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Mondi Capital Markets Day Uncoated Fine Paper

Peter Orisich 2 September 2013

Packaging Paper | Fibre Packaging | Consumer Packaging | Uncoated Fine Paper | South Afr ica Divis ion

UFP at a glance The UFP business manufactures and sells a wide range of quality papers for use in offices and professional printing across its four paper mills in Austria, Slovakia and Russia. It also produces newsprint for the Russian domestic market and generates energy during the production process, some of which is sold to third parties.

Office paper (multifunctional / colour laser)

Product portfolio

17%

Reels

17%

Folio

Cut-size 67%

2012 Sales by customer type (volume %) 2012 Sales by product (volume %)

1.4 million tonnes1 1.4 million tonnes1

6%

10%

Converters and other

OSR 6%

OEM

Merchants

78%

Professional printing paper (folio / reel)

(1) Excludes Syktyvkar newsprint sales. OSR = Office Supply Retailers, OEM = Office Equipment Manufacturers.

1


UFP operations focused on emerging Europe

Mill locations

Pulp Paper 1.5 1.7

Total capacity (million tonnes)1

Syktyvkar 710ktpa

Ružomberok 560ktpa

Neusiedler 387ktpa

(1) Including 204,000 tonnes newsprint capacity in Syktyvkar. Approximately 250,000 tonnes of pulp are used by the Packaging Paper business for the production of VCB.

2

Mill Paper capacity


Solid financial performance

Sales (€ million) and EBITDA margin (%) 1 Operating profit (€ million) and ROCE (%) 1

Mature markets

13%

Emerging markets

87%

2012 Fixed assets by geography (%) 2012 Sales by destination (%)

Emerging markets 66%

Mature markets 34%

1,565 1,351 1,516 1,429 1,466 740

14.1% 17.7% 18.4%

21.6% 20.5% 21.2%

2008 2009 2010 2011 2012 H1 2013

Sales EBITDA %

126 146 179 205 191 102

11.4%

19.1% 16.9% 16.7% 16.7% 17.4%

2008 2009 2010 2011 2012 H1 2013

Operating profit ROCE %

(1) Financial results shown in 2008 to 2012 are for the full financial year.

3


Leading industry return on capital employed

(1) See appendix for definitions of ROCE. (2) Paper business. (3) 2008 – 2010 Fine Paper Division, 2011 – H1 2013 Printing & Reading Division.

UFP ROCE benchmark (%)1

4

-10

-5

0

5

10

15

20

25

30

2008 2009 2010 2011 2012 H1 2013

Mondi UFP Key competitor a Key competitor b Key competitor c Key competitor d 2 3


UFP demand in structural decline in WE, EE and Russia offer moderate growth

2.9%

-1.2%

-5.1%-3.8%

0.6%

-3.0%-1.9%

1.4%

Russia Eastern Europe Western Europe Europe total

12-17E CAGR 07-12 CAGR

-0.6%

-3.7%

1.6%

-1.9%

Eastern Europe Western Europe

12-17E CAGR 07-12 CAGR

?

Source: EMGE European Woodfree Forecast, May 2013 (Eastern Europe includes Iceland and Greece) and Mondi. See region definitions in Appendix.

UFP demand growth (CAGR 2007-2012, 2012-2017E) Cutsize demand growth (CAGR 2012-2017E)

5

Western Europe in secular decline due to: Competition from electronic media (tablets, e-billing, e-archiving) Cost control and “lean” initiatives

Eastern Europe and Russia to grow moderately due to: Lower levels of consumption per capita, economic growth brings increased economic activity and therefore

increase in uncoated fine paper and especially office paper demand Growing computer and printer penetration and increased speed and quality of printers Lower penetration levels of electronic media


Mondi consistently outperforming the market

Total UFP sales volume growth (%)

-4%

-16%

-3%

-12%

2%2%

YTD Jun 2013 vs. Jun 2012 2012 vs. 2007

Mondi sales Industry sales to Europe and overseas Industry sales to Europe

Source: Euro-graph deliveries (Euro-graph producers), Pyrabelisk, EMGE and Mondi estimates. Europe including Russia and Turkey.

6


Leading position in Europe, industry rationalisation needed

Top 5 European UFP producers1 European capacity and production (excl. Russia)2

0

2

4

6

8

10

12

2012 2013E Production Capacity

million tonnes

7

(1) Based on volumes sold in Europe including Russia, other CIS countries and Turkey. Source: Euro-graph, Pyrabelisk, EMGE and Mondi estimates. See definitions in Appendix. (2) Source: EMGE European Woodfree forecast, May 2013 and Mondi. See definitions in Appendix.

We believe Mondi is the leading player in Europe (including Russia) based on sales volumes. However, there are 5 large players within the overall market. Mondi is focused on emerging Europe and Russia

No confirmed new capacity announced besides Alizay (300ktpa, Double A) restart and Koryazhma (150kpta, Ilim). Future of Docelles (160kpta, UPM) and Varkaus (285kpta, Stora Enso) uncertain

Industry needs to see capacity closures to remain balanced, especially in Western Europe (approximately 40% capacity non-integrated)

Mondi

UPM

Portucel Stora Enso IP

#3 #2 #1 #5 #4


New capacity in Russia to be absorbed by demand growth, market currently balanced

0.8

0.70.20.1

0.82 0.81

million tonnes Demand Supply

IP’s capacity expansion

Supply / demand balance in Russia 2012

Mondi

million tonnes

Import

0.1

Supply

-0.7

Export

0.1

Demand

0.7

Mondi

IP

Others

2013 2016

(1) Includes 100,000 tonnes of new capacity in 2013 and 150,000 going forward. (2) Gradual reduction of small local players is considered. Source: McKinsey and Mondi.

Paper demand and supply in 2013-2016 (forecast)

8


Low cost operations delivering superior returns on capital

9

600

800

700

900

500

400

300

200

100

0

1100

1000

Syktyvkar PM14 Theresienthal PM6

Theresienthal PM5

Kematen PM4 Kematen PM3

Ružomberok PM17 Ružomberok PM18

Ružomberok PM16 Syktyvkar PM11

Focus on value added

Delivered costs to Frankfurt of all European machines €/t

€/t Integrated

% industry‘s integrated capacity

31% 30%

Non integrated Semi integrated

39%

Integrated

Mondi machines Semi-integrated Non integrated

12 mt

Source: RISI, Q1 2013. Delivered costs to Frankfurt.


Syktyvkar forestry operations

10

Overview

2.1 million hectares under concession, boreal forests, 100% FSC® certified

Harvesting: 33 own harvesting units and 17 contractor units with an actual

yearly performance of 60,000 m3 / unit (target 2015: 68,000 m3 in average / unit) 3.0+ million m3 harvested annually

Tree nursery: Largest tree nursery in Northwest Russia (4 million seedlings per year

/ 2 additional greenhouses planned)

Transport: 150 own trucks (> 1.0 million m3 yearly) + 90 contractor trucks

(> 0.6 million m3 yearly)1

Road construction: Total road length (Summer roads: 1,885 km. Winter roads: 2,231 km) 100-120 km new roads constructed every year 20-25 bridges built or repaired each year Strong basis for increasing annual harvesting volumes by more

than 20%

Komi Forest Academy: 750 people trained in 2011 – 2013 (incl. externals) More than 46,000 training hours delivered

(1) Only long haul.


Key capital projects

11

Recovery boiler and improvements in chemical recovery and green energy €128 million and IRR ~ 40% Key benefits include:

Increase pulp production (25,000 tonnes p.a.) Reduce the mill’s environmental footprint (dust, CO2,

waste water) Improve overall cost position Improvements in chemical recovery, green energy, heat

production (99% heat produced from biomass) and electricity self-sufficiency (100% electricity self-sufficient)

Ružomberok

Pulp dryer Approximately €30 million investment and IRR

> 50% Key benefits include:

Enabling full utilisation of installed pulp capacity (increased output of approximately 100,000 tonnes annually)

Syktyvkar


Customer led development

12

High-speed inkjet

ColorStream 3500 on Mondi’s booth at drupa 2012

Manufacturer of leading high-speed inkjet printing presses like the ColorStream 3500

Need for reference paper: Printers require optimal paper in order to fully

exploit machine capabilities Maximising productivity improves customer loyalty

Technical development of inkjet technology from the desktop to the print room New opportunities for transactional printers: digital print requirements for personalized documents

(invoices, account statements, pre-filled forms) Lower total cost of printing compared to offset / laser printing combination

Developed in close alignment with Canon OCÉ Optimized for printing speeds of 150 m / min and

above Fast dye and pigment ink absorption Excellent colour reproduction

● Used by Canon OCÉ during the sales process to produce customers’ print jobs: Active recommendation of

DNS® high-speed inkjet Paper and printing press combination allows full

productivity from day one


100 103 119 135 153 50

70

90

110

130

150

170

2008 2009 2010 2011 2012

Productivity (tonne / employee) Index, 2008 = 100

Productivity per employee index (2008=100)

Focus on performance: productivity improvements in UFP

13


Challenges and opportunities

Challenges Weak European economic environment, especially in Western Europe Structural demand decline in Western Europe Capacity restarts announced Reduction of import tariffs in Russia Availability of fibre and increased fibre cost pressures due to demand from renewable energy sector

Opportunities Significant further potential for additional productivity improvements in Syktyvkar, including further

improvements in forestry operations Optimisation of forestry operations in Syktyvkar by swapping forestry areas closer to the mill and

improving transport and road building Cost optimisation around procurement and subcontracted services

14


Summary

Achieve leading market positions

Maintain a high-quality, low-cost

asset base

Continuous focus on performance

Grow through customer focused

development

Group strategic framework

15

UFP value drivers

Leading position in the European market, with a focus on emerging Europe and Russia

Focus on cutsize grades which enjoy slightly better fundamentals

Low-cost, high-quality asset base: Syktyvkar and Ružomberok integrated mills with net long pulp position

Neusiedler short in pulp, focused on value added grades

Continuous focus on improving performance across operations: Recovery boiler Ružomberok

Forestry operations Syktyvkar

Reorganisation of Neusiedler

Overall focus on efficiency and productivity improvements

Appendices


UFP market position and market outlook sources and definitions

Market position estimates:

Uncoated fine paper - based on sales volume of universal grades. Source: EMGE Woodfree Report, December 2011, Eurograph delivery statistics 2012, Pyrabelisk and management estimates.

Europe defined as Europe including Russia and Turkey.

EMGE region definitions (market outlook graphs)

Western Europe -16: Austria, Belgium, Denmark , Finland, France, Germany, Ireland, Italy, Luxemburg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK.

Eastern Europe -14 (emerging Europe): Bulgaria, Cyprus, Czech Republic, Estonia, Greece, Hungary, Iceland, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia.

17


UFP ROCE benchmark notes

Return on Capital Employed (ROCE) definitions:

Mondi:

ROCE: Trailing 12 month underlying operating profit (including share of associates’ net income)/12 month trailing capital employed.

Capital employed: net segment assets plus investment in associates, deferred tax, and other non operating assets and liabilities excluding financial investments.

Key competitor a, key competitor b:

ROCE: underlying operating profit/average capital employed.

Capital employed: total equity plus net debt.

Key competitor c:

ROCE: operating profit before exceptional items/average operating capital employed.

Operating capital employed: non current assets plus operating net working capital.

Key competitor d:

ROOC: (Return On Operational Capital) as a proxy for ROCE: operating EBIT/average operating capital.

Operational EBIT: operating profit excluding non recurring (“NRI”) and fair valuations of the segments and company’s share of the operating profit excluding NRI and fair valuations of its equity accounted investments.

Operating capital: operating assets less operating liabilities.

18


FORWARD - LOOKING STATEMENTS It should be noted that certain statements herein which are not historical facts, including, without limitation those regarding expectations of market growth and developments; expectations of growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, “may” or similar expressions, are forward-looking statements. Since these statements are based on current knowledge, plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. 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 Group’s patents and other intellectual property rights, 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 the Group’s products and raw materials and the pricing pressures thereto, financial condition of the customers, suppliers and the competitors of the Group, potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group’s principal geographical markets or fluctuations of exchange rates and interest rates. Mondi does not a) assume any warranty or liability as to accuracy or completeness of the information provided herein b) undertake to review or confirm analysts’ expectations or estimates or to update any forward-looking statements to reflect events that occur or circumstances that arise after the date of making any forward-looking statements. 19

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