JSE-listed Mondi Group would continue the integration and optimisation of its latest acquisitions as the group shifted its portfolio to exposure to higher-growth products.

The group injected €1.2-billion into various acquisitions within the growing corrugated packaging and consumer packaging value chains during the year ended December 2012 to strengthen the company in tough market conditions, Mondi CEO David Hathorn said in a conference call on Thursday.

“Our business is much more into an optimisation mode and taking advantage of our acquisitions,” he said, adding that no further acquisitions were on the horizon in the immediate future.

Mondi bought Nordenia International for €259-million during the year, boosting its consumer packaging business. Nordenia had operating facilities in seven countries across Europe, North America and Asia and was currently building a greenfield plant in China, which was expected to start operating in early 2014.

The group also successfully acquired certain of packaging company Duropack’s operations – two corrugated box plants and one recycled containerboard mill based in Germany and the Czech Republic – for €125-million.

The two corrugated box plants had a combined capacity of about 130 000 t/y of containerboard, while the recycled containerboard mill held a 105 000 t/y capacity.

Further, Mondi acquired a further 34% stake in Polish paper manufacturer Mondi Swiecie for €295-million, bringing its shareholding to 100%. Mondi Swiecie acquired a combined heat and power generating plant, which provided the bulk of its electricity requirements and all of its heat and steam needs.

The acquisitions were debt-funded and pushed net debt from €831-million in the full year ended December 2011 to €1.9-billion in the period under review.

The paper and packaging company also disposed of its 50% stake in the noncore Aylesford Newsprint to Martland Holdings – recording an estimated loss on disposal of €71-million, despite generating a net cash-flow of €17-million from the sale.

Meanwhile, Hathorn commented that the company would focus on the successful delivery of the significant capital investment projects that it had initiated during the year under review.

The group reported spending €35-million more on capital expenditure (capex) in the 2012 financial year, reaching €298-million in the period under review, compared with €263-million in the prior year.

Mondi's €140-million energy-related investments included a bark boiler at Syktyvkar, in Russia; a steam turbine and recovery boiler economiser at Stambolijski, in Bulgaria; a new recovery boiler at Frantschach, in Austria; and a new steam turbine at the Richards Bay mill, in South Africa.

The €30-million pulp dryer project in Syktyvkar was expected to start shortly.

Further, Mondi on Thursday confirmed that it had approved a further €128-million investment, which would involve the implementation of a new recovery boiler at the 51%-owned Ruzomberok mill.

Hathorn told Engineering News Online that the investments in energy projects were "lucrative projects" and would provide an after-tax internal rate of return of about 40%.

Further, he pointed out that, once completed, the group would likely exceed its target of 97.5% energy self-sufficiency. The group was 93% energy self-sufficient at present.

In addition, other energy projects - principally in Poland - were still under review.

Harthorn said that, following the completion of some of the acquisitions, Mondi had reorganised the group’s management and reporting structures.

The company’s remaining newsprint business Mondi Shanduka Newsprint was incorporated into the group’s South African division.

The Europe and International division had been restructured into four business units, namely packaging paper, fibre packaging, consumer packaging and uncoated fine paper, with a division between upstream and downstream activities.

With the expected contribution from the acquisitions and reorganisations, progress would be made in the year ahead despite expected challenging market conditions, he noted.

The group, which faced a tough start to the year as the first quarter buckled under a continuation of the weak order books at the end of 2011, reported a 1% increase in revenue, from €5.7-billion during the year ended December 2011, to €5.8-billion during the year ended December 2012.

Underlying operating profit fell 9% to €568-million in the period under review, compared with the €622-million recorded in the prior financial year.

The Europe and International division contributed €538-million to underlying operating profit, while the South African division added €68-million.

Harthorn said the group continued to be strongly cash generative with cash generated from operations of €845-million.

Mondi declared a dividend of 28c a share for the full year.

LAND CLAIMS

Mondi reported that a further eight land claims had been settled in 2012. This brought the total number of settled land claims to 19, covering 36 000 ha, while a further 65 claims, covering 105 000 ha had yet to be settled.

Hathorn said the model it was following was working well. It sold the land and leased it back on a long-term basis. At the same time, it committed to uplifting the community through education and training.