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Edited Transcript of MMK.VA earnings conference call or presentation 17-May-18 10:59am GMT

Q1 2018 Mayr Melnhof Karton AG Earnings Presentation

Vienna Jun 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Mayr Melnhof Karton AG earnings conference call or presentation Thursday, May 17, 2018 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Wilhelm Hörmanseder

Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO

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Presentation

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Unidentified Analyst, [1]

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Welcome, ladies and gentlemen, to this audio webcast interview on Mayr-Melnhof Group First Quarter Results of 2018 with the company CEO, Dr. Wilhelm Hörmanseder.

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Questions and Answers

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Unidentified Analyst, [1]

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Mr. Hörmanseder, presenting today's results, what is your first message to the market?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [2]

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The main group was able to exploit the sustained positive momentum on our European main markets also during the first quarter of this year. Both divisions continue to register high capacity utilization based on solid demand. A strong development at MM Karton, mostly due to better pricing more than compensated on earnings decline at the MM Packaging. Hence, the group delivered an ongoing strong and healthy performance.

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Unidentified Analyst, [3]

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In your report, you stated prices for a part of your recovered fiber input have come down. What are the reasons, and how long do you think that this will continue?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [4]

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Prices for mixed recovered paper, which accounts for about half of our fiber input, have seen a decline since the fourth quarter of last year. This resulted mainly from a temporary stop of European exports to China. But on the other hand, higher-recovered fiber qualities as well as pulp have been marked by persistent price increases. In my opinion, both trends are breaking now.

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Unidentified Analyst, [5]

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In the cartonboard division, capacity were utilized at 99% in Q1. How do you think about capacity development for this division the way forward?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [6]

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There are 2 answers to this question. On the one hand, ongoing investment in our board mills will allow us sufficient capacity in the mills for the time ahead. On the other hand, on the market, we will continue to place first priority on price and added value before volume as this has always been the better service to our margin.

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Unidentified Analyst, [7]

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The packaging division reported a margin decline compared to last year. Where do you see the main reasons? And what are your revenue plans?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [8]

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It's particularly increased raw material prices which have been pressing on packaging margins recently. Costs for both recovered and virgin fiber board are up compared to last year, along with a creeping cost inflation covering all other factors, such as freight or transport packaging. Accordingly, we are currently setting first priority on passing on costs through higher prices. In a very competitive market environment, this is certainly a challenge, which we complement with several efficiency- enhancing programs in our plants, for instance, through specialization and rationalization.

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Unidentified Analyst, [9]

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In today's report, the group balance sheet has come back to show a net cash position. How will you deal with this?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [10]

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In the first instance, I consider net cash as a result of an ongoing strong performance and cash generation capabilities of the group. At the second glance, this is just a Q1 figure which will come down, again, since we paid out an increased dividend for last year just a few days ago. And CapEx will be ongoing with a focus on further cost-cutting projects as well as on enhancing the production of products with higher added value.

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Unidentified Analyst, [11]

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CapEx in Q1 was down more than 40% compared to last year. Why was this the case? And how much do you plan to spend in 2018?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [12]

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CapEx reduction is mainly due to the fact that we have a special power station project in the cartonboard division and several plant developments in packaging last year. For this year, we plan to come back to our long-term pattern, which is to invest about 50% of cash earnings.

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Unidentified Analyst, [13]

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Your top line was up for both divisions in Q1. How do you see the robust demand trend of the first months filtering through into the second quarter?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [14]

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European markets still show a generally positive picture for our 2 divisions, translating into an ongoing high capacity utilization also throughout the second quarter. However, the sustainability of this situation is not easy to predict.

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Unidentified Analyst, [15]

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In previous statements on further expansion, you pointed out that the flow of suitable deals has somewhat calmed down. What's your current view?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [16]

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Our attention towards setting on our growth path through acquisitions is high and unchanged. With a strong claim for quality assets, it's a justifiable and manageable risk, a combination which is certainly not easy to find in these days.

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Unidentified Analyst, [17]

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And finally, following the strong first quarter, where do you see your company results heading for in the first half and full year 2018?

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Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO [18]

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Due to positive current trading, we aim to get in first half results also above the previous year. Since the second half of 2017 was quite strong, our target for this year is to tie up with past year record results as best as possible.

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Unidentified Analyst, [19]

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Mr. Hörmanseder, thank you very much for this interview.