Full directors report - Mondi

favourable product mix. Sales volumes,
however, were lower, especially in
corrugated packaging, owing to lower
consumer demand both locally and
internationally. Market-related
downtime in paper production totalling
58,000 tonnes was taken in order to
balance inventories. Specific cost
savings initiatives assisted in lowering
the cost base, although these gains
were partially offset by higher input
costs, mainly in energy.
Merchant & Newsprint
E million 2009 2008 %
Segment revenue
– of which inter-
528 593 (11)
segment revenue 1 1 0
EBITDA 28 24 17
Underlying operating
profit 12 7 71
Capital expenditure 1 7 10 (30)
Net segment assets 194 196 (1)
Return on capital
employed (%) 6.0 3.3 82
1 Capital expenditure is cash payments and
excludes business combinations.
Aylesford Newsprint returned to
profitability, benefiting from improved
selling prices on its annual contract
business, although rising input costs
and the structurally weak European
newsprint market remain a concern for
the future. Europapier’s operating profit
came in below that of the previous
year, owing to lower sales volumes and
prices, exacerbated by the weakening
of some emerging European currencies
in which it trades and higher bad
debts, as several of its smaller
customers were severely affected by
the economic downturn. Mondi
Shanduka Newsprint came under
pressure from lower domestic demand
and pricing pressures, recording
operating profits slightly below the
levels of last year.
Corporate & other
Net corporate costs before special
items decreased by E2 million
compared with 2008. This was mainly
as a result of cost saving initiatives
offset by certain non-recurring costs
incurred in the second half of 2009.
Restructuring
Continuing our strategy of focusing on
retaining a high-quality, low-cost asset
base and in response to the economic
downturn, we accelerated our
restructuring plans. Significant actions
were taken including:
• divestment of the four remaining
corrugated converting operations in
France for total proceeds of
approximately E51 million, thereby
completing the withdrawal from this
market;
• restructuring of the Turkish corrugated
business, the coatings business in
Finland and the UK, and the
Exited 930,000 tonnes
of higher-cost capacity
in just over two years
consumer bags business in Austria;
• closure of a corrugated plant in the
UK and four bag-converting plants
across Europe;
• sale of the Italian recycled
containerboard plant, Cartonstrong
(100,000-tonne-per-annum capacity)
and the related sheet feeder, and the
170,000-tonne-per-annum Frohnleiten
recycled containerboard mill in Austria
(subject to regulatory approval); and
• mothballing of the 110,000-tonneper-annum
Stambolijski kraft paper
mill in Bulgaria and an UFP machine
at Merebank, effectively removing
120,000 tonnes of uncoated fine
paper capacity per annum.
These actions, together with those
taken in 2008, have seen Mondi exit
around 810,000 tonnes of higher-cost
paper capacity in Europe (around 15%
of the Group’s European paper
production capacity) and around 9%
(120,000 tonnes) of its South African
paper production capacity in just over
two years. Importantly, these
measures, together with the various
cost reduction initiatives in ongoing
operations, have placed the Group in a
stronger competitive position than it
was when it entered the downturn,
thereby positioning the Group to take
advantage of any upturn in the
business cycle.
Directors’ report
Annual report and accounts 2009 Mondi Group 27