Half Year 2019 Mayr Melnhof Karton AG Earnings Pre-Recorded Presentation
Vienna Sep 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Mayr Melnhof Karton AG earnings conference call or presentation Tuesday, August 20, 2019 at 6:00:00am GMT
TEXT version of Transcript
* Wilhelm Hörmanseder
Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO
Wilhelm Hörmanseder, Mayr-Melnhof Karton AG - Chairman of the Management Board & CEO 
Good morning, ladies and gentlemen, and welcome to this round-up on Mayr-Melnhof Group first half year results 2019, followed by Q&A conference call later this morning at 9:30, in which I will be pleased to answer your questions.
Today's message is, again, a positive one, since the MM Group could continue its course of growth in earnings and sales also throughout the first half of this year. Although demand on our European main market has turned to a more muted picture with an increasingly competitive landscape, our group demonstrated an overall solid performance. This development was particularly supported by the initial inclusion of the TANN acquisition in MM Packaging, which is proceeding well and meets very much our expectations. In addition, the Cartonboard division was able to sustain its superior earnings level from last year also into this year's first half, based on volume, price and cost improvement.
The positioning of our group is well-known to most of you. MM is Europe's largest producer of cartonboard-based packaging, currently operating 7 cartonboard mills and 45 packaging plants, including 8 recently acquired TANN sites. The focus is on the packaging of consumer staples, including specializations in cigarette packaging, pharmaceuticals and cosmetics.
At present, the MM team comprises of about 10,000 people. With an operating group margin of more than 10% in second quarter, we could carry on good earnings progress into first half year results.
A look at the group P&L shows EBITDA up more than 14% as well as sales and all other earnings figures clearly above the previous year. The drivers derived chiefly from the acquisition. Also, we had to take a noncash one-off effect of about minus EUR 5 million due to international accounting standard valuation requirements in the initial consolidation.
In the Cartonboard division, the operating margin, again, surpassed 10%, with both sales and profit exceeding past year's level. An improved product portfolio with a growing share of new products, better pricing and ongoing full capacity utilization of 98% were important factors. On the raw material markets, fairly stable prices for mixed recovered fibers contrasted with a greater price decline for virgin fiber-related materials from a very high level at the beginning of this year.
Turning to the Packaging division, demand tended to be more volatile and thus, below last year's strong half year result. Although utilization turned to be more heterogeneous among the plants, the general picture was marked by continuity. Measures for gaining new businesses and increasing cost efficiency have been consequently implemented.
The P&L of MM Packaging which you see here was mostly impacted by the initial TANN consolidation, taking both sales and earnings up to a higher level. Liquid funds of the group were down as expected after payment for the acquisition and cash out for dividends. On the other hand, debt was up due to financing and consolidating TANN Group as well as the first-time application of IFRS 16 on leases.
In sum, this took us from a net cash by the end of last year to a net debt of about EUR 330 million by midyear. However, with an equity ratio of 58%, the group's balance sheet kept the accustomed solid picture.
CapEx of more than EUR 60 million was close to depreciation and within our long-term range to invest about 50% of cash earnings. Our CapEx focus stays on the reduction of direct costs and rationalizations, along with the implementation of new technologies, including business automation and digitalization.
Summing up, the MM Group has continued a solid performance during the first half of this year, backed by a well-performing acquisition in packaging and a strong cartonboard results. However, sustaining the group's high earnings level of the second quarter into the third quarter will be quite a challenge in particular, since market demand remains muted, and so competitive pressure is picking up.
Nevertheless, we stay committed to grow volume and value based on attractive, sustainable packaging solutions, a further increase of cost efficiency and consequent pricing. And since the current market environment tends to bring up more activity on the M&A front, we will keep a close eye on shaping additional perspectives for the future, sticking to a solid and sound rationale.