets and strong gains in export markets. As anticipated, there was some price erosion seen towards the end of the fourth quarter and into early 2014 on the back of seasonally weaker demand in Europe and increased competition in key export markets. By the end of the year, average selling prices had declined by around 9% from their highs in mid-2013. It is, however, encouraging to note a recent pick-up in orders. Sack kraft paper price increases are currently under discussion with customers. The uncertain regulatory environment surrounding renewable energy in Poland led to a significant decline in market prices for green energy in the first quarter of the year. As a consequence, the Group recognised an €11 million write down in the value of its existing green energy credits in the first quarter. The lower market prices prevailed throughout the year and income from the sale of green energy credits in the Packaging Paper business was €17 million lower than in 2012 (excluding the impact of the one-off write-down). Input costs were well contained. The cost of paper for recycling was relatively stable throughout the year following a sharp drop in prices seen in the second half of 2012, although there was some regional pressure in Poland following the start-up of new competitor capacity. The average benchmark price was approximately 7% lower than in 2012. Wood costs in central Europe were generally well contained. Following the acquisitions, in Fibre Packaging, of the Duropack corrugated packaging plants in the latter part of 2012, Packaging Paper benefited from the realisation of supply chain synergies. A strong operating performance and significant productivity improvements, most notably in Syktyvkar, ensured that increases in fixed costs were contained well within inflation. Europe & International - Fibre Packaging Underlying operating profit declined by 8% to €93 million as the business was impacted by rising input costs, adverse currency movements and market and operational challenges in the coatings segment. Corrugated packaging benefited from higher sales volumes and higher prices, although margins were squeezed by the lag in passing on increasing paper input costs to customers, currency effects and aggressive competitor activity in certain markets. The business benefited from the successful integration of the acquisitions of the Duropack corrugated plants in Germany and the Czech Republic in the latter part of 2012. Industrial bags continued to deliver solid results. Selling prices and paper input costs were at similar levels to 2012, while the business realised the benefits of its restructuring activities, mainly in western Europe, with fixed costs reducing significantly compared to 2012. Sales volumes increased with good demand in Russia and the CIS as well as in Africa, Middle East and north and central America. Sales volumes in Europe were marginally down on the previous year. The weaker export currencies relative to the euro had a negative impact on margins. The coatings business experienced volume declines and margin pressures, mainly due to weak demand in the industrial and automotive markets and increased competitor activity in the main European markets. Europe & International - Consumer Packaging The benefits of the acquisition of Nordenia in October 2012 are reflected in the increase in underlying operating profit of €55 million to €74 million. On a pro-forma basis, assuming Nordenia was acquired at the beginning of 2012, and excluding the effects of acquisition accounting, the underlying operating profit of the combined business was in line with the prior year, with synergy gains offset by a weaker trading performance, the impact of some one-off costs, and higher fixed costs. Synergies related to the Nordenia acquisition of €16 million were realised during the year, well on track to achieve the targeted €20 million in 2014. One-off costs of €5 million were incurred in achieving these synergies. Sales volumes in the commoditised segments of the films business were lower than the previous year. With focus on higher value added products, it is pleasing to see volumes for fully converted packaging products held up well, up 2%, with good performances from the emerging European and north American operations. It is encouraging to note a pick-up in order intake in early 2014 following a weak finish to 2013. An increase in fixed costs, excluding synergy effects, due in part to costs incurred on new product launches and a new plant start-up further impacted the underlying result. The closure of the Lindlar operation and redirection of production to existing Consumer Packaging facilities in Germany and Hungary and to the Fibre Packaging business in the Czech Republic was completed. Europe & International - Uncoated Fine Paper Uncoated Fine Paper continued to deliver robust results, with underlying operating profit of €172 million and a ROCE of 16.2%. Sales volumes in uncoated fine paper were around 1.5% down on the prior year, reflecting mainly the effects of the decision to restructure the Neusiedler mill. In May 2013, Mondi announced plans to restructure the non-integrated Neusiedler operation to improve the competitiveness of the mill. The restructuring was successfully completed and the mill is now focused on production of speciality paper grades enjoying higher margins. Selling prices were largely unchanged in the first part of the year compared to the levels at the end of 2012, but decreased in the second half in the face of continuing weak demand and the introduction of additional capacity from industry competitors in an already oversupplied market. Average benchmark selling prices for uncoated fine paper were around 2% lower than the prior year, while prices at the year-end were around 1% below the average for the year. Input costs increased, with higher wood costs in Ruzomberok, higher pulp input costs at the unintegrated Neusiedler mill in Austria and higher gas and transportation costs in Syktyvkar. In Syktyvkar, wood costs reduced as a result of a number of cost reduction initiatives. On average, own wood costs in Syktyvkar have decreased by more than 10% from 2012 average costs. Profit improvement initiatives and productivity improvements more than offset inflationary fixed cost increases, enabling the business to realise a net reduction in fixed costs compared to 2012. South Africa Division The South Africa Division delivered a very strong performance. Underlying operating profit was €93 million, an increase of 35%, and ROCE was 16.0%, despite net fair value gains from the revaluation of the Division's forestry assets being around €23 million lower than those realised in the prior year. The business benefited from higher domestic selling prices, good domestic containerboard volume growth, and improved export margins due to the weaker South African rand coupled with higher average export pulp prices. In May 2013, the closure of one of the two newsprint machines located in Merebank was announced as a result of the continued decline in demand for newsprint in South Africa. The machine stopped production with effect from 1 July 2013. The South African rand came under significant pressure during the year, closing the year more than 30% weaker against the euro than in December 2012. The Division generates approximately 40% of its revenue from exports, with a predominantly rand cost base and thus benefited from the weakening currency. The Division has continued to invest in the modernisation of its forestry operations, with a focus on silviculture and harvesting in the current year. The benefits of these investments, further productivity improvements and strong cost management ensured that fixed costs were contained to well within inflationary levels. Tax The Group's underlying effective tax rate of 17% is below that of the prior year, and reflects a favourable underlying profit mix, the continued benefits arising from the utilisation of certain tax incentives available to the Group, most notably in Poland, and further tax incentives received during the year related to the recovery boiler investment project in Slovakia. Non-controlling interests The non-controlling interest charge of €28 million is €7 million lower than the previous year, primarily due to the impact of the acquisition of the remaining minority interest in Mondi Świecie during the first half of 2012. Special items Special items are those items of financial performance that the Group believes should be separately disclosed to assist in the understanding of the underlying financial performance achieved by the Group and its businesses. These items are considered to be material either in nature or in amount. The net special item charge of €87 million before tax, the cash component of which amounted to €20 million, included the following: Closure of Consumer Packaging's Lindlar operation in Germany (€13 million); Closure of the Newsprint machine in Merebank, South Africa and related restructuring activities (€18 million); Impairment of Uncoated Fine Paper's Neusiedler mill in Austria and related restructuring costs (€51 million); Write-down of unutilised assets in Uncoated Fine Paper's Syktyvkar mill in Russia (€9 million); Gain from the sale of land in South Africa Division (€7 million); and Further restructuring and impairment costs in the Industrial Bags segment of Fibre Packaging in France and Mexico (€3 million).Further detail is provided in note 5 of the condensed financial statements. After taking special items into consideration, earnings of €386 million (79.8 euro cents per share) were 59% higher than the previous year (€242 million, 50.1 euro cents per share). Cash flow The Group is strongly cash generative with EBITDA of €1,068 million, reflecting an increase of 15% compared to the prior year. The Group generated €1,036 million of cash from operations (2012: €849 million) after taking into account a net increase in working capital of €27 million. Working capital as a percentage of revenue was 11%, in line with the target of 10-12% of turnover, and represents a reduction on the prior year comparable figure of 11.9% (adjusted for acquisitions). The strong cash flow generation was applied to fund the Group's capital expenditure of €405 million, the payment of finance charges of €124 million, and the payment of dividends to holders of non-controlling interests of €60 million and to shareholders of €138 million. The net cash flow generated by the Group of €174 million was applied to reduce the Group's net debt. Capital investments Capital expenditure of €405 million was €111 million higher than the prior year as expenditure on a number of the Group's previously announced energy and debottlenecking investments ramped up. The capital expenditure to depreciation ratio was 113%. The major strategic investments initiated over the past two years and completed during 2013 include the rebuild of the bark boiler at the Syktyvkar uncoated fine paper and containerboard mill in Russia, a new recovery boiler at the Group's Frantschach kraft paper mill in Austria, a recovery boiler economiser and turbine at the Stambolijski kraft paper mill in Bulgaria and a new steam turbine at the Richards Bay pulp and containerboard mill in South Africa. With the exception of the bark boiler, completed in the first half of 2013, these projects were completed in the second half of the year, with the benefits of reduced energy costs, improved efficiencies and improved electricity self-sufficiency expected to be realised from 2014 onwards. In total, approximately €140 million has been invested in these, and other smaller energy related projects. Early in 2013, the construction of a 150,000 tonne bleached kraft paper machine at the Štěti kraft paper mill in the Czech Republic was approved. This will enable the mill to integrate its remaining open market pulp production on site, providing further growth opportunities for this business. The €70 million project is expected to be completed in the first half of 2014. Good progress is being made on the €30 million investment in a 100,000 tonne pulp dryer in the Syktyvkar mill and the project is on schedule for completion in the second half of 2014. In the first half of the year, a €128 million project to replace the recovery boiler at the Ruzomberok uncoated fine paper mill in Slovakia commenced. Completion is scheduled towards the end of 2014. The project will reduce the mill's environmental footprint and improve its overall cost position. Some of the benefits from this project also result from avoiding otherwise essential stay-in-business capital expenditure. In the second half of the year, the Boards approved a €166 million investment at the Mondi Świecie containerboard mill in Poland, bringing forward the planned replacement of the recovery boiler and the mill's coal fired boilers. The investment will result in a reduction of ongoing maintenance costs, an improvement in overall energy efficiency and a reduction in CO2e emissions. The project is expected to be completed towards the end of 2015. These investments are all proceeding according to schedule. As a consequence of the major capital projects approved during 2013, coupled with some delay in the expected spend on previously approved projects, capital expenditure is expected to increase to around €500 million per annum, on average, over the next two years. Treasury and borrowings Net debt at 31 December of €1,621 million decreased by €251 million from 31 December 2012 as a consequence of the Group's strong cash flow generation and currency effects. The weakening of a number of the emerging market currencies in which the Group's debt is denominated resulted in a net currency gain of €59 million being recorded. Gearing reduced to 36.3% at the end of 2013, down from 39.5% at the end of 2012. The net debt to 12 month trailing EBITDA ratio was 1.5 times, well within the Group's key financial covenant requirement of 3.5 times. Finance charges of €115 million were €5 million higher than the previous year, with higher average net debt as a consequence of the acquisitions made at the end of 2012 offset by a lower effective interest rate. Mondi's public credit ratings, first issued in March 2010, were again reaffirmed during the year at BBB- (Standard and Poor's) and Baa3 (Moody's Investors Service). The Group actively manages its liquidity risk by ensuring it maintains diversified sources of funding and debt maturities. The weighted average maturity of the Eurobonds and committed debt facilities was 3.7 years at 31 December 2013. At the end of the year €792 million of the Group's €2.5 billion committed debt facilities remained undrawn. Dividend The Boards' aim is to offer shareholders long-term dividend growth within a targeted dividend cover range of two to three times over the business cycle. Given the Group's strong financial position and the Boards' stated objective to increase distributions to shareholders through the ordinary dividend, the Boards have recommended an increase in the final dividend. The Boards of Mondi Limited and Mondi plc have recommended a final dividend of 26.45 euro cents per share (2012: 19.1 euro cents per share), payable on 22 May 2014 to shareholders on the register on 25 April 2014. Together with the interim dividend of 9.55 euro cents per share, paid on 17 September 2013, this amounts to a total dividend for the year of 36.0 euro cents per share. In 2012, the total dividend for the year was 28.0 euro cents per share. The final dividend is subject to the approval of the shareholders of Mondi Limited and Mondi plc at the respective annual general meetings scheduled for 14 May 2014. Outlook The trading environment in the Group's main markets remains mixed. The increase in the price of recycled containerboard in the second half of 2013 on solid demand growth is encouraging, and should lend support to the other key containerboard grades. However, price pressure in most virgin paper grades in the second half of 2013 means that the new year started with lower pricing than the average for 2013. The near-term outlook for pricing is largely dependent on the strength of the European macroeconomic recovery. In this regard it is encouraging to see a recent pick-up in orders in some of the Group's main product segments and discussions are underway with customers on price increases in certain virgin packaging grades. Recent exchange rate volatility in several of the emerging markets in which the Group operates does create some challenges. However, the Group's positioning as a net exporter from most of these markets typically allows it to benefit from the devaluation of these currencies relative to the euro. The Group is confident that its ongoing capital investment programme will contribute meaningfully to Mondi's performance going forward. Mondi's proven ability to generate strong cash flows through the cycle provides valuable optionality. As such, the Group remains confident in its ability to continue delivering industry-leading performance. Principal risks and uncertainties It is in the nature of Mondi's business that the Group is exposed to risks and uncertainties which may have an impact on future performance and financial results, as well as on its ability to meet certain social and environmental objectives. The executive committee, mandated by the Boards, has established a Group-wide system of internal control to manage Group risks. The Group-wide system, which complies with corporate governance codes in South Africa and the UK, supports the Boards in discharging their responsibility for ensuring that the wide range of risks associated with Mondi's diverse international operations is effectively managed. Continuous monitoring of risk and control processes across all key risk areas provides the basis for regular reports to management, the executive committee and the Boards. On an annual basis, the executive committee, the audit committee and the Boards conduct a formal systematic review of the Group's most significant risks and uncertainties and the monitoring of and response to those risks. These risks are assessed against pre-determined risk tolerance limits, established by the Boards, taking both the likelihood and severity of the risk factors into consideration. The risk management framework addresses all significant strategic, sustainability, financial, operational and compliance-related risks which could undermine the Group's ability to achieve its business objectives in a sustainable manner. The risk management framework is designed to be flexible, to ensure that it remains relevant at all levels of the business given the diversity of the Group's locations, markets and production processes; and dynamic, to ensure that it remains current and responsive to changing business conditions. The directors are satisfied that the Group has effective systems and controls in place to manage its key risks within the risk tolerance levels established by the Boards. Competitive environment in which Mondi operates The industry in which Mondi operates is highly competitive and selling prices are subject to significant volatility. New capacity additions are usually in large increments which, combined with product substitution towards lighter weight products, electronic substitution, alternative packaging solutions and increasing environmental considerations, have a significant impact on the supply-demand balance and hence on market prices. The Group monitors industry developments in terms of changes in capacity as well as trends and developments in its product markets and potential substitutes. Mondi's strategic focus on low-cost production in growing markets with consistent investment in its operating capacity ensures that the Group remains competitive. Mondi invests in research and development activities to improve existing processes and to identify new markets and new products. The locations in which the Group operates The Group operates in a number of geographical locations in countries with differing levels of political, economic and legal systems. The Group continues to actively monitor and adapt to changes in the environments in which it operates. Management engages in regular formal and informal interaction with the authorities to ensure they remain abreast of new developments. Thorough country risk assessments are conducted and return requirements adjusted to take country risk into consideration. The Group's geographical diversity and decentralised management structure, utilising local resources in countries in which it operates, reduces exposure to any specific jurisdiction. The Boards have established limits on exposure to any particular geographic environment and new investments are subject to rigorous strategic and commercial evaluation. Capital intensive operations Mondi operates large facilities, often in remote locations. The ongoing safety and sustainable operation of all its facilities is critical to the success of the Group. The management systems in place ensure ongoing monitoring of all operations to ensure they meet the requisite standards and performance requirements. The Group has adequate insurance in place to cover material property damage, business interruption and liability risks. A structured maintenance programme is in place under the auspices of the Group technical director. Emergency preparedness and response procedures are in place and subject to periodic drills. Cost and availability of a sustainable supply of fibre Paper for recycling and wood account for approximately one-third of input costs. It is the Group's objective to acquire fibre from sustainable sources and to avoid the use of any illegal or controversial supply. International market prices are constantly monitored and, where possible, cost pass through mechanisms are in place with customers. The Group maintains strong forestry management teams in Russia and South Africa to actively monitor environmental influences impacting its owned sources of fibre. Mondi's relatively high levels of integration and access to own FSCTM certified wood in Russia and South Africa serve to mitigate this risk. All the Group's mills have chain-of-custody certificates in place ensuring that wood procured is from non-controversial sources. Cost of energy and related input costs Energy and related input costs comprise approximately a third of the Group's variable costs. Increasing energy costs, and the consequential impact thereof on both chemical and transport costs, may impact profit margins. Energy usage levels, emission levels and usage of renewable energy are monitored and energy costs are benchmarked against external sources. The Group continues to invest in energy infrastructure at its key operating facilities in order to improve energy efficiency and electricity self-sufficiency as well as to reduce its environmental footprint. Attraction and retention of key skills and talent The complexity of operations and geographic diversity of the Group is such that high-quality, experienced employees are required in all locations. The Group monitors its staff turnover levels, diversity and training activities and conducts regular employee surveys. Appropriate reward and retention strategies are in place to attract and retain talent across the organisation. At more senior levels, these include a share based incentive scheme. Employee and contractor safety The Group's employees work in potentially dangerous environments where hazards are ever-present and must be managed. The Group engages in extensive safety communication sessions, involving employees and contractors, at all operations. The Nine Safety Rules to Live By, applied across the Group, are integral to the safety strategy. Operations conduct statutory safety committee meetings where management and employees are represented. A risk-based approach underpins all safety and health programmes. All business units and operations are required to have safety improvement plans in place. Governance risks The Group operates in a number of legal jurisdictions and non-compliance with legal and governance requirements in these jurisdictions could expose the Group to significant risk if not adequately managed. The Group operates a comprehensive training and compliance programme, supported by regular self-certification and reporting as well as its confidential reporting hotline for all stakeholders, Speakout. Financial risks Mondi's trading and financing activities expose the Group to financial risks that, if left unmanaged, could adversely impact current or future earnings. These risks relate to the currencies in which the Group conducts its activities, interest rate and liquidity risks as well as exposure to customer credit risk. Going concern The Group's business activities, together with the factors likely to affect its future development, performance and position, the most significant risks and the Group's related management and mitigating actions are set out above. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the condensed financial statements. Mondi's geographical spread, product diversity and large customer base mitigate potential risks of customer or supplier liquidity issues. Ongoing initiatives by management in implementing profit improvement initiatives which include ongoing investment in its operations, plant optimisation, cost-cutting, and restructuring and rationalisation activities have consolidated the Group's leading cost position in its chosen markets. Working capital levels and capital expenditure programmes are strictly monitored and controlled. The Group meets its funding requirements from a variety of sources as more fully described in note 11 of the condensed financial statements. The availability of some of these facilities is dependent on the Group meeting certain financial covenants all of which have been complied with. Mondi had €792 million of undrawn committed debt facilities as at 31 December 2013 which should provide sufficient liquidity in the medium term. The Group's debt facilities have maturity dates of between 1 and 12 years, with a weighted average maturity of 3.7 years. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, including an assessment of the current macroeconomic environment indicate that the Group should be able to operate well within the level of its current facilities and related covenants. The directors have reviewed the overall Group strategy, the budget for 2014 and subsequent years, considered the assumptions contained in the budget and reviewed the critical risks which may impact the Group's performance. After making such enquiries, the directors are satisfied that the Group remains solvent and has adequate liquidity in order to meet its obligations and continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing this report. Directors' responsibility statement These financial statements have been prepared under the supervision of the Group chief financial officer, Andrew King CA (SA), and have been audited in compliance with the applicable requirements of the Companies Act of South Africa 2008 and the UK Companies Act 2006. The directors confirm that to the best of their knowledge: the condensed set of combined and consolidated financial statements has been prepared in accordance with International Financial Reporting Standards and in particular with International Accounting Standard 34, ‘Interim Financial Reporting'; the full year results report includes a fair review of the important events during the year ended 31 December 2013 and a description of the principal risks and uncertainties; and there have been no significant changes in the Group's related party relationships from that reported in the half yearly results for the six months ended 30 June 2013.The Group's condensed combined and consolidated financial statements, and related notes, were approved by the Boards and authorised for issue on 27 February 2014 and were signed on its behalf by: David Hathorn, Director, 27 February 2014 Andrew King, Director, 27 February 2014 David Hathorn, Mondi Group chief executive, said: "I am pleased to report a record financial performance, driven by our low cost position, exposure to higher growth markets and ongoing focus on operational excellence. While growth in demand for the Group's key products has remained generally subdued, supply-side constraint has been supportive of pricing. It is particularly pleasing to see how well the integration of the businesses acquired in late 2012 has gone, with synergies delivered in line with target. Despite a difficult trading environment, the new business segment of Consumer Packaging has demonstrated its resilience. With order books strengthening in the new year and the structural growth dynamics still very much in place, we remain confident in the future development of this business. A further priority in 2013 was the successful development of the various capital expenditure projects initiated over the past two years. It is again pleasing to report that a number of these were delivered during the year, all within budget. The projects that are still in progress remain within budget and on target for their scheduled completion dates over the coming two years. The trading environment in the Group's main markets remains mixed. The increase in the price of recycled containerboard in the second half of 2013 on solid demand growth is encouraging, and should lend support to our other key containerboard grades. However, price pressure in most virgin paper grades in the second half of 2013 means that we start the new year with lower pricing than the average for 2013. The near-term outlook for pricing is largely dependent on the strength of the European macroeconomic recovery. In this regard it is encouraging to see a recent pick-up in orders in some of our main product segments and we are in discussions with customers on price increases in certain virgin packaging grades. Recent exchange rate volatility in several of the emerging markets in which we operate does create its challenges. However, the Group's positioning as a net exporter from most of these markets typically allows us to benefit from the devaluation of these currencies relative to the euro. We are confident that the ongoing capital investment programme will contribute meaningfully to our performance going forward. Our proven ability to generate strong cash flow through the cycle provides valuable optionality. As such, we remain confident in the Group's ability to continue delivering industry-leading performance."

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