Again, healthy quarterly results
Even though the market conditions remain challenging, Mayr-Melnhof Karton achieved strong Q3 19 results. Varying improvements materialised in both divisions. While we don’t expect the market headwinds to retreat anytime soon, the group should remain a beneficiary of the still high untapped potential of (European) packaging markets.
15 Nov 19
Strong Q2 results
Mayr-Melnhof Karton’s good run continues. After recovering in Q1 19, the group posted impressive Q2 19 results – a commendable achievement, given the prevalent market headwinds. Both divisions contributed in varying degrees. While market difficulties are likely to sustain in the near term, management’s strategy to focus on value and efficiencies – effective previously as well – should continue to deliver favourable results. MMK remains a preferred asset-light sector bet, especially given the absence of legacy (value-destructive) paper assets.
02 Sep 19
Q1 brought a major relief
MMK embarked 2019 on a good note, especially after a challenging Q4 18. Both divisions witnessed varying operating improvements. While management guided for markets to remain unpredictable and competitive, its sustained focus on business optimisation should render the much-needed cushion. Moreover, a strong balance sheet gives ample headroom to consider attractively-priced growth opportunities, whenever they (like TANN) come to the fore.
20 May 19
Barring Q4 scare, 2018 was a good year
While Q4 18 was impacted by severe destocking, the continuation of intense competition and higher costs, the full-year results were still pretty good. The net cash position was restored and dividends were increased yet again. Interestingly, the Q4 18 demand difficulties have already started retreating in Q1 19. Also, with the materialisation of targeted price hikes, cost efficiencies and addition/acquisition of value-added products, MMK’s margins are likely to improve over time.
22 Mar 19
Stable quarterly performance
Despite somewhat slowing demand dynamics, Mayr-Melnhof reported stable Q3 results. While the group continues to exercise strong control over its operations, the recent acquisition of TANN group should support its margins from 2019 onwards. Overall, MMK remains a beneficiary of packaging market tailwinds and is insulated from the risk of conventional paper market difficulties being reinstated.
15 Nov 18
Operational resilience remains
Despite competition and cost headwinds, Mayr-Melnhof has done well to achieve consistent results. While Karton (in recent months) has been compensating for the weakness in Packaging, there are no major worries in either of the businesses. In fact, the ongoing packaging industry consolidation should result in the much-needed re-rating of packagers.
18 Sep 18
A beneficiary of good (business and economic) momentum
In 2017, Mayr-Melnhof Karton (MMK) hit a lifetime-high of c.€132 per share. This was primarily driven by its resilient operating performance, despite an unwavered focus on Europe – which has struggled for a prolonged period. Not only did the group succeed in achieving reasonable top-line growth (2.1% yoy during 9M 17), the segment-level profitability dent was minimal (-0.8% during 9M 17) – in spite of brewing competitive and input-cost pressures. A key supporting factor was the continuation of cost optimisation initiatives. Moreover, thanks to steady operations, net debt (€33m at 9M 17 end) remained within comfortable bounds.
05 Mar 18
Again soft Q2 results, although there were certain positives as well
While MMK’s Q2 17 results, again a soft performance, came broadly in line with AV’s estimates, the numbers (profits in particular) were below consensus estimates. Sales were almost flat yoy (and down 3.2% qoq) at €566m, while adjusted EBIT came in at €52m (-7.4% yoy; +1.8% qoq) as Q2 16 was supported by a favourable product mix in Packaging. Although, Karton division performed well despite increasing recovered paper prices – largely supported by pricing improvements. Since the group deconsolidated the Tunisian subsidiaries by giving up its 100% stake to STEM in return for a 45% stake in the new associate company, a €2.3m loss was recognised in the income statement. Net profit fell 15% yoy (and 5% qoq) to €35m. Even reported OCFs were down 20% yoy (and 19% qoq), marred by working capital use of €16m vs. €8m in Q2 16 and €4m in Q1 17. With Karton’s focus on modernising a mill in the Netherlands and building a new power station in Austria, and Packaging’s ongoing expansion in Iran, Vietnam, Jordan, Chile and Germany, capex increased (+22% yoy; +18% qoq) to €44m. These factors along with dividend payments of €60m resulted in a net debt position of €50m (vs. net cash of €10m at Q1 17 end). Due to intensifying competition in packaging and increasing input costs in cartonboard, management now aims to ‘just match’ the 2016 results.
06 Oct 17
Soft Q1 results; though the group should withstand the near-term headwinds
Toughening packaging markets weighed on Mayr-Melnhof Karton’s (MMK) Q1 17 results, with profitability below (3%-7%) consensus estimates. Although sales were up 1.5% yoy (and 4.6% qoq) to €585m, adjusted EBIT was down (8.3% yoy; 5.4% qoq) to €51m. While Karton division profits (-21% yoy) were impacted by high input costs (especially for recovered paper), the reason for the Packaging division’s 13% qoq decline – not explicitly mentioned – could have been intensifying competition. Net income came in at €37m (-6.3% yoy; -2.6% qoq). However, healthy reported OCFs of €56m (+32% yoy; -6.7% qoq) and conservative capital spend (€37m; -8.7% yoy; -23% qoq) helped MMK reinstate a net cash position (last seen at end Q3 15) of €10m. Management acknowledges the challenging business environment and plans to cut costs and increase volumes. Moreover, it intends to pass on the higher input prices to customers (also indicated in the earlier quarters).
25 May 17
Tough markets weigh on the Q3 results
Mayr-Melnhof Karton’s (MMK) Q3 16 results were behind consensus estimates. Sales came in at €572m (+4.3% yoy; +1% qoq), mostly benefiting from last year’s Ileos acquisition (in the Packaging division). In the Karton division, despite high capacity utilisation (98%), pricing pressure resulted in sales falling (-3.5% yoy; -1.1% qoq) to €256m. The profitability impact was worse, with adjusted EBIT correcting (15% yoy; 11% qoq) to €49m. Here again, Karton sagged, with operating profit down (40% yoy; 19% qoq) to €15m – the top-line impact was aggravated by higher recovered paper prices. Although some cushion came from Packaging (EBIT of €34m; +4.6% yoy; -7.1% qoq), mostly driven by cost efficiencies and a favourable product mix. Net profit for the quarter was €35m (-14% yoy and qoq). Reported OCFs were slightly better (-5.4% yoy; +8.2% qoq) at €61m – as the quarter witnessed ‘NIL’ working capital investments, while capex was down (-15% yoy; -21% qoq) to €28m. The net debt position (already comforting) improved further to €10m (vs. €42m at end-Q2). Management has painted a bleak near-term outlook, with: 1/ Q4 expected to be similar to Q3 – as the year-end typically witnesses reduced business activity; 2/ raw material costs expected to remain high; and 3/ 2016 performance posing as a challenging benchmark for 2017, given today’s market environment.
22 Nov 16
Given the (growing) market uncertainties, the Q2 results were good
Despite the brewing economic uncertainty in Europe (and the UK), Mayr-Melnhof Karton (MMK) reported a healthy Q2 16 performance. Sales were up 5.7% yoy to €566m, though mostly driven by the acquisition-related higher volumes (+8.5%) in MM Packaging. Sequentially, sales were down 1.7% as overall packaging markets remained competitive. Still, the group managed to sustain its profit momentum, with adjusted EBIT coming in at €56m (+14%; +0.7% qoq). MM Packaging was a key contributor (adjusted EBIT of €37m (+38%; +4.9% qoq)), primarily benefiting from a good product mix. On the other hand, MM Karton suffered (adjusted EBIT of €19m (-15%; -6.4% qoq)) due to the continuation of weak order backlogs (50kt in H1 16 vs. 91kt in H1 15) and higher recovered paper prices. Net profit was up 29% (and 4.1% qoq) to €41m as further support emanated from materially lower net financial expenses. In addition to the profitability resilience, lower working capital requirements (€8m vs. €25m and €22m in Q2 15 and Q1 16, respectively) helped reported OCFs gallop (+70%; +34% qoq) to €56m. Net debt remained largely unchanged (at €42m) due to the dividend payment for FY15. Given a precarious macro situation and growing packaging competition across Europe, management continues to maintain a cautious outlook and anticipates the business environment will remain challenging in H2 16.
22 Aug 16
Q1 strong (as expected); cautious full-year outlook
Mayr-Melnhof Karton (MMK) embarked on another year on a firm note as it reported strong Q1 16 results. Sales were up 7.9% yoy to €576m, primarily due to the Ileos acquisition (completed in October 2015) – resulting in 13% higher sales in ‘MM Packaging’. While scheduled stoppages translated into lower utilisation (97% vs. 99% in Q1 15) and, hence, muted growth (1.7%) in ‘MM Karton’. Sequentially though, sales were up only 2.2%, reflecting a precarious global economic situation. Profitability performance was better with an adjusted EBIT of €55m (+8.7%; +22% qoq). While cost efficiencies continued, somewhat lower recovered paper (a key input) prices rendered further support. Similarly, net profit was up 11% (and 16% qoq) to €39m. While reported OCFs also increased 12% to €42m, net debt remained unchanged at €38m due to 19% higher capex (€40m) on account of the replacement of a power station at an Austrian cartonboard mill.
20 May 16
Impressive performance continues
Drawing curtains for the AV paper and packaging universe results season, Mayr-Melnhof Karton (MMK) reported strong Q4 and FY15 results – thereby maintaining its performance momentum over the years. The results were broadly in line with AV estimates and slightly ahead of the market expectations. Healthy top-line… Sales: Q4 – €564m (+9.2% yoy; +2.9% qoq); 2015 – €2.2bn (+4.5%) Healthy top-line growth has been a hallmark of MMK’s performance and 2015 was no exception to that trend. In fact, 2015 sales were the highest the group has achieved over the past decade, despite Europe continuing to be at the core of its operations. Apart from close to one-fifth of the annual sales growth coming from the Ileos acquisition, annual (and quarterly) volumes in both Karton and Packaging divisions were up 4.7% (11%) and 3.8% (7%), respectively. While capacity utilisation in Karton remained impressive (98% in 2015 vs. 97% in 2014), Packaging capitalised on technological production innovations to counter fierce market competition. …supported by continuation of cost efficiencies Adjusted EBIT – €45m (+3.7%; -22%); 2015 – €203m (+13%) Higher productivity and cost improvements across both divisions helped 2015 group margins to improve 70bp to 9.3%. Although increasing recovered paper prices (a key input – accounting for c.80% of MMK’s annual fibre consumption) are believed to have impacted the Q4 performance to some extent – with the effect being more visible on a sequential basis. With the operating benefits percolating down, full-year net profit came in at €142m (+8%). Visible balance sheet strength The reported OCFs were up 25% to €207m while capex was down 8.4% to €128m. With the completion of the Ileos acquisition, cash at end-2015 was down 20% yoy to €255m, while borrowings were up 10% to €293m. Yet overall leverage is well within control and more (opportunistic) acquisitions are being targeted for 2016, while organic expansion plans would continue unabated. After declaring an interim dividend of €1.6 per share, a final dividend of €1.2 per share was announced. As a result, full-year dividend was up 7.7% to €2.8 per share. The much-awaited “FOODBOARD” (a high quality coated cartonboard for food packaging) has been launched during Q1 16.
23 Mar 16
Productivity gains help sustain strong performance momentum
Even in the absence of material forex benefits (unlike the other AV paper companies), Mayr-Melnhof Karton (MMK) has continued to deliver a strong performance. Q3 sales came in at €548m (+1.9% yoy; +2.3% qoq) driven by healthy volumes (Karton: +1.5%; Packaging: +4.5%) and slightly higher carton prices. Although packaging prices continue to remain under pressure due to intensifying competition. The continuation of productivity gains in both the segments and optimal capacity utilisation (99%) in Karton resulted in adjusted EBIT improving further (+22%; +19% qoq) to €58m. Net profit came in at €41m (+12%; +29% qoq) as higher other financial expenses trimmed some of the operating gains. Reported OCFs galloped 75% (+95% qoq) to €65m as working capital efficiencies (use of only €6m vs. use of €21m and €25m in Q3 14 and Q2 15, respectively) added to the profitability gains. Consequently, net cash position has further strengthened from €8m at the end of Q2 15 to €36m at the end of Q3 15. However, with the completion of the Ileos acquisition (€85m paid in cash) and an interim dividend payment of €32m after the close of Q3, the group should eventually revert to a net debt position. Despite the slowing Karton segment order-book, management guides for earnings improvement to continue on the back of further efficiencies being targeted. Greater confidence in earnings delivery resulted in the group announcing its first interim dividend – in effect prepaying one half of its full-year dividend – in October 2015.
18 Nov 15
Operating improvements continue, despite no material uptick in economic activity
Bucking the Q2 trend of the AV universe paper and packaging companies, Mayr-Melnhof Karton (MMK) reported yet another quarter of strong operating performance. More importantly, the company realised real operating improvements, rather than just benefiting from favourable forex movements. Q2 sales came in at €536m (+5.2% yoy; flat qoq), driven by strong performances in both the ‘Karton’ and ‘Packaging’ divisions. Sequentially, however, sales were flat as gradual price increases in the Karton business (passing on some of the higher input costs to customers) were offset by lower deliveries in both divisions. Apart from a resilient top-line, adjusted EBIT of €46m (+15% yoy; -3.7% qoq) was also supported by the continuation of strong Karton division capacity utilisation (99%) and a growing focus on cost optimisation across facilities. Here again, sequentially, there was some disappointment as the European recovery is yet to deliver tangibly. Despite €3.2m of restructuring expenses in Packaging (pertaining to the integration of facilities), net profit increased 8.9% (though -11% qoq) to €31m. Buoyed by good profitability and working capital efficiencies (use of €25m vs. €38m in Q2 14), reported OCFs galloped 1.2x to €33m. A comfortable net cash position of €7.9m at the end of H1 15 helped the group announce a €80m acquisition (to be completed in H2 15) of folding carton operations of a French packaging company, Ileos SA.
16 Sep 15