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Edited Transcript of MMK.VA earnings conference call or presentation 14-Nov-19 7:00am GMT

Q3 2019 Mayr Melnhof Karton AG Earnings Pre-Recorded Presentation

Vienna Dec 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Mayr Melnhof Karton AG earnings conference call or presentation Thursday, November 14, 2019 at 7:00:00am 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 interim results for the first 3 quarters of 2019 with the company's CEO, Dr. Wilhelm Hörmanseder. Since Dr. Hörmanseder has a slight disposition with his voice at the time of this recording, I would kindly ask you for your understanding.

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Questions and Answers

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Unidentified Analyst, [1]

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Mr. Hörmanseder, having just reported the third quarter, what is your summary on the MM Group's development so far this year?

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

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With a very good third quarter, our group stayed well ahead of last year's 3 quarters in both earnings and sales. Each division contributed significantly to this increase and demonstrated a sound capacity of utilization within an overall muted market.

While the cartonboard division benefited from firm average sales prices and cost reductions, earnings growth at MM Packaging, mainly resulted from the first time inclusion of TANN GROUP.

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Unidentified Analyst, [3]

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Looking into the third quarter, the packaging division's margin went up to more than 10%. What were the reasons? And do you think that this level is sustainable?

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

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The Q3 improvement in packaging was mainly due to higher sales and volume as well as cost savings. To hold up parameters in this direction will stay quite a challenge but also our target.

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Unidentified Analyst, [5]

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At cartonboard Q3 results continued in the superior range of the previous quarters this year, touching again an operating margin of 11%. How was this possible? And where do you see further development?

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

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In the cartonboard division, we follow a selective sales policy heading for both disciplined pricing as well as volume, supported by constant development of attractive new products, which account currently for about 1/4 of our volume. On the other hand, total direct costs were down compared to last year. Looking ahead, there are more headwinds to come on prices and volume, for which I believe we are well prepared.

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Unidentified Analyst, [7]

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Covering shortly the development on the fiber markets, where do you think prices are heading there?

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

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Concerning recovered paper, we have seen a gradual price decline for the mixed household collection, our main grade, throughout the past few quarters and expect more of flattening out, while for pulp, which is just a smaller fraction of our fiber purchase and where we are spot buyers, prices have fallen from a high level at the beginning of the year, and the trend seems not over yet.

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Unidentified Analyst, [9]

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Watching out on CapEx, you report an almost 25% increase compared to last year. Could you please comment on this and your longer-term planning?

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

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The smaller part of this increase is acquisition related. The largest share is part of a series of projects to further step up performance of our plants and products, while decreasing cost and preparing for more internal growth. Our long-term policy remains unchanged with CapEx amounting to about 50% of cash earnings and the development in line with depreciation.

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Unidentified Analyst, [11]

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Following the acquisition of TANN GROUP at the beginning of this year, which was your largest company purchased so far, how is integration proceeding? And what are your aspirations in this specialty market?

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

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To put it short, we are happy with the TANN acquisition. Integration has been running smoothly and swiftly, unlocking synergies through operational excellence as well as on the market. The way forward, we will concentrate on further efficiency gains, innovation and cross-selling of packaging and tipping paper to grow our market share in close attachment to our customers and oriented toward future regions, ex Europe and the Americas.

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Unidentified Analyst, [13]

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Looking into the media, politics and supermarket shelf, sustainable packaging seems to be more sought after than ever. Where do you see current and future opportunities for the MM Group from this development?

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

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In the first instance, I shall strongly underline that we have already for long been holding an excellent set of cards in our hands at the MM Group, covering sustainability from all its aspects, the economic, the environmental and good responsible world citizenship with circular economy being at the core of our business activity, producing packaging products from a renewable fiber base that can be 100% recycled.

Certainly, we engage highly with customers and the supply chain in these days on possibilities of promoting the favorable environmental footprint of carton solutions, and our increasing set of products, offering higher functionality and natural appeal to customers is well received by the market. Immediate effects on the company, I see mainly from quick wins through possible fast changes in packaging and the confirmation of our competitive position. However, in order to assess tangible results, I believe we still need 1 or 2 years to go.

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Unidentified Analyst, [15]

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Finally, turning to your outlook statement, you're addressing slowing demand dynamics towards year-end, how shall we feel about this and the effects on forthcoming results?

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

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Customers continue to plan and call off quite short term. And the supply chain will be kept slim and narrow towards year-end with the usual decrease in ordering activity. Along with a competitive environment, this creates a momentum where it will be quite challenging to head on with the, so far, retained high earnings level throughout the fourth quarter. Nevertheless, the positive prospects for 2019 for full year results and the dividend are fully intact.

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Unidentified Analyst, [17]

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