Mondi PLC

LSE:MNDI

Earnings Call Transcript

[Andrew King]

Good

morning,

all,

and

welcome

to the

Mondi

2021

Results

Presentation.

I'm

Andrew

King,

your

Group

CEO;

and

I'm

joined

by

Mike

Powell,

our

Group

CFO.

I'll

be

providing

you

some

highlights

for

the

year

before

passing

on

to

Mike

for an

overview

of

both

the

financial

and

operating

performance.

I'll

then

be

coming

back

to

update

you

on

both

our

strategic

positioning,

and

more

importantly,

some

of

the

exciting

growth

opportunities

we

do

see

for

the

business

going

forward.

After

that,

Mike

and

I

will

obviously

be

delighted

to

take

your

questions.

However,

before

we

go

into

the

review

of

the

prior

year,

I

would

like

to

share

some

thoughts

on

what

is

obviously

a

fast

escalating

situation

in

the

Ukraine.

The

events

unfolding

in

the Ukraine

are

tragic,

and

the

impact

extends

well

beyond

national

borders.

Our

thoughts

are

obviously

with

those

directly

affected

and

we

are

actively

doing

what

we

can

for

our

much

valued

colleagues

at

our

paper

bag

plant

in

Lviv

in

Western

Ukraine,

where

production

is

currently

suspended,

as

well

as

our

regional

sales

team

located

in

the

capital

Kyiv.

We

also

have

a

number

of

Ukrainian

nationals

working

in

our

plants

in

bordering

European

countries.

So

this

humanitarian

crisis

is

obviously

deeply

personal

for

many

Mondi

employees.

We

are

contributing

to

the

humanitarian

effort,

both

at

the

group

level

with

financial

assistance

to

the

World

Food

Program

where

we

have

an

existing

relationships

and

also

through

many

local

initiatives.

While

we

may

all

wish

for

peace

and

stability,

attempting

to

predict

the

medium

to

long-term

impact

on

both

our

business

and

the

situation

more

broadly

remains

extremely

volatile

and

is,

of

course,

complete

guesswork.

I

remind

you

that

we

have

four

operations

in

Russia

that

represent

around

12%

of

the

group's

revenue

by

location

of

production

and

have

on

average

contributed

around

20%

to

group

EBITDA

over

the

last

three

years.

This

includes

a

high

margin

cost

competitive,

integrated

paper

mill

in

Syktyvkar

in

the

Komi

Republic

and

three

packaging

converting

businesses.

All

are currently

operational.

At

present,

we

do

continue

to

operate

in

all

of

these

locations

where

it

is

both

safe

and

clearly

within

the

law

to

do

so.

We're

actively

assessing

the

implications

on

our

business

of

the

Russian

sanctions

and

of

course

the

related

international

responses.

But

as

I've

already

said,

and

I'm

sure

you'll

appreciate,

this

is

a

fast

moving

and

very

fluid

complex

situation.

I

know

that

you will

have

many

questions,

but

there's

not

much

more

we

can

say

today.

We'll

of

course

update

the

market

as

required

as

developments

unfold.

If

I

then

look

back

at

2021,

I

think

it

can

be

summarized

as

a

year

of

strong

delivery,

accelerating

growth

and

ongoing

progress

on

our

sustainability

journey.

Our

integrated

position,

the

agility

of

our

people,

and

the

proactive

collaboration

across

the

supply

chain

ensured

we

were

able

to

deliver

strongly

for

all

our customers.

We

achieved

good

volume

growth

across

all

key

segments

of

our

business.

I'm

obviously

particularly

pleased

with

the

strong

gains

we

continue

to

make

in

our

growing

packaging

segments,

and

also,

the

recovery

in

volumes

we've

seen

in

uncoated

fine

paper

business,

aided

by

solid

market

share

gains.

We

saw

meaningful

price

momentum

across

the

group,

driven

by

significantly

improve

supply

demand

fundamentals

and

positive

mix

effects.

Importantly,

as

we'll

cover

in

more

detail

later

in

the

presentation,

we

were

able

to

fully

compensate

for

the

significant

cost

inflation

that

we

just

see

and

has

really

become

a

feature

of

the

operating

environment.

We

also

continue

to

invest

for

the

future.

A

highlight

of

the

year

was

the

successful

delivery

on

a

number

of

our

key

CapEx

projects,

bringing

increased

capacity

in

strongly

growing

markets,

cost

improvements,

and

of

course

also

sustainability

benefits.

Importantly,

and

this

is

a

feature

what we

will

discuss

a

bit

later,

the

growing

markets

we

serve

and

the

unique

positioning

we

have

within

these

markets

provides

opportunity

for

further

growth.

Supported

by

our

ambitious

CapEx

programs,

we

have

currently

a

pipeline

of

expansionary

projects

already

approved

or

under

advanced

evaluation

amounting

to

about

€1

billion.

As

I

say,

I'll

come

on

to

provide

more

detail

on

this

later.

We

are

confident

that

the

cash

generation

of

the

business

could

support

both

this

investment

program

and

also

supporting

returns

to

shareholders

with

the

annual

dividend

up

8%.

Sustainability

clearly

remains

center

to

our

strategy.

We

have

a

great track

record

on

this

regard

and

are

rightly

recognized

as

a

leader

in

the

field.

But

clearly,

there's

much

more

to

be

done.

And

here,

we

made

great

progress

in

embedding

our

MAP2030

program,

the

action

plan

for

the

next

decade.

Very

excitingly,

of

course,

around

the

sustainability

agenda,

as

we've

identified

significant

opportunities

to

develop

our

unique

portfolio

of

sustainable

packaging

solutions,

I'll

come

back

to

some

of

the

recent

examples

of

innovation

in

the

space

later

again

in

the

presentation.

We

really

do

see

great

opportunity

to

continue

growing

in

this

area

and

are

supporting

it

with

meaningful

investment.

I'll now

hand

over to

Mike

to

take

us

through

both

the

financial

and

operating

highlights

before

coming

back

to

talk

to

you about

the

strategy.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Thanks,

Andrew.

Morning,

everybody.

Let

me

take

you

through

the

numbers

for

the

year

ended

31st

of

December

2021.

I'll

start

with

the

group

and

then

I'll

dive

into

the

business

units.

We

delivered

a

strong

financial

performance

in

2021.

All

key

metrics

were

up

year-on-year.

EBITDA

of

just

over

€1.5

billion

was

up

€150

million

against

2020

with

the

second

half

up

around

30%.

All

of

this

gives

the

board

confidence

to

propose

a

final

dividend

of

up

10%.

I'll

take

you

through

the

key

components

of

2021's

EBITDA

growth,

which

you

can

see

is

mainly

driven

by

higher

selling

prices,

outpacing

costs

alongside

some

good

volume

increases.

We

drove

volume

growth

in

corrugated

packaging

and

flexible

packaging

on

the

back

of

our

portfolio

of

innovative

and

sustainable

packaging

solutions.

Our

attention

to

quality

and

service

for

our

customers

and

the

reliability

of

our

integrated

value

chain

continues

to

win

through.

Uncoated

fine

paper

volumes

also

increased

with

our

customers

recognizing

the

stability

of

a

long-term

supplier

and

the

sustained

quality

of

our

products

alongside

consistent

service

as

others

exit

this

market.

Selling

prices

were

up

across

the

entire

business,

most

significantly

in

corrugated

packaging.

I'll

talk

a

little

bit

more

about

selling

prices

in

more

detail

as

I

come

to

the

business

units.

However,

let

me

deal

with

costs

generically

on

this

slide

as

it's

pretty

widespread

and

saves

me

repeating

it

4

times

in

each

business

unit.

We

saw

large

cost

increases,

in

particular,

energy,

resins,

paper

for

recycling,

and

transport

costs.

On

energy,

our

pulp

and

paper

mills

generate

most

of

their

energy

needs

internally

from

biomass,

accounting

for

around

65%

of

all

fuel

sources.

This

mitigates

the

impact

of

significant

surge

in

external

fuel

costs.

Energy

costs

gradually

increased

during

the

first

half

from

the

very

low

levels

in

2020

before

rising

sharply

at

the

end

of

Q3

as

a

result

of

the

significant

European

gas

and

electricity

price

increases.

The

year-on-year

increase

in

energy

was

about

€160

million.

Resin

and

paper

for

recycling

costs

increased

sharply

in

the

first

half

and

have remained

stable

at

those

high

levels.

The

year-on-year

increases

were

around

€160

million

and

€120

million

respectively.

We're

currently

seeing

cost

pressures

continuing

to

rise,

particularly

wood,

chemicals,

and

of

course

energy

costs.

That

said,

we

do

expect

to

be

able

to

pass

these

into

the

markets.

The

rest of

the

cost

base

was

well

managed,

though

that

was

subject

to

higher

maintenance

costs

due

to

the

longer

plant

shuts,

additional

resources

to

service

the

extra

demand

for

our

products,

and

general

inflation

applying

to

most

of

the

costs.

Currency

movements

had

a

net

negative

impact,

mainly

already

reported

in

the

first

half of

the

year

as

a

result

of

the

weaker

US

dollar,

coupled

with

losses

on

translation

from

a

weaker

Russian

ruble

and

Turkish

lira

relative

to

the

euro.

Turning

to

the

strong

cash

characteristics

of

the

business

now. On

the

left-hand

side,

you

see

last

year's

closing

net

debt

followed

in

green

by

the

EBITDA

of

€1.5

billion

that

we

delivered

in

FY

2021.

Working

capital

increased

on

the

back

of

strong

revenue

growth

in

the

year

and

some

inflow

timing

of

Q4

in

the

prior

year.

Absolute

working

capital

as

a

percentage

of

revenue

was

12.8%

in

line

with

our

expected

range

and

guidance

of 12%

to

14%.

We

have

leading

market

positions

in

good

markets

and

we

continue

to

consistently

invest

behind

that

potential

to

deliver

value

accretive

growth.

Our

capital

expenditure

for

the

period

was

€573

million.

That

equates

to about

140%

of

depreciation.

And

as

you

know,

we

completed

the

acquisition

of

Olmuksan,

which

is

delivering

well.

With

net

debt

of

€1,673

million,

that

leaves

us

1.2

times

levered

at

the

end

of

the

year

with

good

strength

for

us

to

continue

to

have

optionality

and

Andrew

will

cover

some

of

that

later

in

the

presentation.

In

June

2021,

we

entered

into

a

€750

million

revolving

credit

facility.

This

is

a

sustainability-linked

loan,

matching

funding

strategy

with

the

core

business

strategy.

And

at

the

end

of the

year,

the

group

had

a

strong

liquidity

position

of

around

€1.3

billion.

Credit

ratings

remain

unchanged

and

debt

maturities

in

good

shape

with

nothing

material

due

in

the

short-term.

So,

to

wrap

up

the

group

part,

good

numbers,

continued

opportunities,

and

a

strong

financial

position.

After

the

year

in

mid-February,

we

agreed

to

sell

our personal

care

components

business

to

Nitto

Denko

for

an enterprise

value

of €615

million.

This

simplifies

our

portfolio

and

enables

us

to

focus

on

core

packaging

and

paper

businesses

and

pursue

our

strategic

priority

to

grow

in

sustainable

packaging.

We

expect

completion

of

this

in

the

second

half

of

2022.

A

decision

regarding

the

use

of

the

net

cash

proceeds

from

the

sale

of

PCC

will

be

taken

upon

completion.

The

remaining

portion

of

engineered

materials,

functional

paper

and

films

will

be

merged

into

our

flexible

packaging

business

unit,

and

this

will

strengthen

integration

along

the

kraft

paper

value

chain,

fostering

innovation

in

functional

papers.

I

just

wanted

to

also

take

this

opportunity

to

remind

you

about

our

disciplined

approach

to

capital

allocation.

This

remains

unchanged.

Organically,

we're

focused

on

our

growing

in

packaging

through

selective

capital

investment

opportunities.

Our

track

record

of

execution

here

speaks

for

itself.

We

have

a

strong

pipeline

of

capital

investment

projects

to

further

capture

that

growth.

Again,

Andrew

will

cover

those

later.

Supporting

payments

of

dividends

to

shareholders

remains

important

to

us,

and

we're

pleased

to

recommend

an

increase

in

the

final

dividend,

up

10%.

And

we

continue

to

evaluate

growth

opportunities

through

selective

M&A.

So,

to

summarize,

we

can

invest

organically, deliver

dividends,

and

seize

appropriate

opportunities

in

M&A,

as

well

as

repatriate

cash

if

surplus.

All

these decisions

on

free

cash

flow

are

made

within

the

core

premise

of

maintaining

our

strong

and

stable

financial

position

and

solid

investment-grade

credit

metrics.

And

you've

seen

we've

got

a

strong

balance

sheet.

So,

let

me

dive

quickly

a

little

deeper

business

by

business.

Starting

with

corrugated

packaging.

This

business

continues

to

deliver

industry-leading

margins

and

returns.

Sales

volumes

were

up

in

the

year

and

selling

prices

were

significantly

higher

with

the

effect

coming

through

strongly

in

the

second

half.

Our

capital

investment

program

and

acquisitions

completed

in

the

year

further

contributed

to

corrugated

packaging's

performance.

Whilst

2020

was

very

much

a

story

of

e-commerce

demand,

in

2021,

we

saw

strong

demand

across

all

end

uses,

particularly

e-commerce

and

FMCG.

Pleasingly,

containerboard

sales

volumes

were

up

on

the

prior

year,

supported

by

our

broad,

high-quality

product

portfolio.

Corrugated

solution

volumes

grew

13%

organically.

This

was

made

possible

by

our

backward

integration

to

paper

at

the

time

of

paper

shortages,

ongoing

investments

in

our

converting

network,

and

our

sharp

focus

on

innovative

products

and

services

of

the

highest

quality.

We

implemented

price

increases

across

all

containerboard

grades,

leading

to

higher

average

selling

prices

year-on-year,

and

we

were

successful

in

passing

on

higher

input

costs

through

to

box

prices.

Now,

turning

to

flexible

packaging.

The

business

achieved

good

volume

growth,

successfully

implemented

price

increases

to

recover

significantly

higher

input

cost

prices.

We

saw

strong

volume

growth

in

end

uses,

in

particular

paper-based

shopping and

e-commerce

bags,

as

well

as

consumer

applications

such

as

food

and

pet

food,

where

we

have

leading

market

positions.

There

was

also

good

demand

from

building

materials

and

the

construction

sector

during

the

period.

Kraft

paper

sales

volumes

were

significantly

up

on

the

prior,

notably

in

our

range

of

specialty

kraft

papers

where

sales

volumes

have

almost

doubled

over

the

last

three

years,

benefiting

from

increasing

customer

demand

for

paper-based

sustainable

packaging.

Paper

bags

sales

volumes

were

up

9%,

growth

across

all

regions

supported

by

growing

demand

in

new

applications.

For

example,

our

recyclable,

lightweight,

and

flexible

MailerBAG

for

e-commerce

now

accounts

for

3%

of

our

total

paper

bags

volumes.

Prices

in

the

kraft

paper

value

chain

were

modestly

up

year-on-year.

On

the

back

of

continued

strong

order

books

and

tight

market

conditions,

we

have

implemented

price

increases

across

our

range

of

kraft

papers

and

paper

bags

at

the

start

of

2022

that

reflects

prevailing

spot

prices.

Prices

today

are

some

20%

to

25%

higher

than

the

average

for

that

of

2021.

Engineered

materials,

just

to

remind

you,

this

is

less

than

5%

of

the

group's

revenues.

Its

performance

stabilized

in

2021.

We

saw

good

recovery

in

industrial

and

specialized

end

uses

in

functional

paper

and

films

and

we

completed

the

restructuring

work

in

personal

care

components

that

we

initiated

at

the

end

of

2020.

This

business

also

implemented

significant

price

increases.

Uncoated

fine

papers

underlying

trading

performance

improved

significantly

over

the

course

of

the

year,

higher

volumes

and

prices

offsetting

input

costs

particularly

energy

and

transport.

EBITDA

comparability

with

2020

is

impacted

by

a

€34

million

lower

forestry

fair

value

movement

in

the

year

and

the

impact

of

longer

planned

maintenance

shuts

in

2021

with

a

€30 million

effect.

If

you

add

those

numbers

together,

the

€64

million

effect

was

mainly

a

second

half

effect,

and

therefore,

you

can

see

clearly

from

the

chart

the

underlying

progress

that

was

made

in

this

business.

Our

sales

volumes

grew

11%

in

the

period.

Customers

do

value

us

as

a

supplier

of

choice,

whilst

capacity

leaves

the

market

due

to

our

excellent

customer

service,

superior

cost

competitiveness,

and

our

financial

stability.

We've

increased

our

market

share

in

all

the key

markets

where

we

operate.

In

Europe,

we

estimate

market

demand

to increase

6%

to

7%

in

the

year,

showing

a

good

recovery,

whilst

all

sales

volumes

in

this

region

grew

some

14%.

On

the

back

of

improving

demand

and

increasing

costs,

we

implemented

a

series

of

price

increases,

most

notably

in

the

second

half of

the

year

and

also

earlier

in

this

current

year.

European

benchmark

prices

today

are

20%

to

22%

higher

than

the

2021

average.

So

let

me

summarize.

We're

really

pleased

with

our

strong

financial

performance.

Our

results

have

been

driven

by

growing

volumes,

implementing

price

increases,

which

more

than

offset

higher

costs.

We

have

successfully

executed

strategic

investments

and

the

agreed

PCC

disposal

gives

us

further

focus.

The

group

has

a

robust

balance

sheet,

providing

strategic

flexibility

to

invest

and

grow

in

our

expanding

packaging

markets

where

we

have

leadership

positions.

With

that,

let

me

hand

you

back

to

Andrew

and

he'll

talk

about

the

longer-term

strategic

view.

Thank

you.

[Andrew King]

Thanks

very

much,

Mike.

As

I

said

earlier,

I would

like

to

come

back

now

to

the

strategic

positioning

of

the

group

and

most

importantly

the

growth

opportunities

we

see

for

the

business

going

forward.

I'll

remind

you

of

our

track

record,

how

we

see

the

markets

developing

going

forward,

and

why

we

have

the

ability

to

keep

winning

in

these

markets,

and

in

turn,

how

that

supports

our

accelerated

investment

program.

If

I

step

back

first,

I

remind

you

of

the

credentials

we

have

for

profitable

long-term

value

accretive

growth.

I

think

you

can

see

from

this

slide,

we

have

a

great

track

record

of

delivery.

Over

the

past

decade,

we

have

successfully

grown

the

business

on

all

key

profit

metrics,

while

at

the

same

time

driving

improved

returns

on

capital.

We

have

done

this

by

systematically

investing

in

our

cost-advantaged

assets

and

seizing

acquisition

opportunities

at

the

right

value,

balancing

investment

for

growth

with

supporting

returns

to

our

shareholders.

This

has

of

course

been

facilitated

by

the very

strong

cash

generation

of

the

business,

allowing

us

to

grow

without

recourse

to

external

funds.

As

a

consequence

of

this

disciplined

capital

allocation,

coupled

with

our

relentless

– our

rigorous

and

relentless –

apologies,

didn't

change.

As

a

consequence

of

this

disciplined

capital

allocation,

coupled

with

our

rigorous

and

relentless

focus

on

driving

operational

performance,

we

have

built

an

industry-leading

integrated

cost-advantaged

platform.

Importantly

also,

our

early

embrace

of

sustainability

has

guided

and

focused

our

product development

and

operations

over

many

years.

This

has

ensured

that

as

demand

for

sustainable

solutions

has

increased,

our

ability

to

anticipate

and

respond

to

customers

and

the

end

user

needs

has

kept

us

ahead

of

the

game.

Our

leadership

in

sustainability,

I

think,

is

widely

recognized

and

valued

by

our

customers.

Here,

you

can

see

I

highlight

a

selection

of

external

benchmarks.

I

believe

I

can

safely

say

that

no

other

group

in

our

sector

ranks

consistently

so

highly

across

all

of

these

well-regarded

rating

systems.

And

of

course,

as

mentioned

earlier,

we

are

far

from

done

on

our

sustainability

journey.

We

are

taking

the

necessary

action

for

the

future,

guided

by

our

Mondi

Action

Plan

2030,

which

is

now

very

much

embedded

in

the

business.

More

recently,

you

would

have

seen

this

includes

a

commitment

to

net

zero

by

2050

with

science-based

targets

to

limit

global

warming

below

the

1.5-degree

threshold.

Clearly,

the

urgency

around

climate

change

has

not

diminished

as

a

consequence

of

the

recent

crisis

in

Ukraine.

Our

leading

market

positions

that

focus

on

sustainability,

the

cost-advantaged

assets

that

we

enjoy,

and

of

course

our

culture

of

continuous

improvement

have

allowed

us

to

consistently

deliver

strong

growth

in

our

key

packaging

segments

as

illustrated

on

this

slide.

You'll

see

that

this

growth

has

accelerated

in

the

past

year,

driven

in

large

part

by

the

rapid

increase

in

demand

for

new

sustainable

packaging

solutions.

At the

same

time,

as

Mike

already

talked

to

you

about,

the

demand

for

the

more

traditional

products

has

also

recovered

following

the

slowdown

during

the

height

of

the

COVID

pandemic.

The

security

of

supply

we

can

offer

given

our

wide

production

footprints

and

our

vertical

integration,

coupled

with

our

focus

on

innovation,

service,

and

quality,

has

driven

growth

ahead

of

the

markets

in

all

key

segments.

And

very

importantly,

the

packaging

markets

we

serve

do

continue

to

grow.

While

estimates

obviously

vary

significantly,

we

do

expect

to

see

good,

strong

structural

growth

in

our

two

core

packaging

markets

of

corrugated

and

flexibles,

underpinned

by

those

key

growth

drivers

of

sustainability

and

e-commerce.

Going

to

those

briefly

looking

at

the

e-commerce

led

growth,

we

do

see

the

rate

of

growth

in

demand

for

e-commerce

packaging

slowing

relative

to

the

very

high

levels

seen

in

the

last

few

years,

mainly

as

COVID

restrictions

are

lifted

and

consumers

are

tending

to

spend

more

money

on

services.

However,

we

still

expect

to

see

a

clear

positive

trend

and

absolute

demand

growth

will

still

be

material,

particularly

now

that

e-commerce

is

working

off

a

much

higher

base.

On

sustainability,

it

is

very

clear

that

the

trend

for

more

sustainable

packaging

is

here

to

stay.

All

key

stakeholders

from

end

customers

through

our

FMCG and

other

customers

to

NGOs

and

regulators

are

demanding

change.

We

are

seeing

a

clear

acceleration

of

this

trend

and

are

very

well

placed

to

capitalize

on

it

with

our

unique

platform,

offering

paper

where

possible

and

plastic

where

useful.

I'll

come

back

again

to

some

of

the

latest

innovation

we're

seeing

in

this

area

in

the

presentation.

Supporting

all

of

this,

we

have

an

ambitious

expansionary

capital

investment

program.

We

have

a

pipeline

of

projects

already

approved

or

under

advanced

evaluation

amounting

to

around

€1

billion,

which

we

expect

will

deliver

mid-teen

returns

when

in

full

operation.

On

the

slide,

you'll

see

we

detail

a

number

of

these

key

projects.

Very

compelling

to

me

is

that

the

investments

are

spread

across

our

range

of

packaging

businesses

both

in

terms

of

product

and

geography

and

upstream

and

downstream,

meaning

we

are

not

placing

undue

reliance

on

any

single

market

or

asset.

In

round

terms,

we're investing

around

50%

in

each

of

corrugated

and

flexibles,

while

the

upstream/downstream

split

is

around

60/40.

In

corrugated,

we are

building

on

our

containerboard

capacity

by

investing

in

brownfields

expansion

in

our

Kuopio

and

Świecie

mills,

while

we

have

underway

around

€185

million

in

expansionary

projects

across

our

network

of

corrugated

plants,

serving

the

fast-growing

markets

of

Central

and

Eastern

Europe

and

Turkey.

In

flexible

packaging,

we

are

currently

in

advanced

evaluation

of

a

new

200,000

tonne

per

annum

kraft

paper

machine

at

one

of

our

cost-advantaged

locations

to

serve

the

growing

kraft

paper

market.

Here,

we

have

a

clear

market

leadership

position

with

very

strong

vertical

integration

with

our

paper

bags

business.

Similarly,

many

of

the

new

applications

we are

seeing

for

paper-based

solutions

to

displace

other

forms

of

less

sustainable

packaging

solutions

are

using

kraft

paper

packaging

– paper

products

as

their

base.

Linked

to

this,

we

see

exciting

opportunities

to

grow

functional

papers

offering

to

meet

our

customers'

growing

demand

for

innovative

sustainable

packaging

with

the

necessary

barrier

properties,

again

using

kraft

paper

as

the

base.

In

our

flexibles

converting

businesses,

we

continue

to

expand

our

leading

global

paper

bag

network

while

also

investing

to

expand

our

capacity

and

cement

our

leading

position

in

the

fast-growing

European

pet

food

packaging

market.

With

this

pipeline

of

expansionary

projects,

coupled

with

our

ongoing

[ph]



staying

(00:27:46)

business

needs,

we

would

expect

capital

expenditure

to

be

in

the

region

of

€700 million

to

€800

million

in

2022,

rising

to

€900

million

to

€1 billion

in

2023.

As

you

can

see,

this

represents

a

manageable

acceleration

of

our ongoing

capital

investment

program,

supporting

the

growth

opportunities

we

continue

to

see

in

our

packaging

businesses.

Coming

back

now

then

to

our

innovation

focus,

I

would

like

to

take

you

through

a

few

recent

examples

of

innovation

in

sustainable

packaging

and

our

three

Rs

principle

of

replace,

reduce,

or

recycle,

using

paper

where

possible

and

plastic

when

useful.

Here,

you'll

see

two

fantastic

examples

of

how

we

are

leveraging

our

unique

platform

and

our

capabilities

in

papermaking,

coating,

and

converting

to

replace

unnecessary

plastics

with

recyclable,

paper-based

packaging

for

Iceland

and

Les

Crudettes.

We

have

developed

these

solutions

to

run in

our

customers'

existing

packaging

lines,

avoiding,

as

a

consequence,

additional

costs.

As

important,

they

provide

the

same

shelf

life

preventing

food

waste,

which

is

also

critical

for

sustainable

societies

and

in

taking

action

against

climate

change.

We

continue

to

innovate

with

customers

to

develop

e-commerce

solutions

that

are easy

for

the

consumer

to

recycle

and

enable

our

consumers'

businesses

to

grow.

You'll

see

there

our

fantastically

named

BCoolBox

is

on

the

left-hand

side

of

the

slide.

It has

specially

designed

internal

insulating

panels,

keeping

meals

refrigerated

for

over

24

years – hours.

That

would

be

extreme.

I'd

encourage

you

then to

try

to

time

foods

who has

ability

to

expand

deliveries

beyond

the

city

centers

with

standard

transport,

of

course,

now

without

the

need

for

expensive

refrigerated

trucks.

Our

customized

insert

for

the

ship

in

own

container

solution

on

the

right-hand

side,

as

you'll

on

the

slide,

eliminates

the

need

for

additional

packaging,

fits

through

a

letterbox

while

protecting

the

product,

and

it

is

Amazon-certified

frustration-free

packaging.

And

clearly,

if

our

paper-based

solutions

cannot

do

the

job,

we

believe

recyclable,

flexible

packaging

is

the

most

resource efficient

alternative

due

to

both

its

barrier

properties

and

high material

efficiency.

We

help

our

customers

reach

their

recyclability

targets

by

developing

mono-material

packaging

solutions

that

are

again

fit

for

a

circular

economy.

You'll

see

the

pouch

on

the

left

for

Henkel

uses

70%

less

plastic

than

a

rigid

bottle

and

can

be

a

refill

for

the

dispensing

container

at

home,

supporting

a

consumer

reuse

model.

On

the

right-hand

side

of

the

slide,

you

can

see

our

lightweight

high-barrier

solution

for

a

German

consumer

brand.

WalletPack

replaces

non-recyclable

multi-material

packaging,

while

reducing

plastic

by

40%.

It

is

easy

to

open

and

reclose,

and

again,

very

importantly

prevents

food

wastage.

Let

me

then finish

by

reminding

you

of

the

key

takeaways.

We

continue

to

deliver

strongly,

evidenced

by

that

strong

performance

in

2021

across

all

key

financial

and

sustainability

metrics.

The

strong

growth

we

see

in

our

markets,

coupled

with

our

proven

ability

to

win

in

these

markets,

opens

up

further

growth

opportunities

for

the

business.

And

we

are

putting

more

money

behind

it

with

our

accelerated

investment

program,

including

that

pipeline

of

€1 billion

in

projects

delivering

strong

growth

in

packaging,

which

is

sustainable

by

design.

While

we

are

fully

aware

of

the

recent

significantly

heightened

geopolitical

and

macroeconomic

risks,

we

have

the

capacity

to

both

manage

and

finance

this

investment

program,

and

we

are

convinced

it

is

the

right

thing

for

the

long-term

benefit

of

our

stakeholders.

So,

with

that,

I

thank

you

very

much

and

happy

to

turn

over

to

questions

that

Mike

will

facilitate.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

So,

I

have

the

job

of

facilitating.

We're

back

live

in

the

room,

which

is

great.

It means

we

don't

have

a

camera

3

feet

in

front

of

our

noses,

a

little

bit

further

away.

We've

got

three

streams

just

we

have

people

on

the

phone,

we

have

the

textbox

on

the

webcast,

and

we

have

people

in

the

room.

So

I

will

try

to

navigate

between

those

three

audiences.

I'll

take

the

first

question

from

the

room

if

I

could.

[Cole Hathorn, Analyst, Jefferies International Ltd.]

It's Cole Hathorn

from

Jefferies.

Thanks

very

much

for

taking

the

question.

Andrew,

I'd

like

to

focus

on

the

longer-term

strategic

investments

first

of

all.

I

mean,

you

talked

about 2%

to

4%

packaging

growth.

If

I

went

back

to

2015

levels,

am

I

right

in

assuming

that

this

is

better

growth

into

the

future

than

in

the

past

due

to

the

structural

drivers

you

talked

about

and

particularly

flexible

packaging?

I'd

like

to

focus

on

that.

I

mean,

you

talk

about

a

potential

kraft

paper

machine,

and

then

on

the

converting

side,

how

would

you

frame

your

position

in

kind

of

sack and

kraft

paper

and

how

you're

winning

in

that

converting?

Because

I

think

you're

the

market

leader

with

kind

of

more

than

30%

capacity

on

sack

kraft

and

then

on

the

converting

side

as

well.

Is

this

investment

so

that

you

get

more

than

your

share

of

paper

growth

and

then

the

converting

side

more

than

your

fair

share

of

converting

growth

as

well?

Thank

you.

[Andrew King]

Yes.

Thanks

very

much,

Cole.

Yeah,

I

think

the

short

answer

is

yes.

We

do

see

an

acceleration

in

the

growth

in

these

markets,

particularly,

as

you

say,

in

the

flexibles

space.

I

think

historically,

particularly

in the

sack

kraft

business,

you

would

have

seen

this

was

a

very

low

growth

industry

with

the

tradition –

focused

around

traditional

industrial

applications,

cement,

building

materials,

and

the

like.

Clearly,

we've

seen

a

change

in

that

dynamic

over

the

last

few

years.

As

I

highlighted

in

the

presentation,

a

lot

of

the

kraft

paper

offering

goes

into

a

number

of

these

flexible

solutions,

which

are

increasingly

being

used

to

displace

less

sustainable

packaging

solutions.

We

cite

a

couple

of

examples

there,

but

there

are numerous

such

examples

from

the

StretchWrap

that's

replacing

a

plastic

alternative

to

obviously,

for

example,

things

like

the

MailerBAG

which

is

now

being

used

in

e-commerce

applications

so

displacing

plastic

wrap

in

e-commerce,

similarly

using

kraft

paper

directly

and

wrapping

e-commerce

solutions.

I

can

go

on

things

like

that,

salad

a

simple

example

like

that,

that

packaging

solution

for

salad

and

things

like

that

simply

didn't

exist

two

or

three

years

ago.

And

I

think

what's

important

here

is

one

can

often

talk

about

anecdotal

evidence

of

sort

of

innovation of

things.

These

are

really

making

a

big

difference

now.

We

highlight,

for

example,

the

MailerBAG

being

3%

of our

volume

now

in

paper

bags.

It

was

nothing

two

years

ago.

So

it

just

illustrates

that

is

starting

to

really

move

the

needle.

And

we

are

really

seeing

a

huge

number

of

different

applications

coming

for

those

speciality

kraft

paper

applications

as

we

see,

but

also

the

traditional

sack

kraft.

So

I

think

with

all

of

that

in

mind

applications,

we

are

looking

–

the

market is

extremely

tight.

I

believe

it

will

continue

to

be.

Obviously,

this

is

the

normal,

always

normal

ebbs

and

flows,

but

these

strong

structural

drivers

are

not

going

away.

So

yes,

we're

very

confident

when

referring

to

that

market

growth

of

2%

to

4.

I

mean,

we

think

that's

the

market.

We

still

think

we

can

do

more

than

our

fair

share

of

that.

How

do

we

do

that?

Certainly,

on

the

converting

businesses,

we

continue

to

invest

behind

the

growth

of

those

businesses.

As

you

would

have

seen,

we've

highlighted,

for

example,

our

new

plant

in

Colombia,

we're

doing

a

new

one

–

another

one

in

Morocco

as

well.

We're

investing

also

behind

increased

capacity

in

our

existing

facilities,

and

we

have

the

biggest

global

network

of

paper

bag

plants

of

anyone

by

some

distance.

So

I

think

that

in

itself

puts

us

in

a

very

strong

position.

But

again,

I

come

back

to

the

unique

platform

we

have.

And

again,

I

know

this

is

an

easy

statement

to

make,

but

I

think

it

is

demonstrably

the

case.

We

have

the

deep

knowledge

on

the

kraft

paper

making.

We are

the

biggest

producer

of

kraft

paper

grades

in

the

world.

We

have

deep

knowledge

in

what

we

call

the

coating

applications,

making

functional

barrier

properties

for

that

paper,

where

you

need

additional

functionality.

And

we

have

the

deep

knowledge

and

customer

intimacy

on

the

converting,

both

from

our

consumer

flexibles

and

our

traditional

bags

businesses.

And

really,

it's

about

bringing

that

to

bear

and

giving

that

opportunity

offering

to

our

customers.

And

we

are

very

excited

by

a

lot

of

these

opportunities.

And

again,

we're

putting

money

behind

it

to

make

sure

we

stay

ahead

of

the

market

on

this.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Okay.

I'm

going to

take

the

next

question

from

the

phone

line.

For

those

on

the

phone,

remember,

if

you

want

to

ask

a

question,

please

use

star

one.

And

on

the

webcast,

please

use

the

text

box,

but

we'll

move

to

phones.

Next

question

is

from

Lars

at

Credit

Suisse. Good

morning,

Lars.

[Lars F. Kjellberg]

Good

morning.

Thanks

for

taking

my

question.

I

just

need

to

still

ask

about

Russia.

Of

course,

we're

seeing

quite

a

few

companies

simply

[ph]



putting

down (00:37:37)

trade

lines,

exiting

Russia,

all

sorts

of

reasons.

Where

do

you –

kind

of

how

do

you

think

about

Russia

in

the

context

of

what's

going

on

there? I

know

this

is

an

incredibly

maybe

unfair

and

difficult

question

to

respond

to,

but

if

you

can

provide

some

color

on

that.

And

[indiscernible]



(00:37:56)

simpler

ones,

I

suppose,

you

of

course

had

a

very

strong

price

over

cost

and

very

strong

pricing

momentum,

I

should

say,

at

exceeding

cost

in

2021.

How

should

you

make

us

think

about

that

relationship

in

2022

especially

when

considering

the

big

step

up

you're

seeing

kraft

paper

as

you

– the

annual

contracts,

of

course,

uncoated

fine

is

seeing

strong

momentum.

And

if

you

could

share

some

thoughts

specifically

on

that

business

in

terms

of

the

competitive

environment,

considering

your

cost

business

really

outstanding

versus

some

of

your

peers.

Those

will

be

questions.

Thank

you.

[Andrew King]

Thanks

very

much,

Lars.

As

I

said

in

my

opening

remarks,

I

mean,

the

situation

in

Russia

is

clearly

rapidly

evolving,

highly

complex,

and

extremely

fluid.

We

are

addressing

that

on

an

active

basis,

actively

monitoring

the

situation,

actively

reacting

to

the

situation.

But

as

I

said,

if

we

have

any

further

updates

to

provide,

we

will

provide

them

as

the

situation

unfolds.

On

the

issue

of

price

versus

cost,

it's

the

perennial

debate.

I

mean,

clearly

the

cost

base

is

rising.

And

I

think

that's

not

new

news

to

anyone.

Everyone

who's

talking

in

the

industry

will

be

telling

you

that

and

not

just

our

industry,

across

industries.

But

I

think

very

importantly,

as

you

rightly

point

out,

we

have

seen

good

pricing

momentum.

Why

is

that?

I

mean,

clearly

the

supply

demand

balances

across

our

paper

offerings

has

been

very

strong

of

late

or

very

supportive,

should

I

say,

of

late.

We've

seen

good

price

momentum

on

the

containerboard

grades,

coming

into

the

start

of

this

year.

Clearly,

pricing

is

well

above

where

it

was

on

average

for

last

year.

Similarly,

on

the

kraft

paper

side

as

you

rightly

point

out,

because

we

have

some

more

contractual

business

in

kraft

paper, it

takes

a

bit

more

time

for

the

pricing

to

come

through.

But

that

has

come

through

as

we

expected

on

the

annual

business

going

into

2022

and

we

highlight

that

the

pricing

right

now

is

well

above

the

averages

for

2021.

So

certainly,

as

we

start

the

new

year,

we

have

seen

good

pricing

and

price

levels

are

well

elevated

from

what

they

were

in

2021,

albeit

the

cost

base

clearly

continues

to

rise.

The

most

– the

biggest

imponderable

on

the

cost

base

right

now

is

everyone

would

testify

too

is

the

energy

situation.

We

can

talk

more

about

that,

but

obviously,

it's

highly

volatile.

The

good

news

for

us

is,

as

you

all

know,

even

though

it

is

an

important

input

cost

and

will

continue

to

be

so, and course,

you've

seen

prices

rise

fivefold,

for

example,

for gas

in

Europe

and

even

beyond

that

now,

it'll

always

impact.

But

we're

also

structurally

well-positioned

because

we

have

a

lot

of

own

energy

production.

Because

by

definition,

if

you're

more

virgin

paper

producer –

more

of

a

virgin

paper

producer,

you

produce

more

of

your own

energy.

And

as

you

know,

we've

been

investing

heavily

for

that

energy

efficiency

over

a

number

of

years

now

and

I

think

that

places

us

in

good

stead

as

well.

So

the

cost

base

although clearly

impacted

by

the

input

cost

pressures

we

see

is

possibly

less

so than

you

might

see

if

we

weren't

so

backward

integrated

into

own

energy

production. So I think, yes, as we sit today,

pricing

is

strong

and albeit

there's

still

a

lot

of

pressure

on

the

cost

base.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Thanks,

Lars.

[Justin Jordan, Analyst, Exane BNP Paribas]

Good

morning. I'm

Justin

Jordan

from

BNP

Exane.

I've

got

three

separate

questions.

Firstly,

sorry,

I

need

to

ask a

little

bit

more

on

Russia.

Can

you

just

remind

us

firstly,

geographically,

where

are

you Syktyvkar?

From

memory,

you've

been

there

for

several

decades

through

periods

of

economic

and

political

uncertainty.

And

thirdly,

what

are

the

actual

products

that

you

make

and

sell

in

Russia?

Secondly,

back

to,

I

suppose

the

core

business

as

it

were.

Can

you

talk

us

through

the

increased

CapEx

guidance

that

you're

giving

on

slide

13

and

14?

Are

you

within

the

guidance

of

2023

CapEx?

Does

that

explicitly

include

a

decision

on

the

sack kraft

additional

mill?

Is

that

baked

into

the

guidance

as

it were

or

is

there

additional

potential

beyond

that?

And

then

thirdly,

clearly,

you've

just

–

well,

you're

in

the

process

of

realizing

€650

million

from

the

PCC

disposal,

which

is

fantastic

result.

Can

you

talk

us

through

how

the

board

can

think

about

allocating

net

proceeds?

It

gives

clearly

a very,

very

strong

position

to

the

group.

Just

refresh

our

thinking

on

how

we

should

be

thinking

about

capital

allocation

going

forward.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Sure.

Thanks,

Justin.

Let

me

take

questions

two

and

three

first

and

then

Andrew

can

come

back.

In

terms

of

the

capital,

the

cash

CapEx

flows

that

Andrew

talked

about,

that

does

assume

that

we

deploy

that

expansionary

billion

of

capital

to

help

how

that

sort

of

flows

out

and

these

are

sort

of

rough

numbers

because

it

will

change,

but

I

would

think

of

that

billion

flowing

out

in

cash

terms

is

about €250

million

in 2022,

about

€450 million

in

2023, and

then

the

balance

flowing

out

in

the

years

thereafter

if

that

helps.

Thank

you.

In

terms

of

–

you

mentioned

the

sale

of

the

PCC

business.

I

quite

like

to

complete

the

deal

and

get

the

cash

in.

You'd

expect

me

to

say

that.

Listen,

you

know

how

we

think

of

capital.

I've

been

through

it

again

this

morning. That

hasn't

changed.

We'll

continue

to

look

at

that

and

we'll

clearly

look

at

that

once

the

deal

is

completed.

[Andrew King]

Yes.

Justin,

on

the

Russian

situation,

Syktyvkar is

1,200-odd

kilometers

Northeast

of

Moscow

if

my

geography

is

correct.

It's

high

and

cold.

The

products

out

of

Syktyvkar,

in

particular,

it's

obviously

about

550,000

tonnes

of

uncoated

fine

paper,

330-odd

thousand

tonnes

of

white

top

products,

white

top

containerboard, a

couple

of hundred

thousand

tonnes

of

newsprint

and

some

pulp,

which

is

sold

into

the

outside

market

as

dry

pulp.

So,

that's

around the

product

mix there.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Okay.

I'll

take

one

more

from

the

room

and

then

we'll

go

to

Brian

of

Morgan

Stanley

on

the

phone.

But

one

more

from

the

room

first.

[Wade Napier, Analyst, Avior Capital Markets (Pty) Ltd.]

Good

morning,

everyone.

It's

Wade

Napier

from

Avior

Capital.

Just

a

couple

questions

for

me,

specifically

on

the

kraft

investment,

the 200,000-tonne

[ph]



more

(00:44:57) that

you're

sort

of

assessing

there.

Could

you

just give

us

a

little

bit

of

color

what

the

sort

of

size

of

the

market

is

within

Europe

or

globally?

I

just

want

to

sort of

understand

what

200,000 tonnes relatively

looks

like?

And

then

maybe,

post

investment,

what

your

sort

of

split

between

sort

of,

I

guess

call

it,

commoditized

industrial

bags

versus

specialty

paper

would

look

like?

And

then

what

sort

of

–

which

[ph]



mills (00:45:25)

are

you

actually

specifically

looking

at

making

that

investment?

I'm

just

trying

to

think

where

you

have

excess

pulp

capacity

to

accommodate

that,

[ph]



assuming (00:45:33)

you're

going

to

remain

integrated

vertically

post

that

investment.

And

then

secondly,

just

on

FX

maybe,

you

sort

of

have recorded

a

sort

of

impact

of

about

€60

million

this

year.

Obviously,

the

ruble

has

blown

out,

but

what

you

sort

of

– at

spot

prices,

how

should

we

think

about

that

impacting

the

group

in

2022?

Thanks

very

much.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Thanks,

Wade.

So,

just

to

cover

off

the

FX,

if

you

sat

here

today

and

just

worked the

ruble

out

and

other

currencies,

we're

probably

looking

at

something

around

the

€70

million

hit,

[indiscernible]



(00:46:08)

here today.

Most of

that

is

clearly

ruble

denominated.

That's

fairly

volatile

as

you've

seen.

[Andrew King]

Yes.

And

then,

just

coming

back

on

to

the

kraft

paper machine

that

we

are

looking

at.

In

terms

of

– just

to

put

it

in

context,

we

produced

about

1.2

million

tonnes

of

kraft

paper

grades.

In

round

terms,

it's

about

900,000

tonnes

of

sack

kraft, 300,000

tonnes

of

what

we

call

specialities

with

the

specialities

growing

rapidly.

Now,

in

certain

of

your

facilities,

we

have

the

capability

to

move

between

the

speciality

and

the

sack

kraft.

So,

as

the

different

markets

develop,

we

are

able

to

maneuver

between

them

and

that

is

a

real

strength

of

ours

because

we

have

a

portfolio

of

assets

within

that

kraft

paper,

which

again

makes

us

unique

in

the

market.

What

we'd

be

looking

at

is

–

the

concept

here

is

about

200,000

tonnes

of

incremental

sack

kraft

capacity,

but

it

does

allow

us

in

Syktyvkar,

other

facilities

then

to

look

at

increasing

the

speciality

component.

So,

I

would

think

in

rough

terms,

we

would

look

at

about

on

a

full

incremental

basis,

probably half

of

it

being

sack

kraft

and

the

other

half

being

essentially

specialities

as

we

develop

into

those

speciality

market.

And

that's

because,

as

I

said

earlier, a

lot

of

these

specialities,

speciality

kraft

papers

are

what

are

being

used

in

these

consumer

applications.

And

that

is

obviously

where

we

see

a

lot

of

growth,

but

we

are

seeing

a

lot

of

growth

also

in

the

traditional

sack

kraft

applications.

We

have

an

extremely

strong

downstream

presence

as

you

all

know.

That

is

growing

rapidly. You

saw

the

growth

rates

of

last

year

and

we

continue

to

see

growth

so

we

can

forward

integrate,

frankly

most

of

this

tonnage.

But

we

also

have

an

outside

market

that

we

see

big

opportunities

for

selling

into.

So

we

see

it

as

– yeah,

it's

a

strongly

growing

segment

for

us.

We

are

the

best

positioned

to

deliver

into

that

segment.

In

terms

of

overall

market

size,

the

addressable

global

market

is

hard

to

always

define

because

there

are

a

number

of

kraft

paper

grades

which

are

separately

defined,

but

I

would

say

it's

an

8-million

tonne

global

market

if

you

take

the

total

kraft

paper

segment.

So,

we're

certainly confident

this

is

a paper

that

is

much

needed

in

this

growing

market

and

can

be

easily

absorbed.

In

terms

of

mills

just

finally,

I

mean,

we're

looking

across

our

mill

network.

We

have

again

the

luxury

of

a

lot

of

low

cost

operations

which

have

low

cost

pulp

production

and

also

the

capability

for

expansion.

So,

we're

assessing

that.

But

the

good

news

is

we've

got

options

around

that

and

we

are

refining

all

of

that.

And

as

soon

as

we

have

that

refined,

we

will

be

making

a

final

decision

on

it.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Thanks,

Wade.

So

on

to the

phone

lines.

Brian,

Morgan

Stanley,

over

to

yourself.

[Brian Morgan, Analyst, RMB Morgan Stanley (Pty) Ltd.]

Hi,

thanks

so

much,

guys. Sorry,

I'm going

to

beat

this a

little

bit

more

on

the

kraft

paper.

Would

you

expect

it

to

be

a

virgin

or

recycled

feedstock

or

a

combination

of

both?

And

then

also,

if

you

can

just

set

us

on

the

margins,

[ph]



I

mean obviously

you

don't

give

us

numbers,

you

won't

(00:49:35),

but

just

to

help

us

to

frame

our

thoughts

between

– is

the

specialities

materially

higher

margin

than

the

commodity

sack kraft

side

of

things?

That's

one

question on

kraft

paper.

And

then

the

second

one

is

on

energy

costs.

Can

you

give

us

a

number

for

2021?

I

can't

see

it

in

the

release

anywhere

on

total

energy

costs

and

what

you'd

expect

that

to

be

in

2022

if

you

were

to

say

mark

spot

for

the

rest

of

the

year?

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Yeah,

sure.

Brian,

again,

let

me

take

the

energy

question

first.

The

energy

costs

in

2021

were

around

€500

million.

I

think

if

you

– depends

what

hour

you

look

at

the

forward

spot.

But

to

try

to

be

helpful,

I

think

you

could

probably

add

on

€250

million, €300

million

to

that.

Again,

I

would

just

balance

that

with

what

we've

also

said,

which

is,

of

course,

the

selling

price

environment.

So

of

course,

if

that

passes

through,

we

still

remain

confident

of

passing

those

costs

through

either

through

price

increases

already

established

or

if

the

market

takes

further

cost

increases,

then

I'm

sure

the

market

prices

will

also

move

across

the

industry

to

adjust.

[Andrew King]

Yeah,

Brian,

and

on

the

kraft

paper,

the

feedstock,

again,

I

mean

we

have

the

luxury

as

a

business

of

having

a

great

portfolio

here.

So

we

do

have

some

kraft

paper

grades

which

do

have

some

recycled

content.

So,

for

example, the

EcoVantage

product,

which

I

remind

you

is

the

product

we

invested

in

at

the

beginning

of

this

year

with

that

expansion

in

our

[indiscernible]



(00:51:16) machine

to

be

producing

a

product

for

particularly

the

paper

bag,

the

retail

bag

markets.

That

is

sold

out

because

clearly

huge

demand

for

that

both

driven

by

regulation

and

of

course

consumer

preferences.

That

does

have

some

recycled

content.

But

typically

with,

kraft

papers,

our

real

strength

is

in

the

strength

of

our

paper,

which

is

driven

by

the

virgin

pulp

utilization.

So

the

highest

strength,

the

highest

strength

kraft

paper

offerings

typically

are

largely

virgin

pulp

based,

and

that

is

where

we

see

our

real

strength.

So

where

you

see

a

lot

of

these

applications,

for

example,

that

StretchWrap

product

[ph]



and

things (00:52:04),

what

you

really

need

is

high

strength

properties,

and

that

is

what

the

market

is

looking for,

for

these

type

of

applications,

and

we

think

we

are

extremely

well-positioned.

So

[ph]



long and

short (00:52:17)

of

it

is

this

new

capacity

would

be

virgin

based,

but

we

also

have

some

capacity

across

the

group,

which

does

have

some

recycled

content

as

required

for

different

applications.

In

terms

of

the

margins,

I

mean,

it's

a

gross

generalization

to

say

speciality

is

better

than

sack kraft

because

a

lot

depends

on

the

configuration

of

the

assets

that you're

using,

the

markets

that

you

serve.

We

believe

all

our

kraft

paper

offering

is

nicely

profitable.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Okay.

Thank

you.

Move

next

to

James

Twyman

on

the

telephone

line.

Over

to

you,

James.

[James Twyman, Analyst, Prescient Securities (Pty) Ltd.]

Yes.

Hi.

Thank

you

very

much.

So,

yeah,

I've

got

three

questions.

The

first

one

is

just

on

wood

costs.

It

sounds

as

though

it

was

sort of

low

single-digit

increases

last

year.

Could

you

get

some

idea

about

whether

that's

similar

again

or

in

terms

of

the

presentation, it

sounds

like

it

may

be

picking

up

a

little

bit.

Secondly,

the

engineered

plastic

products

business,

could

you

talk

about

what

you've

actually

got

left

there? Still

quite

a

decent

sized

business

and

why

you

think

that

those

businesses

are

going

to

be

core to

the

group

in

future

when

they

obviously

weren't part

of

the

flexibles

business

when

you

did

change

the

divisional

structure

before?

And

the

final

one,

just

if

you

don't

mind

just

on

Russia,

there

are

some

companies

that

have

said

that

they're going

to

stop

supplying

paper,

chemicals,

and

other

products

to

Russia.

Just

based

on

the

facts

as

we

see

them

now

in

terms

of

what

companies

have

said

going

forward

to

you,

can

you

continue

operating

under

that

scenario?

Obviously,

things

will

change

in the

future

just

based

on

what

we've

seen

so

far.

Thank

you.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Thanks,

James.

Yeah,

let

me

comment

on

wood.

Yeah,

wood

prices

were

fairly

benign

last

year.

They

were

fairly

flattish. They

have

increased

through

very

back

end

of

last

year

and

into

early

this

year.

So

we

would

expect

wood

to

increase

particularly

around

the

sort

of

Central

Europe

and

Eastern

Europe

area.

So

we

are

expecting

increased

wood

prices

there.

I

think

the

scale

of

that

time

will

tell.

But

I

don't

think

they'll

be

low

single-digit.

They'll

be

higher

than

that.

Clearly,

forecasting

that

forward

becomes

quite

difficult.

But

again,

in

terms

of

our

ability

to

pass

those

through,

we

remain

pretty

confident

on

that.

But

we

will

see

increased

wood

prices

we

believe.

[Andrew King]

Yes,

James.

On

the

issue

of

what's

left

after

the

disposal

of

PCC, what's

left

is

a

very

important

business

for

us,

which

is

our

functional

paper

and

films

business.

It

was

in

a

different

business

unit

to

flexibles,

but

that

doesn't

mean

that

there's

not

significant

interaction

and

integration,

benefits

between

the

two.

And

frankly,

it

fits

more

logically

as

part

of

the

flexibles

value

chain

because

effectively

what

they

do

is

they

use

a

lot

of

the

kraft

paper

grades,

which

they

then

coach

with

different

applications

to

provide

additional

barrier

protection

properties,

which

then

in

turn

can

be

used

either

in

our consumer

packaging

applications

or

a

number

of

other

industrial

applications

and

the

like.

So when

we

talk

about

leveraging

that

unique

platform,

I

see

this

as

a

core

part

of

that

because

this

is

really

interlinkage,

should

I

say,

between

the

paper

businesses

and

the

converting

businesses,

providing

that

extra

barrier

functionality,

which

allows

us

to

make

a

number

of

those

products

that

we

showed

earlier.

And

I

think

there's

a

lot

of

exciting

opportunities

around

us

because

where

you

see

the

need

to

replace

plastic

by

paper

solutions,

invariably,

you

need

to

add

barrier

properties

to

that

paper

and

that's

exactly

what

this

business

does

and

we

are

looking

to

put

more

money

behind

it.

I

mentioned

in

the

presentation

that

we're

looking

to

invest

further

in

that

functional

paper

and

films

area

to

deliver

more

of

these

functional

barrier

papers.

So

I

think

there's

a

lot

of

exciting

opportunities

that

that

business

brings

for

us,

and

it

fits

very

well

in

our

flexibles

offering

and

we

are

looking

to

increase

the

integration

of

that

business

into

our overall

flexibles

offering.

And

then

finally,

on

Russia,

I

mean,

we

are

operational

as

we

said

today.

We're not

unaware

of

all

the

complexities

around

all

of

that.

But

as

of

today,

we

are

fully

operational.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Okay.

Thank

you.

Thanks,

James.

We

have

time

for

one

last

question,

and

I'm

going

to

take

it

from

[ph]



Sean

(00:57:07) on

the

phone.

Over

to

you,

[ph]



Sean (00:57:10).

Good

morning,

guys.

Thanks

for

the

time.

A couple of

questions,

and

please

excuse

me,

first

one

[ph]



a

bit

silly (00:57:19).

But

just

in

terms

of

the

PCC

disposal,

barring

sort

of formalities.

Can

we

confirm

that

that is

pretty

much

been

100%

[indiscernible]



(00:57:29)

but

the

proceeds

on

that

basis?

And

then

my

second

question

is

around

the,

I

mean,

it's

quite

a

nice

hefty

CapEx

and

obviously quite

encouraging

in

terms of

your

plans

[indiscernible]



(00:57:42)

in

your

assumptions

for

[indiscernible]

(00:57:46)

CapEx,

what

has

your

assumptions

been

around

Russia and

formulating

that flex.

I

mean,

obviously

the

balance

sheet

at the

moment

is

strong,

the

prices is

going

to be

a bit

stronger

and

you

can pretty

much

assume

[indiscernible]



(00:57:58)

the

balance

sheet

would

be

fine.

So it'd

be

interesting to see

if you

can

give

us

any

insights

on

that.

And

then

just,

sorry

going

back

to

Russia,

just

from

a

operational

[indiscernible]



(00:58:10) at

the

moment,

you've

got

enough

raw

materials,

et

cetera, et

cetera.

But

in

terms

of

actually

making

cash payments

and

receiving

cash

and

export

payments.

Could

you

comment

around

that?

That's

it

from

my

side.

Thanks.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

So

thank,

[ph]



Sean (00:58:23).

On

PCC,

the

deal

is

subject

to

normal

customary

closing

conditions.

We'll

work

through

those.

And

as

I

say, we

expect

to

close that

in

the

second

half

of

2022.

[Andrew King]

Yes.

And

on

the

question

around

CapEx

and

the

Russian

assumptions,

I

mean,

firstly,

obviously,

this

€1

billion

of

CapEx

pipeline

as

you'll

see

is

spread

geographically.

None

of

it

incorporates

our

Russian

position.

But

in

terms

of

funding

requirements,

we

believe

we

are

well-funded

as

a

group.

And

we

have

the

capacity

and

it's

the

right

thing

to

be

doing

to

continue

to

support

long-term

growth

of

the

business.

And

in

terms

of

the

Russian

exports,

again,

I

can

only

reiterate

what

I

said earlier,

it's

a

fluid

situation.

We

continue

to

operate

as

of

today.

[Mike Powell, Group Chief Financial Officer, Mondi Plc]

Okay.

Listen,

thank

you

very

much.

It's

great

to

be

physically

back

with

everybody to

meet

people.

If

we

haven't been

able

to

get

to

your

question,

apologies

for

that.

But

Clara,

myself,

and

Andrew

are

available

as

ever

to

take

your questions.

Thanks

very

much

for

this

morning

and your

support.