MPACT RMB Morgan Stanley Off-Piste Conference October 2014 www.mpact.co.za
Mpact business overview Group 2014 interim performance review Strategy Annexures 2
R m 000 tons SA packaging sector overview SA packaging ex-converter sales 1 2013 (Value) SA packaging ex-converter sales 1 2013 (Volume) Other, 0.8% Metal, 10.7% Plastic, 24.0% Other, 4.3% Metal, 8.5% Glass, 11.9% Plastic, 48.3% Glass, 31.1% Paper, 28.3% Paper, 32.1% Value CAGR ( 09-13) Volume CAGR ( 09-13) Corrugated 6.6% 2.7% Cartonboard 8.0% 1.3% Flexibles 8.3% 3.1% 16 500 14 000 11 500 9 000 Total packaging volume % growth (Value) 1200 1000 800 600 Total packaging volume % growth (Volume) Rigids 8.3% 2.8% 6 500 400 Metal 2.1% (3.1%) 4 000 200 Glass 2.6% (1.8%) 1 500 2009 2010 2011 2012 2013 0 2009 2010 2011 2012 2013 Corrugated Cartonboard Rigids Corrugated Cartonboard Rigids Flexibles Metal Glass Flexibles Metal Glass 1. Source: BMI Report (2014) 2. Ex converter sales refer to sales of packaging materials converted in the country by local producers (includes imports and exports) Industry overview PAGE 3
Mpact business overview Mpact Paper Plastics Primary product categories Recovered paper collection Packaging and industrial papers such as cartonboard and containerboard Corrugated packaging Detpak Quick Service Restaurant (QSR) packaging Primary product categories PET bottles and preforms, hot fill bottles, PET jars and closures Large injection moulded containers PET and styrene trays, fast food containers and clear plastic films Other plastic packaging No. 1 in corrugated packaging No. 1 in recycled based cartonboard and containerboard No. 1 in recovered paper collection No. 1 in PET preforms No. 1 in styrene trays No. 1 in plastic jumbo bins CENTRES OF EXCELLENCE Human Resources, Safety, Health, Environment SHARED SERVICES Finance, IS&T, Stellenbosch R&D Employing 3,998 people, 32 operating sites Sources: Mpact, BMI Report (2014), PAMSA and PRASA 4
Fruit and vegetable trays Paper business overview Cartonboard Standard and customised cases Divisions : Recycling : Paper Manufacturing : Corrugated and converting Containerboard Key products : Cartonboard : Containerboard : Retail ready packaging : Regular slotted cartons : POS packaging and displays : Die-cut solutions : Quick service restaurants total packaging solutions Key customers : Packaging converters (containerboard and cartonboard) : Agricultural producers : FMCG companies : Quick service restaurants : Other consumer and industrial packaging companies Operations : Recycling (7) : Paper Manufacturing (3) : Corrugated and converting (13) 1 Retail ready packaging Other Employees : 2,693 External Revenue (2013) EBITDA (2013) 72% 79% R5,574m Leader in recovered paper collection, production of cartonboard, containerboard and corrugated packaging R835m Sources: Mpact and financial figures extracted from the 2013 audited Mpact financial information Notes: (1) Includes 2 sheet plants in Mozambique and Namibia in which it holds a controlling interest and a sales office in Bloemfontein Paper PAGE 5
Recycling Geographic footprint The largest paper recycler in SA Recovery and recycling of paper in SA ensures local beneficiation of raw materials and creation of jobs MSN 1 and others, 27% Customer base 451k tons Pretoria Johannesburg Midrand Springs Richards Bay Over 100,000 people involved in the recycling industry in SA Seven operations in major centres and 42 buy-back centres Key competitors Internal consumption, 73% Cape Town Durban East London Port Elizabeth Over 40 entrepreneurial companies empowered to facilitate collection strategies Sappi Nampak Kimberly Clark Collected volumes (kt) 441 448 450 Source: Mpact Note: (1) Mondi Shanduka Newsprint 457 451 2009 2010 2011 2012 2013 Sources of recovered paper Governments and local authorities Schools Paper banks Converters Agents, dealers, waste management companies Business and offices Kerbside Imports Mobile cages and bakkies Lothlorien Gayatri Independents 62% Current recovery rate of recoverable paper in SA Mpact Recycling shareholding 75% Mpact Limited 25% Mondi Limited Paper PAGE 6
Paper Manufacturing Geographic footprint Customers Containerboard and cartonboard packaging converters (internal and external) Geographic sales Export, 7% Johannesburg Springs Piet Retief Richards Bay Felixton Durban Domestic, 93% East London Cape Town Port Elizabeth Production capacity in kt Mill/Plant Piet Retief Main products Linerboard and semi-chemical fluting Capacity 2013 (ktpa) 130 Key competitors Non integrated Sappi Felixton Linerboard and semi-chemical fluting 155 Springs Cartonboard and specialities 130 Additionally, Mpact distributes all containerboard products of Mondi Group s Richards Bay Mill, selling mainly into South Africa and selected markets in sub-saharan Africa and Indian Ocean Islands Lothlorein Imports Integrated Nampak Gayatri Source: Mpact Paper PAGE 7
Walvis Bay 1 Cape Town Paper Converting Geographic footprint Windhoek 1 Epping Kya Sands (Detpak) Nelspruit Maputo 1 Johannesburg Brakpan Springs Bloemfontein 2 Port Elizabeth East London Durban Corrugated production in m 2 (million) 328 367 381 369 387 391 413 432 2006 2007 2008 2009 2010 2011 2012 2013 Customers Localised customer base Customers include producers of agricultural, food durable and non durable goods 3 : Sheet board, 19% Other, 15% FMCG, 29% Key competitors Nampak New Era APL Corruseal Houers Lufil Agricultural, 37% Overview Acquisition of Detpak SA in 2013 Three high-graphic printing machines situated in Springs, Pinetown and Epping offering high-quality graphic printing on corrugated board. These are complimented by in-house graphic design facilities ISO 14,000 and ISO 9,000 environmental and quality management systems, respectively Paper converting packaging products include: Corrugated regular cases Die-cut cases Folded glued cases Trays Point of sale displays Quick Service Restaurant total packaging solutions Industrial paper bags Paper Sources: Mpact and BMI Report (2014) Notes: (1) Mpact has sheet plants in Mozambique and Namibia (holding a controlling interest) (2) Corrugated sales office in Bloemfontein (3) Management estimates PAGE 8
Plastics business overview PET Preforms, Bottles and Jars Key products : PET preforms, bottles and jars : Plastic jumbo bins, wheelie bins, plastic crates : Plastic containers such as bottles, jars, closures, with in-mould labelling capability : Styrene and PET trays, fast food containers and clear plastic films Plastic Jumbo Bins, Wheelie Bins, Plastic Crates and Pallets Key customers : FMCG companies (carbonated soft drinks, personal care, pharmaceuticals, food producers) : Fast food producers : Agricultural producers : Retail chains FMCG Bottles, Jars, Closures and In-Mould Labelling Operations : Styrene trays and clear plastic films (3) : Large injection moulds (2) : PET injection (1), FMCG plastic packaging (2) and closures (1) Employees : 1,196 External Revenue (2013) EBITDA (2013) Styrene and PET Trays, Fast Food Containers and Clear Plastic Film 28% 21% R2,124m R238m Leader in the manufacture of PET preforms, styrene trays and plastic jumbo bins Sources: Mpact and financial figures extracted from audited Mpact financial information Plastics PAGE 9
Plastics segment overview Geographic footprint Customer base Harare Other, 4% Distributors, 21% Food, 18% Brits Pretoria Johannesburg Wadeville Pinetown Durban Agricultural, 10% Retail, 8% Home care, 9% Beverage, 25% 1 Personal care, 5% Blackheath East London Atlantis Paarl Port Elizabeth Mills/plants and main products Mill/Plant Main products Key competitors Wadeville Atlantis (Large Injection) Brits Pinetown Atlantis (FMCG) Versapak Paarl Versapak Harare PET preforms, jars, bottles and hot fill bottles, closures Injection moulding, blow moulding Plastic jumbo bins, wheelie bins, plastic crates Injection moulding Plastic jumbo bins, wheelie bins, plastic crates Injection moulding FMCG packaging bottles, jars, closures, in-mould labels Injection moulding, blow moulding, IML FMCG plastic bottles, jars, closures Injection moulding, blow moulding, PET bottles and printing Styrene trays, fast food containers, PET trays and blisterpack and clear plastic films Styrene trays, fast food containers and clear plastic films Nampak Astrapak Bowler Metcalf Polyoak CIBA Boxmore Note: (1) A significant proportion of beverage sales is made up by an Amalgamated Beverages (ABI) contract for PET preforms. Plastics PAGE 10 10
Mpact business overview Group 2014 interim performance review Strategy Annexures 11
R millions R millions Financial highlights as at 30 June 2014 8 000 6 000 4 000 2 000 0 700 600 500 400 300 200 100 0 Group revenue 7 698 6 821 6 149 4 178 3 611 3 275 2 874 3 210 3 520 3 983 2011 2012 2013 2014 HY1 HY2 Group underlying operating profit 655 585 524 419 363 319 7.1% 6.9% 270 205 222 236 6.8% 6.7% 2011 2012 2013 2014 HY1 HY2 HY1 margin Revenue up 13.2% to R4.0bn Volume up 1.0% Price and mix up 9.4% Acquisition 2.8% Underlying operating profit up 14.5% to R270m Margin up to 6.8% from 6.7% Productivity gains offset under-recovery of raw material price increases Fixed costs well controlled Underlying earnings per share up 19.2% to 91.8 cents ROCE up to 16.9% (June 2013: 15.5%) Interim dividend of 26cps, up 18.2% Gearing down to 32.5% (June 2013: 35.6%) Note: Revenue and underlying operating profit excludes Paperlink for the 2011 financial year. 12
R millions R millions Paper business 6 000 5 000 4 000 3 000 2 000 1 000 0 700 600 500 400 300 200 100 0 External revenue 5 574 4 573 5 042 3 023 2 655 2 413 2 160 2 387 2 551 2 914 2011 2012 2013 2014 HY1 HY2 Underlying operating profit 1 635 562 511 384 331 291 10.2% 9.9% 9.7% 9.6% 220 231 251 281 2011 2012 2013 2014 HY1 HY2 HY1 margin Revenue up 14.2% to R2.9bn Volumes up 1.2% Price and mix 9.2% Acquisition 3.8% Underlying operating profit up 11.7% to R281m EBIT margin declined to 9.6% from 9.9% Under-recovery of raw material prices Revenue Paper 73% Operating profit Paper 87% 1. For comparative purposes, full year 2011 underlying operating profit has been restated to reflect corporate costs of R50 million directly attributable, but previously not charged to, the Paper business. 13
R millions R millions Plastics business Revenue 2 500 2 124 2 000 1 577 1 778 1 500 1 155 955 862 1 000 500 715 823 969 1 070 0 2011 2012 2013 2014 HY1 HY2 Underlying operating profit 1 120 117 100 100 106 80 80 60 77 72 40 4.5% 4.1% 20 37 44 34 23 3.5% 3.2% 0 2011 2012 2013 2014 HY1 HY2 HY1 margin Revenue up 10.4% to R1.1bn Good volume growth in bins and crates, offset by FMCG Average price and mix up 10.8% Underlying operating profit up 28.0% to R44m Favourable product mix Under-recovery of raw material price increases Restructure of FMCG business underway Revenue Plastics 27% Operating profit Plastics 13% 1. For comparative purposes, full year 2011 underlying operating profit has been restated to reflect corporate costs of R14 million directly attributable, but previously not charged to, the Plastics business. 14
R millions ROCE % ROCE and net debt 18% 17% 16% 15% 14% Return on capital employed (ROCE) 17.3% 16.9% 16.0% 15.5% 14.1% ROCE of 16.9% as a result of improvement in profitability 13% 2012 2013 2014 HY1 Full year 1 600 1 400 1 200 1 382 1 056 Net debt 1 482 1 116 1 406 Gearing down to 32.5% (June 2013: 35.6%) Net debt at R1.4bn 1 000 800 600 2012 2013 2014 HY1 Full year 1. Return on Capital Employed (ROCE) is an annualised measure based on underlying operating profit plus share of equity accounted investees net earnings divided by average capital employed before impairments. 15
R million Capital expenditure cash flows R million Paper business Plastics business 162 81 81 224 114 110 249 240 164 48 100 192 149 85 79 132 136 80 80 52 56 71 2011 2012 2013 2014 HY1 HY2 Felixton upgrade 2011 2012 2013 2014 HY1 HY2 Capital commitments at 30 June 2014 R m Total commitments 1,189 Spend within 1 year 738 Spend between 1 to 5 years 451 Capital commitments made up of major spend relating to: Felixton upgrade: R717m rpet: R330m 16
Mpact business overview Group 2014 interim performance review Strategy Annexures 17
Strategy Growing our leading market positions Building partnerships through our customer focused operating structure Delivering results through our focus on performance Scale Decentralised structure Financial returns Capability Innovation and capability Skilled and motivated people Products and geographies Intimate understanding of the value chain Smart simplicity 18
Felixton Paper Mill upgrade Phase 1 Phase 2 Total project Capex budget R155 million R610 million R765 million Commissioned 1H2015 2H2017 Additional capacity 20,000 tonnes 40,000 tonnes 60,000 tonnes Rationale Enhance product offering and quality Increase cost competitiveness Improvement in environmental footprint and efficiencies Increase capacity from 155 000 tonnes p.a. to 215 000 tonnes p.a. Move towards fully recycled fibre usage Funding Debt facilities Cash flow from operations Enhance earnings, whilst exceeding through-the-cycle ROCE target of 15% Current status Equipment supply tender awarded and contracts concluded: Bellmer: machine rebuild Voith: recycled fibre plant Phase 1 (H1 2015): recycled fibre plant and paper machine headbox Phase 2 (H2 2017): main machine rebuild 19
rpet project (Mpact Polymers) Total investment Commissioning Capacity R350 million 2H2015 21,000 tons of recycled PET per annum Rationale and benefits Exceeds Mpact s minimum investment criteria over the period Production of bottle grade recycled PET pellets for use in plastic packaging Leverage Mpact s recycling network Improved environmental performance for Mpact, its customers and the community Job creation in the recycling industry Qualifies for S12I tax incentive Funding Shareholder loan from Mpact utilising existing facilities Shareholder loan and debt facilities from the IDC Shareholding Mpact: 79% IDC: 21% 20
Thank you for your participation For further information: www.mpact.co.za info@mpact.co.za Bruce Strong, CEO (011) 994-5508 or Marlize Keyter Keyter Rech Investor Solutions (011) 447-5204 21
Mpact business overview Group 2014 interim performance review Strategy Annexures 22
Capital investments 2700T Injection Moulding Machine Ward Die Cutter 23
Brakpan BHS corrugator upgrade phase 1 Epping BHS corrugator upgrade phase 2 24
Port Elizabeth Apstar rotary die cutter 25
New 8-cavity Engel machine installed in Pinetown for the production of IML yogurt tubs for Dairibord 26
Disclaimer This document including, without limitation, those statements concerning the demand outlook, expansion projects and its capital resources and expenditure, may be considered to be forward looking statements. By their nature, forward-looking statements involve risk and uncertainty and, although Mpact believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government action and business and operational risk management. While Mpact has taken reasonable care to ensure the accuracy of the information presented, Mpact accepts no responsibility for any consequential, indirect, special or incidental damages, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence arising in connection with a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates. 27