Newsdetails
Group Results 2006
2006 - Best ever Results
- Profit for the year increases by 14.3 % to EUR 108.4 million
- Increase in dividend from EUR 2.60 to EUR 2.80 EUR per share
OUTLOOK
- Positive development of demand and good capacity utilization in both Divisions since the beginning of the year
Against the background of the economic recovery in Western Europe and continued dynamic demand in Eastern Europe as well as the neighboring emerging markets, the Mayr-Melnhof Group registered a generally positive order situation and therefore good capacity utilization during 2006 both in cartonboard production and in cartonboard processing. As a result of further productivity improvements and successful business expansion, MM Packaging achieved significant profit growth. Despite a recent, considerable cost increase for energy and crude oil related input factors, MM Karton registered a slight improvement in sales and profit. Overall, the Mayr-Melnhof Group was able to achieve its best annual profit to date in 2006.
The Group’s consolidated sales increased by EUR 57.3 million or 3.9 % to EUR 1,512.5 million. A volume rise in both divisions and higher cartonboard prices made significant contributions to this increase. Approximately 23 % of the growth is attributable to acquisitions.
The operating profit was enhanced by 12.7 % or EUR 17.9 million to EUR 158.6 million, which in particular can be attributed to the significant earnings increase in cartonboard processing. The Group’s operating margin increased accordingly from 9.7 % to 10.5 %. The return on capital employed was at 19.3 % (2005: 19.5 %).
The profit before tax reached EUR 160.3 million after EUR 145.4 million in 2005. This corresponds to a growth of 10.2 %.
The Mayr-Melnhof Group succeeded in closing the 2006 business year with a significant improvement in the annual profit. The profit for the year increased by 14.3 % to EUR 108.4 million.
In accordance with the positive profit development in the 2006 financial year, the Management Board will propose to the Annual Shareholders’ Meeting a dividend increase from EUR 2.60 in 2005 to EUR 2.80 per share for 2006.
Consolidated Balance Sheets
The total assets of the Group increased between December 31, 2005 and the end of 2006 by EUR 149.6 million to EUR 1,496.0 million. The increase in equity from EUR 769.7 million to EUR 856.7 million was essentially attributable to the profit for the year less the 2005 dividend. The equity ratio therefore stood at 57.3 % (2005: 57.2 %), the return on equity at 13.3 % (2005: 12.8 %).
For financing acquisitions and the rotogravure investments, financial liabilities were raised at favorable interest rates. As a result, the financial liabilities, which are primarily of non-current character, experienced a net increase of EUR 30.8 million to EUR 217.0 million.
Total funds available to the Group, which comprise cash and available-for-sale financial assets, increased by EUR 28.8 million to EUR 366.9 million. They exceeded interest-bearing financial liabilities by EUR 149.9 million (December 31, 2005: EUR 151.9 million), implying that the Group continues to have no net debt.
Consolidated Cash Flows
Cash flow from operating activities was EUR 155.9 million, slightly less than the previous year (2005: EUR 158.4 million). This difference resulted in particular from higher payments for income taxes.
Cash flow from investing activities of EUR -127.4 million registered a significant increase from the previous year (2005: EUR -82.8 million). Net payments for investments in tangible and intangible fixed assets rose from EUR -85.0 million to EUR -110.9 million.
The investment expenditures of MM Karton amounted to EUR 43.5 million (2005: EUR 35.5 million). Major projects concerned the replacement of the Yankee cylinder in the Eerbeek cartonboard mill, Netherlands, after an instance of insured damage in 2005, energy-related measures at the Gernsbach plant, Germany, as well as the water treatment plant of the Kolicevo cartonboard mill, Slovenia.
The investments of MM Packaging amounted to EUR 74.7 million, significantly above the expenditures of the previous year (2005: EUR 53.9 million). Emphasis was primarily on technical installations and constructions in connection with the newly erected rotogravure plants in Turkey, the Ukraine, and Germany as well as the purchase of state-of-the-art high-performance technology.
Cash flow from financing activities declined from EUR -40.6 million to EUR +1.0 million. This can be attributed in particular to the net inflow of funds related to the rise of financial liabilities at favorable interest rates.
Outlook
Against the background of the positive consumer sentiment in our primary European markets, we expect a continuation of the sound demand development for cartonboard and folding cartons during the first months of 2007.
Both MM Karton and MM Packaging experienced a generally positive order intake and good capacity utilization at the start of the year.
As a result of the continuous high cost burden from energy and transport, implementation of higher cartonboard prices as well as internal cost cutting programs have the highest priority within MM Karton. An initial indication of the scope of the cost compensation can be expected with the financial results for the first quarter of 2007. At the Bulgarian mill Nikopol, test runs for the production of plasterboard for the regional construction material industry are being continued.
At MM Packaging, the focus remains on gradually passing on the cartonboard price increase and implementing new productivity and efficiency improvements.
In procurement, sustained higher prices can be particularly expected for recovered paper in the coming months due to strong demand resulting from current economic conditions. The prices for natural gas and electricity have to date not followed the decline in the crude oil price.
Growth effects for 2007 are currently expected primarily from the capacity expansions at the newly built rotogravure plants and the recent acquisitions in Russia and Tunisia. The focus of our investment activities remains on projects for reducing direct costs with fast payback.
A profit estimate for 2007 is not possible at this time due to the limited forecast horizon.
Further growth is planned both through acquisitions and newly built production plants. Ensuring the sustained high level of profitability of the Group and keeping risks at a manageable level remain decisive criteria in this regard.
Development in the 4th Quarter 2006
In contrast to previous years, no noticeable seasonal decline in demand was observed in the 4th quarter of 2006. Following the temporary shutdown during the first three quarters, the Bulgarian Nikopol cartonboard mill started test runs for a new cartonboard application that will decide on the future orientation of the mill.
In the fourth quarter of 2006, the Mayr-Melnhof Group registered consolidated sales of EUR 398.8 million (4th quarter 2005: EUR 364.0 million), with the increase compared to the third quarter of 2006 (EUR 382.6 million) being particularly attributable to the first time consolidation of the Russian plant MM Polygrafoformlenie Packaging LLC, St. Petersburg. The operating profit reached EUR 41.3 million (4th quarter 2005: EUR 33.8 million), which put the operating margin at 10.4 % (4th quarter 2005: 9.3 %). Due to technical measures capacities of MM Karton were utilized at 88 % (3rd quarter 2006: 93 %; 3rd and 4th quarter 2005: both at 91 %).
The Group’s profit for the period reached EUR 27.8 million after EUR 21.5 million in the fourth quarter of 2005 (3rd quarter 2006: EUR 26.1 million).
Development in the Divisions
In 2006, MM Karton was able to benefit from the improved economic situation in Europe and expanded market share. In the markets in the Near East, it was also possible to increase sales volume.
Due to another massive price increase in 2006 for energy and crude oil related input fac-tors, it was necessary to raise cartonboard prices. However, the price adaptations could only be implemented slowly and in stages due to the excess of capacity in the industry. To support the price increase, the production at the Bulgarian mill MM Nikopol was taken downtime temporarily for almost the entire year. Supported by this measure and the im-proved market conditions, the average order backlog increased to approximately 89,000 tons (2005: 55,000 tons). In line with new production records at our high-performance mills, it was still possible to convert this strong order basis into new annual record levels in production and sales.
At 92 %, capacity utilization of MM Karton was the same as in the previous year (2005:
92 %). In addition to the shutdown in Nikopol, Bulgaria, a portion of the unused capacity can be attributed to the installation of a new Yankee cylinder at the Eerbeek mill, Netherlands, after an instance of insured damage in 2005 and the reintroduction of the mill to the market. Nevertheless, the production volume of 1,553,000 tons was still 1.6 % above the previous year (2005: 1,529,000 tons).
Procurement markets were significantly affected by a large price increase for energy, transport and other crude oil related input factors. However, the strategic raw material of recovered paper exhibited a largely stable trend.
Sales volume was improved by approximately 2 % or 29,000 tons to 1,542,000 tons. As a result of higher average prices, sales increased by 5.4 % disproportionately to the volume trend and reached EUR 808.8 million (2005: EUR 767.2 million). Approximately 73 % was earned in Western Europe, 15 % in Eastern Europe and 12 % in markets outside of Europe (2005: 72 %; 16 %; 12 %). MM Packaging is the largest customer of MM Karton with a delivery share of 223,000 tons of cartonboard (2005: 220,000 tons) or about 14 % (2005: about 15 %) of sales.
Operating profit rose by 5.2 % from EUR 61.8 million to EUR 65.0 million. As the increased cost burden from the second half of the year could not yet be significantly passed on via the sales prices, the operating margin remained at 8.0 % below the previous year’s value (2005: 8.1 %).
Business development in cartonboard processing during 2006 was characterized by a consistent continuation of the growth course and a clear improvement in profit. Against the background of the noticeable upturn in demand, the folding carton plants enjoyed overall good capacity utilization during the course of the year. MM Packaging continued to succeed well in intense competition and expanded market share.
We greatly strengthened our presence in markets with interesting future potential both through additional acquisitions and new plant construction. With the completion and commissioning of the three new rotogravure plants in Trier (Germany), Cherkassy (the Ukraine), and Izmir (Turkey), a new highly competitive technological basis with important growth prospects was created at the right time and in locations close to the customers. Geographically, we have expanded our growth focus into the emerging region of North Africa with the acquisition of the majority share in a Tunisian folding carton producer. After purchasing the majority interest in the Russian folding carton manufacturer Polygra-foformlenie, St. Petersburg, in May 2006, it was integrated rapidly into the Company’s network and included in the consolidated results as of the 4th quarter of 2006.
Within division-wide programs, the focus on productivity and efficiency enhencements was once again accentuated, with the goal to further strengthen the competitiveness of MM Packaging.
Passing on the cartonboard price increase to the end customers has been a great challenge for MM Packaging since the start of the year.
Due to successful cooperation with international customers, the growth in high-yield seg-ments, and significantly improved productivity, it was still possible to achieve considerable improvements in profit as well as in volume.
The tonnage processed increased by 6.5 % to approximately 538,000 tons (2005: 505,000 tons). In contrast, sales at EUR 821.6 million were only about 2.4 % above the previous year’s level due to the discontinuation of a trading business. The share of sales in Western Europe amounted to 73 %, in Eastern Europe to 26 % and in markets outside of Europe to 1 % (2005: 75 %; 25 %; 0 %). Roughly 42 % of the sales were accounted for by the five largest customers (2005: roughly 45 %).
Operating profit could be increased by 18.6 % to EUR 93.6 million resulting in an operating margin of 11.4 % (2005: 9.8 %).
The Annual Report for the financial year 2006 will be available as of April 5, 2007.
Forthcoming Results:
May 15, 2007 Results for the first quarter of 2007
For further information please contact:
Stephan Sweerts-Sporck, Investor Relations
Mayr-Melnhof Karton AG, Brahmsplatz 6, A-1041 Vienna
Tel.: (+43/1) 50136 – 91180, Fax: (+43/1) 50136 – 91195
e-mail: investor.relations@mm-karton.com, Website: http://www.mayr-melnhof.com
