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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome, ladies and gentlemen, to this audio webcast interview on Mayr-Melnhof Group Interim Results for the First 3 Quarters of 2020 with the company's CEO, Peter Oswald.
Peter, having just reported the third quarter, what is your summary on the MM Group's development so far this year?
MM has demonstrated a solid business development throughout the first 9 months of 2020. Our product focus, cartonboard and carton packaging for consumer staples have proved resilient despite challenging conditions. And what is very important, our products are system relevant. Hence, sales in the first 3 quarters reached again almost the previous year's level.
However, as expected, earnings came in below last year's figures, mainly due to necessary structural- and market-related adjustment measures. Throughout the first 3 quarters, these one-off effects added up to just below EUR 60 million.
Our cash generation remains steady at a good level. Both EBITDA and cash flow from operations are slightly above last year.
So allowing for the one-off effect, MM delivered quite a strong development under difficult framework conditions. In how far was this supported by price, costs and volume?
Compared to other basic industries, we have been able to keep price erosion at limits following a consequent pricing policy. This was also supported by a stable market demand and a good order book, which continues until today.
On the cost side, lower fiber costs contributed, in particular, especially for paper for recycling. Also, we saw a temporary spike in Q2.
Since the corona pandemic has been omnipresent, could you please shed some light in how far this has impacted your business and the supply chain? And second, what further impact do you expect to come from, for instance, the reintroduction of lockdowns across the globe?
Yes. Let's first start with the demand side. Markets for consumer staple, such as food, hygiene products and pharmaceuticals, have been very stable. This has been contrasted to a decline in the premium segment like cosmetics. The premium segment has come out of the trough by now, but it is still below pre-COVID levels.
I'm very pleased to report that we experienced only limited production curtailments. However, we experienced that this situation requires a lot of flexibility from everyone in our team, and I'm confident that the MM team will successfully handle this going forward.
I expect continuity of business on normal level and also important at present, there are no signs of disruptions in the supply chain. With regards to paper for recycling, increasing price volatility is expected due to the coronavirus impact on collections.
Your first signature [ prints ] at MM are perceived with adjustments to improve the asset quality, also involving targeted investments, what is your underlying strategic concept?
It's basically 3 strategic elements we are following to drive both long-term sustainable profitability and growth. And the first is to improve our cost base by scaling up the business, focusing on specific product segments to realize synergies.
Second, we will enhance further market penetration with more value-added business where MM will increase its market share based on sustainability and innovation.
And third, we are looking for acquisitions in our 2 core business areas: cartonboard and folding carton.
On your course to increase MM's gravity in the market, do you follow any geographic priorities?
Well, first of all, MM is well positioned to benefit from consolidation in Europe, and that should be our focus. However, we are exploring also opportunities outside Europe if this strengthens our position and if we can add value to those acquisitions.
Do you foresee any further major adjustment measures to come still this year?
You see our philosophy is, day by day, we want to improve, and therefore, adjustments are an intrinsic part of our business, and I think we take then the measures as required.
And finally, since you are indicating a lower profit for this year due to one-off effects, may shareholders still trust in continuity in the company's payout and dividend policy?
Yes. After 3 quarters, it's too early to speak about the concrete dividend per share for 2020. However, our policy will stay oriented towards long-term continuity based on the company's abilities to generate cash. And as I have outlined, we -- our cash generation is in line or even slightly above last year, and therefore, I think we can have a high confidence in the continuity.
Peter, thank you very much for this interview.
Thank you.