uncoated fine paper

MONDI INVESTOR AND ANALYST PRESENTATION
28 November, 2007
Ružomberok, Slovakia
Agenda
z Overview
Adrian Fowler
z Strategic drivers
Adrian Fowler
z Market overview
Michael Sablatnig
z Productive capability
Michael Sablatnig
z Summary
Michael Sablatnig
z Wood dynamics
Rinat Starkov
z Step project
Rinat Starkov
PAGE 1
OVERVIEW
UNCOATED FINE PAPER HISTORY
2007
2006
Disposal of
Dunaújváros /
Hungary
2002
1999
1995
Pre 1995
Mondi
companies in
Austria and
South Africa
1995
Acquisition of
Dunaújváros /
Hungary
Acquisition of
Szolnok /
Hungary
96
Acquisition of
Hadera Paper /
Israel
Acquisition of
Ružomberok /
Slovakia
1997
1995
97
98
Acquisition of
Syktyvkar /
Russia
2000
99
2000
01
02
03
04
05
06
07
PAGE 3
UNCOATED FINE PAPER – OVERVIEW
z Total paper production capacity
15 PMs at 7 sites in 6 countries
2.3 m tons
z Total pulp production capacity
4 sites in 4 countries
1.9 m tons
z Number of employees YE 2006
14,077
z Turnover 2006
€ 1,889 M
z EBITDA & Margin 2006
€ 237 M / 13%
z Turnover HY 2007
€ 966 M
z EBITDA & Margin HY 2007
€ 149 M / 15%
PAGE 4
PRODUCTS AND MARKET POSITIONS
Products
Universal Segment
z ~ 82% of paper sales
z Universal products
|
Office Paper
– Multifunctional office paper
|
Offset
– Folio/reel
Positions
Speciality Segment
z ~ 18% of paper sales
z Speciality products
|
Office Paper
– Colour laser paper
– Tinted paper
– Recycled paper
|
Offset
– Recycled folio/reel
z No. 2 in Uncoated
Woodfree (UCWF) in
Europe1
z No. 1 in Office Paper in
Europe & Africa1
z No. 1 in UCWF in Africa1
1 Based on production capacity (Pöyry Forest Industry Consulting)
Sources: Pöyry Forest Industry Consulting, Mondi
PAGE 5
TOTAL PRODUCTION CAPACITIES (per mill)
Paper
Pulp
Israel
Hungary (PM7)
(PM8)
5.8%
5.4%
Austria
(PM3, PM4
PM5, PM6) 16.7%
22.4%
Slovakia
(PM16, PM17,
PM18)
Russia
(PM11, PM14,
PM15)
25.3%
Austria
2.6%
Slovakia
22.5%
36.4%
Russia
24.4%
South Africa
(PM31, PM32,
PM33)
Total production: 2.3 m tons
38.5%
South Africa
Total production: 1.9 m tons
PAGE 6
EXPERIENCED MANAGEMENT TEAM
CEO
Peter Machacek
55 years old
CFO (from Jan 1, 2008)
Gerhard Kornfeld
38 years old
z 1 year of paper industry
experience
z FD MP Paper
(since 1.10.2006)
z CEO (6 y.) and CFO
(2y.) VATECH CZ
z Controller (3y.) and
FD (3y.) ABB
z
z
z
z
28 years of paper and packaging experience
CEO Mondi Packaging Paper
Sales Director Paper Mill Frantschach
Sales & Marketing Manager Tetra Pak
Austria
CFO (until Dec 31,2007)
Adrian Fowler
39 years old
z 2 years of paper industry
experience
z CFO Anglo Coal
South Africa
z Group Optimisation
Mgr Anglo Platinum
z Mgmt. Consultant
(co-owner)
Director wood & pulp procurement,
Logistics, Hungary & Israel
Technical Director –
Uncoated Fine Paper
Marketing & Sales Director –
Uncoated Fine Paper
Rinat Starkov
38 years old
Thomas Reibelt
49 years old
Michael Sablatnig
50 years old
z 5 years of paper industry experience
z MD Mondi Russia -Syktyvkar
z 22 years of paper industry experience
z Mill Managing Director Stora Enso
z Director Martin Bauer
(AO ‘Krasnogorskleksredstva’)
z Mill Manager Koehler Kehl
z VP of Manufacturing PWA Decor
z Process Engineer Feldmühle
z 22 years of paper industry experience
z Various positions in Marketing &
Sales - Mondi
z Controller Elin
z Sales Representative Bizerba
PAGE 7
FINANCIAL INDICATORS
Sales1 (EUR B) / ROCE2 (in %)
Profitability (HY 2007)
Sales
(EUR B)
2,0
7
1,5
5
6
EBITDA3
€149M
€114M
+31%
EBITDA
Margin
15%
12%
+29%
Capital
Employed
€1.9B
€1.9B
+1%
ROCE2
7,3%
5,7%
+28%
6
5
1,77
2006
8
7
6
1,0
2007
ROCE
(%)
1,75
4
1,89
3
0,5
0,96
0,97
2
1
0
0,0
2004
2005
2006
2006 HY 2007 HY
Note: ROCE for the year 2004 not available (change of accounting principles from 2003 to 2004).
1 Sales figures include inter-segment revenues.
2 ROCE is an annualised measure based on operating profit before special items plus net profit from associates divided by average trading capital employed for the period.
3 EBITDA is operating profit of subsidiaries and joint ventures before special items, interests, taxes, depreciation and amortisation
Source: Mondi
PAGE 8
STRATEGIC DRIVERS
UNCOATED FINE PAPER STRATEGIC DRIVERS
Strong market
position
z Leading market positions in European UCWF market
z High exposure to fastest growing product segments and geographies
Strong asset
base
z Integrated value chain
Focus on
performance
z Comprehensive Business Excellence programmes
Outperforming
its peers
Value creation
z Low-cost upstream paper production in Russia, Slovakia and South Africa
z Proven M&A/integration track record
z Contributes to Mondi Group’s outperformance of peers measured
by ROCE
z Continued focus on performance and low-cost position
z Disciplined approach to capital allocation
PAGE 10
MARKET SHARES IN EUROPE AND EMERGING
EUROPE PER SEGMENT
Strong market
position
z Leading market
position in
European UCWF
market
Top 5 Uncoated Woodfree
Stora Enso
Mondi
M-Real
16%
13%
11%
Top 5 Office Paper
Mondi
17%
Stora Enso
IP
IP
10%
M-Real
Portucel
10%
Portucel
16%
14%
13%
11%
Mondi Uncoated Fine Paper generates
approximately 65% of UCWF sales in faster
growing Office Paper segment
Notes: Market share is based on European 2007 capacities (Pöyry Forest Industry Consulting) and forecast of 2007 market capacity (EMGE).
Sources: Pöyry World Market Analysis for Uncoated Woodfree Paper - 2007 update; EMGE Western European Woodfree Forecast Report December 2006
PAGE 11
BENEFITING FROM INTEGRATED VALUE CHAIN
Strong market
position
Strong asset
base
Mondi’s Own
Availability1
Forestry
Pulp
5.4 Mm3 2)
1.4 M tons
z Integrated value
chain
Paper
2.1 M tons3
UCWF
Mondi’s Own
Demand
6.0 Mm3
1.8 M tons
Potential Self
Sufficiency
89%
77%
1 Regardless of whether sold externally or used for internal demand.
2 Forestry figures are based on total annual allowable cut without firewood (theoretical capacity).
3 2.3mt including newsprint.
Note: Own supply figures do not include 1.9 mm³ wood and 0.5Mt pulp that are supplied internally to other Mondi businesses, mainly to MP.
Source: Mondi
PAGE 12
LOW-COST POSITION
Strong market
position
Universal Grades (Office Paper) Delivered Cash Cost
EUR/tons
1.400
Strong asset
base
z Integrated value
chain
z Low-cost upstream
paper production
(I)
1.200
1
1.000
800
600
400
91% of Mondi
Universal Office
Paper Capacity
200
0
0
500
Mondi Paper Machines
1.000
1.500
2.000
2.500
3.000
Cumulative capacity (K tons/a)
3.500
4.000
1 Not totally focused on universal segment.
Notes: The supply curve covers only MBP sites that are focused on universal segment.
Not included are sites that serve only domestic markets.
Source: Pöyry Forest Industry Consulting
PAGE 13
SUPERIOR ACCESS TO LOW-COST WOOD
Strong market
position
Average Hardwood and Softwood Costs
(EUR/m3, Q2 2007)
47
42
Strong asset
base
z Integrated value
chain
z ~ 68% of Mondi
Uncoated Fine
Paper wood
consumption from
Russia and South
Africa
39
37
33
30
30
25
25
26
d
ce
Fr
an
an
Fi
nl
en
al
Sw
ed
rtu
g
d
Po
la
n
Po
ia
st
ra
l
Au
hi
le
C
Br
az
il
R
us
si
So
a
ut
h
Af
r ic
a
z Low-cost upstream
paper production
(II)
z Russian and South
African costs are
largely under our
own control.
Therefore, future
wood costs are
largely controllable
Note: The numbers are based on the Pöyry Forest Industry Consulting Q2 2007 wood cost comparison.
Sources: Pöyry Forest Industry Consulting
PAGE 14
CONTINUOUS PROFITABILITY IMPROVEMENTS (I)
Leading
Strong market
market
position
Example: Time Efficiency
95%
Strong asset
base
∆ 0.6%
∆ 0.4%
Focus on
performance
90%
89.9%
90.3%
90.6%
91.2%
∆ 0.4%
91.1%
91.5%
z Comprehensive
Business
Excellence
programmes
z Mondi exceeds
benchmark –
despite rebuilds in
these years (2006
efficiency excluding
PM31 rebuild
project = 92.8%)
z Technological
challenges in
emerging markets
well managed
85%
2004
2005
2006
Benchmark
Mondi
Sources: Metso Benchmark Study; Mondi
PAGE 15
PERFORMANCE IMPROVEMENTS
IN ACQUIRED COMPANIES
Strong market
position
Ruzomberok (Slovakia)
350
300
Strong asset
base
Focus on
performance
z Comprehensive
Business
Excellence
programmes
z Proven M&A/
integration
track record
%
%
20
250
Volume
per capita
.¹
p.a
z Site acquired in 2000
z Integrated operations
200
150
100
2000 2001 2002 2003 2004 2005 2006
z PM18 is world class
leader in productivity3
Syktyvkar (Russia)²
180
Volume
per capita
( )
160
13%
% 140
¹
p . a.
120
100
2002
z Management control
acquired in 2002
z Integrated operations
2003
2004
2005
2006
1 CAGR
2 Forestry workers included
3 Metso Benchmark on paper machine net production measured as km²/meter deckle width
Note: Tons per capita based on employees year average.
Source: Mondi
PAGE 16
INNOVATION – A WAY OF LIFE
2007
2007
World's first
nano-hybrid
paper neox
1978
World's first small-format
cutter installed at MONDI
1967
1989
World's first
chlorine-free
bleached
copy paper
BIO TOP 3
2000
World's
first FSC1995
certified
World's
copy paper 2005
first and
ROTAonly
World's first
TRIM
three-layer
biodegradable
copy paper
ream
TRIOTEC
packaging
71 72 73 74 75 76 77 78 79
1970
81 82 83 84 85 86 87 88 89
1980
91 92 93 94 95 96 97 98 99
1990
Until 2009
NILE
EMILIE
SurFunC ell
Mona Lisa 2
NOA/DigiQ
Mona Lisa 1
Crystallinity
OPTONAN
ADF
HANS
Color NanoTech
OWL
Fun Fibres
EMR
neox offset
Nano Dust Tester
neox laser
Products
LaBaCuS
Methods
Fun Fillers
Nano Coated Fillers
Fall Flat
Process
z Innovation Roadmap for the future
secures Innovation
leadership in the
future
World's first
FSC-certified
laser copy
paper COLOR
COPY
1967
World's first copy paper
for dry toner machines
67 68 69
Until 2012
Implemented 2007
01 02 03 04 05 06 07
2000
PAGE 17
MARKET OVERVIEW
STRONG DISTRIBUTION NETWORK
ACROSS ALL SALES CHANNELS
UNCOATED FINE PAPER
~78%
Merchants
~8%
Original Equipment
Manufacturers
~14%
Office Suppliers
and Retailers
Note: Mondi estimate based on sales data.
Source: Mondi
PAGE 19
EUROPEAN UCWF MARKET AROUND € 9 bn –
OFFICE PAPER SEGMENT EXPERIENCED GOOD GROWTH
European UCWF Market 2000–20061
European Office Paper Market 2000–20061
CAGR2
€9B
Other UCWF
(e.g. Offset)
Office Paper
55%
45%
2006
100%
CAGR2
3%
€ 4B
100%
4%
East Europe
18%
7%3
West Europe
82%
2%
2%
4%
2006
1 Translation of volume in t to value in EUR estimated.
2 Volume growth based on 2000-2006 demand estimates by Pöyry Forest Industry Consulting.
3 Volume growth based on 2005-2006 demand estimates by Pöyry Forest Industry Consulting.
Source: Pöyry Forest Industry Consulting, Mondi
PAGE 20
FORECASTED EUROPEAN DEMAND AND
OPERATING RATES
West Europe 16
UCWF 2006 - 2011 demand growth (in %)1
Operating Rate (%)
Demand (k tons)
9,8
10.000
1,3%
7.405
7.495
7.645
7.555
7.705
7.880
2006
2007
2008
2009
2010
2011
5.000
0
6,6
100
80
60
40
20
0
East Europe 14
Demand (k tons)
Operating Rate (%)
6,6%
2.000
1.500
1,3
1.000
995
1.035
1.110
1.190
865
915
2006
2007
2008
2009
2010
2011
500
WE
EE
CIS
Sources: EMGE Woodfree Forecast Report; October 2007 for Western and Eastern Europe.
World Paper markets, Pöyry 2005 Edition for CIS. CIS market growth from 2004 - 2010
0
Demand
100
80
60
40
20
0
Operating rates
PAGE 21
PRODUCTIVE CAPABILITY
OVERVIEW OF MONDI UCWF PRODUCTION
Uncoated Fine Paper
Non / Partly Integrated Mills
Theresienthal/
Kematen
(Austria)
Szolnok
(Hungary)
Integrated Mills
Hadera
(Israel)
Ruzomberok
(Slovakia)
Own Wood
availability
Pulp
Capacity
49 kt
Paper
Capacity
4 PMs
384 kt
Main
Products
•
•
•
•
1 PM
125 kt
Tints
Color Laser
Recycled
A+ , B+
• B+
• C+
1 PM
132 kt
• B+
• C+
• Offset
30% of total UCWF capacity
Syktyvkar
(Russia)
Merebank/
Richards Bay
(South Africa)
3.2 mm³ 1
4.4 mm³ 1
421 kt
680 kt2
720 kt2
∑ 1 870 kt
3 PMs
513 kt
2 PMs 388 kt
3 PMs
560 kt
(2 294 kt incl.
newsprint)
• C+
• Offset
1 PM 192 kt
(newsptint)
• C+
• Offset
∑ 7.6 mm³ (1)
∑ 2 102 kt
• B+
• C+
• Offset
70% of total UCWF capacity
1 Own wood availability include wood for pulp production attributed to Mondi Packaging and include wood for all usages (pulp/woodchips production, firewood,…).
2 The Syktyvkar and Richards Bay pulp mill capacities include 185 kt and 270 kt of pulp attributed to Mondi Packaging
PAGE 23
AUSTRIA
z Mills
Hausmening,
Kematen
z Management Board
Karl Grill,
Gerhard Schwiegk
z Number of employees
YE 2006
~800
z Paper production capacity
384,000 tons
z Pulp production capacity
49,000 tons
PAGE 24
HUNGARY
z Mills
Szolnok
z Management Board
Gábor Ferencz,
Thomas Rost
z Number of employees
YE 2006
~400
z Paper production capacity
125,000 tons
PAGE 25
ISRAEL
z Mills
Hadera
z Management Board
Avner Solel,
Yehonatan Roash,
David Muhlgay,
Dror Cohen,
Lior Peretz
z Number of employees
YE 2006
~300
z Paper production capacity
132,000 tons
PAGE 26
SLOVAKIA
z Mills
Ružomberok
z Management Board
Eliaz Amar,
Richard Zigmund,
Dusan Simo,
Franz Aigner
z Number of employees
YE 2006
~1,800
z Paper production capacity
513,000 tons
z Pulp production capacity
421,000 tons
PAGE 27
RUSSIA
1
2
z Mills
Syktyvkar
z Management Board
Andrey Dribny,
Maxim Smirnov
z Number of employees
YE 2006
~8,4001
z Paper production capacity
580,000 tons1
z Pulp production capacity
680,000 tons2
z Own wood availability
3.2 M m³
(annual allowable cut)
Excludes the board business (PM 21), which is managed by Mondi Packaging, but legally incorporated in
MBP Syktyvkar. Total number of employees including the board business amounted to ~10.600 employees .
The Syktyvkar pulp mill capacity includes 185 kt of pulp attributed to Mondi Packaging
PAGE 28
SOUTH AFRICA
z Mills
Merebank,
Richards Bay
z Management Board
Ron Traill,
Rory Sharp,
Viv McMenamin
z Number of employees
YE 2006
~2,200
z Paper production capacity
560,000 tons
z Pulp production capacity
720,000 tons1
z Own wood availability
4.4 M m³
1 The Richards Bay pulp mill capacity includes 270 kt of pulp attributed to Mondi Packaging
PAGE 29
SUMMARY
HIGHLIGHTS OF THE LAST 18 MONTHS
Strong market
position
Strong asset
base
Focus on
performance
Strengthen
low-cost position
& market
positioning
Efficiency
Improvements &
comprehensive
Business
Excellence
programmes
Outperforming
its peers
Disciplined
approach to
capital allocation
Value creation
z Maintaining of strong positions of key brands &
market positions in key markets
{ Top rating of Color Copy brand by EMGE
{
2nd place ranking of Mondi in mill performance
z Improvements realized in industry operational
efficiency benchmarks
z The resolution of the PM31 technical issues
PandaAward 2006
z Continued focus on comprehensive Business
Excellence programs
{ Awards received in the innovation &
environmental arenas
{ The launch of Neox (Nano Technology Paper)
z Develop value-added growth options (e.g.
modernisation and expansion project in
Syktyvkar)
STEP
Source: Mondi
PAGE 31
HIGHLIGHTS OF THE NEXT 18 MONTHS
Strong market
position
Strong asset
base
Strengthen
low-cost position
& market
positioning
z
z
z
z
z
Strengthening position in the fast growing office supply retail channels
Maintain strong market positions in key markets
Delivering on the targets of taking out complexity and costs
Concluding the plans for the high complexity / high cost operations
Strengthening Mondi’s fibre position
Lost time injury frequency rate
in LTI / 200,000 working hrs employees + contractors
Focus on
performance
Efficiency
Improvements &
comprehensive
Business
Excellence
programmes
z Continuing the safety
path to Target 0
z Continued focus on
comprehensive
Business Excellence
programmes
2.30
0.71
2001
Outperforming
its peers
Disciplined
approach to
capital allocation
Value creation
2002
0.62
2003
0.35
0.18
0.19
0.16
2004
2005
2006
YTD
2007
z Delivering the Syktyvkar modernisation and
expansion project to plan
z Continue to evaluate value generating growth
opportunities
STEP
Source: Mondi
PAGE 32
WOOD DYNAMICS
INTEGRATED VALUE CHAIN COMBINED WITH
ACCESS TO LOW-COST WOOD
Forestry
Pulp
Average Hardwood and Softwood Costs
(EUR/m3, Q2 2007)
Paper
47
42
1.4m tons
33
d
ce
Fr
an
en
an
Fi
nl
al
Sw
ed
rtu
g
la
n
ia
d
Po
Po
st
ra
l
Au
ut
h
hi
le
26
C
a
25
z Russian and South
African costs are
largely under our
own control.
Therefore, future
wood costs are
largely
controllable.
So
77%
il
89%
Br
az
Potential Self
Sufficiency
1.8m tons
25
Af
ric
a
2.1 m
UCWF
6.0 Mm3
30
30
us
si
5.4 Mm3 2)
tons3
Mondi’s Own
Demand
39
37
R
Mondi’s Own
Availability1
z ~ 68% of Mondi
Uncoated fine
Paper wood
consumption from
Russia and South
Africa
1 Regardless of whether sold externally or used for internal demand.
2 Forestry figures are based on total annual allowable cut without firewood (theoretical capacity).
3 2.3mt including newsprint.
Note: Own supply figures do not include 1.9 mm³ wood and 0.5Mt pulp that are supplied internally
to other Mondi businesses, mainly to MP.
Source: Mondi
Note: The numbers are based on the Pöyry Forest Industry Consulting Q2 2007 wood cost
comparison.
Sources: Pöyry Forest Industry Consulting
Control over wood resources due to the wood dynamics increasingly becoming a key competitive factor
Î Mondi benefiting from an integrated value chain combined with access to low-cost wood with Russian
and South African costs largely under our own control giving Mondi a competitive advantage
PAGE 34
WOOD DYNAMICS
z
Recently a number of studies have been conducted on wood
availability and pulp wood prices in the European region.
z
The results show that the wood processing industry in Western
Europe is under pressure from increased fibre demand and
bio-mass burning for energy and is forecasted to experience
increasing wood shortages.
z
Eastern European countries and Russia are less affected by
this trend.
z
Russia is influencing the market via the introduction of
potentially prohibitive customs duties.
z
The wood market is still a regional one, as transportation costs
are high.
PAGE 35
TOTAL HARVESTING EASTERN
EUROPE & WEST RUSSIA
Million m3
Million m3
150
20
HW
SW
120
15
90
10
60
5
30
0
0
20
120
Fuelwood
Industrial wood
W Russia
Slovenia
Serbia
Bosnia
Croatia
Bulgaria
Hungary
0
Lithuania
0
Belarus
30
Slovakia
5
Estonia
60
Latvia
10
Ukraine
90
Romania
15
Source: Pöyry: Wood availability outlook in Eastern Europe & Russia (Aug. '07)
PAGE 36
EASTERN EUROPE (EXCL. RUSSIA):
STABLE DEMAND/SUPPLY SITUATION
Expected Wood Availability in CEE1 (excl. Russia)
CEE1 (excl. Russia)
demand / supply – 2005 (in Mm3)
CEE1 (excl. Russia)
demand / supply – 2020 (in Mm3)
12
151
8
110
163
118
Other
Other
5
Local demand
18
Net exports
Supply
Pulpwood
33
7
Local demand
Net exports
Pulpwood
Supply
z Currently, demand and supply balanced to a great extent
z Future domestic demand and supply pushed by prospering economic growth
z Limited growth of exports (to WE), as
{ domestic prices expected to grow in line with WE prices
{ thus keeping price differential to WE more or less at current level
{ thus levelling incentive to export
1 The following countries were analysed: Belarus, Bosnia, Bulgaria, Croatia, Estonia, Hungary, Latvia, Lithuania, Romania, Serbia, Slovakia, Slovenia, Ukraine
Source: Pöyry: Wood availability outlook in Eastern Europe & Russia (Aug. '07), BCG analysis
PAGE 37
WEST RUSSIA: INCREASINGLY BALANCED DEMAND/
SUPPLY SITUATION, BUT STILL HOLDING A
CONSIDERABLE RESERVE OF WOOD
Expected Wood Availability in Western Russia
West Russian
demand / supply – 2005 (in Mm3)
West Russian
demand / supply – 2020 (in Mm3)
167
96
26
21
Net exports
Local
demand
5
172
West Russian
theoretical supply – 2020 (in Mm3)
112
284
Unused
supply
Theoretical
supply
172
122
Other
Other
67
Supply
Pulpwood
38
Local
Net exports
demand
49
Pulpwood
Supply
z Increase of Russian demand / supply balance, as:
{ Establishing of export duties, aiming to foster domestic value creation,
causing decrease of exports
{ High distances to WE potentially do not lead to an increase of exports
Used
supply
z Potentially, Russia with large
unutilised supplies
z Not used due to export duties and
high transport distances to WE
Source: Pöyry: Wood availability outlook in Eastern Europe & Russia (Aug. '07), BCG analysis
PAGE 38
MARKET WOOD PRICES INCREASED IN
RECENT QUARTERS
Market Softwood prices (USD/m³)
Market Hardwood prices (USD/m³)
US$/m³
Delivered to local
Pulp mills
US$/m³
Delivered to local
Pulp mills
105
100
95
90
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
1q/2005
2q/2005
3q/2005
4q/2005
1q/2006
2q/2006
3q/2006
4q/2006
1q/2007
US South
US
Northwest
Canada
West
Finland
Sweden
Germany NW Russia
Brazil
2q/2007
3q/2007
105
100
95
90
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
US South
US
Northwest
Finland
Sweden
Germany NW Russia
Brazil
Indonesia
Pressure from energy sector combined with warm winter and lack of infrastructure
(e.g. in Russia) caused increases of wood market prices
Source: Wood Resources International LLC (WRI): Wood resource quarterly report, 2007
PAGE 39
CONCLUSIONS FROM RECENT WOOD /
BIO ENERGY STUDIES
z
General raw material demand, combined with bio-energy
demand is increasing pressure on fibre supply.
z
Bio-energy subsidies do seem to be slowing.
z
Overall European fibre supply is considered to remain tight
with further cost increases anticipated,
{
{
Eastern European demand and supply is balanced to a
large extent,
Only Western Russia holds considerable wood reserves,
which duties are now confining to domestic producers.
z
Consequently wood prices are likely to increase further in the
coming years.
z
As forests in Russia and South Africa are managed, future
wood availability and costs are largely under our control.
PAGE 40
STEP PROJECT – RUSSIA
SYKTYVKAR MODERNISATION AND
EXPANSION PROJECT
Modernisation and expansion of low-cost Pulp and paper mill
in Syktyvkar, Russia
Capex: EUR 525 m
PAGE 42
WOOD RESOURCES
Annual Allowable Cut (in M m3)
550
z Russia offers an abundant,
high quality fibre resource
that Mondi is well positioned
to take advantage of, to
supply the tight global
market for wood products
Total
volume
26
Economical
viable
volume
250
16
7
3.2
Russia
Rep. of
Komi
Actual cut Mondi
in Komi controlled
3.0
4.0
Mondi
Actual
demand
Mondi
demand incl. STEP
z The STEP Project will
augment Mondi’s access to
existing and future forestry
rights in the Komi Republic
z Actual cut in Komi Republic
amounts to 27% of AAC
PAGE 43
WOOD COSTS
Average Hardwood and Softwood Costs (EUR/m3, Q2 2007)
47
39
37
30
25
25
30
42
33
z Wood costs of Russia rank
at the bottom of the
international wood cost
benchmark from Pöyry
26
Fr
an
ce
Fi
nl
an
d
en
l
Sw
ed
Po
rtu
ga
Po
la
nd
Au
st
ra
lia
hi
le
C
Br
az
il
R
us
si
So
a
ut
h
Af
ric
a
z Future wood costs largely
depend on efficiency of our
own operations
Note: The numbers are based on the Pöyry Forest Industry Consulting Q2 2007 wood cost comparison.
Sources: Pöyry Forest Industry Consulting
PAGE 44
COST POSITIONING
Universal Business Paper Cost Curve
EUR t
Cost level 2006/III
1,200
z The Syktyvkar mill enjoys an
excellent cost position on
the cost curve.
1,000
800
z The STEP Project will take
Mondi further down the cost
curve by expanding
production in the lowest cost
environment
600
400
Syktyvkar PM14
200
0
1,000
2,000
3,000
4,000
Cumulative capacity (1 000 t/a)
Note: The graph shows manufacturing cash cost.
Source: Pöyry Forest Industry Consulting.
PAGE 45
MARKET FORECAST
White-top liner
Demand Forecast
UCWF / Cut size Paper Demand Forecast
CEE incl. Russia, M tons
CAGR
5.7%
CIS cutsize (C+ Grade)1
CAGR
8.7%
3.1
0.7
2.6
Russia, k tons
CAGR
9.1%
0.8
0.7
0.6
275
195
1.7
115
2004
2010
2015
2007
2008
1 Based on Mondi Research
Source: Pöyry (World Paper Markets up to 2020); Mondi Analysis
2009
2010
2005
2010
The STEP Project
will enable Mondi
to benefit from the
strong growth in
demand for
UCWF and
containerboard in
the domestic
Russian market
2015
Source: Pöyry (White-top Kraftliner and White-top Testliner
cost competitiveness and Market Outlook); February 2007
PAGE 46
SYKTYVKAR OPERATIONAL ACHIEVEMENTS
z The Russian operation Syktyvkar has been a success story for Mondi,
outperforming in the areas of safety, productivity, costs and
environmental management
Syktyvkar (Russia)²
180
Volume
per capita
( )
160
13%
% 140
¹
p . a.
120
100
2002
z Management control
acquired in 2002
z Integrated operations
2003
2004
2005
2006
z In the process Mondi has developed highly valued relationships with the
local government and stakeholders, which in conjunction with the above,
positions Mondi uniquely to fully utilize this attractive value creating
opportunity
1 CAGR.
2 Forestry workers included.
Note: Tons per capita based on employees year average.
Source: Mondi
PAGE 47
STEP PROJECT – PROJECT SCOPE
New and expanded
Upgraded / Rebuilt
Benefits include
z Wood handling facilities
z Two chemical pulp lines
z Lower operating costs
z Recovery boiler and turbine
z PM14 UCWF machine
z Improved efficiencies
z Evaporation of Black Liquor
z PM21 containerboard
machine
z Expanded electricity
generating capacity
z Limekiln
z 190,000 tpa increase in
pulp production capacity
z 52,000 tpa increase in
UCWF production capacity
z 46,000 tpa increase in
containerboard
z Reduced environmental
footprint
PAGE 48
MILESTONES OF THE PROJECT
2007
Q3
Q4
ƒ Main equipment
vendors chosen
ƒ Start construction
ƒ Project completion
Q1
2008
Q2
Q3
Q4
Q1
2009
Q2
Q3
Q4
Q1
2010
Q2
Q3
Q4
July / August 2007
April 2008
Mid 2010
PAGE 49
Q&A