Stanley Off-Piste Conference October 2014 www.mpact.co.za Mpact - - PowerPoint PPT Presentation

www.mpact.co.za

RMB Morgan Stanley Off-Piste Conference

October 2014

MPACT

• Mpact business overview
• Group 2014 interim performance

review

• Strategy
• Annexures

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SA packaging sector overview

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SA packaging ex-converter sales1 2013 (Value) SA packaging ex-converter sales1 2013 (Volume)

1. Source: BMI Report (2014) 2. “Ex converter” sales refer to sales of packaging materials converted in the country by local producers (includes imports and exports)

Industry overview

1 500 4 000 6 500 9 000 11 500 14 000 16 500 2009 2010 2011 2012 2013 Corrugated Cartonboard Rigids Flexibles Metal Glass R’m

Total packaging volume % growth (Value)

Value CAGR (’09 - ’13) Volume CAGR (’09 - ’13) Corrugated 6.6% 2.7% Cartonboard 8.0% 1.3% Flexibles 8.3% 3.1% Rigids 8.3% 2.8% Metal 2.1% (3.1%) Glass 2.6% (1.8%) Other, 4.3% Metal, 8.5% Glass, 31.1% Paper, 32.1% Plastic, 24.0% Other, 0.8% Metal, 10.7% Glass, 11.9% Paper, 28.3% Plastic, 48.3% 200 400 600 800 1000 1200 2009 2010 2011 2012 2013 Corrugated Cartonboard Rigids Flexibles Metal Glass

Total packaging volume % growth (Volume)

‘000 tons

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Plastics Mpact

Primary product categories

• Recovered paper collection
• Packaging and industrial papers such as cartonboard and

containerboard

• Corrugated packaging
• Detpak – Quick Service Restaurant (QSR) packaging

Primary product categories

• PET bottles and preforms, hot fill bottles, PET jars and closures
• Large injection moulded containers
• PET and styrene trays, fast food containers and clear plastic

films

• Other plastic packaging

Paper

• No. 1 in corrugated packaging
• No. 1 in recycled based cartonboard and containerboard
• No. 1 in recovered paper collection
• No. 1 in PET preforms
• No. 1 in styrene trays
• No. 1 in plastic jumbo bins

CENTRES OF EXCELLENCE Human Resources, Safety, Health, Environment

Employing 3,998 people, 32 operating sites

SHARED SERVICES Finance, IS&T, Stellenbosch R&D

Sources: Mpact, BMI Report (2014), PAMSA and PRASA

Mpact business overview

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Paper business overview

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Key products : Cartonboard : Containerboard : Retail ready packaging : Regular slotted cartons : POS packaging and displays : Die-cut solutions : Quick service restaurants total packaging solutions Key customers : Packaging converters (containerboard and cartonboard) : Agricultural producers : FMCG companies : Quick service restaurants : Other consumer and industrial packaging companies Operations : Recycling (7) : Paper Manufacturing (3) : Corrugated and converting (13)1 Employees : 2,693

Leader in recovered paper collection, production of cartonboard, containerboard and corrugated packaging

Sources: Mpact and financial figures extracted from the 2013 audited Mpact financial information Notes: (1) Includes 2 sheet plants in Mozambique and Namibia in which it holds a controlling interest and a sales office in Bloemfontein

Paper Divisions : Recycling : Paper Manufacturing : Corrugated and converting Cartonboard Standard and customised cases Fruit and vegetable trays Retail ready packaging Containerboard External Revenue (2013) R5,574m EBITDA (2013) R835m

72%

Other

79%

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Recycling

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Paper

Geographic footprint Customer base Sources of recovered paper Collected volumes (kt)

Source: Mpact Note: (1) Mondi Shanduka Newsprint

Sappi Nampak Kimberly Clark Lothlorien Gayatri Independents

Key competitors

Richards Bay Durban Port Elizabeth East London Cape Town Johannesburg Springs Pretoria Midrand

Governments and local authorities Schools Paper banks Converters Agents, dealers, waste management companies Business and offices Kerbside Imports Mobile cages and bakkies

62% Current recovery rate of recoverable paper in SA

Mpact Recycling shareholding



75% Mpact Limited



25% Mondi Limited

Internal consumption, 73% MSN1 and others, 27%

451k tons

441 448 450 457 451 2009 2010 2011 2012 2013

• The largest paper recycler in SA
• Recovery and recycling of paper in

SA ensures local beneficiation of raw materials and creation of jobs

• Over 100,000 people involved in the

recycling industry in SA

• Seven operations in major centres

and 42 buy-back centres

• Over 40 entrepreneurial companies

empowered to facilitate collection strategies

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Paper Manufacturing

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Paper

Geographic footprint Customers Key competitors Production capacity in kt

Additionally, Mpact distributes all containerboard products of Mondi Group’s Richards Bay Mill, selling mainly into South Africa and selected markets in sub-Saharan Africa and Indian Ocean Islands Mill/Plant Main products Capacity 2013 (ktpa) Piet Retief Linerboard and semi-chemical fluting 130 Felixton Linerboard and semi-chemical fluting 155 Springs Cartonboard and specialities 130

• Containerboard and cartonboard packaging

converters (internal and external)

Geographic sales

Non integrated Sappi Lothlorein Imports Integrated Nampak Gayatri

Durban Port Elizabeth East London Cape Town Johannesburg Springs Piet Retief Felixton

Domestic, 93%

Richards Bay

Source: Mpact

Export, 7%

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Durban Port Elizabeth Nelspruit Maputo1 East London Bloemfontein2 Walvis Bay1 Windhoek1 Cape Town Johannesburg Springs Epping Brakpan

Paper Converting

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Paper

Geographic footprint Customers Key competitors Corrugated production in m2 (million) Overview

Sources: Mpact and BMI Report (2014) Notes: (1) Mpact has sheet plants in Mozambique and Namibia (holding a controlling interest) (2) Corrugated sales office in Bloemfontein (3) Management estimates

Nampak New Era APL Corruseal Houers Lufil

• Acquisition of Detpak SA in 2013
• Three high-graphic printing

machines situated in Springs, Pinetown and Epping offering high-quality graphic printing on corrugated board. These are complimented by in-house graphic design facilities

• ISO 14,000 and ISO 9,000

environmental and quality management systems, respectively

• Paper converting packaging

products include:

• Corrugated regular cases
• Die-cut cases
• Folded glued cases
• Trays
• Point of sale displays
• Quick Service Restaurant total

packaging solutions

• Industrial paper bags
• Localised customer base
• Customers include producers of agricultural,

food durable and non durable goods3:

Sheet board, 19% Agricultural, 37% FMCG, 29% Other, 15% 328 367 381 369 387 391 413 432 2006 2007 2008 2009 2010 2011 2012 2013

Kya Sands (Detpak)

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Plastics business overview

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Leader in the manufacture of PET preforms, styrene trays and plastic jumbo bins

Key products : PET preforms, bottles and jars : Plastic jumbo bins, wheelie bins, plastic crates : Plastic containers such as bottles, jars, closures, with in-mould labelling capability : Styrene and PET trays, fast food containers and clear plastic films Key customers : FMCG companies (carbonated soft drinks, personal care, pharmaceuticals, food producers) : Fast food producers : Agricultural producers : Retail chains Operations : Styrene trays and clear plastic films (3) : Large injection moulds (2) : PET injection (1) , FMCG plastic packaging (2) and closures (1) Employees : 1,196

Plastic Jumbo Bins, Wheelie Bins, Plastic Crates and Pallets Styrene and PET Trays, Fast Food Containers and Clear Plastic Film PET Preforms, Bottles and Jars FMCG Bottles, Jars, Closures and In-Mould Labelling

External Revenue (2013) R2,124m EBITDA (2013) R238m Plastics

Sources: Mpact and financial figures extracted from audited Mpact financial information

28% 21%

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Plastics segment overview

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Plastics

Geographic footprint Customer base Key competitors Mills/plants and main products

Mill/Plant Main products Wadeville PET preforms, jars, bottles and hot fill bottles, closures Injection moulding, blow moulding Atlantis (Large Injection) Plastic jumbo bins, wheelie bins, plastic crates Injection moulding Brits Plastic jumbo bins, wheelie bins, plastic crates Injection moulding Pinetown FMCG packaging bottles, jars, closures, in-mould labels Injection moulding, blow moulding, IML Atlantis (FMCG) FMCG plastic bottles, jars, closures Injection moulding, blow moulding, PET bottles and printing Versapak Paarl Styrene trays, fast food containers, PET trays and blisterpack and clear plastic films Versapak Harare Styrene trays, fast food containers and clear plastic films

Nampak Astrapak Bowler Metcalf Polyoak CIBA Boxmore

Beverage, 25%1 Food, 18% Distributors, 21% Retail, 8% Personal care, 5% Agricultural, 10% Home care, 9% Other, 4%

Durban Port Elizabeth Brits East London Atlantis Johannesburg Paarl Pretoria Harare Pinetown Wadeville

Note: (1) A significant proportion of beverage sales is made up by an Amalgamated Beverages (ABI) contract for PET preforms.

Blackheath

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• Mpact business overview
• Group 2014 interim performance

review

• Strategy
• Annexures

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Financial highlights as at 30 June 2014

2 874 3 210 3 520 3 983 3 275 3 611 4 178 2 000 4 000 6 000 8 000 2011 2012 2013 2014 R’ millions

Group revenue

HY1 HY2 6 149 6 821 7 698 205 222 236 270 319 363 419 7.1% 6.9% 6.7% 6.8% 100 200 300 400 500 600 700 2011 2012 2013 2014 R’ millions

Group underlying operating profit

HY1 HY2 HY1 margin 524 585 655

• Revenue up 13.2% to R4.0bn
• Volume up 1.0%
• Price and mix up 9.4%
• Acquisition 2.8%
• Underlying operating profit up 14.5%

to R270m

• Margin up to 6.8% from 6.7%
• Productivity gains offset

under-recovery of raw material price increases

• Fixed costs well controlled
• Underlying earnings per share up

19.2% to 91.8 cents

• ROCE up to 16.9% (June 2013: 15.5%)
• Interim dividend of 26cps, up 18.2%
• Gearing down to 32.5% (June 2013:

35.6%)

Note: Revenue and underlying operating profit excludes Paperlink for the 2011 financial year.

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2 160 2 387 2 551 2 914 2 413 2 655 3 023 1 000 2 000 3 000 4 000 5 000 6 000 2011 2012 2013 2014 R’ millions

External revenue

HY1 HY2

• Revenue up 14.2% to R2.9bn
• Volumes up 1.2%
• Price and mix 9.2%
• Acquisition 3.8%
• Underlying operating profit up 11.7% to

R281m

• EBIT margin declined to 9.6% from

9.9%

• Under-recovery of raw material

prices

220 231 251 281 291 331 384 10.2% 9.7% 9.9% 9.6% 100 200 300 400 500 600 700 2011 2012 2013 2014 R’ millions

Underlying operating profit1

HY1 HY2 HY1 margin

Revenue

1. For comparative purposes, full year 2011 underlying operating profit has been restated to reflect corporate costs of R50 million directly attributable, but previously not charged to, the Paper business.

4 573 5 042 5 574 511 562 635

Operating profit

Paper 87%

Paper business

Paper 73% 13

715 823 969 1 070 862 955 1 155 500 1 000 1 500 2 000 2 500 2011 2012 2013 2014 R’ millions

Revenue

HY1 HY2 23 37 34 44 77 80 72 3.2% 4.5% 3.5% 4.1% 20 40 60 80 100 120 2011 2012 2013 2014 R’ millions

Underlying operating profit1

HY1 HY2 HY1 margin

1. For comparative purposes, full year 2011 underlying operating profit has been restated to reflect corporate costs of R14 million directly attributable, but previously not charged to, the Plastics business.

• Revenue up 10.4% to R1.1bn
• Good volume growth in bins and

crates, offset by FMCG

• Average price and mix up 10.8%
• Underlying operating profit up 28.0% to

R44m

• Favourable product mix
• Under-recovery of raw material

price increases

• Restructure of FMCG business

underway

1 577 1 778 2 124 100 117 106

Revenue Operating profit

Plastics 27%

Plastics business

Plastics 13% 14

• ROCE of 16.9% as a result of

improvement in profitability

• Gearing down to 32.5% (June 2013:

35.6%)

• Net debt at R1.4bn

1. Return on Capital Employed (ROCE) is an annualised measure based on underlying operating profit plus share of equity accounted investees’ net earnings divided by average capital employed before impairments.

14.1% 15.5% 16.9% 16.0% 17.3%

13% 14% 15% 16% 17% 18% 2012 2013 2014 ROCE %

Return on capital employed (ROCE)

HY1 Full year

ROCE and net debt

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1 382 1 482 1 406 1 056 1 116

600 800 1 000 1 200 1 400 1 600 2012 2013 2014 R’ millions

Net debt

HY1 Full year

79 52 56 71 85 80 80 2011 2012 2013 2014 HY1 HY2

Paper business Plastics business

R’million 81 110 149 192 81 114 100 48 2011 2012 2013 2014 HY1 HY2 Felixton upgrade R’million

Capital expenditure cash flows

162 224 249 164 132 136 16 240

Capital commitments at 30 June 2014 R’m

Total commitments 1,189 Spend within 1 year 738 Spend between 1 to 5 years 451

Capital commitments made up of major spend relating to:

• Felixton upgrade: R717m
• rPET: R330m

• Mpact business overview
• Group 2014 interim performance

review

• Strategy
• Annexures

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Strategy

Growing our leading market positions

Capability Products and geographies Scale

Building partnerships through our customer focused

• perating structure

Innovation and capability Intimate understanding of the value chain Decentralised structure

Delivering results through our focus on performance

Skilled and motivated people Smart simplicity Financial returns

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Felixton Paper Mill upgrade

Phase 1 Phase 2 Total project Capex budget R155 million R610 million R765 million Commissioned 1H2015 2H2017 Additional capacity 20,000 tonnes 40,000 tonnes 60,000 tonnes Rationale

• Enhance product offering and quality
• Increase cost competitiveness
• Improvement in environmental footprint and efficiencies
• Increase capacity from 155 000 tonnes p.a. to 215 000 tonnes p.a.
• Move towards fully recycled fibre usage
• Enhance earnings, whilst exceeding through-the-cycle ROCE target of 15%

Funding

• Debt facilities
• Cash flow from operations

Current status

• Equipment supply tender awarded and contracts concluded:
• Bellmer: machine rebuild
• Voith: recycled fibre plant
• Phase 1 (H1 2015): recycled fibre plant and paper machine headbox
• Phase 2 (H2 2017): main machine rebuild

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rPet project (Mpact Polymers)

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Total investment R350 million Commissioning 2H2015 Capacity 21,000 tons of recycled PET per annum Rationale and benefits

• Exceeds Mpact’s minimum investment criteria over the period
• Production of bottle grade recycled PET pellets for use in plastic

packaging

• Leverage Mpact’s recycling network
• Improved environmental performance for Mpact, its customers and the

community

• Job creation in the recycling industry
• Qualifies for S12I tax incentive

Funding

• Shareholder loan from Mpact utilising existing facilities
• Shareholder loan and debt facilities from the IDC

Shareholding

• Mpact: 79%
• IDC: 21%

Thank you for your participation

For further information:

www.mpact.co.za info@mpact.co.za

Bruce Strong, CEO (011) 994-5508

• r

Marlize Keyter Keyter Rech Investor Solutions (011) 447-5204

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• Mpact business overview
• Group 2014 interim performance

review

• Strategy
• Annexures

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Capital investments

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2700T Injection Moulding Machine Ward Die Cutter

• Brakpan BHS corrugator

upgrade – phase 1

• Epping BHS corrugator upgrade

– phase 2

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Port Elizabeth Apstar rotary die cutter

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New 8-cavity Engel machine installed in Pinetown for the production of IML yogurt tubs for Dairibord

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This document including, without limitation, those statements concerning the demand outlook, expansion projects and its capital resources and expenditure, may be considered to be forward looking statements. By their nature, forward-looking statements involve risk and uncertainty and, although Mpact believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government action and business and operational risk management. While Mpact has taken reasonable care to ensure the accuracy of the information presented, Mpact accepts no responsibility for any consequential, indirect, special or incidental damages, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence arising in connection with a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates.

Disclaimer

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