Newsdetails
Results for the 1st Quarter of 2007
• Growth in earnings and volume continued
• Strong order intake and high capacity utilization
• Rise in raw material costs necessitates price increases
• Positive outlook
Group Key Indicators (IFRS, unaudited)
consolidated in EUR millions Q1/2007 Q1/2006 +/-
Sales 421.3 377.0 +11.8 %
Operating profit 42.2 40.1 +5.2 %
Profit before tax 43.2 40.4 +6.9 %
Profit for the period 29.0 27.4 +5.8 %
thereof minority interests 0.6 0.5
As indicated the Mayr-Melnhof Group could successfully capitalize on the economic tailwind also in the first quarter of 2007 and continued growth in earnings and volume. At EUR 29.0 million, the profit for the period exceeded the previous year’s figure by 5.8 %.
MM Karton as well as MM Packaging registered a strong order intake and an increasing order book during the first three months of 2007. Considerable volume enhancement due to new business and high production performance were, however, accompanied by an upward price trend on the procurement markets in both segments. The significant price increase on the raw material markets so far could only be partially offset by higher sales prices. In particular recovered paper demonstrated a marked price surge since the beginning of the year due to strong demand resulting from economic conditions. Against this backdrop cartonboard will be sold at higher prices by mid-year.
According to economic forecasts the positive economic situation is expected to continue in Europe also throughout the coming months, whereby general price increase tendencies for industrial input factors will further intensify.
Consolidated sales amounted to EUR 421.3 million and thus exceeded the previous year’s figure by 11.8 % or EUR 44.3 million. This increase mainly resulted from a volume rise in both divisions, higher cartonboard prices and to about one quarter from the latest packaging acquisitions in Russia and Tunisia.
Operating profit was improved by 5.2 % to EUR 42.2 million. This increase is attributable to earnings growth in both cartonboard production and cartonboard processing. At 10.0 % the operating margin came in below the previous year’s level (Q1 2006: 10.6 %) due to the latest increase in raw material costs, especially recovered paper, and start-up costs for full capacity utilization at the three new rotogravure plants.
Profit before tax increased by 6.9 % to EUR 43.2 million (Q1 2006: EUR 40.4 million).
Income tax expense totaled EUR 14.2 million (Q1 2006: EUR 13.0 million) resulting in an effective Group tax rate of 32.9 % (Q1 2006: 32.2 %).
Hence, the Group generated during the first quarter of 2007 an improvement in the profit for the period from EUR 27.4 million to EUR 29.0 million. Earnings per share climbed from EUR 2.44 to EUR 2.58.
DIVISIONS
MM KARTON
An overall positive picture characterized the market situation of MM Karton in the first quarter of 2007. In all regions sales growth of recycled fiber based cartonboard outperformed the development in virgin fiber based cartonboard. MM Karton successfully strengthened its position in Western and Eastern Europe, stabilized grounds in markets outside of Europe thus increasing its overall market share.
In line with the dynamic demand in the first quarter 2007 the average order backlog of MM Karton amounted to approximately 149,000 tons which is considerably above last year’s figure (Q1 2006: 82,000 tons). Again, MM Karton succeeded in translating its strong order basis into new record levels in production and sales. The tonnage produced increased by 4.9 % to approximately 407,000 tons (Q1 2006: 388,000 tons) resulting in a capacity utilization of 96 % (Q1 2006: 94 %).
Cartonboard sales reached approximately 403,000 tons and surpassed last year’s level
(Q1 2006: 388,000 tons) by about 4 %. Approximately 85 % of this volume was sold in Europe and 15 % exported to non-European markets (Q1 2006: 80 %, 20 %).
Final implementation of last year’s second cartonboard price increase constituted a prime focus in the ongoing business during the first three months of 2007. This was achieved but could not compensate the recent price increase of recovered paper during the first quarter of 2007. Another cartonboard price increase effective as of mid-year was announced.
The new orientation of our Bulgarian mill, MM Nikopol, towards production of technical cartonboard (plasterboard) proceeds according to schedule. Thus, our target of a continuous production in the second half of this year seems reachable.
The 7.7 % rise in sales from EUR 204.0 million to EUR 219.7 million mainly resulted from higher sales volume as well as realized price improvement. Operating profit reaching EUR 17.5 million increased however disproportionately by +2.3 % due to recent cost hikes. At 8.0 % the operating margin therefore came in below last year’s level (Q1 2006: 8.4 %).
MM PACKAGING
Against the backdrop of ongoing positive consumption dynamics in Western and Eastern Europe demand for folding cartons exhibited an unbroken dynamic development during the first months of 2007. MM Packaging continued to capitalize on the positive demand situation and registered an overall high plant utilization as well as significant growth in all of its sales areas (food, cigarettes, detergents, and confectionary).
Approximately 162,000 tons of cartonboard were processed in the first quarter of 2007, which is equivalent to an increase of about one quarter compared to the previous year’s period (Q1 2006: 130,000 tons). This growth resulted from the latest acquisitions in Russia and Tunisia, the new rotogravure plants as well as from new business.
In line with strong demand our rotogravure capacities in the Ukraine and Turkey have been extended by adding a second printing line to each plant. In Tunisia the production base of our Joint-Venture TEC MMP was enlarged by a newly built site for microflute cartons which are predominantly used in detergent packaging.
Sales increased by 17.2 % or EUR 34.7 million to EUR 236.0 million, with the latest acquisitions accounting for approximately one third of this growth. Due to start up costs at the new rotogravure plants and higher cartonboard prices, which so far could only be partly compensated, the operating profit moved up somewhat slower compared to the previous year’s period by 7.4 % from EUR 23.0 million to EUR 24.7 million, resulting in a decline of the operating margin from 11.4 % to 10.5 %.
OUTLOOK
In view of the sound demand situation and solid order intake we expect an undiminished high capacity utilization and volume development also for the summer months.
Due to the considerable rise in recovered paper prices since the beginning of this year cartonboard will be sold at higher prices by mid-year. From a current perspective there is still no relief at sight on recovered paper markets and price increase tendencies are expected to continue for industrial input factors.
Consequently, passing on this important rise in cartonboard costs will constitute the primary target of our cartonboard processing activities during the next months.
Due to high capacity utilization we expect a sound development in results also for the second quarter of 2007.
Our target remains to grow by intensified market penetration and acquisitions as well as by new production sites.
Please find our detailed Interim Report on the 1st Quarter of 2007 on the Internet at www.mayr-melnhof.com.
Forthcoming results:
August 16, 2007 Results for the 1st-Half-Year of 2007
For further information please contact:
Stephan Sweerts-Sporck, Investor Relations, Mayr-Melnhof Karton AG, Tel.: (+43/1) 50136-0, Fax: (+43/1) 50136 – 91195 Brahmsplatz 6, A-1041 Vienna, e-mail: investor.relations@mm-karton.com, Website: http://www.mayr-melnhof.com
