Mayr-Melnhof Karton AG: MM reports Annual Results 2023

• Sharp decline in demand and significant market- and capex-related downtime at MM Board & Paper weigh on results
• Strong profit performance at MM Packaging
• Comprehensive modernisation programme to increase competitiveness of MM Board & Paper implemented
• Successful integration of last year’s acquisitions in the resilient area of pharmaceutical packaging
• Profit & cash protection plan proves effective
• Dividend of EUR 1.50 proposed in line with long-standing dividend policy
• Positive volume trend for MM Board & Paper at beginning of 2024, however pressure on margins is continuing

Group Key indicators - IFRS

Peter Oswald, MM CEO, comments: “After the record result of the previous year, the MM Group faced a significantly lower demand in the paper and cartonboard industry as well as increasing price pressure in 2023. In addition to destocking in the supply chain, inflation-related changes in consumer behaviour which led to lower consumption of everyday goods and the overall economic slowdown in our European main markets were the main causes.

The difficult general conditions were reflected in particular in the weak result and volume development in the division MM Board & Paper. In addition to significant market-related machine downtimes, there was also considerable capex-related downtime as part of the implementation of the so far most extensive modernisation programme at three large cartonboard mills.

In contrast, the division MM Packaging recorded an overall solid performance despite a heterogeneous packaging market. Furthermore, last year's acquisitions in the resilient area of pharmaceutical packaging were successfully integrated with a result development above plan.

The decline in adjusted operating profit to EUR 229.2 million after EUR 562.4 million in 2022 primarily resulted volume- and price-related from the division MM Board & Paper, while MM Packaging recorded a significant increase in both profit and margin.

With demand expected to recover only slowly, MM has focussed on safeguarding and gaining volumes at reasonable margins. The profit & cash protection plan launched in mid-2023, which provides for a significant reduction in working capital and a reduction in capex cash-outs in addition to cost reductions in all areas, has already made a significant contribution to reducing net debt to EUR 1,261.9 million in the reporting year (December 31, 2022: EUR 1,481.5 million).

In line with the profit development and long-term dividend policy, which provides for the distribution of one third of profit, a dividend of EUR 1.50 per share (2022: EUR 4.20) for the financial year 2023 will be proposed to the 30th Annual Shareholders’ Meeting on April 24, 2024.”

INCOME STATEMENT

At EUR 4,164.4 million, the Group's consolidated sales were 11.1 % or EUR 517.7 million below the previous year’s figure (2022: EUR 4,682.1 million). A volume- and price-related decline in the division MM Board & Paper, was offset by an acquisition-related increase in the division MM Packaging.

The decrease in adjusted operating profit to EUR 229.2 million after EUR 562.4 million in 2022 was primarily volume- and price-related from the division MM Board & Paper, while MM Packaging recorded a significant increase. The Group's operating margin was therefore 5.5 % (2022: 12.0 %) and the return on capital employed was 6.5 % (2022: 17.9 %). Adjusted EBITDA amounted to EUR 450.2 million (2022: EUR 769.0 million), resulting in an EBITDA margin of 10.8 % (2022: 16.4 %).

Financial income went up to EUR 8.7 million (2022: EUR 4.3 million). The increase in financial expenses from EUR -32.1 million to EUR -58.3 million resulted in particular from the rise in interest rates for variable-interest loans and further financing of the accomplished acquisitions and organic growth projects. "Other financial result - net" changed to EUR -11.4 million (2022: EUR -15.5 million), in particular owing to currency translation.

Profit before tax was EUR 136.7 million compared to EUR 467.0 million in the previous year. Income tax expense amounted to EUR 47.6 million (2022: EUR 121.7 million), resulting in an effective Group tax rate of 34.8 % (2022: 26.1 %).

Profit for the year totalled EUR 89.1 million (2022: EUR 345.3 million).

DEVELOPMENT IN THE 4^TH QUARTER

With a slight volume growth in the division MM Board & Paper, which was offset by a decline in the MM Packaging division, the 4^th quarter was characterised by a heterogeneous picture. As in the previous quarters, however, the pressure on prices and margins continued. Consolidated sales of EUR 967.9 million were volume- and price-related below last year’s period (4^th quarter 2022: EUR 1,231.7 million).

The Group's adjusted operating profit decreased mainly price-related to EUR 38.8 million (4^th quarter 2022: EUR 109.1 million). The operating margin was 4.0 % (4^th quarter 2022: 8.9 %). Profit before tax amounted to EUR 17.8 million (4^th quarter 2022: EUR 50.2 million), profit for the period to EUR -2.1 million (4^th quarter 2022: EUR 30.0 million).

MM Board & Paper recorded an adjusted operating profit of EUR -24.2 million after EUR 87.4 million in the 4^th quarter of the previous year, mainly as a result of lower average prices. The operating margin was -5.4 % (4^th quarter 2022: 14.1 %).

The adjusted operating profit of MM Packaging at EUR 63.0 million was above the previous year’s quarter (4^th quarter 2022: EUR 21.7 million), particularly acquisition-related. The operating margin amounted to 11.2 % (4^th quarter 2022: 3.3 %).

OUTLOOK

In the highly competitive European cartonboard and paper sector, MM Board & Paper is currently experiencing a positive volume trend, however, at the same time pressure on margins is continuing. Although destocking in the supply chain has largely been completed, we expect only a slow market recovery due to the weak economic situation in Europe and continued restrained consumer spending. At the same time, due to difficult general conditions on non-European export markets continued oversupply and dampened capacity utilisation in Europe are expected to remain.

The pressure to increase competitiveness is therefore constantly increasing. This also applies to MM Packaging, although this sector is overall more resilient due to its broad positioning. Against this backdrop, our profit & cash protection programme will be consistently continued in 2024 and supplemented by targeted structural adjustment measures. Recent increases in production costs will be passed on through corresponding price adjustments.

The capex volume of around EUR 300 million expected for 2024, which includes carry-overs from the previous year, will be focussed on selected projects to improve competitiveness.

With more sustainable and innovative packaging solutions as well as the significantly optimised asset base in recent years and solid financing, MM is very well positioned to successfully manage the persistently challenging market situation.
 

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The press release and a video statement from the Management Board are available on the internet under www.mm.group.

The Annual Report 2023 will be available as of April 3, 2024.

Forthcoming Results:
April 23, 2024  Results for the 1^st quarter of 2024

For further information, please contact:
Stephan Sweerts-Sporck, Investor Relations, Mayr-Melnhof Karton AG,
Brahmsplatz 6, A-1040 Vienna, Tel.: +43 1 501 36-91180,
E-Mail: investor.relations@mm.group, Website: https://www.mm.group