Mondi Group
Integrated report
and financial
statements 2018
Sustainable
packaging
and paper
by design
Mondi at a glance
Mondi is a global
packaging and
paper company.
Our name may not
be familiar to the public,
but our products are.
They touch the lives
of millions of people
at home, at work and
at leisure every day.
Packaging is in the spotlight as people
look for ways to achieve sustainable
consumerism. Packaging is both the answer
and the problem. It protects and prolongs
the life of products, making them more
accessible to people around the world.
It is also disposable and when used poorly,
it suffocates our oceans and poisons the
land. Used well it is reusable, recyclable,
compostable – sustainable by design.
We have a responsibility to provide
the answers, and we’re perfectly placed
to do it with a range of innovative
paper-based, flexible plastic and hybrid
packaging solutions.
Front cover:
Sustainable by design: paper where
possible, plastic when useful
By taking a holistic view, we can develop
solutions that consider the needs of each
customer, their products and the planet.
For example, our paper-based industrial
bags are strong, light-weight and made from
a renewable resource.
Mondi Group
Integrated report and financial statements 2018
1
Mondi
today…
We have delivered more
than 10 years of successful
growth as a listed company
– building on our heritage
of 50 years as Mondi
and more than 200 years
in papermaking.
Today we are a global
industry player with an
outstanding reputation for
excellence, leadership, and
sustainably adding value.
26,100
employees
102
production sites
33
countries
6 million
tonnes annual paper and
market pulp production
all set for
tomorrow.
Our customers and
the world need new
solutions from us:
high-quality paper and
brilliant packaging
that’s fit for purpose,
competitively priced and
designed to be reused,
recycled or composted.
And that’s exactly what
we are doing.
2
2018 at a glance
Performance highlights1
e Strong financial performance on all key metrics
e Robust operational performance and strong cost control across the Group
e Capital investment projects on track and delivering growth
e Good progress integrating acquisitions, total spend €424 million
e Delivering against our 2020 Growing Responsibly commitments
e Announced intention to simplify corporate structure
Revenue
Underlying EBITDA
€7,481m q5%
€1,764m
q19%
Capital expenditure
€709m
Return on capital employed
23.6%
23.6% underlying EBITDA margin
Reduction in total specific CO2e
emissions against 2014 baseline
14.5%
Safety: total recordable case rate –
reduction against 2015 baseline
11%
Underlying operating profit
€1,318m q28%
FSCTM or PEFCTM certified wood2
71%
Profit before tax
Basic earnings per share
€1,105m q25%
170.1
euro
cents
q23%
Ordinary dividend per share
76.0
euro
cents
q23%
Underlying earnings per share
Electricity self-sufficiency
189.1
euro
cents
q27%
100%
Mondi Group
Integrated report and financial statements 2018
Scope
Mondi’s Integrated report and financial
statements 2018 is our primary report
to shareholders.
The scope of this report covers the
Group’s main business and operations,
and provides an overview of the
performance of the Group for the year
ended 31 December 2018.
All significant items are reported
on a like-for-like basis, unless
otherwise stated.
Our Integrated report is prepared in
accordance with the requirements
of both the Listings Requirements of
the JSE Limited and the Disclosure
Guidance and Transparency and
Listing Rules of the United Kingdom
Listing Authority. We also prepare a
detailed Sustainable development
report, in accordance with the GRI
G4 core requirements and externally
assured, which is available at
www.mondigroup.com/sd18.
Alternative Performance Measures
The Group presents certain measures
of financial performance, position
or cash flows in this report that are
not defined or specified according
to International Financial Reporting
Standards (IFRS). These measures,
referred to as Alternative Performance
Measures (APMs), are defined in note 32
and where relevant reconciled to IFRS
in the notes to the combined and
consolidated financial statements,
and are prepared on a consistent basis
for all periods presented.
Non-financial information statement
In accordance with sections 414CA
and 414CB of the UK Companies Act
2006, each of the required non-financial
information disclosures can be found in
the Strategic report. A summary table is
set out on page 50.
Materiality
Mondi’s Integrated report and financial
statements 2018 aims to provide a
fair, balanced and understandable
assessment of our business model,
strategy, performance and prospects
in relation to material financial,
economic, social, environmental and
governance issues.
The material focus areas were
determined considering the following:
e Specific quantitative and
qualitative criteria
e Matters critical in relation to achieving
our strategic objectives
e Principal risks identified through our
risk management process
e Feedback from key stakeholders
during the course of the year
1 The audited annual financial statements for the year
ended 31 December 2017 were restated due to
the adoption of IFRS 16, ‘Leases’, which has been
disclosed in notes 32 and 33 of the combined and
consolidated financial statements
2 The Forest Stewardship CouncilTM (FSCTM) and
Programme for the Endorsement of Forest
CertificationTM (PEFCTM)
Overview
2-11
Performance highlights
Our businesses
Where we operate
Joint Chair statement
Chief Executive Officer’s letter
Strategic
report
12-83
Governance
84-143
Financial
statements
144-240
External context
Our business model
Our strategy and strategic performance
Key performance indicators
Principal risks
Sustainability performance
Financial performance
Business reviews
Fibre Packaging
Consumer Packaging
Uncoated Fine Paper
Introduction from Joint Chairs
Board of directors
Corporate governance report
DLC nominations committee
DLC audit committee
DLC sustainable development committee
Mondi Limited social and ethics committee
DLC executive committee and
company secretaries
DLC executive committee
Remuneration report
Other statutory information
Directors’ responsibility statement
Independent auditors’ report
Financial statements
Production statistics and exchange rates
Group financial record
Additional information
for Mondi plc shareholders
Shareholder information
Glossary of terms
2
4
6
8
10
14
18
26
36
38
48
64
68
70
76
80
86
88
90
102
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240
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Integrated report and financial statements 2018
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Our businesses
Sustainable packaging
and paper by design
Fibre Packaging
Business
review
Page 70-75
Our virgin and recycled containerboard is used to make corrugated
packaging designed to protect our customers’ products and display
them in-store and online. We produce a full range of corrugated
packaging from traditional boxes to fully customised multi-piece solutions,
appealing point-of-sale displays and heavy-duty shipping containers.
As the global leader in sack kraft paper and industrial bags, we
create strong, light-weight and sustainable products for cement
and building materials, agricultural, chemical and food products.
Our speciality kraft paper is used to make a variety of packaging solutions
from industrial applications to retail shopping bags and more sustainable
food packaging. Extrusion coatings provide high-quality barriers for a
range of products from food packaging to building insulation.
Consumer Packaging
Business
review
Page 76-79
Our consumer goods packaging products extend shelf-life
and improve end-user experience. We offer a range of flexible
packaging such as stand-up pouches and re-closable bags.
Personal care components form part of diaper, femcare and adult
incontinence products. They include soft nonwovens, stretchy
elastic films and laminates, mechanical fastening components and
wrapping films.
Segment revenue
€4,108m
Underlying EBITDA
€1,086m
Segment revenue
€1,611m
Underlying EBITDA
Our release liners are used for tapes, fibre composites and graphic
arts; and our technical films provide solutions from high-barrier films
to surface protection films.
€194m
Uncoated Fine Paper
Business
review
Page 80-83
We transform responsibly sourced raw materials into innovative
paper products that meet customer needs in a cost-effective and
sustainable way. Our extensive range of office papers is designed
to achieve optimal print results on laser, inkjet and copy machines.
High-performance professional printing papers are dedicated for
offset presses and the latest digital print technologies.
With our wide range of high-quality papers we aim to provide
customers a one-stop-shop solution for their needs.
Segment revenue
€1,877m
Underlying EBITDA
€516m
Glass7Box
Pick up tray
Side support
Designed for premium
glass brand Riedel, featuring a
shock-absorbent structure.
Fully recyclable tray and handle
that can carry a 71% higher
product load.
Insert which acts as corner
support when transporting
heavy content.
Our award winning products
Mondi won eight 2019 WorldStar awards, more
than any other packaging company worldwide.
BarrierPack Recyclable has also been shortlisted as one of
three finalists for their special Sustainability Award (winner to
be announced in May 2019).
The WorldStar awards are run by the World
Packaging Organisation (WPO) and are
considered to be the pre-eminent international
award in packaging. 2019 winners were
announced in December 2018.
WORLDSTAR
WINNER 2019
Mondi Group
Integrated report and financial statements 2018
Leading market positions
#1 virgin containerboard
producer in Europe
#1 containerboard producer
in emerging Europe
#3 corrugated packaging
producer in
emerging Europe
#1 kraft paper
producer globally
#1 industrial bags
producer globally
Leading market positions
#3 consumer flexible
packaging producer
in Europe
#1 commercial release liner
producer in Europe
Leading market positions
#1 uncoated fine paper
supplier in Europe
#1 uncoated fine
paper producer
in South Africa
Packaging
closing optimisation
Recyclable waste
separation system
Pal-bridge
pallet support system
Yoghurt tray
with tear tape
BarrierPack
Recyclable
Semi-automatic solution
for closing the bottom of boxes,
saving time and materials.
Corrugated bins that can
be disposed of along with
the waste.
Easy-to-fold system that fills the
gaps in the top layer of pallets
to support further stacking.
Corrugated tray with a unique
integrated tear tape that makes
it easy to divide if required.
Highly functional, fully recyclable
flexible plastic laminate for
pre-made pouches.
Mondi Group
Integrated report and financial statements 2018
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Where we operate
Our global presence
Mondi has around 100 production
sites across more than 30 countries,
with key operations located in
Europe, North America and Africa.
Russia
Employees
Production sites
5,500 4
Revenue by location of:
Production
Customer
12%
9%
North America
Employees
Production sites
1,900 13
Revenue by location of:
Production
Customer
7%
10%
Revenue from customers in South America
represented 1% in 2018
Key
Fibre Packaging
Paper mills
Converting operations
Consumer Packaging
Uncoated Fine Paper
Mondi Group
Integrated report and financial statements 2018
Africa
Employees
Production sites
1,800 7
Revenue by location of:
Production
Customer
9%
10%
Western Europe
Employees
Production sites
7,300 37
Revenue by location of:
Production
Customer
36%
38%
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Employees
Production sites
8,900 32
Revenue by location of:
Production
Customer
35%
23%
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Employees
700
Production sites
9
Revenue by location of:
Production
Customer
1%
9%
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Group offices
Johannesburg
London
Vienna
Production sites
Austria
Belgium
Bulgaria
China
Côte d’Ivoire
Czech Republic
Egypt
Finland
France
Germany
Hungary
Iraq
Italy
Jordan
Lebanon
Malaysia
Mexico
Morocco
Netherlands
Oman
Poland
Russia
Serbia
Slovakia
South Africa
South Korea
Spain
Sweden
Thailand
Turkey
Ukraine
UK
US
Mondi Group
Integrated report and financial statements 2018
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Joint Chair statement
A culture that delivers
sustainable growth
The Mondi Way is our framework for
creating sustainable value founded on our
three core values of acting with integrity,
being passionate about performance, and
caring about the world and each other.
Our vision, which Peter Oswald expands
on in his Chief Executive Officer’s letter,
explains our future aspirations in line with
our strategy.
Chief Executive Officer’s letter
Page 10-11
Mondi Way
Page 18-19
We appreciate the trust our shareholders
place in us to generate industry-leading
returns, while contributing to society and
minimising our impact on the environment.
This includes supporting local communities;
ensuring a safe, fair, diverse and inclusive
working environment; and helping
employees, customers and suppliers to
realise their full potential.
Acting with integrity
The boards of Mondi Limited and Mondi
plc support the highest standards of
corporate governance with a focus on
transparency, honesty and accountability.
Our governance framework is designed to
guide our behaviour in all areas of decision-
making, keeping our culture and values at
the forefront when we consider how best to
achieve our strategy. By acting with integrity
we can balance our passion for performance
and our commitment to achieving long-term
shareholder value with the diverse needs of
all our stakeholders.
Our directors dedicate time to reviewing
best-practice developments, assessing
performance and optimising Mondi’s
approach. We regularly review our
governance framework and practices to
ensure they remain relevant, and we update
policies and procedures as required.
We also consider the composition of the
Boards and length of service of individual
board members to ensure an appropriate
balance of capabilities, business experience,
independence and diversity. We are pleased
to welcome Stephen Young to the Boards
and as our new audit committee chair,
he brings strong financial and general
management experience, as well as an
in-depth understanding of working for an
international industrial business. We said
goodbye to John Nicholas in May after
almost nine years’ service. We thank John
for his significant contribution to Mondi
during this time, not least as chair of the audit
committee, and we wish him all the best for
the future.
Governance
Page 84-143
Passion for performance
Mondi’s strong track record of delivering
value accretive growth is achieved by our
relentless focus on performance across
our talented and hard-working teams; a
portfolio of cost-advantaged assets making
a diverse range of high-quality products;
and the integration of sustainability into
all business decisions. By building on the
Group’s inherent strengths we can take
advantage of opportunities while mitigating
the impact of risks.
In June, a number of our board members
attended Mondi’s Leadership Forum,
alongside senior leaders and Mondi
Diamond Awards finalists. This provided
us with an invaluable opportunity to see
Mondi’s leaders in action as participants
shared ideas, discussed strategic priorities to
ensure the Group’s long-term success, and
celebrated excellence in innovation through
the Mondi Diamond Awards presentations.
It gives us great confidence to know that
Mondi’s future lies in the hands of this highly
professional and forward-thinking team.
Investing in the future is the key
to creating long-term value.
David Williams Joint Chair (left)
Fred Phaswana Joint Chair (right)
Mondi Group
Integrated report and financial statements 2018
Together we have set the performance
bar high. Over the last five years, Mondi
has delivered a compound annual growth
in basic underlying earnings per share of
15%, with an industry leading return on
capital employed averaging 20.2% over the
same period. We remain confident in the
Group’s ability to deliver long-term value
to shareholders.
2018 was another strong year for Mondi.
Underlying EBITDA was up 19% to
€1,764 million (underlying EBITDA margin
of 23.6%), profit before tax was up 25%
to €1,105 million, and return on capital
employed was 23.6%. The boards of Mondi
Limited and Mondi plc have recommended
a final ordinary dividend of 54.55 euro
cents per share (2017: 42.90 euro cents per
share). Together with the interim ordinary
dividend of 21.45 euro cents per share, this
amounts to a total ordinary dividend for
the year of 76.0 euro cents per share, an
increase of 23% from 2017.
Financial performance
Page 64-67
Underlying earnings per share
euro cents
189.1
euro
cents
1 5 %
C A G R 1 :
189.1
137.8
148.9
5 - y e a r
133.7
107.3
2014
2015
2016
2017
2018
1 Compound annual growth rate
Total ordinary dividend per share
euro cents
76
euro
cents
762
621
57
52
42
2014
2015
2016
2017
2018
1 In addition to the 2017 ordinary dividend, a special dividend of
100 euro cents was paid in 2018
2 Based on proposed final ordinary dividend of 54.55 euro cents
per share
Five-year total shareholder return (TSR) of 74%
(euro returns: indexed to 1 January 2014)
Mondi plc
Median of peer group
Peer performance range
x
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400
350
300
250
200
150
100
50
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1 Jan
2014
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
Caring about people
Safety remains our top priority and is a focus
area at every Board meeting. We are therefore
deeply saddened that two contractors lost
their lives while carrying out work for Mondi,
one in 2018 at Syktyvkar (Russia) and
the second early in 2019 at Ružomberok
(Slovakia). We also regret five life-altering
injuries during the year. Our thoughts are with
their families and colleagues. Importantly our
teams have worked hard to understand the
events leading to these incidents and how
similar situations can be prevented in the
future. We continue to strive for zero harm and
promote behaviour that ensures everyone
returns home safely to their families every day.
We know that in order to be successful in the
future, we need to unlock the full potential
of our people and nurture their passion.
By treating people with care and respect, we
can promote a culture that encourages our
teams to be dynamic, entrepreneurial and
empowered. This in turn helps Mondi to build
constructive partnerships with stakeholders.
Investing in the future
Looking forward, we expect the macro
environment to remain uncertain, but overall
our industry fundamentals are robust. With a
strong balance sheet and industry-leading
margins, Mondi has the potential to sustain
its successful track record. Our approach is
to focus on areas where we have the ability
to make a positive impact. This includes
the investment and business decisions we
make, how we interact with our stakeholders,
and our commitment to creating value in a
sustainable way.
Our Growing Responsibly model remains the
framework through which we shape our long-
term response to sustainability, and enables
us to demonstrate, monitor and improve
our sustainability performance across the
value chain.
The model covers 10 Action Areas and
includes 16 public commitments to be
achieved by 2020, along with a carbon
emissions commitment that runs to 2030.
Sustainability performance
Page 48-63
Digitalisation is also a strong focus for Mondi.
Our view is that by enhancing the way we
use technology, we can ensure that our
people have more time to focus on areas
requiring uniquely human skills. Mondi has
set out a digital roadmap and training is being
ramped up to fast-track the digital expertise of
our teams.
The Group has a strong major capital
expenditure project pipeline. We successfully
commissioned the modernisation of the Štětí
mill (Czech Republic) towards the end of 2018,
and continue to make good progress on
major capital projects, including our innovative
new containerboard machine at Ružomberok.
During the Boards’ visit to Świecie (Poland)
we were impressed by the results of the
€260 million capital investment programme
completed in 2017. Mondi also completed
the acquisition of Powerflute (Finland), as well
as two industrial bag plants in Egypt, and
we continue to evaluate further acquisition
opportunities as they arise.
Strategic performance
Page 28-35
On behalf of the Boards we thank all who have
contributed to Mondi’s excellent performance
in 2018, showing integrity, passion and
commitment along the way. We have every
reason to believe that with our dynamic
yet respectful approach, and passion for
sustainable growth we will continue to deliver
industry-leading returns into the future.
Fred Phaswana
Joint Chair
David Williams
Joint Chair
Mondi Group
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Chief Executive Officer’s letter
Contributing
to a better world
2018 has been an exceptional year for
Mondi on a number of levels, not least
because we have delivered another
strong set of results. However, it will also
be remembered as the year the spotlight
on plastics and the challenges thrown
up by our disposable society came into
focus – driven in part by a welcome
surge in media and consumer interest.
The reaction by government and business
has been extensive.
The Mondi Way is our framework for creating
sustainable value, with our culture and values
guiding the way we work. It’s important for
our stakeholders to understand how Mondi
is responding to the needs of our evolving
global society and the role we choose to
play in addressing the challenges. We have
defined our vision for the future to:
e Contribute to a better world
e Be an employer of choice
e Be the global industry benchmark in
quality, customer service, innovation
and productivity
These are big ideas.
Mondi Way
Page 18-19
Contributing to a better world
At Mondi, we are pleased that the need for
sustainable packaging has moved sharply
into focus. We are uniquely positioned, as
a manufacturer of paper, but also flexible
plastic packaging, to create the best
solutions for forward-thinking consumer
brands in collaboration with sustainable
materials suppliers and recyclers.
Our paper and flexible plastic packaging
solutions regularly win awards, but
commercial demand for some of our most
innovative sustainable packaging was limited
before this year.
Mondi Group
Integrated report and financial statements 2018
The public focus on the impact of plastic
waste is changing that. This momentum
gives us an important opportunity to lead our
industry with innovative sustainable paper and
plastic packaging. By taking a holistic view,
we can develop packaging that considers
the needs of customers, their products and
the planet.
The development of a circular economy,
which is restorative and regenerative
by design, requires deep collaboration.
During 2018 we strengthened existing
partnerships and built new ones, for example:
e Through the Ellen MacArthur
Foundation’s New Plastics Economy
Initiative we’re working with partners
from across the value chain as part of
a Mondi-led pioneer project to innovate
a new sustainable FMCG packaging
solution that will prove the concept of
design for recycling.
e We continue to contribute as a member of
the WBCSD’s Forest Solutions Group and
as WWF International’s corporate partner
in the paper and packaging industry.
In 2018 our Consumer Packaging and
Fibre Packaging business units increased
their collaborative efforts to fast-track the
development of EcoSolutions with a focus on:
e replacing plastic packaging with
renewable fibre-based paper packaging,
e.g. EcoVantage shopper bags and
EcoComp food waste bags;
e replacing rigid plastic packaging with
flexible plastic packaging, typically
reducing plastic consumption by 70%;
and
e optimising plastic packaging for recycling,
e.g. BarrierPack Recyclable and the
Frosch pouch – both 100% recyclable.
Business review: Consumer Packaging
Page 76-79
Another key focus area is our commitment to
fighting climate change. Our aim is to reduce
emissions, improve energy efficiency and
replace fossil fuels with renewable biomass-
based energy, where it is practical and
economically feasible. We combine strategic
energy-related investments across our pulp
and paper mills with good management
and sharing of best practice. For example,
over the past 10 years Mondi has invested
in five new highly efficient recovery boilers
at Frantschach (Austria), Ružomberok
(Slovakia), Štětí (Czech Republic), Świecie
(Poland), and Syktyvkar (Russia), as well as
biomass boilers at Syktyvkar and Świecie.
As a group, we have reduced our specific
CO2e emissions by 38% since 2004 and
64% of Mondi’s pulp and paper mills’
fuel consumption came from renewable
biomass-based sources in 2018.
Sustainability performance
Page 48-63
Being an employer of choice
Our primary responsibility as an employer of
choice must be the safety of our employees.
We have made significant progress in recent
years in our goal to zero harm, but 2018
started tragically with the death of a contractor
in Syktyvkar and the year saw five incidents
leading to life-altering injuries. Unfortunately we
suffered another fatality in January 2019
during drilling works at the construction site
of our new paper machine in Ružomberok.
Our deepest condolences have been
extended to family members and colleagues.
There isn’t a single solution to this, but zero
harm remains our first priority and we have
plans in place to address the challenge.
We are proud of our passion for performance,
and as CEO I am more determined than ever
to make this a passion for safe performance.
Mondi’s focus on key global industry
trends in sustainability, digitalisation
and empowering brands continues
to drive value accretive growth.
Peter Oswald
Chief Executive Officer
Low unemployment in many of our core
markets and changing aspirations of
millennials means we have to be smart
and responsive in attracting and retaining
the talent we need to achieve our business
ambitions. In 2018 we held our first global
Diversity & Inclusion conference, from
which we created targeted plans across
Mondi. Gender diversity is important, but
so are age, ethnicity and all other forms
of diversity. We have made progress in
broadening representation in some areas,
but at the heart of our ambition is the
creation of an environment where all voices
are heard and new ideas rise quickly to
the surface. At Mondi, we recognise that
leading for innovation requires a different
approach to leading for change, and we
need the skills and agility to do both. I look
forward to communicating our progress
in 2019.
Leading with our hearts and minds,
combined with clear strategic direction
is the key to our ongoing success. So, in
addition to our regular interactions, Mondi’s
senior leaders come together every few
years for our Leadership Forum – in 2018
we met in the energetic city of Berlin.
The goal was to align around the priorities
for Mondi’s growth journey – with inspiring
leadership and employee engagement.
It is where we launched our vision for the
future, and celebrated excellence with the
culmination of the Mondi Diamond Awards.
Our 12 finalists presented their projects in
person, showcasing the very best of Mondi
out of a diverse and impressive range of
100 entries from across the world.
Business reviews
Page 68-83
Global industry benchmark –
delivering excellence
We intend to set the standard for customer
service, innovation, quality, and productivity.
This means delivering excellence across
all our work streams and there were many
positive milestones in 2018. We have
also seen strong progress on our capital
expenditure projects, in particular the
modernisation of our Štětí mill and our
planned new kraft top white machine
in Ružomberok.
We completed the acquisition of Powerflute
in Finland and two industrial bag plants
in Egypt. Over the past five years we
have completed a limited number of
smaller acquisitions as we struggled to
meet sellers’ expectations on valuation.
Looking forward, with our strong financial
position and depth of management
resources, we are well placed to move
should the right assets become available at
reasonable values.
Mondi has a strong track record of
operational performance and comprehensive
programmes to eliminate costs. Going
forward we believe that digitalisation will play
an important role. We have been piloting
projects that will accelerate our digital
journey and identify the best way to harness
technology: data science and advanced
analytics will help us to improve productivity
and lower costs, and be key to connecting
better with our customers. Technology can
make us efficient, but it’s our employees that
make us smart!
Strategic performance
Page 28-35
Driving future growth
I am confident that Mondi’s focus on key
global industry trends in sustainability,
digitalisation and enhancing brand value will
continue to drive growth. Geographically we
remain well-placed for opportunities in
Europe and North America, which account
for around half the global packaging
market. Our leading position in central
and eastern European markets, as well as
exposure to growing markets in Africa and
Asia also provide strong opportunities for
our continued growth.
While we cannot predict the impact of
the current heightened geo-political
and macro-economic uncertainties, our
industry leading margins and strong cash
generation, coupled with a strong balance
sheet make us resilient and provide us
with the strategic flexibility to exploit
opportunities as and when they arise.
Our proposal to simplify our dual listed
structure into a single holding company
structure under Mondi plc will, subject to
shareholder approval, simplify cash and
dividend flows; enhance our strategic
flexibility; increase transparency; and
remove the complexity associated with the
current structure.
With our robust business model and
integrated value chain, strong cost
management, and focus on partnering with
our customers to deliver innovative and
sustainable solutions, I am convinced we
are well positioned for the future.
Overall 2018 was a year of strong progress
for Mondi across all fronts. At the heart of
this success is our people and it is to them
that I extend my thanks, for their passion,
their innovation and their commitment.
Peter Oswald
Chief Executive Officer
Mondi Group
Integrated report and financial statements 2018
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Strategic
report
External context
Our business model
Our strategy and strategic performance
Key performance indicators
Principal risks
Sustainability performance
Financial performance
Business reviews
Fibre Packaging
Consumer Packaging
Uncoated Fine Paper
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The Strategic report was approved by the Boards
on 27 February 2019 and is signed on their behalf by:
Peter Oswald
Chief Executive Officer
Andrew King
Chief Financial Officer
Contributing
to a better
world
We want to make our
processes and products
sustainable. This includes
securing wood from
responsible sources,
minimising waste from our
operations and working
with customers to create
EcoSolutions that
are reusable, recyclable,
and/or compostable.
71%
Wood certified to FSC or PEFC
Sustainability performance
Page 48-63
As one of our
strategic value drivers,
growing responsibly
is an integral part of
our future success.
Gladys Naylor
Group Head of Sustainable
Development
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Mondi Świecie has reduced waste
going to landfill from 100% in 2003
to only 1% today – everything
else is recycled and/or reused.
Business review: Fibre Packaging
Page 74
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External context
Opportunities and challenges
in a rapidly changing world
We operate in a fast-paced world with diverse
and complex issues impacting the planet,
society and the way we do business.
Our success is built on our ability to anticipate
and respond to the challenges and opportunities
we face today and in the future, partnering
with others to find long-term solutions.
Mondi is well-positioned to proactively
respond to three of the most relevant themes:
e Enhancing brand value
e Digitalisation and interconnectivity
e Sustainability
Enhancing brand value
Overview and challenges
A rising middle class in emerging markets,
an ageing population in the developed
world, urbanisation and evolving lifestyles
globally are changing the way brand
owners engage with their customers.
Whether through traditional retail and
distribution or growing e-commerce
channels, brand owners are under
increased pressure to differentiate
themselves from competitors. 2018 was
a year in which bricks and mortar stores
and e-commerce came closer together, as
smart brands recognised the consumer’s
desire to interact with brands physically
as well as virtually and increasingly to
personalise their offer.
In this interconnected world, packaging
has become the key link for the consumer
across multiple senses – sight, touch,
sound and smell. For our customers,
great packaging embodies brand values
and offers a consumer experience which
stands out from the crowd.
On or offline, packaging is the first
interaction the consumer has with a
product, so it plays a critical role in the
decision making process. We expect a
lot from packaging. It needs to catch the
eye, which for well-known brands means
being immediately recognisable, and
for challenger brands it means stealing
attention away from the familiar. When the
consumer first touches the packaging it
needs to represent the brand’s quality
and value. In addition, it still has to protect
the product through a ‘frustration free
packaging’ journey from manufacture
to consumption, whether it is fragile,
awkwardly shaped, heavy or vulnerable.
Mondi Group
Integrated report and financial statements 2018
Pre and post consumption, our
consumers and customers expect
our packaging to be sustainably
disposable and made using minimum
materials – renewable and recyclable
wherever possible.
Opportunities and how
we are responding
We continue to invest for growth to
enhance our product and service
offering and we are leading the industry
in innovative design for EcoSolutions:
paper where possible, plastic when useful.
With our six specialised R&D centres and
global reach, we develop partnerships
with our customers to create innovative
and appealing packaging designs that
portray our customers’ brand values
and differentiate them either on the store
shelf or when their customers receive the
product at home.
Our range of shelf-ready packaging and
point-of-sale display solutions help our
customers reduce handling costs while
enhancing shelf attractiveness with
our high-quality and visually impactful
print solutions.
Enhancing brand value also means
designing packaging that prioritises
functionality. For example, developing
tailored solutions that make brands more
useful by adding convenience features to
ensure that the packaging is easy to use,
easy to store and extends the product
shelf-life. This can include hassle-free
openings, reclosability features, multi-
barriers and on-the-go solutions.
We also know how important it is for us to
help our customers to stay competitive by
simplifying their processes and reducing
costs, while still creating packaging that
exceeds customer expectations.
Spotlight on packaging for premium brands
Benetton shopping bags
Premium brands like Benetton
can enhance their customers’
experience with luxurious, natural
and sustainable shopping bags
made from Mondi’s speciality
kraft paper. Our ‘shoppingworld’
portfolio is built on consumer
trend insights, branding expertise
and paper grades that combine
high functionality with outstanding
printability. A shopping bag is more
than a useful transportation vehicle.
It is part of the brand experience.
A superior product loses value in
a shabby bag. If retailers get this
right, consumers reuse their bag as
an accessory and an expression
of their lifestyle – and thus become
valuable brand ambassadors.
Digitalisation and interconnectivity
Overview and challenges
Accelerating technological innovation
brings new opportunities for Mondi as well
as our customers. For Mondi, it means
going beyond the automation of repetitive,
mechanical tasks. We are training our
employees to maximise the effectiveness
of automation so they can focus on
the roles that humans still do best –
continuous improvement and innovation.
Technology will make us effective, but it’s
our people who make us smart.
Technology also supports transparency.
With widespread use of the internet,
mobile technology and social media,
society now has greater access to
a much wider range of information
and the ability to use their collective
power to shape business and influence
public policy. In the eyes of today’s
stakeholders, businesses are responsible
for managing their impact not only within
their own operations, but also across
their increasingly complex supply chains
including our customers’ customers.
It is more important than ever that
business improves transparency of global
supply chains and new technologies can
help address risks related to human
rights and environmental impacts of
supply chains.
For our customers, digitalisation has brought
opportunities to reach new and existing
consumers far beyond the boundaries of
bricks and mortar. However, growing online
retail activity requires efficient primary and
secondary packaging solutions to protect
and track goods in transit, while optimising
packaging requirements and minimising
waste. E-commerce is rapidly growing
and transforming the retail landscape.
With packaging for e-commerce expected
to grow at an annual growth rate of 11% in
Europe and 14% globally1, it provides us with
significant growth opportunities with the right
packaging solutions.
Opportunities and how
we are responding
The digital revolution is creating
opportunities for us to scrutinise our
production processes, supply chains,
customer interfaces and employee
engagement platforms to explore new ways
of working to better achieve our purpose.
We have digitalisation projects underway
across a number of business areas to
enhance customer satisfaction, drive
performance, optimise pricing and facilitate
customer collaboration 24/7.
Operational efficiency initiatives include
further improved production process
stability and product quality, reduced waste
and predictive maintenance.
Digitalisation enables a greater level
of traceability within our supply chain
with a focus on raw material sourcing,
especially fibre. Across our supply chain,
we promote transparency through active
engagement with customers, consumers
and the wider public about how we do
business. Using digital technology we
are able to standardise and strengthen
our social and environmental practices
through analysis, monitoring and in-
depth reviews of activities within our
supply chain. This enables us to address,
manage and mitigate risks.
1 Smithers Pira, The Future of e-commerce packaging to 2022
Spotlight on e-commerce
Mondi Vino Box® Sprint
The digital era has transformed
the way we consume goods.
Mondi’s strong portfolio of
corrugated e-commerce solutions
and MailerBAG, our paper-based
e-commerce bag, are made
from renewable materials and
protect goods in transit, giving
our customers the possibility
to differentiate themselves
by enhancing the consumer
experience. We also optimise
packaging sizes to avoid wasteful
over packaging.
Speed of filling can also make a
difference to a busy e-commerce
business, so we developed Mondi
Vino Box® Sprint for online wine
merchants. It can safely ship up
to six wine bottles and is 100%
recyclable. There is no additional
assembly needed, it simply
pops up from a flat pack with an
integrated divider, instantly ready
to fill. The result is a saving of up to
80% in assembly time compared to
standard wine packaging.
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Integrated report and financial statements 2018
16
External context
Sustainability
Demand for sustainable packaging and
paper solutions is fortunately here to stay.
Consumers around the globe are increasingly
demanding packaging solutions that are
sourced, produced and can be disposed of
responsibly. The legitimacy of a compelling
business model will be increasingly linked
to the real value created for society as a
whole. Products manufactured within the
limits of the planet, and that enable society
to address its challenges, make clear social,
environmental and business sense, and
open up opportunities for brand growth on a
global scale. Below are the most important
sustainability themes that we see affecting our
business today and in future.
Overview and challenges
The cost of unnecessary plastic
2018 saw unprecedented awareness about
the impact plastic has on our environment.
Around 25% of total plastics produced
worldwide are used for packaging, 95%
of plastic packaging’s material value is lost
after a first (sometimes short) use, and at
least 8 million tonnes of plastic leaks into the
oceans every year1.
Governments are introducing new
legislation around single-use plastics and
plastic waste and, with China (previously
the world’s largest importer of plastic
waste in the world) no longer accepting
imports of certain types of plastic as of
2017, western countries are needing to
deal with their plastic differently, leading
to even bolder targets and regulations.
The EU Strategy for Plastics in the Circular
Economy states that all plastic packaging
should be reusable or recyclable by 2030.
As governments and consumers increase
their demand for sustainable plastics, big
fast moving consumer goods (FMCG)
and retailer brands are coming under
the most scrutiny for the plastic they
use in their products and packaging.
Many of our biggest customers have already
communicated ambitious targets and they
are going to be relying on us to provide
them with innovative high-quality sustainable
solutions from across our product portfolio.
Flexible plastic, which typically uses
70% less material than rigid plastic2, and
innovative plastic-paper combinations can
provide essential functionality that is critical
to fulfil the purpose of the packaging (for
example preventing food waste).
Mondi Group
Integrated report and financial statements 2018
Much more rapid climate change
Dramatic changes due to climate change
are already occurring at a faster rate than
expected. Climate change will worsen
the outlook for the availability of critical
resources such as food, water and energy.
The severity of existing weather patterns
is set to intensify in future, with wet areas
getting even more wet, and dry and arid
areas becoming more so3. In recent years,
the extremely dry summers in Europe have
led to water shortages that have impacted
businesses including packaging and
paper manufacturers.
The 2018 IPCC ‘Special Report on Global
Warming of 1.5°C’ states that limiting
global warming to 1.5°C would require
rapid, far-reaching and unprecedented
changes in all aspects of society, with clear
benefits to people and natural ecosystems.
Achieving this will require urgent and
fundamental action, beyond business as
usual. Businesses have a critical part to
play – both in reducing emissions and
providing solutions for mitigating and
adapting to climate change.
The need for resource efficiency
in a growing world
Industrial growth since the mid-20th century
has created wealth, development and
economic growth, but it has also endangered
the crucial ecosystems that society relies on.
The global population is growing at a rapid
pace, especially in urban areas. We know
that we use the equivalent of 1.7 planets to
provide resources and absorb waste, and
scientific evidence makes it clear that we are
pushing our planet’s natural systems to the
edge4. Demand for food, water and energy
is set to grow substantially by 2030 (food
to rise by 35%, water by 40%, and energy
by 50%)3. Tackling problems pertaining to
one commodity will be linked to supply and
demand for the others.
Economic development and production
patterns are also shifting to the east and
south, with overall trade volumes, disposable
income and consumption rising. The US,
European, and Japanese share of global
income is projected to fall from 56% today to
well under 50% by 20303. 5.3 billion people
are expected to make up the middle classes
by 2030, up from 3.6 billion people today5,
with the middle classes in the developing
world poised to expand substantially.
Urban centres are estimated to generate
80% of economic growth; the potential
exists to apply modern technologies and
infrastructure, promoting better use of
scarce resources3.
Access to sustainable fibre
Forests are core to the cultures and livelihoods
of communities worldwide with some
1.6 billion people relying on them for their
livelihoods6. Deforestation and illegal logging
contribute to biodiversity loss and climate
change, negatively impacting on ecosystem
services, and encroaching on the livelihoods
and human rights of people around the
world. The last few decades have seen a
slowdown in net global deforestation, and in
Europe forests are not declining. More forest
areas are coming under protection and
more countries are actively improving forest
management. Despite this, only around 11%
of global forests are certified7 and the shortage
of sustainable fibre on the market remains a
significant challenge.
Opportunities and how
we are responding
We are convinced that growing responsibly
and contributing to a better world is in the
best interest of all our stakeholders and
our continued success as a business.
We’re committed to continuing this journey
and we constantly adjust our response
to the evolving sustainable development
landscape through the framework of
our Growing Responsibly model, which
explains how we approach sustainability
to create value for our business and for our
stakeholders. Among our 10 Action Areas
are ‘sustainable fibre’, ‘climate change’,
‘constrained resources and environmental
impacts’, and ‘solutions that create value
for our customers’ – showing how we are
responding to the themes set out above.
Sustainability performance
Page 48-63
Online Sustainable development report
www.mondigroup.com/sd18
1 Ellen MacArthur Foundation
2 Flexible Packaging Europe
3 National Intelligence Council: Global Trends 2030
4 Footprint Network and WWF Living Planet
Report 2018
5 World Data Lab
6 WWF
7 UNECE: Forest Products Annual Market Review 2016-2017
EcoSolutions: paper where
possible, plastic when useful
Mondi is actively leading the future of a
sustainable packaging industry by showing
that contributing to a better world makes
good business sense, driving innovation
and change throughout the value chain.
We believe all packaging must be ‘fit for
purpose’: paper where possible, plastic
when useful. We offer a range of high-
performance paper-based, flexible plastic
and hybrid packaging solutions. By taking
a holistic view, we can develop packaging
that considers the needs of each customer,
their products and the planet.
For many years Mondi has been making
sustainable fibre-based and flexible plastic
packaging for forward-thinking FMCG
brands, and working in collaboration
with sustainable materials suppliers
and recyclers.
In the last decade, Mondi has reduced
the average weight of corrugated boxes
and paper bags, while increasing strength
and functionality. Mondi continues to
seek new sustainable product innovation
across both its paper and plastics business
areas. We are actively working with
our customers, suppliers and recycling
companies to find innovative solutions that
improve the sustainability of packaging.
Flexible plastic packaging, when
manufactured, used and disposed of
appropriately, delivers many benefits: from
resource efficiency (by reducing material
usage and being less transport intense) to
reducing food waste by enabling correct
sized portions and extending shelf-life.
However, we recognise the urgent need
to collaborate to make plastic packaging
more circular and bring about the system
change required in order to achieve this.
We are working with partners across
our value chain to reinvent flexible plastic
packaging so that it is fit for a circular
economy. Mondi is one of the first
signatories of The New Plastics Economy
Global Commitment – committing to 100%
of plastic-based packaging being reusable,
recyclable or compostable; and 25% being
from recycled content (where it does not
compromise functionality or food health
requirements) by 2025.
We believe our flexible packaging
solutions can contribute towards global
sustainable plastics, based on circular
economy principles.
Strategic performance
Page 28-35
Business reviews
Page 68-83
Spotlight on sustainable packaging by design
perFORMing – the #1 natural,
brown formable paper solution
Recycled washing powder
packaging
Newly patented Mondi perFORMing is a paper-based multilayer,
thermoformable packaging material that reduces plastic by up to 70%
by using coated Advantage Formable paper instead of plastic in trays
for attractive cheese and cold meat packaging. This innovative solution,
which is also recyclable in some countries, shows the unique benefits of
being able to combine expertise from our Extrusion Coatings, Speciality
Kraft Paper and Technical Films businesses.
Together with a recycling partner (APK AG) – who have developed a
process called Newcycling® – Mondi has tested the suitability of recycled
polyethylene (PE) for multi-layer films by designing a new plastic packaging
solution for washing powder that replaces up to 80% of the previously
virgin PE layer with post-industrial waste. The result is a high-quality
packaging laminate that maintains the functionality requirements of our
customer, reduces the demand for virgin fossil based PE and achieves a
packaging solution containing up to 50% recycled materials.
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Integrated report and financial statements 2018
18
Our business model
Creating value
the Mondi Way
The Mondi Way is our unique framework
for creating sustainable value. Our purpose
drives our vision and provides context for our
strategy, which we then execute through our
operating framework, in line with our culture
and values.
The Mondi Way is the foundation for our
integrated value chain and it guides the
strategic, operational and stakeholder-related
decisions we make across our business.
Our integrated value chain
Page 20-21
Purpose
and vision
Strategy
Operating framework
Culture and values
Mondi Group
Integrated report and financial statements 2018
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Our purpose states what
we do and why we do it.
Our vision sets out our
long-term aspirations as we
bring our purpose to life.
Our purpose
Our vision
We delight you with innovative
and sustainable packaging
and paper solutions. Every day.
e To contribute to a better world
e To be an employer of choice
e To be the global industry
benchmark for packaging
and paper
Our strategy is our plan of
action designed to build on our
competitive advantages so that
we can achieve our purpose.
We drive value accretive growth
via our four strategic value drivers:
Our operating framework,
The Mondi Diamond, converts
strategy into clear objectives
that drive performance at an
operational level.
Drive performance
along the
value chain
Invest in assets
with cost
advantage
Inspire our people
and grow
responsibly
Partner with
customers
for innovation
Cutting-edge
solutions
Sustainable
development
Inspired
people
Operational
excellence
Successful
customers
Our culture and values
connect, guide and inspire
our people.
Passion for
performance
Caring
Acting with
integrity
We are dynamic,
entrepreneurial and
empowered
We are respectful
and responsible
We encourage honesty
and transparency
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Integrated report and financial statements 2018
20
Our business model
Integrated across
the value chain
Our key resources
Our integrated value chain
Resins, films
and other raw materials
Wood (internal and external)
Paper for recycling
High-quality, well-invested,
cost-advantaged integrated assets
80%
pulp & paper capacity
in two lowest cost quartiles
€6bn
capital employed
Engagement and collaboration
with customers and suppliers
9,000
customers
1,500
key suppliers
Responsible procurement of
raw materials and other inputs
71%
wood procured from FSC
or PEFC certified sources
64%
mill fuel consumption
from biomass-based
renewable sources
Diverse and talented people
26,100
employees
21%
women employed
across our operations
Strong financial position
and cash flow generation
€1,226m
cash flow generated
BBB+/Baa1
S&P/Moody’s credit rating
Key stakeholder relationships
Numerous
strategic partnerships,
memberships &
collaborations
79%
of mills & forestry
operations completed a
SEAT assessment to date
Forests and raw materials
Fibre is a key input in our pulp and paper production
process, with wood sourced from our own sustainably
managed forests as well as externally. In 2018, 71%
of our procured wood was certified with the balance
meeting our minimum Controlled Wood standard,
which is in line with best practice certification scheme
requirements. Throughout our manufacturing activities,
we require access to natural resources (most notably
water and energy) and raw materials (such as wood,
paper for recycling, chemicals and polymers).
We support an inclusive and sustainable supply chain
promoting responsible procurement of raw materials.
Competitive advantages
e Well located operations with access
to cost-competitive fibre
e Own fibre supply in Russia and South Africa
(where we manage around 2.4 million hectares of
100% certified forests)
e 100% electricity self-sufficiency resulting in lower
energy costs, and 64% of mill fuel consumption
from biomass-based renewable sources
Our integrated value chain
provides us with competitive
advantage and creates long-
term value by converting raw
materials into innovative and
sustainable packaging and
paper solutions, using the
Mondi Way as our framework.
Mondi Way
Page 18-19
Our key relationships
It is vital that we engage with our key
stakeholders across the value chain
to maintain the mutually beneficial
relationships that help us to create long-
term value. Our stakeholders include:
e Employees
e Customers
e Investors
e Communities
e Suppliers and contractors
e Partners, associations,
governments and regulators
Key relationships
Page 22-25
Managing our risks
Successfully managing our risks and
appropriately setting our risk appetite is
also critical to ensuring we continue to
generate long-term value. We categorise
our risks into strategic risks, financial risks,
operational risks and compliance risks.
Principal risks
Page 38-47
Mondi Group
Integrated report and financial statements 2018
Our key outputs
Our integrated
value chain
Page 68-69
High-performing operations
23.6%
ROCE
13
production records
on pulp/paper machines
Pulp and
paper mills
Converting
operations
Recycling
Packaging and
paper solutions
Innovative products and solutions
€22m
spent on research
& development
8
WorldStar Packaging
awards (2019)
Sustainably managed natural
resources and outputs
10mGJ
energy provided to
communities & public grid
100%
managed forests certified
Inspired and skilled people
30+
average annual training
hours per employee
89%
participation in global
employee survey
Capital appreciation and
dividends to shareholders
23%
increase in ordinary
dividend per share
74%
total shareholder
return (5 years)
Support to regional economies
and local communities
€248m
direct taxes paid
€7.9m
community investments
Pulp and paper mills
Converting operations
Supporting a circular economy
Our integrated pulp and paper mills produce pulp,
packaging paper and uncoated fine paper. We produce
slightly more pulp than we need in our paper
production, and we sell the small surplus externally.
Our containerboard and kraft paper is used by our
converting operations, with the remainder sold to other
customers. Our range of uncoated fine paper includes
office and professional printing paper.
Our fibre-based packaging operations convert packaging
papers (sourced internally and externally), together with
other raw materials into corrugated board and boxes,
industrial bags and speciality extrusion-coated solutions
for a wide range of consumer and industrial end-uses.
We operate across the flexible packaging production
process, from resin compounding to bag making,
laser cutting and incorporating special features.
Our packaging solutions protect and preserve
food, pet food, personal care and other consumer
products, extending shelf-life, reducing food waste and
enhancing consumer experience.
Competitive advantages
e High-quality, well-invested, cost-advantaged
asset base with around 80% of our pulp and
paper capacity in the two lowest industry cost
curve quartiles
Competitive advantages
e Unique position as a leading producer of both
plastic and paper-based solutions, providing an
ideal platform to meet our customers’ sustainable
packaging needs
e Vertically integrated asset base reducing our
e Leading market positions provide us the scale
exposure to price volatility of key raw materials
(particularly pulp), providing security of supply and
enabling production and logistics optimisation
e Focus on excellence – superior operating
performance achieved through continuous
improvement initiatives and driving performance
along the entire value chain
and ability to service key accounts by leveraging
our plant network
e Integrated model, coupled with ongoing
specialised R&D, enables us to develop
partnerships with our customers to deliver
innovative and customised solutions
Fibre is a renewable resource. Our mills use both
virgin fibre and paper for recycling (recovered after
use), to produce our containerboard products.
Paper for recycling is an important and sustainable
source of fibre. The recovery of fibre at the end of
the product’s life reduces waste and contributes to a
circular economy.
Our flexible plastic packaging operations use resins,
films and other raw materials as part of the production
process. Mondi is working with stakeholders across
the value chain to innovate and develop sustainable
solutions that support a circular economy for flexible
plastic packaging solutions. We have committed to
100% of plastic-based packaging being reusable,
recyclable or compostable, and 25% being from
recycled content (where it does not compromise
functionality or food health requirements) by 2025.
External context
Page 14-17
Mondi Group
Integrated report and financial statements 2018
21
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Our business model
Key relationships
How we engage
e Biennial group-wide
employee surveys
e Regular local briefing sessions
by managers
e Electronic communications
and publications
e Group-wide intranet (planetmondi)
e Performance and
development reviews
e Internal conferences and
leadership forums
e Employee training programmes
and workshops
e Virtual leadership and
employee meetings
Key topics discussed
e Fair working conditions
e Development opportunities
e Safety
How we engage
e Regular customer satisfaction surveys
e Collaboration on product innovation
e Customer events and exhibitions
e Questionnaires
e Key account manager relationships
e Digital customer interfaces
Key topics discussed
e Product innovation
e Quality
e Responsible sourcing
Our employees
We have a diverse team of 26,100 people
with a broad range of skills and expertise.
In addition to on-the-job informal
communication, we regularly engage
with our employees through formal
communication channels to provide an
opportunity for open dialogue and we
invest in training programmes to support
their development.
It is through this collaborative effort that
we resolve challenges together, enabling
shared success through an engaged
workforce and a performance-driven
approach. We aim to achieve a consistent
culture across our operations, with values
that connect, guide and inspire our
people, thereby providing a platform for
our shared success.
Sustainability performance
Page 48-63
Online Sustainable development report
www.mondigroup.com/sd18
Our customers
As part of our strategy, partnering with
customers for innovation is a key value
driver for our joint success. Global trends
are requiring us to collaborate with our
customers more than ever.
We are uniquely positioned to offer our
9,000 customers a range of innovative
and sustainable solutions that exceed their
expectations and help them to meet
their sustainability commitments. We also
continue to strive for excellent customer
service and quality, with a focus on digital
acceleration initiatives.
Our customers know us as a partner in
their success. We are problem solvers.
By creating EcoSolutions across multiple
industries, we are enhancing the value of
some of the world’s best known brands,
as well as local favourites.
External context
Page 14-17
Strategic performance
Page 28-35
Mondi Group
Integrated report and financial statements 2018
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Spotlight on how we engage with
customers to create innovative solutions
The ambition required deep
innovation know-how in ice cream
packaging to ensure that the window
helped the brand to stand out,
without compromising the sleeve’s
performance. “We were the only
supplier to accept this challenge
and the first commercial products
hit the shelves in May 2018.” says
Sedat Igbar, European commercial
manager at Mondi Kalenobel. “We
worked step by step with Oexmann
and developed and patented a cone
sleeve that lets ice cream lovers see
the goodness inside.”
Oexmann began making ice cream
cones back in 1926 and Thomas
Oexmann, grandson of founder
Karl Oexmann, says business
is flourishing.
“We are currently producing almost
five million ice cream cones every
day and we export to virtually every
country in Europe.”
Mondi’s special sleeves are being
used to package premium cones
together with Oexmann’s customer
Fonterra (New Zealand).
The oval clear window on the cone
is made of biodegradable film to
ensure it’s a sustainable packaging
solution. We also created a small
transparent laser-cut window on
the cone lid so that consumers can
see the ice cream. Fonterra liked
it, and we are now supplying
custom-made lids in addition to the
cone sleeves!
We worked step by
step with Oexmann
and developed and
patented a cone
sleeve that lets ice
cream lovers see the
goodness inside.
Sedat Igbar
European commercial manager
at Mondi Kalenobel
The inside scoop
on why partnering
with customers
makes good
business sense
Estimated retail sales of the global
ice cream market is around
US$74 billion1, and just keeps
growing. Europe accounts for
30% of the global ice cream
market with consumption growth
mainly driven by single portion ice
cream1. Mondi Kalenobel (Turkey)
is establishing itself as a packaging
innovator in the ice cream world.
The team recently took on a
customer challenge that no one
else dared to: producing a paper
ice cream cone sleeve with a clear
biodegradable plastic window that
allows the consumer to see the
sugar wafer cone. Family-owned
sugar-cone maker Oexmann
GmbH & Co. KG (Germany)
approached Mondi to explore
whether or not it could be done.
1 Euromonitor
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Integrated report and financial statements 2018
24
Our business model
Key relationships
Our investors
We actively and regularly engage with our
investors and analysts, primarily relating to
our financial performance, sustainability,
governance, risk management and strategy.
The feedback we receive informs our
management and reporting practices.
Our relationship with debt investors
and banks as key providers of capital
to the Group, together with credit rating
agencies, ensures we have access to
funding for investment opportunities
through the business cycle. We have solid
investment grade credit ratings.
We are proud of our industry-leading
performance, and we appreciate the
trust our shareholders place in us to
deliver value accretive growth in a
sustainable way.
How we engage
e Annual General Meetings
e Events including results
presentations, trading update calls,
site visits and capital markets days
e Roadshows
e Telephone calls and meetings
e Integrated report and
financial statements
e Questionnaires and ad hoc questions
and requests
e Independent disclosure platforms
for investors such as CDP
e Investor perception studies
Key topics discussed
e Strategy
e Governance
e Capital allocation
Strategic performance
Page 28-35
Financial performance
Page 64-67
How we engage
e Socio-economic Assessment
Toolbox (SEAT) process
e Community Engagement Plans
(CEPs)
e Open days and visits to our sites
e Partnering with communities
and other stakeholders on
development initiatives
Key topics discussed
e Employment and enterprise support
e Community health
e Local infrastructure investment
Our communities
We are a global company with diverse
operations located across multiple
jurisdictions. We play a key socio-
economic role in the communities where
we operate, creating employment and
business opportunities in addition to
paying local and regional taxes. In 2018,
we paid €248 million in direct taxes.
Ongoing and transparent dialogue
with local communities enables us to
collaboratively address challenges,
understand and manage risks, generate
opportunities and improve performance.
In 2018, we invested €7.9 million globally
in the communities where we operate,
supporting health, education, local
enterprise and infrastructure.
Sustainability performance
Page 48-63
Online Sustainable development report
www.mondigroup.com/sd18
Read more
Page [00]
Mondi Group
Integrated report and financial statements 2018
Our suppliers and contractors
How we engage
e Regular compliance assessments of
key suppliers
e Supplier collaborations
and partnerships
e Discussions on credible certification
systems to secure long-term
sustainable wood fibre suppliers
e Ongoing focus on working together
to improve safety performance
Key topics discussed
e Local procurement and
resource support
e Safety
e Sustainability along the supply chain
In 2018 we procured €5.6 billion worth of
goods and services from our suppliers.
We follow a practical, risk-based approach
when engaging with our 1,500 key
suppliers and smaller, regional suppliers.
We operate a central procurement
function in a number of key spend
categories and manage the remainder
regionally or locally. We engage with our
suppliers to develop solutions to the social
and environmental challenges we all face
across the value chain. We encourage
supply chain transparency and promote
fair working conditions together with our
suppliers by developing a responsible,
inclusive and sustainable supply chain.
We work closely with our contractors
to mitigate risks, improve practices and
ensure they follow Mondi protocols
and practices in areas such as safety,
transparency and business ethics.
Sustainability performance
Page 48-63
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www.mondigroup.com/sd18
Partners, associations, governments and regulators
We believe in global partnerships
and initiatives where together we
can bring about meaningful change.
Shared resources and best practice
merged together provide an opportunity
for multi-stakeholder collaborations to
find sustainable solutions along the entire
value chain.
We engage with national and local
governments and regulators to share our
intentions, understand their concerns
and priorities, and find mutually beneficial
solutions on important topics such as
climate change, regulatory compliance
and support for research programmes.
Sustainability performance
Page 48-63
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www.mondigroup.com/sd18
Among others, we engage with:
e WWF
e Ellen MacArthur Foundation’s
New Plastics Economy Initiative
e The Cambridge Institute for
Sustainability Leadership (CISL)
e The United Nations Global
Compact (UNGC)
e World Business Council for
Sustainable Development (WBCSD)’s
Forest Solutions Group
e Confederation of European Paper
Industries (CEPI)
e Circular Economy for Flexible
Packaging (CEFLEX) project
Key topics discussed
e Climate change and
circular economy
e Regulatory compliance
e Support for research programmes
Mondi Group
Integrated report and financial statements 2018
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Our strategy
Strategic framework
Our strategy is to deliver value accretive
growth by focusing on our four strategic value
drivers. This approach allows us to build on the
competitive advantages we enjoy today, and
sets a clear framework for our investment and
operational decisions to continue to create value
into the future. All strategic value drivers are
important, with priority levels differing across
the value chain.
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We drive
value
accretive
growth
Inspire our p e o p l e
and grow resp o n s i b l
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Our Uncoated Fine Paper business has
a clear cost competitive advantage and
exposure to growing markets in central
and eastern Europe, Russia and South
Africa. We will continue to invest to
maintain and improve its competitiveness,
and leverage this asset base to increase
our exposure to faster growing packaging
products where the opportunity arises.
Our disciplined approach to this strategic
framework, while retaining flexibility on
how we execute it, has positioned us as
a leading global packaging and paper
group with a strong platform for growth.
We continue to expand our business,
with an emphasis on assets and markets
that offer us inherent advantages, and
products that are core to our portfolio or
bring related development opportunities.
We see greater potential for structural
growth in the packaging sectors, where
we plan to continue growing through
value-enhancing capital investments and
acquisitions that build on our competitive
advantages and enable us to better serve
our customers.
We focus on our four strategic value drivers
to build on our inherent competitive advantages.
Peter Oswald
Chief Executive Officer
Mondi Group
Integrated report and financial statements 2018
Drive performance along
the value chain
Our passion for performance will
always be central to the way we
run our business – from our focus
on commercial excellence and
lean processes, to rigorous quality
management and operational
excellence programmes that enhance
productivity and efficiency.
Our collaborative approach to
benchmarking enables us to learn
from our best performing operations
and identify emerging issues to ensure
performance is optimised throughout
the organisation. We have continuous
improvement systems and processes
in place focused on enhancing
productivity, increasing efficiency,
reducing waste and ensuring our
processes stay lean. When necessary,
we take decisive action to restructure
non-performing assets. We also focus
on finding innovative ways of working
and using digital technology to further
enhance our performance.
We maintain selected centralised
functions, where we believe we can
benefit from a coordinated approach,
such as procurement, technical,
sustainable development, treasury and
tax, to optimise collaboration and costs.
A key component of our success in
driving performance along the value
chain is creating an entrepreneurial and
dynamic culture across our organisation.
Priorities going forward
e Commercial excellence programmes,
digitalisation initiatives and quality
management systems
e Continuous improvement initiatives
to further enhance productivity, efficiency and
reduce costs
Related risks and mitigation
1 3 8 9 10 15
Principal risks
Page 38-47
Invest in assets with
cost advantage
Inspire our people
and grow responsibly
Partner with customers
for innovation
We believe that our portfolio of assets
is industry leading. Investing in our
cost-advantaged asset base to maintain
and enhance our competitiveness is
of particular importance for our pulp
and paper operations where products
are generally more standardised and
relative cost competitiveness is a
key value driver. We focus on driving
organic growth, strengthening our
cost competitiveness, enhancing our
product offering, quality and service
to customers, and improving our
environmental footprint. We invest in
our existing operations and, where
appropriate, in acquisitions. We aim
to acquire businesses that produce
high-quality products with sustainable
competitive advantage and the potential
to achieve world-class operating
standards. This enables us to generate
synergies through integration, enhance
our product and service offering and/or
extend our geographic reach to better
serve our customers.
Our integrated business model, with
backward pulp integration and high
electricity self-sufficiency, provides us
with security of supply and reduced
exposure to raw material price volatility,
and helps us manage sustainability risks
and opportunities more holistically.
Our disciplined approach to
investigating, approving and executing
capital projects is one of our key
strengths and plays an important role
in successfully delivering strong returns
through the cycle.
We engage with our people to ensure
their commitment to a business which
they feel is responsible, empowering
and able to offer a range of development
opportunities. Creating an environment
that fosters and respects diversity and
inclusion is vital to our success, and
improves our competitive advantage in
becoming an employer of choice.
We believe that being part of the
solution to global sustainability
challenges will secure the long-term
success of our business and the
wellbeing of our communities and other
stakeholders. Communicating openly
and working together helps us to better
understand and address risks and
opportunities so that we can continue to
generate value for our stakeholders long
into the future.
Our sustainability commitments are
reflected across the 10 Action Areas
of our Growing Responsibly model,
including 16 commitments to 2020
(the climate commitment runs to
2030). We are already working on our
approach post 2020 to build on our
achievements, monitor and improve
the way sustainability is embedded
in our business, and enable our
future success.
Our collaborative partnerships are key
as we look to scale up our contribution
beyond our own boundaries. It’s only by
working together that we will achieve the
impact, innovation and scale necessary
to bring about change.
Priorities going forward
e On time and on budget execution
of capital investment programme
e Continue to evaluate value-enhancing organic
and inorganic investment opportunities
Priorities going forward
e Continued initiatives to engage our people,
with special attention to diversity and
inclusion initiatives
e Continue to manage sustainability risks
and opportunities, and develop post 2020
Growing Responsibly commitments
Working with our customers to
create high-quality, innovative and
sustainable solutions is key to our
long-term success. In our upstream
packaging and paper operations
our focus is on producing lighter-
weight packaging materials without
compromising strength; enhancing the
printing quality of our products; and
achieving productivity and efficiency
gains. Our converting operations focus
on product innovation to help our
customers find the most sustainable
packaging for each product; protect and
promote their products; and optimise
longevity, freshness and convenience.
In our Fibre Packaging business, our
backward integration provides us
security of paper supply and enables us
to carry developments in our upstream
paper operations over to our converting
plants. As a leading producer of plastic
and fibre-based packaging, we are
uniquely positioned to leverage our
relationships and product know-how
to offer our customers innovative and
sustainable solutions, combining
the best of our paper and flexible
plastic packaging.
Getting innovation right is critical to
meeting increasingly sophisticated and
bespoke customer needs. Our R&D
centres and innovation activities span the
entire value chain. We also cooperate
with external partners to maximise the
potential of our R&D around designs,
technologies, procedures, and markets
to deliver products that enable our
customers to succeed, while minimising
the impact on society.
Priorities going forward
e Strong focus on product innovation especially
around sustainable paper and plastic-based
packaging solutions
e Further implementation and enhancement of
digital CRM systems across our businesses
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Related risks and mitigation
Related risks and mitigation
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28
Strategic performance
A strong track record
of value accretive growth
2018 was a successful year for the Group. We delivered strong
results, building on our track record of value accretive growth,
which is testament to our consistent and focused strategy,
robust business model, integrated approach to sustainability,
and firm commitment to drive performance.
Our financial
performance in 2018
Group revenue of €7,481 million was up
5%. Excluding the impact of acquisitions
and divestitures, revenue was up 4%,
mainly due to higher average selling prices
achieved across all our businesses.
We saw volume growth in Fibre Packaging,
driven by the benefit of previously
completed capital investment projects,
operational improvements and strong
organic volume growth in Industrial Bags.
Consumer Packaging volumes were
impacted by our targeted approach to
exit lower margin business and a decline
in volumes in personal care components.
While core product volumes in the
Uncoated Fine Paper business were up
year-on-year, market pulp and newsprint
volumes were negatively impacted,
respectively, by the extended shut at our
Richards Bay mill (South Africa) and the
strategic decision taken in the prior year to
exit the newsprint market in South Africa.
Underlying EBITDA was up 19% to
€1,764 million. We benefited from good
demand across our fibre packaging
businesses, higher average selling prices
and the contribution from our recent
acquisitions. We are particularly pleased to
report on a robust operating performance,
delivering productivity gains and strong
cost containment, mitigating the inflationary
pressures on our cost base.
Our return on capital employed (ROCE) was
23.6%. After taking into consideration the
impact of depreciation and special items,
operating profit of €1,192 million was up 23%.
We continue to make good progress
in delivering value accretive growth
and enhancing the ongoing cost
competitiveness of our operations through
our capital expenditure programme.
During the fourth quarter of 2018, we
successfully started up the €335 million
modernisation of our kraft paper facility in
Štĕtí (Czech Republic) and we received the
final permits to proceed with our investment
in a 300,000 tonne kraft top white machine
at our Ružomberok mill (Slovakia), while
work to upgrade the pulp mill at the same
site is progressing well.
Group revenue
€ million
€7,481m
Group underlying EBITDA
€ million
€1,764m
q19%
on
2017
7,481
7,096
1,764
1,325
1,366
1,482
1,126
6,819
6,662
6,402
Fibre Packaging
1,086
Consumer Packaging
194
Uncoated Fine Paper
516
Breakdown excludes corporate
costs of €32 million
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Underlying EBITDA margin
%
Underlying EBITDA development by Business Unit
€ million
Current estimated pre-tax weighted average cost of capital
23.6
253
(28)
52
5
1,764
(446)
20.5
20.9
1,482
19.4
17.6
(126)
1,192
2014
2015
2016
2017
2018
Underlying
EBITDA
Fibre
Packaging
Consumer
Packaging
Uncoated
Fine Paper
Corporate
Underlying
EBITDA
Depreciation,
amortisation
& impairment
Special
items
Operating
profit
2017
2018
2018
Mondi Group
Integrated report and financial statements 2018
Investing in our cost-advantaged assets
gives us a strong platform for growth.
Peter Oswald Chief Executive Officer (left)
Andrew King Chief Financial Officer (right)
Expansionary capital expenditure projects
at a number of our packaging operations
and the integration of acquisitions
completed in the year will further enhance
our production capabilities and product
offering to customers.
Basic underlying earnings of 189.1 euro
cents per share were up 27% compared
to 2017.
A special item net charge amounting to
€126 million before tax was recognised
(2017: €61 million) for restructuring and
closure costs and related impairments.
After taking the effect of special items into
account, basic earnings of 170.1 euro cents
per share were up 23% compared to 2017.
Cash generated from operations of
€1,654 million (2017: €1,363 million), reflects
the continued strong cash generating ability
of the Group. Following the payment of a
special dividend (€484 million) in May and
the completion of acquisitions totalling
€424 million during the year, net debt was
up to €2,220 million (2017: €1,532 million)
or 1.3 times (2017: 1.0 times) net debt to
12-month trailing underlying EBITDA.
Financial performance
Page 64-67
Delivering value
accretive growth
We made good progress on all our
strategic value drivers in 2018, continuing
to deliver value accretive growth and cost
optimisation. Our position as a global
packaging and paper group secures a solid
foundation to grow, with our packaging
interests offering exposure to good
structural growth opportunities.
In June 2018, we completed the acquisition
of Powerflute (Finland), an integrated pulp
and paper mill with a production capacity
of 285,000 tonnes per annum of high-
performance semi-chemical fluting, for a total
consideration of €365 million on a debt and
cash-free basis. The integration is progressing
well and further broadens our containerboard
product range and geographic reach.
We also completed two industrial bag plant
acquisitions in Egypt bolstering our presence
in the fast growing Middle East industrial
bag market, enabling us to better serve our
customers in the region.
While in recent years we have found greater
opportunity for value-enhancing growth
through organic capital investments,
acquisition led growth remains important
to our strategy and we continue to evaluate
opportunities as they arise.
Strategic framework
Page 26-27
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Western Europe
Russia
South Africa
North America
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Return on capital employed (ROCE)
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23.6%
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Strategic performance
Drive performance along
the value chain
We continue to benefit from our ongoing
operational excellence and cost control
initiatives, driving productivity and efficiency
as well as minimising waste. To further
improve the reliability and technical integrity
of our pulp and paper operations and
reduce maintenance costs we continue
to develop our asset management
processes, including the implementation of
specific training to enhance the skills and
qualifications of our people across our mill
network. We also established a programme
to optimise the performance of our recovery
boilers, which we expect will deliver energy
savings, enable best-practice sharing
and continue to improve the reliability of
our operations.
To continue to optimise our production
footprint and leverage our cost-advantaged
locations, we undertook a number of
restructuring initiatives during the year.
We announced the closure of two industrial
bag plants in Europe, and one in Kentucky
(US) and restructured our UK Consumer
Packaging operations, including the closure
of our plant in Scunthorpe. We stopped
production of in-line silicone coated products
at Štětí due to technical challenges and
process complexity, and uncoated fine
paper production at one of our machines
at Merebank (South Africa) due to declining
margins on unintegrated paper production
following the rapid rise in hardwood pulp
input costs. In June 2018, we completed
the sale of a flat sack kraft paper mill in Pine
Bluff, Arkansas (US), with 130,000 tonnes of
annual production capacity.
We believe digital solutions can help us
drive performance to further enhance our
competitiveness. We are piloting a number of
digital projects across the Group, focused on
applying advanced analytics in our processes
to improve quality and pricing decisions as
well as introducing new ways to share best
practice across our machines and plants.
The power of people in a successful integration process
In June 2018 we acquired
Powerflute, an integrated pulp
and paper mill in Kuopio (Finland),
supporting our strategy to invest in
high-quality packaging and paper
assets; enhancing our product
portfolio; and increasing our
exposure to the growing global
food and consumer electronics
packaging sectors. It also makes
us the leading European virgin
containerboard producer.
Successful acquisitions have
been a key part of Mondi’s
growth over the years. We know
how important it is to involve
people right from the start so
that they feel a connection to
Mondi’s culture and strategy, and
understand how to contribute to
business objectives. This helps to
ensure a smooth transition with
a focus on creating a safe and
inspiring working environment
while transferring knowledge,
driving performance and
prioritising our customers.
A structured integration process
with clear responsibilities is
essential to maximise potential.
The Powerflute integration
brought together a diverse team
of around 70 people including
local management and Mondi
specialists in areas such as
safety, supply chain, capex
and operations, information
technology, human resources,
communication and marketing as
well as procurement.
The team has been collaborating
across 18 workstreams, with 6
already successfully completed
by the end of 2018. And there are
opportunities to keep learning
from each other as we focus on
benchmarking best practice,
optimising operational excellence,
and realising synergies.
Mondi Group
Integrated report and financial statements 2018
Invest in assets with
cost advantage
We have a focused capital expenditure
project pipeline securing our future
growth. Over the past three years our
major capital projects have contributed
€95 million of incremental operating profit,
including €20 million in 2018. We expect
to generate a further €50 million in 2019.
Key developments are outlined below.
In the fourth quarter of 2018, we
successfully commissioned the €335 million
modernisation of the Štětí mill to replace the
recovery boiler, rebuild the fibre lines and
debottleneck the existing packaging paper
machines. The project is expected to result
in additional annual production of 90,000
tonnes of softwood market pulp and
55,000 tonnes of packaging paper.
We obtained the final necessary permitting
to proceed with the €340 million investment
in a new 300,000 tonne per annum kraft
top white machine at Ružomberok, with
start-up expected towards the end of 2020.
The related pulp mill upgrade at the same
site is progressing according to plan with
start-up expected in late 2019.
Responding to continued good demand
across our range of speciality kraft papers
in Europe, supported by the drive to
replace plastic carrier bags with paper-
based alternatives, we have approved a
€67 million capital investment project to
convert a containerboard machine at Štětí
to be fully dedicated to the production of
speciality kraft paper with a mix of recycled
and virgin fibre content for shopping
bag applications. This will also allow us
to optimise productivity and efficiency
at Świecie (Poland), where this grade is
currently produced. The project will result
in an additional 75,000 tonnes per annum
of speciality kraft paper capacity, while
reducing our containerboard capacity by
around 30,000 tonnes per annum. Start-up
is expected by the end of 2020.
Investing in Mondi Štětí to create social and economic value
Our Štětí mill has set its sights
on an ambitious new vision:
to cement its position as one
of the leading speciality and
sack kraft paper mills in the
world by significantly expanding
its production of top quality
products, at the lowest costs in
the market.
The €335 million modernisation
project, commissioned as
planned at the end of 2018,
is fundamental to realising
this ambition and facilitating
future development.
The project scope includes
the rebuild of the fibre lines,
debottlenecking the existing
packaging paper machines, and a
new recovery boiler.
The benefits of the project include:
e Increasing softwood market
pulp production by 90,000
tonnes per annum, and lowering
per tonne pulp production costs
e Debottlenecking the existing
packaging paper machines to
increase production by 55,000
tonnes per annum
e Reducing the mill’s
environmental footprint
e Increasing electricity self-
sufficiency and lowering
energy costs
e Creating new jobs which will
have a positive impact on the
region’s economic development
Engaging with the Štětí
community has been and
continues to be key, and we’re
seeing the benefits through
improved local relationships and
opportunities. Describing Mondi’s
Štětí mill as a ‘shining example of
a successful foreign investment’,
Bohuslav Sobotka, Prime Minister
of the Czech Republic said,
“This modernisation project
demonstrates Mondi’s long-term
commitment to growth and
sustainable business in the
Czech Republic, and will deliver
benefits to both the region and the
national economy.”
Capital expenditure
€ million
€709m
709
611
562
595
465
Five-year net investment1
%
Corrugated
value chain2
Bags value chain3
44%
37%
Consumer Packaging 19%
Uncoated Fine Paper
0%
31
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As part of our plan to maintain Syktyvkar’s
(Russia) competitiveness and increase
saleable production by around 100,000
tonnes per annum in the medium term, we
are investing to debottleneck production
and avoid unplanned shutdowns, including
various upgrades of the mill infrastructure,
fibre lines and pulp dryer, and a new
evaporation plant.
We are investigating alternatives for the
modernisation of our Richards Bay facility,
including the modernisation of the mill’s
energy and chemical plants.
We continue to invest in our Fibre
Packaging and Consumer Packaging
converting plants with competitive
advantages to grow with our customers,
enhance our product and service offering
and reduce conversion costs.
Our recently completed and planned major
capital projects in the Czech Republic,
Slovakia and Russia are expected to
increase our current saleable pulp and
paper production by around 10% when in
full operation.
In recent years, we have invested
significantly in the modernisation and
growth of our Consumer Packaging
business. While further capital investment
opportunities in this business remain an
option, we are currently focused on the
optimisation of our existing operations
including leveraging recently completed
investments as well as completing current
capital investment projects underway.
Given the approved project pipeline and in
the absence of any other major investment,
our capital expenditure is expected to be in
the range of €700-800 million per annum,
on average, for 2019 and 2020.
Vertical integration
production in million tonnes
We use
Net market exposure
0.2
4.1
3.8
1.61
0.3
0.8
1.7
0.3
0.6
(0.1)
Pulp
Virgin
container-
board
Recycled
container-
board
Kraft
paper
Uncoated
fine
paper
1 In addition to the 1.6mt of uncoated fine paper, the Group also
produced 0.2mt of newsprint in 2018
2014
2015
2016
2017
2018
1 Net investment calculated as capex less depreciation and
amortisation, plus acquisitions, less disposals
2 Corrugated value chain comprises Containerboard and Corrugated
Packaging business segments
3 Bags value chain comprises Kraft Paper, Industrial Bags and
Extrusion Coatings business segments
Mondi Group
Integrated report and financial statements 2018
32
Strategic performance
Inspire our people
and grow responsibly
Our Growing Responsibly model remains
the framework through which we shape
our long-term response to sustainability,
and enables us to demonstrate, monitor
and improve our sustainability performance
across the value chain. The model covers
10 Action Areas that reflect the aspects
of sustainability that are most relevant for
Mondi and our stakeholders. Within these
Action Areas, we have made 16 public
commitments to be achieved by 2020,
along with a carbon emissions commitment
that runs to 2030.
In addition to driving our response to
the sustainability issues that are most
relevant to our business, our commitments
demonstrate Mondi’s positive contribution
to achieving the UN Sustainable
Development Goals (SDGs).
In 2018, we completed a new materiality
assessment to understand the relative
importance of our material issues to our
stakeholders, and to identify new and
emerging issues. The results will inform our
commitments beyond 2020.
When it comes to our safety performance,
we have come a long way over the last 10
years. Open and honest discussions have
seen a step change in the way we engage
in, and take responsibility for safety. But while
we are among the safety leaders in our
industry, unsafe behaviour was a common
factor in many of our incidents in 2018.
We were deeply saddened by the fatality of a
contractor at Syktyvkar in April 2018 during
planned maintenance work at the woodyard
as well as five life-altering injuries across the
business. Unfortunately, we suffered another
fatality in January 2019 when a contractor
lost his life during drilling works at the
construction site of our new paper machine
in Ružomberok. Thorough investigations are
conducted after all incidents and action plans
implemented to prevent repeat incidents.
With zero harm our goal, we continue to work
tirelessly to eliminate fatal and life-altering
injuries by focusing on the top risks at all
operations enabling us to better anticipate
and manage our highest risk activities.
Mondi Group
Integrated report and financial statements 2018
Purpose, impact and scale:
Making a real contribution to the UN SDGs
collaborating with key players
and stakeholders and scaling
our efforts.
Impactful response
This thinking has seen us focus
on SDGs 7, 8, 9, 12, 13 and
15. These are the areas where
we have the greatest impact
and are best positioned to
contribute meaningfully.
Supporting youth-
led solutions
In 2018, we partnered with One
Young World on the Lead2030
initiative – a competition to find
youth-led practical solutions to
drive progress on the SDGs.
We committed to funding a
project where the winning
candidate has the opportunity
to turn their concept into a viable
waste tackling solution.
Action at scale
The ambitions of the SDGs call
for new types of partnership.
This is why, as a member of
WBCSD’s Forest Solutions Group
(FSG), we are working with other
companies to develop a SDG
sector roadmap. Set to launch
in mid-2019 the roadmap aims
to inform decision-making by
describing the most impactful
contributions the sector can make
through process, product and
partnership innovation.
Purposeful communication
Advancing our communication
of the SDGs, this year we have
introduced a comprehensive
index that references SDG links
throughout our online Sustainable
development report, enhancing
the accessibility, transparency
and navigability of our disclosure.
Integrating the SDGs into our
reporting brings focus and
perspective to our sustainability
thinking and messaging,
strengthens our social relevance
as a business and helps us to set
more meaningful future targets.
Online Sustainable
development report
Page 29
Stakeholder expectations of
business taking an active and
central role in tackling global
development challenges have
increased significantly.
At Mondi we believe that the
primary contribution of any
business to the SDGs is through
job opportunities, taxes and social
and economic development.
Beyond these however, we
understand that making a real
and lasting difference to the global
development agenda can only
be achieved by considering our
impacts, targeting our response,
We continue to focus on the 24-hour safety
mindset approach introduced in 2017.
The concept is designed to tap into people’s
awareness on an emotional, unconscious
level by applying safety to all aspects of their
lives, not just at work. In 2018, we had 262
recordable cases, which equates to a TRCR
of 0.68. This is in line with the previous year
level (adjusted for acquisitions) and 11% lower
than our 2015 baseline.
As a Group, we aim to be an employer
of choice by attracting talent, creating a
stronger culture of employee recognition
and retaining our high-performing
workforce. We have a number of
programmes currently in place and are
defining further initiatives to ensure we have
the right talent and succession plans to
deliver on our long-term strategic targets.
In 2018, we focused in particular on
creating a culture that encourages diversity
and inclusion, which will enhance our
competitive advantage going forward.
Our most recent group-wide employee
survey was carried out in February
2018. All Mondi employees were
invited to take part, with the survey
available in 24 languages. We are
encouraged by the response rate of 89%
(2015: 90%), reflecting the engagement of
our employees in achieving a better, more
inspiring workplace together.
Positive findings included employee
empowerment in stopping unsafe
behaviour, employees’ perception of
positive attitude among leadership, and
the common characteristic of ‘thinking
ahead and acting quickly’ in teams.
Key actions in response to the findings
include increasing focus on care and
recognition for our employees, as well as
continuing to strengthen our culture of
people development.
Value distribution1
%
€2,773m
Employees
Providers
of equity capital
Direct taxes paid
Providers
of loan capital
Reinvested
in the Group
38
29
9
3
21
1 Value distribution defined as operating profit before taking into account
personnel costs and depreciation, amortisation and impairments
Total recordable case rate (TRCR)
per 200,000 hours worked
0.83
0.76
0.69
0.68
0.68
2014
2015
2016
2017
2018
1 2015–2017 restated to include acquisitions, and 2017 includes
a confirmed fatality of a missing person in Syktyvkar
2 The total number of hours worked (employees and contractors)
in 2018 was 77.6 million hours (2017: 75.3 million hours)
3 2018 excludes Powerflute and Egyptian industrial bag plants
acquired in 2018
GHG emissions from our pulp
and paper mills
Scope 1 (million tonnes)
Scope 2 (million tonnes)
Specific Total CO2e
s
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1.00
4.31
0.78
4.48
1
3
8
.
0
3
8
.
0
6.0
5.0
4.0
3.0
2.0
1.0
1.0
0.9
0.8
0.7
0.67
4.07
0.69
3.78
0.58
3.81
6
7
.
0
2
7
.
0
2
2
7
.
0
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2014
2015
2018
1 The 2014 baseline of 0.844t/t excludes a divested mill
2 0.722t/t excludes Powerflute (acquired in 2018) but includes
Pine Bluff until date of divestiture
2017
2016
A number of our major capital projects
currently in progress and recently
completed are expected to contribute to
our Growing Responsibly commitments,
particularly relating to greenhouse gas
(GHG) emissions and waste reduction.
We are pleased our total specific CO2e
emissions (in tonnes per tonne of
saleable production) have declined to
0.72, a 14.5% reduction against the 2014
baseline, as we continue to make progress
in making our business less carbon
intensive. The contribution of biomass-
based renewable energy to the total fuel
consumption of our mills has increased
from 59% in 2014 to 64% in 2018.
We continue working closely with WWF
in the fifth year of our global partnership
focusing on water stewardship in
South Africa, protection of intact forest
landscapes in Russia, sustainable forest
management and biodiversity as well as
setting long term reduction targets for our
GHG emissions. In 2018, we joined WWF’s
Climate Savers, a leadership programme
for businesses, as part of our commitment
to continue to work on further reducing our
GHG emissions using the science-based
target setting methodology.
The environmental impact of flexible plastic
packaging continues to gain attention, both
externally and internally. We are working with
partners across our value chain to reinvent
flexible plastic packaging so that it is fit for
a circular economy. Evidence shows that
flexible plastic is often the most sustainable
solution over the course of its life-cycle, if it is
disposed of responsibly.
Mondi joined the Ellen MacArthur
Foundation’s New Plastics Economy Initiative
in 2017, and in 2018 we pledged to increase
investment in research and development,
and drive deeper collaboration throughout
our supply chain to move away from
non-renewable and non-recyclable plastic.
We are one of the first signatories of The
New Plastics Economy Global Commitment
– committing to 100% of plastic-based
packaging being reusable, recyclable or
compostable; and 25% being from recycled
content (where it does not compromise
functionality or food health requirements)
by 2025.
Sustainability performance
Page 48-63
Online Sustainable development report
www.mondigroup.com/sd18
33
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Partner with customers
for innovation
As a producer of both paper and plastic
packaging, we believe we are uniquely
positioned to leverage our customer
relationships and paper, bag and barriers
know-how to develop sustainable
packaging solutions for our customers.
We believe all packaging must be ‘fit for
purpose’: paper where possible, plastic
when useful. During the year we focused on
strengthening our portfolio of EcoSolutions:
high-performance paper-based, flexible
plastic and hybrid packaging solutions.
Mondi won eight 2019 WorldStar awards,
more than any other packaging company
worldwide, consolidating our position
as a truly innovative force in the industry.
BarrierPack Recyclable has also been
shortlisted as one of three finalists for the
special Sustainability Award (winner to be
announced in May 2019).
In April 2018, we hosted ‘Let’s paper
the world’, the first European shopping
bag summit bringing together leading
converters, suppliers and customers
to collaboratively address the fast
growing needs for sustainable paper-
based shopping bag solutions and to
showcase our ‘shoppingworld by Mondi’
product range.
Flexible plastic packaging, when
manufactured, used and disposed of
appropriately, delivers many benefits from
resource efficiency (by reducing material
usage and being less transport intense) to
reducing food waste by enabling correct
sized portions and extending shelf-life.
One of the most significant developments
in 2018 was the momentum gained in
the way we are working with customers
to develop innovative and sustainable
flexible plastic packaging. The New Plastics
Economy Initiative has rallied businesses
and governments behind a positive vision
of a circular economy for plastics. It has
brought together 290 signatories, including
many leading companies, who have also
committed to working towards 100%
reusable, recyclable, or compostable
plastic packaging by 2025.
Business review: Consumer Packaging
Page 76-79
Mondi Group
Integrated report and financial statements 2018
34
Strategic performance
During the year we spent €22 million on
R&D across our businesses to develop
innovative products for our customers.
By leveraging our specialised R&D
capabilities and partnering with our
customers, we are able to provide
cutting-edge solutions that meet our
customers’ evolving needs.
We continue to evolve our customer
interaction and partnerships using digital
solutions. During 2018, we updated and
enhanced our digital technical sales
service platform further supporting our
containerboard customers and connected
all targeted uncoated fine paper customers
to our myMondi platform. These 24/7
on-line systems support our customers by
providing product and order information
thereby increasing efficiency through the
sales process. We continue to explore
digital platforms that further connect us to
our customers.
Collaborating with big brands to meet
their ambitious sustainable packaging targets
Top FMCGs, retailers and other
big brands are under scrutiny for
the plastic used in their products
and packaging. Many of our
biggest customers have already
communicated ambitious targets
and they are going to be relying
on us to provide them with
innovative high-quality sustainable
solutions from across our range
of high-performance paper-
based, flexible plastic and hybrid
packaging solutions.
In terms of plastic packaging,
evidence shows that flexible
plastic is often the most
sustainable solution over the
course of its life-cycle, if it is
disposed of responsibly.
So we are working with partners
across our value chain to reinvent
flexible plastic packaging so that it
is fit for a sustainable economy.
A good example is our WorldStar
award winning BarrierPack
Recyclable. We launched this
fully-recyclable plastic laminate
in 2018 and it has already been
validated for existing industrial
recycling streams. It was
developed in direct response to
customer needs for packaging
that reduces plastic waste
without compromising on quality
or functionality.
Ton Emans, Managing Director
at CeDo Recycling & President
of Plastics Recyclers Europe,
said: “The European Commission
announced a strategy in January
2018 to ensure that all plastic
packaging is recyclable by 2030.
This innovation shows that flexible
plastic packaging can become
truly circular.”
We are well positioned to support
our customers on their path to
a circular economy by finding
the most sustainable packaging
solution for each application –
paper where possible, plastic
when useful.
Mondi Group
Integrated report and financial statements 2018
Strategic financial priorities
and returns to shareholders
We manage our cost of capital by
maintaining an appropriate capital structure
with a balance between equity and net
debt. The primary sources of our debt
include our €2.5 billion Guaranteed Euro
Medium Term Note Programme and our
€750 million Syndicated Revolving Credit
Facility. The Group’s liquidity position
remains robust. At the end of the year,
€616 million of our €2.5 billion committed
debt facilities were undrawn and the
weighted average maturity of committed
debt facilities was 4.6 years.
Our free cash flow priorities remain
unchanged. We are focused on maintaining
solid investment grade credit metrics,
undertaking selective organic capital
investment opportunities and supporting
the ordinary dividend. To the extent we
have capacity beyond these requirements,
we are able to consider acquisitions and/or
additional shareholder distributions.
We believe that a strong and stable financial
position, supported by an investment grade
credit rating, increases our flexibility and
provides opportunities to access capital
markets throughout the business cycle,
allowing us to take advantage of strategic
opportunities when they arise.
We pursue a dividend policy that reflects
our strategy of disciplined and value-
creating investment and growth, with the
aim of offering shareholders long-term
dividend growth.
We target an ordinary dividend cover range
of two to three times underlying earnings on
average over the cycle, although the payout
ratio in each year will vary in accordance
with the business cycle.
Our Boards have recommended payment
of a final ordinary dividend of 54.55 euro
cents per share, bringing the total ordinary
dividend for the year to 76.0 euro cents per
share, an increase of 23% on 2017.
Five-year cumulative cash flow
€ billion
5.1
(2.9)
(1.7)
(0.9)
(0.2)
0.6
Cash flow
generation
Invested in
asset base
Distributed to
shareholders
Spent on
acquisitions
Effect of
restatement1
Change in
net debt
1 Net debt prior to 2017 does not include the effect of IFRS 16
Total ordinary dividends per share
euro cents
76
euro
cents
Interim ordinary dividend
Ordinary dividend cover (times)
Final ordinary dividend
2
6
.
7
3
2.6
8
3
.
4
1
7
7
.
8
2
2.6
3
2
.
3
1
9
1
.
8
3
2.4
1
8
.
8
1
0
9
.
2
4
2.4
0
1
.
9
1
2
5
5
.
4
5
2.5
5
4
.
1
2
2014
2015
2016
20171
2018
1 In addition to the 2017 ordinary dividend, a special dividend of
100 euro cents was paid in 2018
2 Proposed
Strategic risk management
The industries and geographies in which
we operate expose us to specific risks.
These include:
e Industry productive capacity
e Product substitution
e Fluctuations and variability in selling
prices or gross margins
e Country risk
These risks are long term in nature and
accepted by the Boards as they are
directly related to the Group’s strategy and
operating footprint. The Boards continue
to monitor our exposure to these risks and
investment decisions are evaluated against
our exposures and the established tolerance
levels for any individual strategic risk.
Our conservative funding model and low level
of financial leverage provide some protection
against these risks, while we continually
monitor key trends impacting our business,
taking early and decisive action to mitigate
emerging risks where necessary.
Principal risks
Page 38-47
Simplification of
corporate structure
On 19 November 2018, the Boards
announced a proposal to simplify the
existing Mondi Group structure from the
current dual listed company structure into
a single holding company structure under
Mondi plc.
If approved, the simplification will be
implemented by way of a South African
scheme of arrangement whereby
Mondi plc will acquire Mondi Limited.
Mondi Limited shareholders will receive
one new Mondi plc share in exchange
for each Mondi Limited share held.
Following the simplification, each Mondi
plc shareholder will have the same voting
and capital interests in the Group as each
Mondi Limited and Mondi plc shareholder
currently has.
The proposed simplification will enhance
strategic flexibility, increase transparency
and remove the complexity associated
with the current structure. It will also
simplify cash and dividend flows and
facilitate continued investment in the South
African operations.
Mondi plc will continue to have a premium
listing on the London Stock Exchange
and will have an inward secondary listing
on the Johannesburg Stock Exchange
quoted in rand. Mondi plc shares will
continue to be included in the FTSE 100
index. Today Mondi Limited shares are not
eligible for inclusion in the FTSE 100 index.
Following the issue of Mondi plc shares
in exchange for Mondi Limited shares as
a result of the simplification, it is expected
that Mondi plc’s weighting in the FTSE
100 index will increase. Mondi plc shares
are expected to continue to be eligible for
inclusion in the key JSE indices.
The simplification is subject to certain
conditions, including, among other things,
the approval of the shareholders of Mondi
Limited and Mondi plc. A shareholder
circular, scheme document and prospectus
is expected to be made available to
shareholders at the end of the first quarter
in accordance with the Annual General
Meetings timetable. Implementation is
currently expected in the second half
of 2019.
Near-term outlook
Looking ahead, while there are macro-
economic uncertainties, we remain
confident in the structural growth drivers in
the packaging sectors in which we operate.
Pricing is mixed going into 2019, with recent
price reductions in containerboard grades
and market pulp and stronger pricing in
our kraft paper markets. During 2019,
we are planning longer maintenance and
project related shuts, while looking forward
to the incremental contribution from
recently completed major capital projects
and acquisitions.
Mondi is uniquely positioned to develop
sustainable packaging solutions. With our
robust business model, strong balance
sheet, focus on leveraging key industry
trends of sustainability, e-commerce
and enhancing brand value, and culture
of continuously driving performance,
we continue to look to the future
with confidence.
Peter Oswald
Chief Executive Officer
Andrew King
Chief Financial Officer
35
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Mondi Group
Integrated report and financial statements 2018
36
Key performance indicators
Tracking our
performance
We track our long-term performance against
strategic, sustainable development and financial
key performance indicators.
Key Performance Indicators (KPIs)
Aligning KPIs to remuneration
Our KPIs are intended to provide a broad
measure of Mondi’s performance. We set
individual targets for each of our business
units in support of these Group KPIs.
e Our strategic KPIs measure our success
in creating value accretive growth for
our shareholders
e Sustainable development KPIs track
our progress against our Growing
Responsibly commitments
e Financial KPIs provide comparable
measures of our operating and cash
generating performance
Our Remuneration report describes
how our executive directors and senior
management are remunerated in line with
these KPIs. In particular, the executive
directors are set specific targets relating to
ROCE, underlying EBITDA and safety for
purposes of the Bonus Share Plan and on
Total Shareholder Return and ROCE for the
Long-Term Incentive Plan.
Remuneration report
Page 122-141
Strategic
Strategic performance
Page 28-35
Return on capital employed (ROCE)
% (12-month trailing)
Total shareholder return (TSR)1
%
ROCE
Current estimated pre-tax weighted average cost of capital
Mondi plc
Median of peer group
20.5
20.3
19.3
17.2
23.6
1-year
-10%
3-year
15%
10.5
5-year
74%
2014
2015
2016
2017
2018
1 Based on 31 December value
Why this is a KPI
ROCE provides a measure of the efficient and
effective use of capital in our operations.
We compare ROCE to our current estimated Group
pre-tax weighted average cost of capital to measure
the value we create.
2018 performance
ROCE of 23.6% reflects an industry-leading
performance.
Why this is a KPI
TSR provides a market-related measure of the Group’s
progress against our objective of delivering long-term
value for our shareholders.
TSR measures the total return to Mondi’s
shareholders, including both share price
appreciation and dividends paid.
2018 performance
Mondi realised a five-year TSR of 74% and recommended
a total ordinary dividend of 76.0 euro cents per share.
In addition to the 2017 ordinary dividend, a special
dividend of 100.0 euro cents per share was paid in 2018.
Mondi Group
Integrated report and financial statements 2018
Sustainable development
Sustainability performance
Page 48-63
Online Sustainable development report
www.mondigroup.com/sd18
Total recordable case rate (TRCR)
per 200,000 hours worked
Sustainable fibre supply
% FSC- or PEFC-certified wood procured
Total specific CO2e emissions1
tonnes per tonne of saleable production
0.83
0.76
0.69
0.68
0.68
Wood (Internal and external)
2020 commitment: above 70%
2030 commitment against 2014 base: below 0.718t/t
66
66
67
71
71
0.832
0.83
0.76
0.72
0.723
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
1 2015–2017 restated to include acquisitions, and 2017 includes
a confirmed fatality of a missing person in Syktyvkar
2 The total number of hours worked (employees and contractors)
in 2018 was 77.6 million hours (2017: 75.3 million hours)
3 2018 excludes Powerflute and Egyptian industrial bag plants
acquired in 2018
Why this is a KPI
The safety and health of all our employees and
contractors is of paramount importance, and we
need to create a culture where people instinctively act
safely. Our goal is a zero harm workplace.
2018 performance
While our overall TRCR has improved by 11% against
the 2015 baseline, we were deeply saddened by the
fatality and life-altering injuries during the year.
1 2018 excludes Powerflute (acquired in 2018)
1 From our pulp and paper mills
2 The 2014 baseline of 0.844t/t excludes a divested mill
3 0.722t/t excludes Powerflute (acquired in 2018) but includes
Pine Bluff until date of divestiture
Why this is a KPI
Securing sustainable fibre for our integrated pulp
and paper mills is critical to their long-term success.
We are committed to maintaining 100% FSC-certified
forests and procuring at least 70% of wood from
FSC- or PEFC-certified sources by 2020.
2018 performance
100% of our managed forests remained FSC-certified,
and 71% of the wood we procured was FSC-or
PEFC-certified, on track with our 2020 commitment.
Why this is a KPI
We have continually focused on making our business
less carbon intensive to address climate impacts.
We are committed to a 15% reduction in specific
CO2e emissions by 2030 against our 2014 baseline.
2018 performance
To date, we have reduced our specific CO2e emissions
by 14.5%, on track for our 2030 commitment. We have
adopted a new science-based target for production-
related CO2 emissions intensity to 2050.
Financial
Financial performance
Page 64-67
Underlying EBITDA
€ million
Underlying operating profit
€ million
1 2 %
C A G R 1 :
5 - y e a r
1,325
1,366
1,482
1,764
1,126
1 4 %
C A G R 1 :
1,318
981
1,029
5 - y e a r
957
767
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
1 Compound annual growth rate
1 Compound annual growth rate
Why this is a KPI
Underlying EBITDA provides a measure of the cash
generating ability of the Group that is comparable
from year to year.
Why this is a KPI
Underlying operating profit provides a measure
of the operating performance of the Group that is
comparable from year to year.
Why this is a KPI
We aim to maintain investment grade credit ratings
to ensure we have access to funding for investment
opportunities through the business cycle.
2018 performance
Underlying EBITDA of €1,764 million represents a
19% year-on-year increase, with a 5-year CAGR
of 12%.
2018 performance
28% year-on-year increase in underlying operating
profit to €1,318 million, with a 5-year CAGR of 14%.
2018 performance
Standard & Poor’s upgraded the Group’s credit rating
to BBB+ (stable outlook), while Moody’s Investors
Service maintained their Baa1 (stable outlook)
credit rating.
Mondi Group
Integrated report and financial statements 2018
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Dec2013Oct2014May2015Sep2017Apr2018Dec2018Investment grade credit ratingInvestment gradeNon-investment gradeMoody’s Investors ServiceStandard & Poor’sBBB+BBBBBB-BB+BBBB-Baa1Baa2Baa3Ba1Ba2Ba3
38
Principal risks
Our proactive approach
to risk management
Our risk management framework and internal control environment is
designed to address all the significant strategic, financial, operational
and compliance risks that could undermine our ability to achieve
business objectives into the future.
Our risk management framework and internal control environment
e Overall responsibility for the Group’s strategy and risk management
e Determine risk appetite in line with Group strategy, and approve the Group’s risk management framework
e Approve the annual budget and three-year plan
Boards
Sustainable
development committee
Audit
committee
e Monitors and reviews material safety, health, environment and
e Reviews and monitors the adequacy and effectiveness of the
other sustainable development risks
Group’s internal control and risk management processes
e Ongoing review of the principal risks through the course of
the year
e Approves the annual internal audit plan
e Formulates risk management policies in terms of the approved risk management framework
to ensure risks are managed within accepted tolerance levels
e Assesses and monitors risks on an ongoing basis
Executive committee
Business units
Group functions
e Responsible for identification of emerging risks and for
e Responsible for providing oversight, and management of certain
implementation of risk management policies and procedures
specialised risk areas that benefit from central coordination
e Work closely with the business units to manage and monitor
these risk areas
The three levels of assurance in our internal control environment
External
audit
e External assurance
is provided through
external audit
which is designed
to detect material
errors and material
irregularities that
impact the financial
statements
Internal
audit
e The Group
has a centrally
coordinated internal
audit function,
which makes use of
local competency,
and reports
directly to the audit
committee
Operational
management
e Key policies and procedures covering
all main areas of business conduct are
approved by the Boards and each business
unit is required to adhere to these overall
Group policies.
e Management is responsible for regularly
reviewing its entity’s operating and financial
performance and for preparing and
reviewing monthly management accounts
and business reports including safety,
health, environmental and other material
sustainability matters for the reporting period.
e Twice a year, all financial managers are required
to complete an internal control assessment and
provide written confirmation of compliance with
Group policies and procedures. This formal
confirmation highlights any control weaknesses
or deficiencies identified.
Mondi Group
Integrated report and financial statements 2018
Management review
and assurance
e Management is responsible for regularly
reviewing the Group’s operating and
financial performance, including monthly
management accounts, the progress of
significant capital investment projects and
plans, safety, health, environmental and other
sustainability matters.
e Management at Group level and, in more
depth, at business unit level is responsible
for a detailed assessment of current
market conditions.
e The Group functions (information technology,
Group and business unit controlling,
sustainable development, safety and health,
treasury and tax) each have board-approved
policies in place against which conduct is
regularly assessed.
Independent
assurance
e Internal and external audit.
e Speakout provides a confidential
hotline for reporting irregularities.
Follow up is coordinated by internal
audit and reported to the Boards and
audit committee.
e The Group is registered with, and
subject to, regular audits by a number of
standard setting authorities, such as ISO.
e The Group is subject to regular review
and vetting by external regulatory
bodies as well as non-regulatory
parties, including annual insurance
assessments, sustainable development
data assurance, and information
security programmes.
Risk management is by its nature
a dynamic and ongoing process.
Our well-defined approach is flexible
to ensure that it remains relevant at all
levels of the business, and dynamic
to ensure we can be responsive
to changing business conditions.
This is particularly important given
the diversity of the Group’s locations,
markets and production processes.
In combination with the audit
committee, the Boards have
conducted a robust assessment of
the principal risks to which Mondi is
exposed and they are satisfied that
the Group has effective systems
and controls in place to manage its
principal risks within the risk tolerance
levels established.
The details of the review and the
risk management framework and
processes on which the Group’s risk
review is based are set out in this
section. This report addresses the
Group’s principal risks.
Our risk management
framework
The Boards have overall responsibility for
setting the Group’s strategy and they are
responsible for monitoring and maintaining
the effectiveness of the Group’s risk
management activities and internal control
processes. The Boards have put in place
procedures for identifying, evaluating, and
managing the risks faced by the Group.
The Boards have determined the Group’s
risk appetite, using a risk rating matrix which
takes into consideration both the likelihood
and the magnitude of the impact in the event
that the risk event occurs. The risk rating
matrix is based on the residual risk that the
Group faces after taking into consideration
the internal control environment and other
mitigating factors. The Boards have also
established specific risk tolerance levels for
each category of risk. The Boards consider
changes in current principal risks and review
emerging risks during the year.
The audit committee performs an annual
review of the risk management policy and
plan, including consideration of acceptable
risk tolerance levels for the Group. Each of
the Group’s principal risks is reviewed in
detail by the audit committee through the
course of the year, considering the detailed
risk description, the controls and mitigating
actions in place and the resultant residual
risk exposure. As in prior years, in 2019 the
committee will continue to focus on the
principal risks to the Group and the actions
taken to mitigate these risks.
Business units are required to conduct
an annual, detailed review of their risks
and compile a risk register which is
reviewed and approved by the business
unit operating committees. The risk
management process ensures that the
various business unit operating committees
review the principal risks in their respective
businesses and identify the actions
and controls in place to mitigate risk.
Management assurance is provided on
both a formal and informal basis, and risk
management is embedded in all decision-
making processes, with ongoing review by
the Boards and risk assessments forming
part of all investment decisions.
Our internal control
environment
Our internal control environment is
designed to safeguard the Group’s assets,
ensure reliability and integrity of information
and ensure compliance with laws and
regulations thereby providing reasonable
assurance that the Group’s business
objectives will be achieved.
Through our structured approach, the
control environment is subject to regular
oversight and review to ensure that there
are no significant deficiencies, control
weaknesses are identified and addressed,
and new or emerging risks are identified
early and monitored regularly.
The Group’s organisational structure
is regularly reviewed and where
circumstances dictate, changes to the
organisational structure are recommended
to the executive committee or Boards to
ensure it remains relevant.
The Boards and their committees have
approved the Group’s financial, business
conduct, operating, and administrative
policies, including those relating to
delegation of signing authorities and
information security. The policies provide
a framework for the Group’s internal
control environment and outline required
standards of behaviour. Business units
are required to ensure that they adhere to
approved Group policies and that they have
implemented their own supporting policies
where appropriate. In line with the approved
delegation of authorities, specific matters
are reserved for executive committee or
board approval including the approval of
major capital investments, acquisitions,
and disposals.
Management is responsible for regularly
reviewing the Group’s financial performance
and it is the responsibility of management
at all operational levels to ensure that risks
are appropriately managed and a proper
control environment is in place to anticipate
and respond to risks. The Group’s reporting
cycle includes the monthly flash and
management reports, a quarterly outlook,
and the annual budget and three-year plan.
Detailed monthly management reports and
variance analyses comparing actual with
planned results are prepared. These regular
reviews are designed to ensure ongoing
monitoring of financial performance and
early identification of potential issues and/or
emerging risks.
Mondi Group
Integrated report and financial statements 2018
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Principal risks
Our principal risks
Over the course of the past year, the audit committee
has reviewed the principal risks set out below.
In evaluating the Group’s risk management and internal
control processes, the committee has considered
both internal and external audit reports and received
confirmation from the finance directors of the business
units that financial control frameworks have operated
satisfactorily. The sustainable development risks are
considered throughout our business and consolidated
into the principal risks where relevant. These risks
have been reviewed by the sustainable development
committee during the year.
Key changes in the year
The majority of the Group’s most significant risks are
long-term in nature and in general do not change
significantly in the short-term. The Group’s principal
risks are unchanged from prior year. During the risk
review process the assessment of the principal risks
was updated to reflect the developments in our
strategic priorities. In addition, during the year, further
analyses were performed to understand the risks and
implications around climate change and the UK’s exit
from the European Union.
11
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3
4
7
1
6
8
10
12
15
2
9
1.
Industry productive capacity
2. Product substitution
3. Fluctuations and variability in selling
prices or gross margins
4. Country risk
5. Capital structure
6. Currency risk
7. Tax risk
8. Cost and availability of raw materials
9. Energy security and related
input costs
10. Technical integrity of our
operating assets
11. Employee and contractor safety
12. Attraction and retention of key skills
and talent
13. Environmental impact
14. Reputational risk
15. Information technology risk
Strategic
Financial
Operational
Compliance
Strategic risks
Risk tolerance:
High
Key person responsible:
Peter Oswald (Chief Executive Officer)
The industries and geographies in which we operate expose us to specific long-term
risks which are accepted by the Boards as a consequence of the Group’s chosen
strategy and operating footprint.
While there have been no significant changes in our strategic risk exposures during
the year, we continue to monitor recent capacity announcements and demand
developments, the developments in the process as the UK seeks to exit the European
Union, the stability of the Eurozone and the increasing prevalence of trade tariffs and
economic sanctions.
The executive committee and Boards monitor our exposure to these risks and evaluate
investment decisions against our overall exposures so that our strategic capital
investments and acquisitions take advantage of the opportunities arising from our
deliberate exposure to such risks.
1 Industry productive capacity
Potential impact
Plant utilisation levels are the main driver of profitability in paper mills. New capacity
additions are usually in large increments, which through their impact on the
supply/demand balance, influence market prices. Unless market growth exceeds
capacity additions, excess capacity may lead to lower selling prices. In our
converting operations, investments in newer technology may lower operating
costs and provide increased product functionality, increasing competition and
impacting margins.
Monitoring, mitigation, and where relevant,
independent assurance activities
Our strategic focus on low cost production and innovation aims to achieve
cost advantages and produce higher value added, responsibly produced
and sustainable products. Combined with our focus on growing markets and
consistent investment in our existing asset base this secures our competitiveness.
We monitor industry developments in terms of changes in capacity, utilisation
levels both short and long term, as well as market trends, and trade flows in our
own product markets. This helps us to establish target capacity utilisation levels
in the short term and to evaluate capital investment projects in the long term.
We maintain strong relationships with machine suppliers to identify current market
developments and technologies and we routinely review our asset portfolio and
capacity utilisation levels to identify underperforming assets and take decisive
action to drive performance.
Mondi Group
Integrated report and financial statements 2018
2 Product substitution
Potential impact
Global socio-economic and demographic trends and changing consumption
patterns, including increased public awareness of sustainability and increasing
customer purchasing power, are driving changes in customers’ needs and
attitudes, and could affect the demand for Mondi products. The increased public
and stakeholder focus on the impact of plastic-based packaging on ocean and
land ecosystems has led to heightened environmental considerations, changes
in legislation and a shift in consumer attitudes. Substitution may be to different
products not produced by Mondi or to different solutions meeting the same
customer requirement.
Factors that may positively or negatively impact the demand for our products
include reduced weight of packaging materials, increased use of recycled
materials, electronic substitution of paper products, substitution of plastic
packaging, substitution of rigid plastic by flexible packaging, increased demand
for high-quality printed material, certified and responsibly produced goods, and
specific material qualities such as recyclable/biodegradable.
Monitoring, mitigation, and where relevant,
independent assurance activities
Our ability to meet changes in consumer demand depends on our capacity
to correctly anticipate change and develop new products on a sustainable,
competitive and cost-effective basis. Opportunities also exist for us to take market
share from substitutes produced by our competitors. Our focus is on products
enjoying positive substitution dynamics and growing regional markets.
We regularly monitor trends, new developments and innovations in our product
markets. We conduct customer surveys to get a better insight into our customers’
needs. In our Consumer Packaging business, we have established a sustainability
task force to monitor the market and legislative developments around sustainability
of our plastic-based packaging. We are a member of the Ellen MacArthur
Foundation’s New Plastics Economy Initiative, where we collaborate with
stakeholders across the plastic value chain.
Our research and development pipeline ensures that our products remain cutting-
edge with added focus on sustainability properties (e.g. recyclable, compostable
or biodegradable products, sourced responsibly). Our broad range of converting
products provides some protection from the effects of substitution between paper
and plastic-based packaging products.
3 Fluctuations and variability in selling prices or gross margins
Potential impact
The Group operates in cyclical markets and fluctuations in our key packaging
and paper prices or converting margins can have material profit and cash flow
implications. Our selling prices are determined by changes in capacity and demand
for our products, which are, in turn, influenced by macroeconomic conditions,
competitive behaviour, consumer spending preferences, and inventory levels
maintained by our customers.
Monitoring, mitigation, and where relevant,
independent assurance activities
Our strategic focus is on higher growth markets and products where we enjoy
a competitive advantage through innovation, proximity or production cost.
We continue to invest in our high-quality, cost-advantaged asset base to ensure we
maintain our competitive cost position. We continue to further develop businesses
in higher growth markets with better long term fundamentals.
Changes in prices differ between products and geographic regions and the timing
and magnitude of such changes have varied significantly over time. Gross margins
in our downstream converting operations are impacted by fluctuations in key input
costs, which cannot be passed on to customers in all cases.
Our high levels of vertical integration reduce our exposure to price volatility of our
key input costs. In our downstream operations the focus is on passing through our
main material costs to sales prices. Our financial policies and structures take the
inherent price volatility of the markets in which we operate into consideration.
4 Country risk
Potential impact
The Group has operations across more than 30 countries with differing political,
economic and legal systems. In some countries, such systems are less predictable
than in countries with more developed institutional structures. Political or economic
upheaval, inflation, changes in laws, protectionism, nationalisation, or expropriation
of assets may have a material effect on our operations in those countries.
The current macroeconomic environment is impacted by the uncertainties from
effects of increased protectionism, use of trade tariffs, economic sanctions, the
stability of the Eurozone and the uncertainty over the outcome of the UK’s decision
to exit from the European Union.
In South Africa, the Group is subject to land claims and could face an adverse
land claim ruling. In February 2018 a motion was passed in the National
Assembly in South Africa for Section 25 of the South African Constitution to
be reviewed and potentially amended to allow government to expropriate land
without compensation. A process may therefore start to have the South African
Constitution amended accordingly or there could be other changes in legislation
governing land ownership in South Africa.
We regularly review and monitor the current market fundamentals, market demand
trends and market prices to evaluate price expectations in the short term but
also to understand the long term trends. We monitor our order intake to identify
changing trends and developments in our own product markets.
Monitoring, mitigation, and where relevant,
independent assurance activities
Our geographic diversity and decentralised management structure, utilising local
resources in countries in which we operate, reduces our exposure to any specific
jurisdiction. To mitigate the effect of country specific risks we structure our capital
and debt in each country based on assessed risks and exposures. We regularly
review our sales strategies to mitigate export risk in countries with less predictable
environments and, where possible, we obtain credit insurance.
The Boards have approved specific country risk premiums to be added to the
required returns on investment projects in those countries where risks are deemed
to be higher and new investments are subject to rigorous strategic and commercial
evaluation. Where we have large operations in higher risk locations, we maintain a
permanent internal audit presence and operate asset protection units.
During the year further analysis has been undertaken to better understand the
possible consequences of the UK’s exit from the European Union. The Group’s
exposure to the UK is limited. The Group operates two Consumer Packaging
plants in the UK and exports containerboard and uncoated fine paper to the UK.
Revenues from customers in the UK represent around 3% of the Group’s total.
The impact on trade flows between the UK and the European Union continues to
be monitored closely. Given our current knowledge of the Brexit process and the
limited direct trading exposure of the Group to the UK, we do not expect Brexit to
materially impact our ability to continue normal business operations.
In South Africa the Group has settled a number of land claims structured as sale
and leaseback arrangements which provide a framework for settling future land
claims and continues to work with other stakeholders to engage with government
on land matters. We actively monitor all countries and environments in which we
operate. Regular formal and informal interaction with government officials, local
communities, and business partners assists us to remain abreast of changes and
new developments.
Mondi Group
Integrated report and financial statements 2018
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Principal risks
Financial risks
Risk tolerance:
Medium to Low
Key person responsible:
Andrew King (Chief Financial Officer)
Our approach to financial risk management is set out in more detail in the Strategic
performance and Financial performance sections. We aim to maintain an appropriate
capital structure and to conservatively manage our financial risk exposures in
compliance with all laws and regulations.
Despite ongoing short-term currency volatility and increased scrutiny of the tax affairs
of multinational companies, our overall residual risk exposure remains similar to
previous years, reflecting our conservative approach to financial risk management.
5 Capital structure
Potential impact
A strong and stable financial position increases our flexibility and provides us with
the ability to take advantage of strategic opportunities as they arise.
Our ability to raise debt and/or equity financing is significantly influenced by general
economic conditions, developments in credit markets, equity market volatility, and
our credit rating.
Failure to obtain financing at reasonable rates could prevent us from realising our
strategy and have a negative impact on our competitive position.
6 Currency risk
Potential impact
As a multinational Group, operating globally, we are exposed to the effect of
changes in foreign currency rates. The impact of currency fluctuations affects us
because of mismatches between the currencies in which our operating costs are
incurred and those in which revenues are received.
Key operating cost currencies that are not fully offset by local currency
denominated revenues include the South African rand, Polish zloty, Swedish krona
and Czech koruna; whilst the fluctuations in the US dollar, Russian rouble, UK
pound sterling and Turkish lira can also have a material impact as our revenues in
these currencies are greater than operating costs incurred.
Additionally, appreciation of the euro compared with the currencies of the other
key paper producing regions or paper pricing currencies, notably the US dollar,
reduces the competitiveness of Mondi products in Europe compared with imports
from such key paper-producing regions which can result in lower revenues
and earnings.
7 Tax risk
Potential impact
We operate in a number of countries – all with different tax systems.
In addition, the international tax environment is becoming more onerous, requiring
increasing transparency and reporting and in-depth scrutiny of the tax affairs of
multinational companies.
We make significant intragroup charges, the basis for which is subject to review
during tax audits.
Monitoring, mitigation, and where relevant,
independent assurance activities
We operate a central treasury function under a board-approved treasury policy.
We target investment grade credit ratings and we have access to diverse sources
of funding with varying maturities. The majority of our external debt is issued
centrally. We use a blend of floating and fixed rate debt contracts to mitigate the
interest rate risk.
We report regularly to the Boards on our treasury management policies.
Our central treasury function monitors compliance with treasury policies at
operating level and we engage external advisors to review the treasury function
at regular intervals.
Monitoring, mitigation, and where relevant,
independent assurance activities
Balance sheet exposures and material forecasted capital expenditures are hedged
upon identification. We do not hedge our exposure to projected future sales or
operating costs and our businesses respond to adverse currency fluctuations by
increasing selling prices or increasing exports where competitiveness improves
as operating currencies weaken. Entities also borrow in their local currencies to
minimise translation risk.
We continuously monitor exchange rate movements and sensitivities, and evaluate
the impact of exchange variances on our results. We regularly review our prices
and monitor the import and export trade flows.
Monitoring, mitigation, and where relevant,
independent assurance activities
We aim to manage our affairs conservatively and our operations are structured
tax efficiently to take advantage of available incentives and exemptions. We have
dedicated tax resources throughout the Group supported by a centralised Group
tax team.
Arm’s length principles are applied in the pricing of all intragroup transactions
in accordance with Organisation for Economic Cooperation and Development
guidelines. The Boards have approved the Group tax strategy, and perform a
formal review of the Group’s tax affairs at least annually.
We obtain external advisory opinions for all major tax projects, such as acquisitions
and restructuring activities, and make use of external benchmarks where possible.
We regularly engage with external advisors to stay up-to-date with changes in tax
legislation and tax practice.
Mondi Group
Integrated report and financial statements 2018
Operational risks
Risk tolerance:
Low
Key people responsible:
Peter Oswald (Chief Executive Officer)
John Lindahl (Group Technical
& Sustainability Director)
A low residual risk tolerance is demonstrated through our focus on operational
excellence, investment in our people and commitment to the responsible use
of resources.
Our investments to improve our energy efficiency, engineer out our most significant
safety risks, improve operating efficiencies, and renew our equipment continue to
reduce the likelihood of operational risk events. However, the potential impact of any
such event remains unchanged.
8 Cost and availability of raw materials
Potential impact
Access to sustainable sources of raw materials is essential to our operations.
The raw materials used by the Group include significant amounts of wood, pulp,
paper for recycling, plastic resins and chemicals. The prices for many of these raw
materials generally fluctuate in correlation with global commodity cycles.
Wood prices and availability may be adversely affected by reduced quantities of
available wood supply that meet our standards for credibly certified or controlled
wood, the impact of climate change through increased frequency of severe
weather events, changes in rainfall or increased instances of pest and disease
outbreaks and increasing use of wood as a biofuel.
Monitoring, mitigation, and where relevant,
independent assurance activities
We are committed to acquiring our raw materials from sustainable, responsible
sources and avoiding the use of any controversial or illegal supply. We are involved
in multi-stakeholder processes to address challenges in meeting the global
demand for sustainable, responsible fibre and we encourage legislation supporting
the local collection of recycled materials.
Sustainable management of our forestry operations is key in managing our overall
social and environmental impact, helping to protect ecosystems, protect worker
and community rights, and to develop resilient landscapes.
We have access to our own sources of wood in Russia and South Africa and we
purchase wood, paper for recycling, pulp, and polymers to meet our needs in the
balance of our operations. Where we source our raw materials in areas of weaker
governance, we may face potential social and environmental risks related to waste,
pollution, poor safety and labour practices and human rights issues.
We have multiple suppliers for each of our operations and our centralised
procurement teams work closely with our operations in actively pursuing longer
term agreements with strategic suppliers. In Europe, we source our wood from
diverse regions and forest types to mitigate the potential impacts of climate change
on our wood supplies.
9 Energy security and related input costs
Potential impact
Mondi is a significant consumer of electricity which is generated internally and
purchased from external suppliers.
Where we do not generate electricity from biomass and by-products of our
production processes, we are dependent on external suppliers for raw materials
such as gas, oil and coal. Fossil-based energy sources could pose a sustainability
and regulatory risk to our energy security.
Higher energy costs contribute significantly to increasing chemical, fuel and
transportation costs which are often difficult to pass on to customers.
As an energy-intensive business, operating globally and relying on global supply
chains, we face potential physical and regulatory risks related to climate change.
We have developed an internal monitoring and risk assessment system, Responsible
Procurement, to assess and evaluate the performance of our suppliers and their
adherence to our Code of Conduct for Suppliers. Supplier performance is evaluated
through questionnaires and audits.
We have built strong forestry management resources in Russia and South Africa to
actively monitor and manage our wood resources in those countries. We continue
to certify our forests with credible external certifications. In South Africa, we have
tree improvement programmes in place, which aim to produce stronger, more
robust hybrids that are better able to resist disturbances such as drought, pests
and diseases.
Monitoring, mitigation, and where relevant,
independent assurance activities
We focus on improving the energy efficiency of our operations by investing in
improvements to our energy profile and increased electricity self-sufficiency,
including the use of renewable energy sources, while reducing ongoing operating
costs and carbon emission levels.
Where we generate electricity surplus to our own requirements, we may sell such
surplus externally. We also generate income from the sale of green energy credits
in certain of our operations at prices determined in the open market.
We focus on optimising the use of biomass-based fuels in order to reduce our use
of fossil-based energy sources, and to decrease carbon-intensive energy sources
such as coal.
Energy costs are closely monitored and benchmarked against external sources
and we monitor our electricity usage, carbon emission levels and use of renewable
energy. Most of our larger operations have high levels of electricity self-sufficiency.
We actively monitor the renewable energy market fundamentals and changes in
legislation and maintain contact with local energy regulators. We have undertaken
detailed compliance assessments regarding Industry Emissions and Energy
Efficiency Directives to determine future investment requirements.
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Integrated report and financial statements 2018
44
Principal risks
Operational risks
10 Technical integrity of our operating assets
Potential impact
We have five major mills which account for approximately 75% of our total pulp and
paper production capacity, and a significant consumer packaging manufacturing
facility in Germany.
If operations at any of these key facilities are interrupted for any significant
length of time, it could have a material adverse effect on our financial position
or performance.
Incidents such as fires, explosions, or large machinery breakdowns or the inability
of our assets to perform the required function effectively and efficiently whilst
protecting people, business, the environment and stakeholders could result in
property damage, loss of production, reputational damage, and/or safety and
environmental incidents.
Monitoring, mitigation, and where relevant,
independent assurance activities
Our capital investment programme supports the replacement of older equipment
to improve both reliability and integrity, and our proactive repair and maintenance
strategy is designed to improve production reliability and minimise breakdown
risks. We conduct detailed risk assessments of our high-priority equipment and
have specific processes and procedures in place for the ongoing management and
maintenance of such equipment.
We continue to develop our asset management system to ensure best practices
for maintenance procedures and we have a maintenance training programme
for our employees. Benchmarking activities enable us to optimise our production
throughout the organisation by learning from our best performing operations and to
identify any emerging issues early.
We actively monitor all incidents and have a formal process which allows us to
share lessons learned across our operations, identify emerging issues, conduct
benchmarking, and evaluate the effectiveness of our risk reduction activities.
We engage external experts to perform technical integrity assessments in our
major sites.
Our Fire Protection programme is supported by independent loss prevention audits
and we take out property insurance cover for key risks.
11 Employee and contractor safety
Potential impact
We operate large facilities, often in remote locations. Accidents/incidents cause
injury to our employees or contractors, property damage, lost production time,
and/or harm to our reputation.
Risks include fatalities, serious injuries, occupational diseases, and substance and
drug abuse.
Monitoring, mitigation, and where relevant,
independent assurance activities
To ensure the safety of our employees and contractors, we apply safety
management systems, including amongst others, risk assessments, safety
procedures and controls. We have a goal of zero harm and aim to continuously
advance our 24-hour safety mind-set and safety culture.
We continue with the project to engineer out the most significant risks in our
operations supported by robust controls and procedures for operating those
assets and conducting related tasks. During 2018 we rolled out the revised Permit
to Work methodology across the Group to improve safety performance.
We provide extensive training to ensure that performance standards and practice
notes are communicated and understood and our incentives are impacted by
the non-achievement of safety milestones (lag indicators) as well as achievement
of lead indicators. We continually investigate and monitor incidents and major
close calls and actively transfer learnings across our operations. Our Task Risk
Management Methodology provides a practical approach to conducting pre-task
risk assessments, and our focus is on better understanding the high risk tasks in
our operations.
We apply externally accredited safety management systems and conduct regular
audits of our operations to ensure our facilities remain fit-for-purpose.
12 Attraction and retention of key skills and talent
Potential impact
Our success is driven by our people. Key to our long-term success is attracting,
retaining, recruiting and developing a skilled and committed workforce.
Access to the right skills, particularly management and technical skills, is critical
to support the performance and growth of our business. Operations in remote
locations make attracting and retaining skilled employees challenging.
Losing skills or failing to attract new talent to our business has the potential to
undermine our ability to drive performance and deliver on our strategic objectives.
Monitoring, mitigation, and where relevant,
independent assurance activities
Our culture and values play a key role in empowering and inspiring our people.
These are highlighted by various Inspire Programmes and collaboration initiatives
throughout our operations. We have a zero tolerance policy towards discrimination
and we provide equal opportunities for all employees.
To attract skills and talent we are investing in employer branding; we are engaged
in fair and transparent recruitment practices; and have reviewed and updated our
diversity and inclusion, labour and human rights policies. We ensure competitive
compensation levels through benchmarking and continue to support and invest in
group-wide as well as local training programmes. We have implemented measures
to monitor and manage succession planning, staff turnover, internal placements
and training.
We perform 360˚ feedback at a management level and regularly conduct
performance and development reviews at a local level. We carry out a group-wide
employee survey approximately every two years.
Through a confidential reporting hotline, Speakout, employees can raise concerns
about conduct that may be contrary to our values.
Mondi Group
Integrated report and financial statements 2018
13 Environmental impact
Potential impact
We operate in a sector where the environmental impact of our business can be
high and we need to manage the associated risks.
Our operations are water, carbon and energy intensive; consume materials such
as fibre, polymers, metals and chemicals; and generate emissions to air, water
and land. We are the custodian of more than two million hectares of forested land.
We consider potential negative impacts on constrained resources and loss of
biodiversity and ecosystems from our forestry and manufacturing operations.
We are subject to a wide range of international, national and local environmental
laws and regulations, as well as the requirements of our customers and
expectations of our broader stakeholders. Costs of continuing compliance,
potential restoration and clean-up activities, and increasing costs from the effects
of emissions could have an adverse impact on our profitability.
The impacts of climate change such as rising frequency and intensity of water
shortages, floods and storms worldwide and pests and diseases also have the
potential to impact our operations and forests.
Reporting on climate-related risks and opportunities
Monitoring, mitigation, and where relevant,
independent assurance activities
We ensure that we are complying with all applicable environmental, health
and safety requirements where we operate. Our own policies and procedures,
at or above local policy requirements, are embedded in all our operations
and are supported through the use of externally accredited environmental
management systems.
We focus on a clean production philosophy to address the impact from emissions,
discharge, and waste. We manage our water resources responsibly to address
risks related to water scarcity in some of our operations, and to ensure equitable
use of water resources among local stakeholders wherever we operate.
We emphasise the responsible management of forests and associated ecosystems
and protect high conservation value areas. We ensure that we manage our forests
responsibly and implement measures to protect biodiversity.
We collaborate with customers and supply chain stakeholders to better understand
the concerns related to the environmental impact of plastics in the environment,
and to work together on scaleable, meaningful solutions to address this.
Our product design and innovation focuses on reducing the environmental impact
of our products throughout their life cycle.
We monitor our environmental performance indicators and report our progress
against our 2020 commitments, with our GHG emissions independently assured
to reasonable assurance level. We monitor regulatory developments to ensure
compliance with existing operating permits and perform SEAT (Socio-economic
Assessment Toolbox) assessments and water impact assessments locally to better
understand our local environmental footprint and stakeholder needs.
Potential financial implications include
a significant reduction in EU Emission
Trading Scheme (EU ETS) allowances,
which we estimate could have an
impact of around €5 million per
annum1 and therefore not significant
in the context of the Group. We have
also identified potential opportunities
such as improved energy efficiency
and reduced water consumption
and continue to make progress on
quantifying all of these and assessing
impacts through scenario testing.
We are committed to improving the
integration of climate-related risks in
our overall business risk assessment
process using our dedicated cross-
functional team and will continue
to consult with external experts
and other corporates to improve
our understanding.
Online Sustainable
development report
Page 69-70
There is a growing demand from
investor and regulatory communities
for improved financial disclosures from
companies in relation to climate-related
risks and opportunities. In meeting this
need the Financial Stability Board´s (FSB)
Task Force on Climate-related Financial
Disclosure (TCFD) published a report
in 2017 outlining recommendations
for more effective climate-related
disclosure standards. Although Mondi’s
online Sustainable development
report and CDP disclosure make
us largely compliant with the TCFD
recommendations, this year we have
focused on closing the gap by starting
to quantify the financial implications of
these potential risks and opportunities.
For Mondi, climate-related risks (e.g.
extreme weather patterns, water
shortages, floods, or other natural
disasters) could give rise to business
interruptions in our operations or in
our supply chain and make our forests
more vulnerable to pests and diseases.
Moreover, as countries explore options
to transition to low carbon economies
in order to achieve international
commitments to respond to the risk of
climate change, laws and regulations
are being implemented to enforce both
mitigation and adaptation measures
to deal with and reverse effects of
climate change.
1 The regulation is expected to come into force
in 2021. Calculated assuming an average
price of €35/t CO2
Mondi Group
Integrated report and financial statements 2018
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Principal risks
Compliance risks
Risk tolerance:
Low
Key person responsible:
Andrew King (Chief Financial Officer)
We have a zero tolerance approach to compliance risks. Our strong culture and values,
emphasised in every part of our business, with a focus on integrity, honesty, and
transparency, underpins our approach.
14 Reputational risk
Potential impact
Non-compliance with the legal and governance requirements and globally
established responsible business conduct in any of the jurisdictions in which we
operate and within our supply chain could expose us to significant risk if not actively
managed. Failure to successfully manage relationships with our stakeholders could
disrupt our operations and adversely impact the Group’s reputation.
These requirements include laws relating to the environment, exports, price
controls, taxation, competition compliance, data protection, human rights,
and labour.
Fines imposed by authorities for non-compliance are severe and, in some cases,
legislation can result in criminal sanction for entities and individuals found guilty.
Areas of weaker governance also present the challenge of addressing potential
human rights issues in our operations and supply chain. The introduction of human
rights legislation, such as the UK Modern Slavery Act 2015, has further highlighted
the need to identify and address potential risks of child labour, forced or bonded
labour and human trafficking in our supply chain.
15 Information technology risk
Potential impact
Many of our operations are dependent on the availability of IT services and an
extended interruption of such services may result in a plant shutdown and an
inability to meet customer requirements.
Cybercrime continues to increase and attempts are increasingly sophisticated, with
the consequences of successful attacks including compromised data, financial
fraud, and system shutdowns.
Monitoring, mitigation, and where relevant,
independent assurance activities
We operate a comprehensive training and compliance programme, supported by
self-certification and reporting, with personal sanction for failure to comply with
Group policies.
We engage with our stakeholders through formal and informal processes such as
our SEAT assessment and Community Engagement Plans.
Our legal and governance compliance is supported by a centralised legal
compliance team and is subject to regular internal audit review.
We have a confidential reporting hotline, Speakout, enabling employees,
customers, suppliers, managers and other stakeholders to raise concerns
about misconduct.
Monitoring, mitigation, and where relevant,
independent assurance activities
We have a comprehensive IT Security Policy approved by the Boards and we
operate an extensive training and awareness programme for all our users.
The IT infrastructure is regularly tested and verified and where possible, we have
redundancies in place. Our system landscape is based on well-proven products.
We conduct regular threat assessments and utilise external providers to evaluate
and review our security policies and procedures and we have cybercrime
insurance in place.
Mondi Group
Integrated report and financial statements 2018
Viability statement
As part of the approval of this Integrated
report, the Boards have assessed the
Group’s prospects and viability.
Factors in assessing
long-term prospects
The Group’s business model and strategic
framework are described in detail on
pages 18 to 27. Our strategy is to deliver
value accretive growth by focusing on our
four strategic value drivers. Our industry-
leading asset portfolio and our focus on
performance is supported by our strong
capital expenditure project pipeline and
where relevant by acquisitions to build on
our competitive advantages and to better
serve our customers. Our current and
future prospects are discussed in more
detail in our Chief Executive Officer’s letter
and Strategic performance review.
Mondi’s geographical spread, product
diversity and large customer and supplier
base mitigate potential risks of customer or
supplier liquidity issues. Ongoing initiatives
by management in implementing profit
improvement programmes, which
include ongoing investment in operations;
plant optimisation; cost-cutting; and
rationalisation activities, have consolidated
the Group’s leading positions in its
chosen markets.
Assessment of viability
The Boards believe that the three-years to
December 2021 is an appropriate period
over which a reasonable expectation of
the Group’s longer-term viability can be
evaluated. In coming to this view, the
Boards have considered the inherent
volatility in commodity prices and exchange
rates, the time taken for new investments
in pulp and paper production capacity
to be introduced into the market, typical
new product development cycles, and
the Group’s capital structure. Given the
strategic risks described, the Boards
believe that the ability to assess the Group’s
longer-term viability beyond this period
becomes increasingly reduced. The Boards
have considered the Group’s current
financial position, strategy and plans for the
next three years, marking the end of the
Group’s formal planning horizon.
The Group’s budget and plan has been
tested for severe but plausible downside
scenarios linked to the Group’s principal
risks. The purpose of this is to test the
impact of events that have the ability to
threaten the viability of the Group, but are
hypothetical in the sense that multiple
control measures and mitigation actions
are in place to prevent such events from
occurring. In an event that a scenario partly
or fully takes place, the Group has various
options available to maintain liquidity and
continue operations.
The scenarios tested include lower
packaging and uncoated fine paper prices
and weaker demand for a long period
of time. Given the Group’s geographical
spread the potential impact of exchange
rate fluctuations has also been evaluated,
including a weaker US dollar/euro exchange
rate and stronger emerging market
currencies. Based on the results of these
scenarios, the Boards are satisfied that the
Group would be able to respond to such
circumstances through various means
which could include a reduction of capital
expenditure and further rationalisation
and/or restructuring, to ensure that
the Group can continue to meet its
ongoing obligations.
The Group meets its funding requirements
from a variety of sources as more fully
described in the financial statements.
The Boards are satisfied that the Group will
have sufficient liquidity to meet its needs
over the planning horizon. The scenario
testing is carried out against Mondi’s
current debt facilities, with an assumption
that the Group’s €500 million Eurobond
maturing in September 2020 is successfully
refinanced and the €750 million Syndicated
Revolving Credit Facility is refinanced ahead
of maturing in July 2021. In the scenarios
evaluated, the Group remains within its key
financial covenant ratio in terms of which
its net debt to trailing 12-month underlying
EBITDA ratio must not exceed 3.5 times.
Taking into account the Group’s long-term
strategy, the principal risks described
above, and the results of the downside
scenario assessments, the directors
have a reasonable expectation that the
Group remains viable over the period of
the assessment.
Going concern
The directors have reviewed the Group’s
budget, considered the assumptions
contained in the budget, and reviewed
the significant risks which may impact
the Group’s performance in the near
term. These include an evaluation of the
current macroeconomic environment and
reasonably possible changes in the Group’s
trading performance.
The Group’s financial position, cash flows,
liquidity position, and borrowing facilities
are described in the annual financial
statements. At 31 December 2018, Mondi
had €616 million of undrawn, committed
debt facilities. The Group’s debt facilities
have maturity dates of between 1 and 8
years, with a weighted average maturity of
4.6 years.
Based on our evaluation the Boards
considered it appropriate to prepare
the financial statements on the going
concern basis.
Accordingly, the Group continues to adopt
the going concern basis in preparing
the Integrated report and financial
statements 2018.
.
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Integrated report and financial statements 2018
48
Sustainability performance
Growing
responsibly
Our Growing Responsibly
model remains the framework
through which we respond
to our sustainability challenges
and opportunities, and provides
a solid structure for our future
success. As one of the Group’s
strategic value drivers, it shapes
our long-term response to
sustainability challenges and
enables us to demonstrate, monitor
and improve our performance
across the value chain.
The model covers 10 Action Areas, which
reflect the aspects of sustainability that are
most relevant for Mondi and our stakeholders.
Within these Action Areas, we have made 16
public commitments to be achieved by 2020,
along with a carbon emissions commitment that
runs to 2030.
Contributing to the UN Sustainable
Development Goals (SDGs)
It is a responsibility of business to participate
in the delivery of the UN SDGs, so this year,
in addition to highlighting the strongest links
between our Action Areas and respective SDG
targets, we have included a comprehensive
index that references SDG links in our SD report.
Our main reporting focus continues to be on
the six priority SDGs where we believe we have
the greatest impact and therefore the greatest
opportunity to make a real and lasting difference:
7 Affordable & clean energy
8 Decent work & economic growth
9 Industry, innovation & infrastructure
12 Responsible consumption & production
13 Climate action
15 Life on land
Materiality
Our material issues articulate what matters most
to our business and our stakeholders along the
value chain. This year, we carried out a new
assessment of our material issues to understand
their relative importance to our stakeholders, and
identify new and emerging issues. The updated
list will inform our commitments beyond 2020.
Our materiality assessment combined qualitative
and quantitative inputs from internal and external
stakeholders, meeting GRI guidance and best-
practice standards.
Online Sustainable
development report 2018
www.mondigroup.com/sd18
Mondi Group
Integrated report and financial statements 2018
UN SDGs
Solutions that
create value for our
customers
We encourage sustainable,
responsibly manufactured
products and closer
collaboration with our
customers and partners.
Read more
Page 62-63
UN SDGs
Relationships with
communities
We aim to enhance our
social value to communities
through effective stakeholder
engagement and meaningful
social investments, using global
frameworks that enable us to
address local priorities.
Read more
Page 61-62
Supplier conduct
and responsible
procurement
We’re taking steps to encourage
greater transparency and
promote fair working conditions
by developing a responsible,
inclusive and sustainable
supply chain.
Read more
Page 60-61
Biodiversity and
ecosystems
We promote ecosystem
stewardship to sustain
services that our businesses
and communities rely
on through sharing best
practices and continued,
long-term collaboration with
our stakeholders.
Read more
Page 59-60
Constrained
resources and
environmental
impacts
Our focus on operational
excellence drives efficiency
improvements to ensure
responsible use of water,
reduction of waste and
emissions, the cascading use
of wood and development of
resource-efficient products.
Read more
Page 58-59
UN SDGs
UN SDGs
UN SDGs
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UN SDGs
Employee and
contractor safety
Our goal is zero harm
to employees and
contractors, and a safe
and healthy workplace.
Read more
Page 51-52
A skilled and
committed workforce
UN SDGs
We’re developing a culture
that aims to inspire, engage and
develop all our people to reach
their full potential, while ensuring
our business can continue
to grow and succeed.
Read more
Page 52-53
Fairness and diversity
in the workplace
UN SDGs
The diversity of our workforce
is one of our greatest strengths.
We promote fair working
conditions for a better,
more diverse workplace.
Read more
Page 53-54
Sustainable fibre
UN SDGs
We’re promoting positive change
to support credible certification
systems that will meet increasing
demand for sustainable fibre.
We also manage our own
forests sustainably.
Read more
Page 55-56
Climate change
UN SDGs
We consider climate
change in our business
decisions through sound
investments to improve energy
efficiency and responsible
procurement of wood and
fibre. Our sustainably managed
forests also play an important
role in storing carbon.
Read more
Page 56-57
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www.mondigroup.com/sd18
Mondi Group
Integrated report and financial statements 2018
9
8
10
7
1
Our
10 Action
Areas
6
2
5
3
4
Through this model, we’re
able to demonstrate, monitor
and improve our sustainability
performance as well as
our contribution towards
achieving the UN Sustainable
Development Goals.
Dominique Reiniche
Chair of the DLC sustainable
development committee
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Sustainability performance
Growing responsibly: Our approach
Robust governance is fundamental to building
a resilient and successful organisation in which
sustainability is embedded at all levels.
External recognition
Our sustainability performance has been
disclosed in or received recognition
by a number of external corporate
ratings and indices, including:
Sustainability governance
Our Boards and committees provide the
necessary leadership to implement the
principles of good corporate governance
across the Group, ensuring decisions and
interactions with all stakeholders are based
on integrity, accountability, fairness and
transparency. Comprehensive policies,
standards and management systems
help us meet our commitments and
guide our practice, linked to our material
issues and aligned with our Growing
Responsibly model, to address the risks
and opportunities facing us.
Our Sustainable Development Governance
Policy supports our overall approach
and is further supported by the following
policies, which apply to all our owned and
managed operations:
e Safety and Occupational Health
e Labour and Human Rights
e Sustainable Forestry
e Energy and Climate Change
e Environment
e Supply Chain and
Responsible Procurement
e Product Stewardship
e Communities
More information
www.mondigroup.com/sustainability/
governance-of-sustainability
Our policies include some of our longer-
term sustainability commitments and inform
the setting of targets and commitments
for each new period. Operating standards
define the minimum requirements for
good operational management and
control across all policy areas and provide
guidance on the implementation of the
Sustainable Development Management
System (SDMS) at Group, business unit
and operational levels.
We apply due diligence processes to our
practices and performance to ensure
alignment with our policies. These include:
monthly and annual monitoring of our
operations’ sustainability performance
and regular reporting to the sustainable
development committee; active and
voluntary use of external assurance and
verification of our external sustainability
reporting; internal audits to monitor
operations’ adherence to our standards;
training and communication on current
and future regulatory requirements and
material sustainability issues; and the use of
externally certified standards at operational
and group level.
In 2018, we commenced a comprehensive
review of our operating standards,
the second tier of our SDMS, which
set minimum requirements for Mondi
operations to comply with group policies.
Draft operating standards and their
supporting practice notes are currently
being developed.
Online Sustainable development report
Page 36
Non-financial information statement
In accordance with sections 414CA and 414CB of the UK Companies Act 2006, the required non-financial
information disclosures can be found integrated throughout the Strategic report.
A summary of key areas of disclosure is set out below:
Business model
Information relating to environmental matters
Information relating to employees
Information relating to social matters
Information relating to respect for human rights
Information relating to anti-corruption and anti-bribery matters
Principal risks
Page 18 to 25
Page 55 to 60
Page 51 to 54
Page 61 to 62
Page 54
Page 63
Page 38 to 47
Non-financial key performance indicators
Page 37, 48 to 63, and 70 to 83
Mondi Group
Integrated report and financial statements 2018
e Advanced Reporter
e Joined 2015
e Member of the FTSE4Good
Index Series
e FTSE/JSE Responsible Investment
Index: Top 30
e Leadership for Climate
Change disclosure
e B List for Forests and Water
Security disclosures
e Ranked sixth FTSE 100 company
e Member of the ESI
Excellence Europe
e UK 20
e Europe 120
e World 120
e GOLD recognition level
e Top 1% of all suppliers
e ESG Rating AA
The CEO Water Mandate WE SUPPORT Growing responsibly: Our progress in 2018
Performance worse than or the same as the base year;
measures in place to be back on track1
Achievement of the commitment
behind target
Achievement of the commitment
on track
1
Employee and
contractor safety
Our commitments to 2020
2018 performance in brief
Status1
Avoid work-related employee
and contractor fatalities
Prevent life-altering employee
and contractor injuries
One fatality
Five life-altering injuries
Reduce TRCR by 5% compared
to 2015 baseline, including new acquisitions
0.68 TRCR
11% reduction against 2015
When it comes to our safety
performance, we’ve come a long
way over the last 10 years. Open and
honest discussions have seen a step
change in the way we engage in and
take responsibility for safety. But while
we’re among the safety leaders in
our industry, unsafe behaviour was a
common factor in many of our incidents
in 2018. Ultimately, if we want to achieve
our zero harm ambition, then we
need to create a culture where people
instinctively act safely in everything
they do, every day.
1 For fatalities and life-altering injuries we compare our
performance to our goal of zero harm
2 2017 recordable cases and TRCR have been restated to include
a missing person confirmed deceased in 2017, and acquisitions
completed in 2016 and 2017
We had 262 recordable cases in
our operations in 2018 (2017: 2552).
This equates to a total recordable
case rate (TRCR) of 0.68 (2017: 0.682).
This represents an 11% improvement
compared to our 2015 baseline of 0.76
(adjusted to include acquisitions). We saw
one newly compensated occupational
disease case in 2018 at our Richards Bay
mill (South Africa).
We were deeply saddened by a fatality
in April 2018 when a contractor lost his
life at our Syktyvkar operation (Russia)
during maintenance of a conveyor in the
woodyard. Regretfully we also experienced
a contractor fatality at our Ružomberok mill
(Slovakia) in January 2019, during drilling
activities on site. Five life-altering injuries
occurred during the year, details of which
can be found in the Business reviews.
Business reviews
Page 68-83
In all instances, we carry out investigations
to understand the events and behaviour
involved, and to identify how we might
prevent such incidents in the future.
Embedding a 24-hour
safety mindset
We introduced a 24-hour safety mindset
approach in 2017, where safety is seen as
something we do for ourselves, our families,
our colleagues and their families.
In 2018, we launched a poster campaign
showing employees with their children in
situations related to our potential life-altering
and fatal risk tasks. We also created a hard-
hitting safety communication programme
to address injuries relating to moving and
rotating equipment, and we are exploring a
group-wide focus on conscious and sub-
conscious safety behaviour.
We continued to provide training to first-line
managers to enable them to manage the
safety and health of their teams. 1,315
(2017: 1,125) people have now attended
the three-day first-line managers training
programme. We also developed the next
module of our training programme for
safety and health professionals, to be
completed by 2020.
Risk-based approach
We take a risk-based approach to managing
safety and health. Risk assessments are
an important tool for identifying hazards
and putting necessary control measures in
place. Every operation continues to identify
their top risks and develop management
plans to engineer them out of the business.
Where the latter is not feasible, robust
controls and procedures are introduced to
reduce and manage the risks.
In 2013 we introduced our Top 5 Fatal Risks
approach to address the top risks in all our
operations. In 2018, we commenced the
third phase of work to identify the next set
of top risks and actions to address them.
Our Task Risk Management Methodology
provides a practical, easy-to-understand
approach to conducting pre-task risk
assessments, assessing probability and
severity of any incident and guiding action
plans based on a hierarchy of controls to
address the risks. The approach aims to
firstly prevent incidents and then, if they do
occur, to reduce their severity.
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Sustainability performance
Growing responsibly: Our progress in 2018
This requires operations to consider the top
three risk controls – elimination, substitution
and engineering – before looking at
administrative controls or issuing personal
protective equipment.
Employees are engaged during the risk
assessment processes and assessments
are revised at predefined frequencies and
when required as a result of incidents.
Our new Permit to Work methodology was
rolled out at all operations in 2018.
Measuring progress: lead,
current and lag indicators
In addition to conventional safety
performance metrics, which focus on
incidents and total recordable case rate
(TRCR) – known as ‘lag indicators’ – we
use ‘current’ and ‘lead’ indicators, which
allow us to monitor proactive efforts
and improvements aimed at preventing
incidents. Performance against current
and lead indicators form part of our senior
managers’ bonus scheme, with targets
assigned to each indicator as part of the
annual performance and development
review (PDR) process. In 2018, we carried
out 106,290 (2017: 106,840) safety audits
including management risk-focused audits;
firstline manager task audits; Safety, Health
and Environment (SHE) professional focus
audits; and peer observations, against a
target of 77,673.
Health and wellbeing
We promote awareness of diseases such
as HIV/AIDS, diabetes and tuberculosis
by encouraging testing, counselling
and treatment. We also offer health
and wellbeing facilities and wellness
programmes at many locations. In 2018,
3,465 employees and contractors
(2017: 3,530) participated in the HIV/AIDS
voluntary programme in our South African
operations, with 1,156 opting for testing
(2017: 3,307). In addition, 12 employees
(2017: 40) and 1,087 contractors (2017: 485)
benefited from the Antiretroviral Therapy
programme. A further 28 employees tested
joined the programme at the start of 2019.
Online Sustainable development report
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Mondi Group
Integrated report and financial statements 2018
2
A skilled and
committed workforce
Our commitment to 2020
2018 performance in brief
Status
Engage with our people to create
a better workplace
89% response rate in 2018 employee survey,
with actions undertaken in response
to findings
With around 26,100 employees across
more than 30 countries, we aim to be
an employer of choice, inspiring and
empowering our global workforce to
deliver our strategy. Engaging and
developing our people to reach their
full potential and providing inspiring
opportunities for their personal and
professional development ensures
our business continues to grow
and succeed.
Employee engagement
‘Inspire’ is our programme for engaging
people to live Mondi’s three core values
– passion for performance, acting with
integrity and caring. Launched in 2011,
‘Inspire’ guides our approach to training and
development, operational transparency,
and the way we engage and motivate
our employees.
We use both formal and informal processes
to communicate and engage with
employees, together with regular PDRs
conducted at a local level. In addition to
our global intranet platform, regular local
sessions focus on safety, operational
objectives, performance and the Group’s
vision, strategy, values and culture.
There are a number of performance-related
pay schemes that reward employees for
the pursuit and achievement of business
objectives, and the majority of our
employees participate.
Our group-wide employee survey provides
important feedback from employees on
specific issues and tracks our progress.
Our latest survey was carried out in February
2018 by a third party to ensure 100%
confidentiality. All Mondi employees3 were
invited to take part, with the survey covering
over 100 operations in 24 languages.
The response rate was 89% (2015: 90%)
with results highlighting the following areas
as key strengths:
e Employees feel comfortable to stop
others from working unsafely
e Management enforce safe behaviour in
the workplace
e Expectations of employees are clear
e Thinking ahead and acting quickly in
teams is common
e Employees perceive a positive attitude
among leadership
3 Employees as of 1 December 2017 with a minimum of 2-months’
contract and excluding those on leave, and external contractors
Growing responsibly: Our progress in 2018
Areas considered as opportunities for
improvement include:
e Teams receiving high quality support
from other teams with which they work
e The belief that quality is
everyone’s responsibility
e Management doing what they say
e Employees feeling cared for by
the company
e Action taken on issues raised in the
previous survey
Survey results were shared across the Group
to enable the development of targeted action
plans with a focus on care and recognition,
and fostering a learning culture through
strong people development.
Between our global employee surveys, we
also conduct pulse checks at our larger
mills to track progress. Following the 2015
survey we carried our pulse checks at three
mills in 2017, and further checks are planned
in 2019.
Transparency, assessment
and feedback
Annual PDRs are an important tool for
employees and their managers to reflect
on the past year’s performance and set
goals for employees’ immediate and long-
term development.
360º feedback is another important tool
for people to understand their behaviours
and areas for improvement. Senior leaders
and line managers receive 360º feedback
every three years and new leaders receive
360° feedback around six to eight months
after appointment.
Having expanded the opportunity to receive
such feedback, 531 employees received
feedback focused on SHE topics and
604 received a standard 360° feedback
(2017: 358).
We also introduced the digital FlexiFeedback
tool, through which managers and employees
can select questions and receive feedback in
a quick and flexible way.
Training and development
By enhancing the skills of our people, we
encourage them to realise their potential
while meeting our business needs.
Personal development and training also
enables our employees to be accountable
for upholding our business conduct
standards, principles and policies.
Our employee induction includes training
related to the business and its strategic value
drivers, including products and our approach
to sustainable development. Specific training
schemes are designed to empower and
support diversity, particularly gender diversity.
Employees in sales and marketing roles
– and those in positions that have, or may
have, contact with competitors – complete
annual competition compliance training
(completed by 2,865 in 2018, 2017: 514).
3
Fairness and diversity
in the workplace
Our commitment to 2020
2018 performance in brief
Status
Promote fair working conditions
and diversity in the workplace
Diversity and inclusion roadmap developed and
10 priority work streams identified to support and
enhance diversity and inclusion in the workplace
In 2018, we devoted around 819,200 hours
of employee and contractor time to training
and development (2017: 829,900 hours).
This does not include informal and on-the-
job training, where much of our employee
learning happens.
Some 40% of this training was dedicated
to safety and health issues (2017: 37%).
In addition to 267,028 hours of general
safety training (2017: 247,965), we
conducted 59,995 hours of critical safety
training (2017: 58,594).
The Mondi Academy
The Mondi Academy International is our
global training facility, which provides core
business-related training programmes for
leaders, line managers and employees.
Along with group-wide training networks
and local academies (currently in Poland,
Russia, Slovakia, the Czech Republic
and South Africa), it plays a key role in
employee development.
The Mondi Academy International conducted
126 seminars and programmes in 2018
(2017: 148) which were attended by 1,196
employees, 26% female (2017: 1,180, 25%
female). It increased its focus on providing
digital learning tools, laying the foundation
for the Digital Academy, which is due to be
launched in 2019 to support employees in
developing their digital skills.
We strive to create an inclusive
environment where differences are
valued and embraced and we apply
a zero tolerance policy towards
discrimination and harassment.
Equal opportunities for all is a priority
across our operations.
Although labour and collective bargaining
practices differ from country to country,
basic rights and fair employment standards
(including fair wages4) apply throughout the
business. They are managed locally, guided
by Group policies and standards.
4 Ensuring that wages paid for a standard working week shall at
least meet legal or industry minimum standards and shall always
be sufficient to meet the basic needs of our employees and to
provide some discretionary income
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Sustainability performance
Growing responsibly: Our progress in 2018
Diversity and inclusion (D&I)
Our policy is to treat everyone – including
all our employees and contractors, whether
part-time, full-time or temporary – fairly and
with respect, irrespective of origin, nationality,
disability or gender. Opportunities for
employment, engagement, promotion,
training and any other benefit are based on
skills and ability.
We monitor gender diversity across
the business, and among our senior
management. We provide equal
opportunities for all genders regardless of
race, age, sexual orientation, ethnicity or
any other difference and we are working to
increase the representation of women at
all levels.
Our D&I policy, updated in 2017, takes into
account evolving regulatory requirements
and stakeholder expectations. The policy
was informed by the Hampton-Alexander
Review5 recommendation that boards, as
well as executive committees and their direct
reports combined, should be 33% women
by 2020. It also provides a greater focus on
ethnic and race diversity across our board
and executive committee members and it
continues to support our Labour and Human
Rights policy.
We consider applications for employment
in a fair and balanced way, seeking to cater
for individual requirements, disabilities and
needs. Group policy ensures training, career
development and promotion is consistent
and fair, including for people with disabilities.
In the event of an employee suffering a life-
altering or life-threatening injury at work, we
facilitate appropriate medical treatment and
rehabilitation. We have supported continued
employment at Mondi for all employees
who have suffered life-altering injuries by
finding alternative equivalent jobs for them
as necessary.
At the end of 2018, 21% of employees
were female (2017: 22%). We had two
female directors representing 25% of
the composition of the Boards and one
director of ethnic minority background.
In June 2018, we reported to the Hampton-
Alexander Review that we had 27%
female representation across our executive
committee and its direct reports (2017: 27%).
5 An independent review body which builds on the work of the
Davies Review to increase the number of women on FTSE
boards and includes a focus to improve women’s representation
in senior leadership positions
Mondi Group
Integrated report and financial statements 2018
We believe that diverse teams will
improve our competitive advantage.
Our global D&I taskforce is focusing
on 10 workstreams to drive
progress across the organisation.
Sara Sizer
Group Communication & Marketing
Director and Exco D&I sponsor
60% of Mondi South Africa’s management
team (six out of 10 operational committee
members) were previously disadvantaged
individuals (2017: 57%).
In September 2018, we held our first
Diversity & Inclusion conference, bringing
75 colleagues together to shape the vision
of a diverse and inclusive culture at Mondi.
A pilot initiative is helping us to better
understand and address the needs
of employees with a disability. We are
developing metrics that can more clearly
monitor, measure and track our
commitment to promoting fair working
conditions in the workplace.
Gender diversity 2018* Male % Female %
Directors
6 75
2 25
Senior managers
283 92
26
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Employees
20,708 79
5,468 21
* As at 31 December 2018
Senior managers includes directors as per the definition set out
in section 414C of the UK Companies Act 2006
Governance report
Page 104-105
Human rights
We’re further strengthening our monitoring
and reporting of potential human rights
risks in our operations and supply chain.
This includes embedding sustainability
criteria relating to labour and human rights
across our procurement processes.
Respecting and protecting human rights is
embedded in many existing practices and
initiatives across the business, including:
ensuring safety and health at work;
engaging employees and treating them
fairly; our respect for the law wherever we
operate; engaging with and investing in
communities; minimising our environmental
footprint; producing our products to
the highest safety, health and hygiene
standards; and working with suppliers
and contractors to meet high standards of
business conduct.
Our upcoming Operating Standard
related to human rights and working
conditions, due to be rolled out in 2019,
will provide guidance for identifying,
mitigating and managing potential human
rights risks. In addition, we are working
on the implementation of comprehensive
mechanisms to identify and address human
rights incidents in our supply chain.
There were no human rights incidents in
our operations or supply chain reported
through our Speakout tool or any other
reporting mechanisms in 2018.
We support the UK Modern Slavery Act
and its requirement for organisations to
prepare an annual slavery and human
trafficking statement. Our first statement
was published in June 2017 for the financial
year 2016. The latest statement was
published on our website in June 2018 for
the financial year 2017, with the next update
due in June 2019.
Corporate restructuring
Where employees are affected by corporate
restructuring, we follow our HR policies and
local labour rules as a minimum. If roles are at
risk, we seek to provide retraining, interview
skills and CV writing services, re-employment
and relocation, supporting entrepreneurship
as well as severance payments depending
on local regulations and available legal
schemes. In 2018, the closure of our
Louisville facility (US) impacted about 100
employees. The closure of our Scunthorpe
plant (UK) impacted 79 employees, all of
whom secured alternative employment or
became self-employed. We also ceased
production of industrial bags at our Zeltweg
plant (Austria), impacting around 100
employees, and we are in the process of
merging our two industrial bags plants in the
city of San Pietro in Gu (Italy) on to one site,
with the majority of employees retaining their
jobs. In South Africa, following the closure of
a paper machine at our Merebank mill, 119
impacted employees were offered access
to career guidance and support in order to
secure employment elsewhere, with only five
remaining unplaced.
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Growing responsibly: Our progress in 2018
4
Sustainable
fibre
Our commitments to 2020
2018 performance in brief
Status
Maintain FSC certification for 100% of our owned
and leased forest lands and promote sustainable
forest management
100% of owned and leased
forests certified
Procure at least 70% of our wood from FSC-
or PEFC-certified sources with the balance
meeting our company minimum wood standard
that complies with FSC’s requirements for
Controlled Wood
71% of wood certified
All Chain-of-Custody certifications
with Controlled Wood requirements
were maintained
Wood is one of our primary raw
materials and we work hard to
provide the best assurance for our
stakeholders that the wood and fibre
we use comes from responsible
sources. We combine forest
certification with risk-assessment
processes as part of our Due Diligence
Management System (DDMS).
Our long-term aim is to increase the
proportion of our products that are
made using credibly certified fibre
and to support efforts to increase its
availability in the supply chain.
We manage around 2.4 million hectares
of forest landholdings in Russia and
South Africa. Sourcing wood through
our own forestry operations gives us
maximum assurance that our fibre is
sustainable and provides opportunities
to test new sustainable forestry practices
and landscape stewardship approaches.
We maintain FSC certification of all our
owned and leased forests as well as PEFC
certification in our Russian forests.
A significant portion of our wood demand
is sourced externally. We combine forest
certification with risk-assessment as part
of our DDMS. The system meets FSC
Controlled Wood (CW) requirements as a
minimum and addresses the requirements
of the European Union Timber Regulation
(EUTR) and the US Lacey Act.
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In European countries, through the strong
consideration of sustainability factors
in forestry traditions, regulations and
practice, we promote PEFC certification.
For countries identified as high-risk through
our DDMS, or where we do not have
expertise on national legislation, society and
environment and where we lack experience
working with local suppliers, we only
accept FSC-certified wood or wood that
is verified through a recognised credible
certification body.
We do not source wood or products from
sources that involve any of the following:
violation of national and international
legislation; violation of traditional and human
rights; destruction of high conservation
values, conversion of forests to plantations
or non-forest use; introduction of genetically
modified organisms; or violation of any
of the International Labour Organization
(ILO) Core Conventions. None of our
sourcing contributes to illegal logging
or deforestation and we don’t use
illegal wood, including mixed tropical
hardwood species and species listed by
the Convention of International Trade on
Endangered Species (CITES).
In 2018, 71% of our total procured wood
was certified to FSC or PEFC (2017: 71%)
and 94% of our externally procured pulp
was from FSC or PEFC certified sources
(2017: 93%). All our mills are certified to FSC
and/or PEFC Chain-of-Custody standards.
While forest and supply chain
certification alone does not
provide proof of legal compliance
with EUTR, it is without doubt
a very strong tool when used
within a corporate Due Diligence
Management System.
Charles Townsend
FSC/PEFC Lead Auditor, EUTR
Consultant, SGS United Kingdom Ltd.
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Sustainability performance
Growing responsibly: Our progress in 2018
5
Climate
change
Our commitments
2018 performance in brief
Status
Reduce specific CO2e emissions from our
pulp and paper mills by 15% by 2030 against
a 2014 baseline
Reduce specific, production-related, Scope 1
and 2 GHG emissions from our pulp and paper
mills to 0.25 tonnes CO2 per tonne of saleable
production by 2050 against a 2014 baseline
14.5% reduction in specific CO2e
emissions against 2014 baseline
7.7% reduction of specific
production-related CO2 emissions
against a 2014 baseline
Our approach to climate change
addresses both the risks and the
opportunities in transitioning to a
low carbon economy. Key focus
areas include energy optimisation
programmes, increasing the ratio
of renewable energy and biomass-
based fuels, and increasing electricity
self-sufficiency. In 2018, we joined
WWF’s Climate Savers, a leadership
programme for businesses, as part of
our commitment to continue to reduce
our GHG emissions using the science-
based target setting methodology.
We combine strategic energy-related
investments across our pulp and paper
mills with good management and sharing
of best practice. Our aim is to reduce
emissions, improve energy efficiency and
replace fossil fuels with renewable biomass-
based energy, where it is practical and
economically feasible. We also manage
our impacts by using low carbon energy
technologies, reducing the carbon footprint
of our products and refining our approach
to responsible, sustainable forestry.
We continued to update and refine our
DDMS in 2018 to address the requirements
of evolving legislation. This was done with
input from the certification body SGS,
WWF, and our consultant ERM. We will
pilot the updated DDMS in 2019 for our
wood and pulp supply chain, supported by
group-wide training.
Use of recycled fibre
Recycled fibre is an important raw material
for our packaging and paper products.
We consider virgin and recycled fibres as
complementary. We assess the balance
between virgin and recycled fibres in our
products on a case-by-case basis, using
the optimum solutions to create high-
quality, resource-efficient products for
our customers. In 2018, we used around
1.3 million tonnes of paper for recycling
(recovered paper) (2017: 1.3 million tonnes).
Cascading use of wood
We believe that sustainable consumption
of wood needs to be at the heart of the
circular economy and government policy to
meet projected demand for wood-based
products. The cascading use of wood
principle maximises the value society
gains from the world’s forests through the
complementary use of virgin and recycled
fibre. It prioritises value-adding non-fuel
uses first and ensures wood is only burnt
for energy after it has been used, reused
or recycled for other purposes. With the
EU setting new member state targets for
obtaining energy from renewable sources
by 2030, we continue to support calls for
these targets to be met without causing
inadvertent damage to the world’s forests
and the sustainable wood supply chain.
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Mondi Group
Integrated report and financial statements 2018
Growing responsibly: Our progress in 2018
Managing risks
and opportunities
Our group-wide risk management framework
ensures the effective governance of all our
material risks and opportunities. It includes
pre-determined risk tolerance limits which
take the likelihood and severity of risk factors
into consideration.
We are committed to adhering to
internationally accepted recommendations
– such as those published by the Financial
Stability Board’s Task Force on Climate-
related Financial Disclosures (TCFD) – to
investigate and report on climate-related
risks and opportunities. In 2018, we made
progress in defining Mondi´s climate-related
risks and opportunities and investigated
their financial implications according to the
recommendations of the TCFD.
We have identified three key risks and two
opportunities, and started the process to
understand the financial implications.
Our climate-related risks include regulatory
risks such as reduced EU ETS allowances
in period IV, which may result in the demand
of additional GHG credits. We have also
identified physical risks such as extreme
weather conditions that may result in reduced
tree growth yields as a consequence of
drought, fire, erosion loss and pests and
disease. Water scarcity may affect water
resources required for production in our
mills located in water scarce countries,
and lead to increased expenses for water
and/or higher investment requirements to
ensure water security. Our climate change-
related opportunities include operating
cost reductions through implementation
of efficiency improvements both for water
use and energy as well as opportunities for
generating income from by-products from
our pulp process with low-carbon, biomass
based chemicals which can be sold as
secondary raw materials.
Energy use and generation
In 2018, the total energy use by our
mills was 148.7 million GJ (2017: 151.6).
Some 91.6 million GJ was consumed for
pulp and paper core processes in the form
of heat and electricity at our operations
(2017: 93.1) and 8.5 million GJ was sold to
the local grids (2017: 8.4). Total energy sales
including green fuel sales amounted to
10.2 million GJ (2017: 10.1).
The contribution of biomass-based
renewable energy to the total fuel
consumption of our mills increased from
59% in 2014 to 64% in 2018, mainly due
to the new biomass boilers at our mill in
Świecie (Poland) and production increases
at Syktyvkar which increased biomass
(black liquor and bark) incineration and, in
combination with reduced energy sales, led
to a higher ratio of biomass-based energy
production at Syktyvkar.
Our mills’ electricity self-sufficiency was
100% in 2018, up from 96% in 2017.
GHG emissions6
Pulp and paper mills
In 2018, the Scope 1 emissions of
our mills was 3.8 million tonnes CO2e
(2017: 3.8 million). This equated to 0.63
tonnes CO2e per tonne of saleable
production (2017: 0.61).
We reduced our mills’ Scope 2 emissions
from 0.69 million tonnes CO2e in 2017 to
0.58 in 2018, equating to specific emissions
of 0.10 tonnes per tonne of saleable
production (2017: 0.11). All our mills use
market-based emission factors for reporting
Scope 2 emissions. Our reported CO2e
figures do not include any carbon off-
setting.
GHG emissions from our pulp
and paper mills
Scope 1 (million tonnes)
Scope 2 (million tonnes)
Specific Total CO2e
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0.8
0.7
0.67
4.07
0.69
3.78
0.58
3.81
6
7
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0
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7
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7
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2014
2015
2018
1 The 2014 baseline of 0.844t/t excludes a divested mill
2 0.722t/t excludes Powerflute (acquired in 2018) but includes
Pine Bluff until date of divestiture
2017
2016
Our long-term GHG reduction target,
calculated using the science-based target
setting methodology, is:
e Reduce production-related specific GHG
emissions to 0.25 tonnes CO2 per tonne
of saleable production by 2050, against a
2014 baseline of 0.59 tonnes
e 2025 milestone: 0.44 tonnes CO2 per
tonne of saleable production
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Converting operations
The Scope 1 emissions from our converting
operations totalled 0.15 million tonnes
CO2e in 2018 (2017: 0.15). Their Scope 2
emissions totalled 0.26 million tonnes CO2e
(2017: 0.27). Our converting operations
contributed 31% of the Group’s total Scope
2 emissions.
Scope 3 emissions
Our indirect emissions (Scope 3) arise
from transportation of products and raw
materials, employee commuting, business
travel, disposal of waste and production of
fuels and raw materials. In 2018, our Scope
3 emissions were estimated to amount
to 3.24 million tonnes CO2e (2017: 3.01).
Over the last few years, we have increased
the number of categories we report as
Scope 3 emissions to provide a more
complete picture of our indirect emissions.
We are currently working with WWF and an
external consultant to replace some of the
secondary data with primary data7.
Energy-related investments
To achieve our climate goals, we make
targeted energy-related investments
across our pulp and paper mills, mainly
through recovery boilers that utilise the
biomass residues of our pulp making
process. Since 2013 we have invested over
€400 million in energy efficiency measures
and increasing biomass based energy in
our mills, including new recovery boilers
at Frantschach (Austria), Ružomberok,
and Świecie. In addition, we invested
in a new recovery boiler as part of the
€335 million modernisation project at Štětí
(Czech Republic), and we are investing
€125 million to upgrade the energy plant at
our Syktyvkar mill.
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6 We report our GHG emissions according to the Greenhouse
Gas Protocol, published by the WBCSD and the WRI, and
have reported our scope 1 and 2 GHG data in compliance with
ISO 14064:1-2006. ERM CVS has provided reasonable (pulp
and paper mills) and limited (converting operations) levels of
assurance on our scope 1 and 2 GHG data in accordance with
ISO 14064. See their full statement at www.mondigroup.com/
sdassurance
7 Primary data includes data provided by suppliers or other value
chain partners related to specific activities in the reporting
company’s value chain. Secondary data includes industry-
average data (e.g. from published databases, government
statistics, literature studies, and industry associations), financial
data, proxy data, and other generic data
Mondi Group
Integrated report and financial statements 2018
58
Sustainability performance
Growing responsibly: Our progress in 2018
6
Constrained resources
and environmental impacts
Our commitments to 2020
Performance in brief
Status
Reduce specific contact water consumption
from our pulp and paper mills by 5% compared
to a 2015 baseline
2% reduction of specific contact
water consumption
against the 2015 baseline
Reduce specific waste to landfill by 7.5%
compared to a 2015 baseline
1.3% increase of specific waste to landfill
against the 2015 baseline
Reduce specific NOx emissions from
our pulp and paper mills by 7.5% compared
to a 2015 baseline
Reduce specific effluent load to the
environment (measure COD) by 5% compared
to a 2015 baseline
16.3% reduction of specific NOx emissions
against the 2015 baseline
6.1% increase of specific effluent load
against the 2015 baseline
Resource efficiency underpins
many of our material issues – from
product design to minimising our
environmental impacts and sourcing
responsibly. We consider solid waste
and emissions to air and water as
wasted resources and we work to
minimise them across our operations.
Our investments in Best Available
Techniques (BAT)8 have enabled us to
achieve significant improvements in
resource efficiency.
Water reduction and recycling
Given the critical importance of water to our
business, to local communities and to other
stakeholders, we strive to manage our
water use wisely and efficiently – especially
in water stressed regions. We’ve committed
to reducing the specific contact water
consumption of our pulp and paper mills
by 5% by 2020, against a 2015 baseline.
In 2018, total Group water input was around
303 million m³ (2017: 307 million m³), with
specific contact water consumption at
33.2 m3 per tonne of saleable production
(2017: 32.8 m3) at our mills.
Mondi Group
Integrated report and financial statements 2018
25 million m³ of our water input was
in water scarce areas in South Africa
(2017: 26 million m³). We saw a 2.2%
decrease in our water withdrawal in water
stressed regions in 2018 – mainly due to
the closing of our newsprint production
capacity at our Merebank mill. Our Richards
Bay operation had a significant increase in
water consumption caused by the impacts
of an extended shut in February.
Managing waste
We have committed to reduce the waste
we send to landfill by 7.5%9 by 2020,
against a 2015 baseline. In 2018, we sent
38.2 kg of waste to landfill per tonne of
saleable production (2017: 30.8 kg). This is
a 1.3% increase against 2015 (37.7 kg per
tonne of saleable production) and a 24.2%
increase since the previous year due to
the extended shut at our Richards Bay mill
when about 16,000 m³ of fibre sludge had
to be dewatered and landfilled. Additionally,
our Syktyvkar mill had to increase its waste
to landfill due to finalisation of the re-
cultivation of its sludge pond.
In 2018, we committed US$50,000 to fund
a One Young World Lead2030 youth-led
project that will turn waste generated by
the packaging industry into raw materials
of inherent value. Outcomes will include
demonstrating how current retail, collection,
sorting and recycling infrastructure can
be adapted to generate raw materials of
inherent value and how consumers can be
incentivised and encouraged to improve
sorting and collection of packaging waste.
Air emissions
We are committed to minimising
environmental impacts related to air
emissions from our sites. We carefully
manage our air emissions and use ISO
standards for monitoring, analysing and
calculating absolute emissions of pollutants.
In 2018, we emitted 55 tonnes of TRS
(2017: 56), a slight decrease compared
with 2017.
8 In support of the EU´s Directive on Industrial Emissions (IED,
2010/75/EU), Best Available Techniques (BAT) reference
documents, the so-called BREFs have been published under
http://eippcb.jrc.ec.europa.eu/reference/
9 kg of waste per tonne of saleable production
Growing responsibly: Our progress in 2018
At our Richards Bay mill, problems in
the lime kiln meant we had to introduce
methanol into the flare, resulting in burner
temperature instability; emissions of un-
combusted concentrated non-condensable
gases (CNCG); and a significant
increase in TRS emissions, leading to
around 300 odour complaints from the
surrounding community.
In 2018, our SO2 emissions were 1,567
tonnes (2017: 1,447). This represents a 72%
reduction against 2015 levels, mainly due to
the new biomass boiler and the fuel switch
from coal and heavy fuel oil to natural gas at
our Świecie mill.
Our specific NOx emissions amounted to
1.7 kg per tonne of saleable production
(2017: 1.8 kg), down 16.3% against 2015
levels. We emitted 1,023 tonnes of fine dust
emissions (particulates) (2017: 921), an 11%
increase compared to 2017 mainly caused
by problems with our electrofilters at the
recovery boiler in Syktyvkar.
Effluent and wastewater quality
Our commitment is to reduce the specific
effluent load (COD) of wastewater by 5% by
2020 (against a 2015 baseline) by avoiding
spills of chemicals in production processes
and by investing in wastewater treatment
plants. Specific COD after wastewater
treatment was 7.95 kg per tonne of saleable
production (2017: 6.85). This represents a
6.1% increase against 2015 and a 16.1%
increase against 2017, mainly due to the
extended shut at our Richards Bay mill.
We’ve achieved significant reductions in
AOX emissions from 390 tonnes in 2005 to
150 tonnes in 2018 (2017: 170), mainly due
to replacing elemental chlorine as bleaching
agent in our pulp mills.
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7
Biodiversity
and ecosystems
Courtesy Ministry of Natural Resources and Environmental Protection of the Republic of Komi © Trier Igor
Our commitment to 2020
Performance in brief
Status
Promote ecosystem stewardship in the
landscapes where we operate through continued
multi-stakeholder collaboration
We support resilient production
landscapes and work to optimise
wood production in balance with other
components of natural capital and
thriving ecosystem services. We use
our forests to apply best practice and
develop new practical solutions for
sustainable forest management, taking
into account the specific features and
needs in different forest types.
Ecological networks are
critically important for ensuring
biodiversity and ecosystem service
benefits within highly productive
plantation landscapes.
Professor Michael Samways
Head of the Mondi Ecological Networks
Programme, Professor at Stellenbosch
University (South Africa)
Extended the work of the WWF-Mondi
Partnership in South Africa and Russia, as
well as 10-year review of local partnerships
with Silver Taiga and MENP
Continued to actively support collaborations
including NGP, BFP, TFD, CISL, HCVRN,
WBCSD FSG and IUFRO
The sustainable working forest
Our working forest concept provides
a visual representation of the positive
contribution that well-managed production
landscapes make to society and the
environment by integrating commercial
forests and conservation networks.
Since its launch, we have used the working
forest concept to promote landscape
stewardship and the crucial importance
of securing a sustainable increase of
long-term wood supply, while at the same
time maintaining essential ecosystem
services. The concept has gained external
recognition among global stakeholders and
is supported by our partners, strengthening
its wider outreach.
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Sustainability performance
Growing responsibly: Our progress in 2018
Managing biodiversity
and ecosystems
We are committed to managing key natural
ecosystems in our forestry operations in a
way that allows ongoing representation of
biodiversity and delivery of key ecosystem
services. We do this by maintaining an
effective network of conservation areas and
priority ecosystems and imitating natural
dynamics for key types of ecosystems
wherever possible. The management of
our conservation areas is guided by our
environmental management system, and
the site-specific requirements are reflected
in a series of map-based Environmental
Management Plans (EMPs). We set
aside around 24% of our owned and
leased land for conservation purposes;
the rest of our managed land is used for
production purposes.
To scale up our impacts, we share best
practice and local experience through
regional and global platforms, designed
to catalyse action on a wider scale.
These platforms include the Boreal
Forest Platform (BFP)10, New Generation
Plantations Platform (NGP)11 and The Forest
Dialogue (TFD)12.
We continue to develop best practices
across our main forest types through the
Ecosystems Stewardship workstream
of our WWF Global Partnership in South
Africa, Russia and Bulgaria, as well as
our local partnerships with Silver Taiga
Foundation in Russia and the Mondi
Ecological Networks Programme (MENP) in
South Africa.
Water stewardship
We collaborate with stakeholders to
promote water stewardship through a
multi-stakeholder approach at a landscape
or catchment scale. By involving key
organisations and stakeholders who share
an interest in a catchment, the approach
aims to develop and implement shared
solutions and actions to secure water-
related ecosystem services at scale. In this
way, Mondi promotes water stewardship
across water catchments well beyond its
forest boundaries.
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Page 91
8
Supplier conduct and
responsible procurement
Our commitment to 2020
Performance in brief
Status
Encourage supply chain transparency and
promote fair working conditions together with
our key suppliers
Continued development of the
responsible procurement process to
identify sustainability risks in our supply
chain and carried out a pilot screening of
100 suppliers to test the methodology
Mondi Group
Integrated report and financial statements 2018
10 http://borealforestplatform.org/en/
11 https://www.newgenerationplantations.org/
12 https://theforestsdialogue.org/
In an increasingly globalised and
connected economy, transparency
has become a key supply chain
success metric for stakeholders
worldwide. We’re taking steps to
improve transparency and manage our
impacts by partnering with suppliers
to build a responsible, inclusive and
sustainable supply chain. Our global
supply chain spans more than 17,000
first-tier suppliers13 in 63 countries
around the world. We focus on
sourcing fibre responsibly, ensuring
no human rights violations and
improving our understanding of
climate change and of water-
related risks.
We have focused on developing a more
standardised approach to identifying
sustainability risks and assessing supplier
performance. This work supports our
response to the UK Modern Slavery Act
and other similar modern slavery legal
requirements. It will enable us to improve
the transparency in our supply chain,
minimising risk to our business and meeting
stakeholder expectations for global supply
chain transparency, particularly around
human rights and environmental practices.
13 First-tier suppliers that were active in 2018 with at least one
purchase order, grouped into single entities
Growing responsibly: Our progress in 2018
Risk-based approach
We take a targeted, risk-based approach
to prioritise areas in our supply chain
that require attention. We use credible
third-party risk ranking data such as
the Corruption Perception Index, Global
Slavery Index, the World Bank’s Worldwide
Governance Indicators and other
public sources.
In 2018, we developed a comprehensive
methodology for assessing sustainability
risks in our supplier base and conducted
training for procurement specialists.
We also developed a process to assist
us in identifying key sustainability risks
associated with our supply chain – namely
labour rights, climate change, water-related
and biodiversity risks.
Our Code of Conduct
for Suppliers
We expect every company in our supply
chain to adhere to our Code of Conduct
for Suppliers, which covers social,
environmental, governance, legal and
ethical aspects. We updated the Code
in 2017 to strengthen the human rights
element, addressing the issues of human
trafficking and modern slavery risks.
In 2018, we updated the Code again to
include additional risk areas related to
labour rights, environmental impact and
water stress. The updated Code will be
rolled out to new suppliers from 2019 and
to existing suppliers in the course of the
contract prolongation process.
Responsible procurement
process
Our responsible procurement approach14
covers the onboarding, evaluation and audit
stages of assessing supplier performance.
We conduct regular assessments to
evaluate the reliability of supply and quality
of service, as well as the environmental and
social practices of suppliers.
The new responsible procurement process
will continue to be implemented in 2019.
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14 We have changed the name from ‘Supplier Relationship
Management’ approach to ‘responsible procurement approach’
as it is no longer based on the SRM tool but on multiple IT tools
9
Relationships
with communities
Our commitment to 2020
Performance in brief
Status
Enhance social value in our communities
through effective stakeholder engagement and
meaningful social investments
Progress made on a toolkit to
measure the social and business
value of community investments
The social, economic and
environmental health of local
communities is important to our
success and we work hard to maintain
positive and open relationships.
Transparent engagement helps us
address challenges, understand and
manage risks, generate opportunities,
identify material issues and improve
our business performance.
We continuously aim to improve our
understanding of the impacts of our
business on local communities – positive
or negative, actual or potential, short term
or long term, direct or indirect, intended
or unintended. We do this through various
forms of impact assessment, monitoring
and reporting, including our tailored Socio-
economic Assessment Toolbox (SEAT) and
learnings from ongoing formal and informal
stakeholder engagement.
The immediate outputs are SEAT reports,
action plans and community/stakeholder
engagement plans. We use these to target
our community development programmes,
investments in local initiatives, community
forums, and training for our community
and human resource professionals.
Committees and functions such as works
councils, health and safety committees and
others help us to shape our response to
the findings.
During the year we conducted a SEAT at
Frantschach, the first for the mill. The process
was well received and positive reference
was made to Mondi’s strong social licence
to operate, proactive communication and
focus on safety. The mill was also recognised
for providing a family-style atmosphere and
being a reliable business partner, as well as
for its investments in the community.
We also began the process of updating our
Sustainable Development Management
System (SDMS) operating standard related
to stakeholders to provide group-level
guidance on where and how often we need
to conduct SEATs.
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Sustainability performance
Growing responsibly: Our progress in 2018
Investing in our communities
We’ve invested some €39.6 million in local
community initiatives over the past five
years, including contributing employee time
and gifts in kind. Our investments in 2018
totalled €7.9 million (2017: €9.6 million).
Our commitment to empowering local
communities is brought to life through
practical support and assistance focused
on the following key development enablers:
Education
Educational programmes help to secure
talent and skills for our future business
and address limited technical knowledge
in some of the communities where
we operate.
Mondi Świecie has partnered with
educational institutes to improve technical
education and career development,
and Mondi Stambolijski (Bulgaria) has
inspired school children to have more
fun with mathematics.
Educational initiatives sometimes also serve
to promote social cohesion, reduce crime
and set the foundation for community
development. INGWE, our youth
development programme in South Africa, is
achieving this.
Health
Public health provision can be a challenge
in some of the more remote communities
where we operate. We actively promote
the health and wellbeing of our people, and
improving the health of our workforce and
local communities is an important element
of our community strategy.
e Our Stambolijski mill provides a medical
facility within the mill premises for
the benefit of the employees and the
local community. Štětí’s ‘Mondi for
Life’ project, a club of 185 members
from employees and the community,
addresses a healthy work-life balance
and a healthy and active lifestyle.
e Our Syktyvkar mill provides specific and
targeted health programmes through its
medical treatment facility, and delivers
various family care programmes for
employees and their children.
e Mondi provides an Austria-wide health
management programme in collaboration
with ‘Fonds Gesundes Österreich’ (Fund for
a Healthy Austria) and the regional health
insurance funds focused on safe and
healthy working conditions for employees.
e Our highly successful Mobile Clinic
Programme is being used to promote early
childhood development in South Africa.
Infrastructure and community
development
We invest in improving infrastructure and
development in the communities where
we operate. High-quality infrastructure
promotes access and opportunities,
empowers enterprise, facilitates improved
levels of health and education, and
supports efficient business operations.
For example our agri-villages in South Africa
provide permanent residence in sustainable
human settlements with secure tenure, and
in Russia we build or maintain more than
100 km of forest roads annually.
Business review: Uncoated Fine Paper
Page 83
Employment and enterprise support
Mondi supports local enterprise, which
in turn creates wealth and employment,
strengthens the local supply chain,
enables independence and builds
community resilience.
Mondi Zimele15 aims to accelerate
community empowerment in the forestry
value chain and support small businesses
around Mondi’s operations.
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10 Solutions that create
value for our customers
15 http://www.mondizimele.co.za
Responsibly produced and innovative
packaging and paper products have a
crucial role to play in tackling issues
such as climate change, resource
scarcity, food waste and plastics
in the environment. As a producer
of both fibre and plastic-based
packaging solutions, we are well
positioned to combine our expertise
and partner with customers to find the
best packaging for each application
– be it a high-performance paper,
flexible plastic or plastic-paper
hybrid solution.
Our commitment to 2020
Performance in brief
Status
Encourage sustainable, responsibly
produced products
Updated and renamed our Sustainable
Products criteria and signed up to the New
Plastics Economy Global Commitment
Mondi Group
Integrated report and financial statements 2018
Growing responsibly: Our progress in 2018
Customer engagement
and transparency
Surveys are a key tool for measuring
customer satisfaction and they guide the
development of our product portfolio.
Early in 2019 we conducted a new customer
satisfaction survey covering all businesses.
It included sustainability-related questions
around certification of sustainable products
and results will be available at the end of
the first quarter. We also measure our
performance by participating in a wide
range of external benchmarking initiatives
that aim to increase transparency, including
WWF’s biennial Check Your Paper, the
Environmental Paper Company Index (EPCI)16
and Paper Profile.
EcoSolutions
Our focus on EcoSolutions will actively
encourage customers – especially in fast
moving consumer goods (FMCG) – to
switch to more sustainable packaging
solutions. The essence is ‘Sustainable
packaging by design: paper where
possible, plastic when useful’.
Chief Executive Officer’s letter
Page 10-11
External context
Page 14-17
Green Range
For Uncoated Fine Paper, we have an
existing system in place, the Green Range,
which we use to communicate sustainability
criteria specific to our uncoated fine paper
products. Green Range products are
produced from FSC- or PEFC-certified
wood from sustainably managed forests
or 100% recycled paper, or are produced
totally chlorine free (TCF).
Our Sustainable
Products criteria
In 2018, we identified the need to refocus
certain elements of our Responsible
Products criteria definitions to promote our
circular economy approach and make the
criteria relevant to all fibre and plastic-based
products. The criteria have been reviewed,
updated and renamed our Sustainable
Products criteria.
Our businesses have started to define
business-specific criteria and develop a
corresponding scorecard to track progress.
This will increase transparency for our
customers and partners on our portfolio
of EcoSolutions.
Online Sustainable development report
Page 110
Our Sustainable Products
criteria reflect all stages
of the value chain:
Responsible sourcing: Products
using responsibly sourced raw materials
and services from suppliers that meet
our standards on social, environmental,
legal and ethical criteria.
Renewable materials: Products made
with renewable material or feedstock.
Recycled materials: Products
made with recycled content without
compromising quality or safety.
Resource optimisation:
Products designed, engineered and
manufactured to best utilise all available
resources including reduced emissions
to air, water or land.
Enhanced product performance:
Products and solutions (including
substitution of materials) with
sustainable features to reduce product
loss and/or environmental impact in the
supply chain.
Next life: Products are optimised for
the most desirable end-of-life scenario
to retain value into their next life, such
as reusability and recyclability, or
compostability and biodegradability.
Code of business ethics
Mondi’s code of business ethics sets
clear standards that ensure we conduct
business to a high ethical standard, build
trust with stakeholders, and comply with
all applicable laws and regulation across
the Group. It is based on a number of
voluntary codes and guidelines and
comprises five principles under the
following headings: legal compliance;
honesty and integrity; human rights;
stakeholders and sustainability.
Detailed application of the code is
documented in Mondi’s policies and
procedures, in particular the business
integrity policy, which addresses Mondi’s
zero tolerance approach to bribery and
corruption. There is a clearly defined
process for reporting violations, with
the Group Chief Executive Officer,
Group Chief Financial Officer and Group
Head of Internal Audit being notified in
all instances.
Regular training is provided to all
relevant employees and compliance
with the policy is monitored by the
audit committee. The directors believe
that the Group has robust compliance
procedures in place in relation to the
code and are not aware of any material
non-compliance with the Code.
We have rigorous internal processes
to facilitate the reporting, investigation
and resolution of any issues. Speakout,
our confidential hotline operated by an
independent third party, is the primary
tool through which employees and other
stakeholders can raise concerns.
In 2018, we received 104 Speakout
messages (2017: 120) relating to 65 cases
(2017: 74). These covered a number
of topics, in particular the reporting
of HR-related concerns, potential
business irregularities and perceived
fraudulent activities.
16 https://epci.panda.org/results/mondi
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Financial performance
Strong performance
on all key metrics
Our strong cash flow generation and robust
financial position make us resilient and provide
us with strategic flexibility to take advantage
of opportunities.
Our financial performance1
€ million
Group revenue
Underlying EBITDA
% margin
Depreciation, amortisation and impairments
Underlying operating profit
% margin
Net finance costs
Net profit from equity accounted investees
Underlying profit before tax
Underlying tax charge
Non-controlling interests
Underlying earnings
Special items (after tax)
Profit after tax and
non-controlling interests
Basic earnings per share (euro cents)
Basic underlying earnings per share
(euro cents)
ROCE %
Our financial position
€ million
Property, plant and equipment
Goodwill
Working capital
Other assets
Other liabilities
Net assets excluding net debt
Equity
Non-controlling interests in equity
Net debt
Capital employed
2018
7,481
1,764
23.6%
(446)
1,318
17.6%
(88)
1
1,231
(273)
(42)
916
(92)
824
170.1
189.1
23.6%
2018
4,340
942
972
540
(749)
6,045
3,485
340
2,220
6,045
Restated2
2017
7,096
1,482
20.9%
(453)
1,029
14.5%
(85)
1
945
(181)
(43)
721
(53)
668
137.9
148.9
19.3%
Restated2
2017
4,128
698
899
530
(716)
5,539
3,683
324
1,532
5,539
1 Alternative Performance Measures are defined in note 32, and where relevant reconciled to IFRS in the notes to the
combined and consolidated financial statements
2 Refer to notes 32 and 33 in the notes to the combined and consolidated financial statements for basis of restatement
%
change
5%
19%
28%
30%
27%
23%
23%
27%
Group revenue of €7,481 million was up
5% on the prior year. Underlying EBITDA
of €1,764 million was up 19% on the prior
year, with strong contributions from Fibre
Packaging and Uncoated Fine Paper.
A combination of higher selling prices,
a strong operational performance, the
contribution from acquisitions, and the
benefits of our ongoing cost reduction
initiatives more than offset higher
variable and fixed costs and negative
currency effects.
Input costs were generally higher than the
prior year period, mitigated by our ongoing
cost reduction initiatives. Wood costs were
generally higher in local currency terms.
Strong wood cost inflation was seen in
northern and certain central European
markets, while wood costs were lower in
Poland and the Czech Republic driven by
favourable regional wood supply dynamics.
Energy and chemical costs were up year-
on-year mainly due to higher crude oil and
gas prices. Caused mainly by Chinese
import policies, average benchmark paper
for recycling costs were down 33% on
the prior year, declining sharply during
the first quarter and stabilising thereafter.
Polyethylene prices were slightly lower year-
on-year.
Despite general labour cost inflation, most
evident in central and eastern Europe,
Russia and South Africa, and higher
maintenance costs at a number of our key
pulp and paper mills, we were able to limit
the overall increase in fixed costs due to the
success of our ongoing cost containment
and productivity improvement initiatives.
The impact of maintenance shuts on
underlying EBITDA in 2018 was around
€110 million (2017: €95 million). Based on
prevailing market prices, we estimate
that the impact of planned maintenance
shuts on underlying EBITDA in 2019 will
be around €150 million, of which the first
half year effect is estimated at around
€90 million (2018: €55 million). This includes
an extended maintenance shut planned
at our large Syktyvkar mill (Russia) in the
second quarter and a project related shut
at our Ružomberok mill (Slovakia) in the
second half.
Mondi Group
Integrated report and financial statements 2018
Depreciation and amortisation charges
were marginally lower during the period, as
currency effects and disposals more than
offset the effects of acquisitions and the
Group’s capital investment programme.
e Consumer Packaging: Restructuring
of operations, primarily in the UK.
Restructuring costs of €13 million and
impairment of assets of €16 million
were recognised.
Following the discontinuation of in-line
silicone coating production at Štětí,
restructuring costs of €3 million and
related impairment of assets of €2 million
were recognised. Reversal of impairment
of assets of €2 million was recognised.
e Uncoated Fine Paper: Closure of an
uncoated fine paper machine at Merebank
(South Africa). Restructuring costs of
€16 million and related impairment of
assets of €5 million were recognised.
Underlying operating profit of €1,318 million
was up 28% on the prior year. After taking
into consideration the impact of special
items of €126 million (2017: €61 million),
operating profit of €1,192 million was
up 23%.
In 2018, the special item net charge
comprised the following by business unit:
e Fibre Packaging: Discontinuation of in-
line silicone coating production at Štětí
(Czech Republic). Restructuring costs
of €4 million and related impairment of
assets of €51 million were recognised.
Restructuring of industrial bags
operations in the US. Restructuring costs
of €9 million and related impairment of
assets of €9 million were recognised.
Underlying EBITDA development
€ million
626
(226)
(67)
(72)
5
14
1,764
(446)
1,482
2
Strong cash flow generation
Cash generated from operations of
€1,654 million (2017: €1,363 million), reflects
the continued strong cash generating
capability of the Group.
Working capital as a percentage of revenue
was 13.0%, in line with the prior year
(12.7%) and within our expected range of
12% to 14%. The net cash outflow from
movements in working capital during the
year was €117 million (2017: €122 million).
In 2018, capital expenditure amounted
to €709 million (2017: €611 million), in line
with our expectations as outflows related
to our major capital expenditure projects
increased. We completed the acquisition
of Powerflute (Finland), two industrial bag
plants in Egypt and forest plantations in
South Africa for a total consideration, on a
debt and cash-free basis, of €424 million.
Further significant outflows from
financing activities included the payment
of ordinary dividends of €309 million
(2017: €273 million) and the payment
of a special dividend (€484 million)
(2017: zero). Interest paid of €73 million
(2017: €97 million) was lower than in the
prior year period primarily due to the
payment of the final coupon of the 5.75%
2017 €500 million Eurobond on maturity
in the prior year. Tax paid of €248 million
(2017: €151 million) was higher than the
prior year due to improved profitability.
(126)
1,192
Underlying
EBITDA
2018
Depreciation,
amortisation
& impairment
Special
items
Operating
profit
2018
Underlying
EBITDA
Sales
volumes
Sales
prices
Variable
costs
Cash
fixed
costs
Currency
effects
Acquisitions
& disposals
Other
2017
Movement in net debt
€ million
1,532
(1,654)
709
53
424
327
1,312
345
Cash generated from operations
€ million
484
2,220
€1,654m
1,654
1,401
1,363
1,279
1,033
Cash generated
from operations
Capital
expenditure
Investment
in forestry
assets
Tax,
interest
and other
Ordinary
dividends
paid1
Net debt before
acquisitions
and special
dividend
Acquisitions
Special
dividend
paid
Net debt
Dec
2017
1 Ordinary dividends paid to shareholders and non-controlling interests
Net debt
Dec
2018
2014
2015
2016
2017
2018
Mondi Group
Integrated report and financial statements 2018
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Financial performance
Our net debt and interest1
€ million
Net debt
Average net debt
Net interest expense
Effective interest rate
Committed facilities
Of which undrawn
2018
2,220
1,979
(83)
4.2%
2,487
616
Restated2
2017
1,532
1,572
(75)
4.8%
1,987
791
% change
(45)%
(26)%
(11)%
Net debt to 12-month trailing underlying
EBITDA (times)
1.3
1.0
1 Alternative Performance Measures are defined in note 32, and where relevant reconciled to IFRS in the notes to the combined and
consolidated financial statements
2 Refer to notes 32 and 33 in the notes to the combined and consolidated financial statements for basis of restatement
Managing our financial risks
Our capital structure
Capital employed is managed on a basis
that enables the Group to continue trading
as a going concern, while delivering
acceptable returns to shareholders. We are
committed to managing our cost of capital
by maintaining an appropriate capital
structure, with a balance between equity
and net debt.
Our capital employed is used to fund the
growth of the business and to finance our
liquidity needs. We retain access to diverse
sources of funding with various debt
maturities, as set out in the chart below.
Our short-term liquidity needs are met
through our €750 million Syndicated
Revolving Credit Facility.
The Group’s liquidity position remains
robust. At the end of the year, €616 million
of our €2.5 billion committed debt facilities
were undrawn and the weighted average
maturity of committed debt facilities was
4.6 years. Gearing at the same date was
37% and our net debt to 12-month trailing
underlying EBITDA ratio was 1.3 times,
well within our key financial covenant
requirement of 3.5 times.
During the year, Standard & Poor’s
upgraded the Group’s credit rating to BBB+
(stable outlook) from BBB, while Moody’s
Investors Service maintained their Baa1
(stable outlook) credit rating.
Net debt at 31 December 2018 was
€2,220 million, up from €1,532 million
at 31 December 2017, representing a
reduction in net debt of €220 million
before the payment of a special dividend
(€484 million) and acquisitions totalling
€424 million.
In April 2018, we issued a 1.625%
€600 million Eurobond with an 8-year tenor
under our Guaranteed Euro Medium Term
Note Programme, thereby extending the
Group’s maturity profile and maintaining our
strong liquidity.
Net finance costs of €88 million were
€3 million higher than the previous year as
the benefit from a lower effective interest
rate (4.2% in 2018 compared to 4.8% in
2017) was offset by higher average net debt
of €1,979 million (2017: €1,572 million).
Maturity profile of net debt
€ million
€2,220m
Composition of debt
€ million
Net debt and finance costs
€ million
Within 1 year
1–2 years
2–5 years
>5 years
218
548
233
1,221
Bonds
1,592
Bank loans
and overdrafts
Lease liabilities
Other loans
484
184
10
Net finance cost (underlying)
1,979
Average net debt
Effective interest
1,675
1,650
1,476
%
2
.
6
%
3
.
6
%
4
.
5
1,572
%
8
.
4
97
105
101
85
%
2
.
4
88
Mondi Group
Integrated report and financial statements 2018
2014
2015
2016
2017
2018
Currencies
Tax
Our multi-national presence results
in exposure to foreign exchange risk
in the ordinary course of business.
Currency exposures arise from commercial
transactions denominated in foreign
currencies, financial assets and liabilities
denominated in foreign currencies
and translational exposure on our net
investments in foreign operations.
Our policy is to fund subsidiaries in their
local functional currency wherever practical.
External funding is obtained in a range of
currencies and, where required, translated
into the subsidiaries’ functional currencies
through the swap market.
We hedge material net balance sheet
exposures and forecast future capital
expenditure. We do not hedge our
exposures to projected future sales or
purchases. We do not take speculative
positions on derivative contracts.
Currency movements had a net negative
impact on underlying EBITDA versus the
comparable prior year period. The negative
impact of a weaker Russian rouble on
translation of our domestically focused
Uncoated Fine Paper business and a
weaker Turkish lira more than offset
the benefits to our export orientated
businesses of a weaker South African rand
and a strong US dollar relative to the euro,
seen in the second half of the year.
We aim to manage our tax affairs
conservatively, consistent with our
approach to all aspects of financial
risk management. Our objective is to
structure our operations tax efficiently,
taking advantage of available incentives
and exemptions, while complying with
all applicable laws and regulations.
In accordance with Organisation for
Economic Cooperation and Development
guidelines, our policy is that all intra-group
transactions are conducted on an arm’s
length basis.
While ultimate responsibility for the tax
affairs of the Group rests with the Boards,
the executive committee ensures that the
tax governance framework is aligned with
the principles of financial management
applied throughout the Group. We have
dedicated internal tax resources throughout
the organisation, supported by a centralised
Group tax department who take day-to-
day responsibility for management of the
Group’s tax affairs. We maintain a detailed
set of operational guidelines aimed at
ensuring a sound tax control environment.
In addition, we seek regular professional
advice to ensure that we remain up to date
with changes in tax legislation, disclosure
requirements and best practice.
Tax risks are monitored on a continuous
basis and are more formally reviewed on a
half-yearly basis by the audit committee as
part of our half-yearly reporting process.
As Mondi operates in a number of
countries, each with a different tax system,
the Group is regularly subject to routine
tax audits and tax authority reviews which
may take a considerable period of time to
conclude. Our intention is to maintain a
constructive dialogue with tax authorities
and to work collaboratively with them to
resolve any disputes. Where necessary,
provision is made for known issues and the
expected outcomes of any negotiations
or litigation.
Our underlying tax charge for the year was
€273 million (2017: €181 million) reflecting
tax on higher profits combined with a
higher effective tax rate at 22% (2017: 19%),
as a consequence of the full utilisation of
tax incentives in Poland in 2017. Tax relief
on special items amounted to €34 million
(2017: €8 million).
Assuming a similar geographic profit mix
and stable statutory tax rates, we would
expect our effective tax rate in 2019 to be
around 23%.
Non-financial information statement
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%
Euro
Czech koruna
Polish zloty
Turkish lira
US dollar
Pounds sterling
Other
54
18
13
4
3
2
6
Czech koruna 18
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Mondi Group
Integrated report and financial statements 2018
68
Business reviews
Our integrated
value chain
We are integrated across the
packaging and paper value
chain. Our sustainably managed
forests, backward pulp integration
and high electricity self-sufficiency
provide us with security of fibre
supply, reduced exposure to
raw material price volatility and
the ability to manage risks and
opportunities more holistically.
We believe that the integrated nature of our
business places us in an ideal position to deliver
on our customers’ packaging and paper needs.
We are working with partners across our
value chain to design fibre and plastic-based
packaging that it is fit for a circular economy.
This includes using the optimum amount of
recycled content and creating products that can
be recycled.
1 Due to commercial, logistic and sustainability considerations, the actual
wood procured from our managed forests was lower than the annual
allowable cut
2 In addition to the 1.6mt of uncoated fine paper, the Group also produced
0.2mt of newsprint in 2018
3 Total consumption (aggregate of internal and externally procured
packaging paper) in million tonnes (mt)
4 Pulp and packaging paper net exposure
5 The majority of the Group’s market pulp is produced by the Uncoated
Fine Paper business with the balance from Fibre Packaging
6 Based on 2018 statistics
Mondi Group
Integrated report and financial statements 2018
Raw materials6
Mondi managed forests
Annual allowable cut: 8 million m³
Internally procured wood1
4 million m³
Externally procured wood
14 million m³
Paper for recycling
1.3 million tonnes (mt)
Recycling
Films and
other raw
materials
Resins
Production processes6
Products6
Pulp mill
4.3 mt
Paper mill2
Uncoated fine paper
1.6 mt
Kraft paper
1.1 mt
Virgin containerboard
2.0 mt
Recycled containerboard
0.5 mt
0.8 mt3
0.3 mt3
0.6 mt3
Pulp4,5
0.2 mt
Uncoated
fine paper2
1.6 mt
Kraft paper4
0.3 mt
Virgin containerboard4
1.7 mt
Recycled containerboard4
- 0.1 mt
Fibre-based
packaging operations
Corrugated
packaging
1.6bn m2
Industrial
bags
5.3bn bags
Extrusion
coatings
1.2bn m2
Consumer flexible
packaging operations
Consumer packaging
7.3bn m2
69
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Mondi Group
Integrated report and financial statements 2018
Consumer PackagingUncoated Fine PaperFibre Packaging
70
Business reviews
Fibre Packaging
Our Fibre Packaging business
manufactures and sells a
broad range of containerboard,
speciality and sack kraft papers
as well as converted corrugated
packaging, industrial bags and
extrusion-coated products
for a variety of consumer and
industrial applications.
Operating sites
70 in 29 countries
Paper mills: 10
Converting plants:
Corrugated Packaging: 16
Industrial Bags: 40
Extrusion Coatings: 4
Employees
13,500
Production capacity1
Pulp: 3,055 ktpa
Virgin and recycled containerboard: 2,720 ktpa
Sack and speciality kraft paper: 1,216 ktpa
1 Includes full year capacity of Powerflute and modernisation
of Štětí
We are a leading producer of fibre-based
packaging with an integrated, well-invested,
cost-advantaged asset base.
Our comprehensive product portfolio
is based on renewable raw materials
from sustainably managed forests, and
includes products that are biodegradable,
compostable or contain recycled content.
Our products meet customer requirements
around sustainability, printability, strength
and moisture resistance. We also offer
strong innovation capabilities in areas such
as brand differentiation, light-weighting,
e-commerce and functionality.
Our virgin and recycled containerboard
is used to make corrugated packaging,
primarily designed to protect our
customers’ products along the value
chain and display them in-store.
Innovation and design improvements
extend our corrugated packaging offering
well beyond traditional boxes to fully
customised trays and wraps, multi-piece
solutions, appealing point-of-sale solutions
and heavy-duty shipping containers.
As the global leader in sack kraft paper
and industrial bags, we create strong,
light-weight and sustainable products
optimised for high-speed filling and easy
handling used for cement and building
materials, agricultural, chemical and
food products. Our range includes open
mouth bags, pasted valve bags, water-
repellent bags, bags suitable for food
contact, e-commerce bags and heavy-
duty packaging.
Our customers benefit from our end-use
driven expertise in sustainable speciality
kraft papermaking. Our broad portfolio
includes natural brown and white paper
made from virgin and recycled fibre for
applications including retail shopping
bags and more sustainable food
packaging solutions like shallow trays for
supermarket shelves.
Our extrusion coatings portfolio offers
sustainable alternatives for high-quality
barrier solutions required for applications
such as food packaging, building insulation,
foam papers, wrappers, case linings as well
as automotive and protective clothing.
In 2018 we merged our Packaging Paper
and Fibre Packaging business units to
achieve improved strategic alignment and
operational coordination across the fibre-
based packaging value chain.
Spotlight on sustainable packaging by design
Mondi Advantage ONE –
making one ply strong enough
Corrugated packaging
for car bumpers
We have developed 17 innovative new packaging systems that have
transformed the way a major European car manufacturer ships car-parts
to China and the US. The target was to meet the high standards of global
logistics while at the same time minimising the use of natural resources and
offering full product protection. For example, our new and innovative car
bumper packaging reduces packaging material by 25% and also optimises
truck loads by 87%, reducing carbon footprint and saving transport costs.
We use Mondi Advantage ONE, a
high-performance, fully recyclable
sack kraft paper to make our OK
Compost certified ONE and ONEPlus
industrial bags for the cement
industry. The strength of this paper
means that these one-ply valve bags
are up to 20% lighter than the usual
two-ply version without compromising
on functionality. Using less material
makes this a resource efficient and
cost effective packaging solution.
If enhanced moisture protection is
required, ONEPlus is equipped with a
biodegradable PE film as an inner ply.
Mondi Group
Integrated report and financial statements 2018
Segment revenue
€ million
€4,108m
3,396
3,670
3,472
3,735
4,108
Underlying EBITDA
€ million
€1,086m
ROCE
734
721
833
%
8
1
2
.
%
8
9
1
.
%
6
0
2
.
651
%
7
0
2
.
1,086
%
8
.
6
2
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Production information
Containerboard
Kraft paper
Softwood pulp
Hardwood pulp
Corrugated board and boxes
Industrial bags
Extrusion coatings
Financial performance
€ million
Segment revenue
Underlying EBITDA
Underlying EBITDA margin
Underlying operating profit
Special items
Capital expenditure cash payments
Operating segment net assets
ROCE
Sustainable development
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
million m²
million units
million m²
% change
10%
30%
41%
TRCR3
Gender diversity
Training hours
per 200,000 hours worked
% women employed
thousand hours
Energy consumption
Scope 1 and 2 GHG emissions million tonnes CO2e
FSC- or PEFC-certified
wood procured
million GJ
%
Environmental management
certification
% operations certified to
ISO 14001 standards
CoC Certification
% operations certified to FSC
or PEFC CoC standards
2018
2,530
1,118
1,986
714
1,635
5,255
1,230
2018
4,108
1,086
26.4%
841
(73)
469
3,804
26.8%
20182
0.85
20
348
58.70
1.17
63
55
59
Restated1
2017
2,297
1,206
2,010
547
1,650
4,952
1,281
Restated1
2017
3,735
833
22.3%
596
3
398
3,246
20.6%
Restated1
2017
0.88
21
368
59.99
1.25
66
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1 Refer to notes 2, 32 and 33 in the notes to the combined and consolidated financial statements for basis of restatement
2 2018 excludes Powerflute and Egyptian industrial bag plants acquired during the year
3 2017 TRCR has been restated to include acquisitions completed in 2016 and 2017
Financial review
Underlying EBITDA was up 30% on
the prior year to €1,086 million, with
higher average selling prices, improved
product mix and volume growth more
than offsetting higher costs and negative
currency effects. A positive contribution
from acquisitions was partly offset by
disposal and one-off effects.
Good demand and limited supply
supported a strong pricing environment
in containerboard markets. Average
benchmark European prices for
unbleached kraftliner were up 16%
year-on-year, while benchmark recycled
containerboard prices were up around
12% on the prior year. Prices for white top
kraftliner and semi-chemical fluting, which
typically show less volatility through the
business cycle, were up in the range of 8%
to 10% year-on-year. A slowdown in the
rate of demand growth in the fourth quarter
exacerbated by customer de-stocking, and
pressure from imports into Europe led to
price reductions in containerboard grades
going into the new year.
Corrugated Packaging achieved good
volume growth in the second half of the
year in its key markets, following stable
volumes in the first half on a strong
comparable prior year period. The business
successfully implemented price increases
required to compensate for significantly
higher paper input costs and negative
currency effects; continued to benefit
from growing e-commerce activity;
and remained focused on continuous
improvements to reduce conversion costs
and further enhance its product offering,
quality and service to customers.
We saw good demand across our range of
kraft paper grades during the year, leading
to a strong pricing environment. Kraft paper
prices were up around 10% on average
year-on-year. The drive to replace plastic
carrier bags with paper-based alternatives
supported strong demand across our
range of speciality kraft papers, while good
growth in selected emerging markets drove
demand for sack kraft paper. Kraft paper
prices in early 2019 are up between 7%
and 8% on average compared to average
2018 price levels following price increases
through the second half of 2018 and
early 2019.
Mondi Group
Integrated report and financial statements 2018
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Business reviews
Fibre Packaging
Delivering on our strategy
Strategic value drivers
Progress in 2018
2019 priorities
Drive performance along
the value chain
Invest in assets
with cost advantage
e Implemented and realised benefits from operational
e Continue commercial and operational excellence
and commercial excellence programmes
e Focused on leveraging our cost-advantaged
production footprint through plant network optimisation
initiatives
e Continued to develop our asset management system
and recovery boiler optimisation programme to further
improve reliability and technical integrity
efforts across our site network
e Further focus on enhancing efficiency and reliability
of our pulp and paper assets
e Leverage digitalisation opportunities when available
e Commissioned the modernisation of Štětí
(Czech Republic)
e Received the final necessary permitting and proceeded
with new paper machine investment at Ružomberok
(Slovakia)
e Approved and progressed with several investments in
our converting plant network
e Ramp-up modernisation project at Štětí
e Progress with the new paper machine investment
at Ružomberok and complete the related pulp mill
upgrade
e Progress with investment at Bupak (Czech
Republic) and Ansbach (Germany) and speciality
kraft paper investment conversion at Štětí
Inspire our people and
grow responsibly
e Improved safety performance during annual mill shuts
e Continued community and employee engagement
e Reduced our carbon footprint
e Continued focus on growing our safety maturity and
reducing our environmental footprint
e Realise environmental benefits from the recently
completed Štětí mill modernisation
e Focus on talent attraction and retention initiatives
Partner with customers
for innovation
e Completed the acquisition of Powerflute (Finland) and
e Leverage recently implemented customer platforms
two industrial bag plants in Egypt
e Improved customer interaction through developing and
enhancing digital service platforms and hosting events
such as the first European shopping bag summit
e Partnered with our customers to develop lighter,
stronger and high performance solutions
and develop similar tools in our converting
businesses
e Continue to partner with our customers to develop
sustainable fibre-based packaging solutions
Industrial Bags sales volumes were up 3%
on a like-for-like basis, due to strong growth
in Iberia, emerging Europe, Middle East
and West Africa, partly offset by weaker US
volumes. Price increases were achieved in
the early part of the year to compensate for
higher paper input costs. However, margins
came under pressure during the second half
as higher paper prices, following mid-year
increases, could not be fully passed on to
customers due to contractual agreements.
Strong cost management and the benefit of
rationalisation activities resulted in significant
fixed cost savings during the period.
Annual contracts for 2019 have mostly been
finalised, with price increases implemented
that largely reflect the full impact on the
cost base of the recent sack kraft paper
price increases.
With the exception of paper for recycling,
costs were above the prior year period,
mitigated by our ongoing cost reduction
programme. We saw higher wood,
chemical and energy costs and inflationary
increases on cash fixed costs. This was
partly offset by higher average green energy
prices in Poland.
A planned maintenance shut at our
Syktyvkar mill (Russia) and an extended
shut at Richards Bay (South Africa) were
completed during the first half of the year.
Planned maintenance shuts at Świecie
(Poland) and the majority of our kraft paper
mills, including an extended shut at Štětí
as we commissioned the extensive plant
modernisation project, were completed in
the second half. Maintenance shuts are
planned at our Syktyvkar, Powerflute and
Richards Bay mills for the first half of 2019,
while the majority of the remaining shuts are
scheduled for the second half of the year.
Mondi Group
Integrated report and financial statements 2018
High-tech corrugated production at Mondi Świecie
Drive performance
along the value chain
We continued to benefit from our ongoing
operational excellence initiatives, driving
productivity and efficiency, minimising
waste, delivering procurement savings and
enhancing our quality systems. During the
year we achieved annual production
records at 10 of our paper and pulp drying
machines. We also focused on our supply
chain, including a programme to improve
our mills’ ocean transport system, which will
reduce costs and improve effectiveness,
service quality and reliability.
During the year, our converting operations
continued with initiatives to pass through
raw material price increases, especially
paper input costs. Our corrugated
packaging business is also developing
digital dynamic pricing tools to support our
performance in this area.
To further improve the reliability and
technical integrity of our pulp and paper
operations and reduce maintenance
costs we continue to develop our asset
management processes, including the
implementation of specific training to
enhance the skills and qualifications of our
people across our mill network. We also
established a programme to optimise the
performance of our recovery boilers, which
we expect will deliver energy savings,
enable best-practice sharing and continue
to improve the reliability of our operations.
We continue to optimise our production
footprint and leverage our cost-advantaged
asset base. In 2018, we announced
the closure of two industrial bag plants
in Europe and another in Kentucky
(US). We are able to continue to serve
customers from our existing plant network,
benefiting from economies of scale.
We stopped production of in-line silicone
coated products at Štětí due to technical
challenges and process complexity.
In June, we completed the sale of a flat
sack kraft paper mill in Pine Bluff, Arkansas
(US), with 130,000 tonnes of annual
production capacity.
Invest in assets
with cost advantage
In the fourth quarter of 2018, we
successfully commissioned the €335 million
modernisation of the Štětí mill to replace the
recovery boiler, rebuild the fibre lines and
debottleneck the existing packaging paper
machines. The project is expected to result
in additional annual production of 90,000
tonnes of softwood market pulp and
55,000 tonnes of packaging paper.
We obtained the final necessary permitting
to proceed with the €340 million investment
in a new 300,000 tonne per annum kraft
top white machine at Ružomberok, with
start-up expected towards the end of 2020.
The related pulp mill upgrade at the same
site is progressing according to plan with
start-up expected in late 2019.
Responding to continued good demand
across our range of speciality kraft papers
in Europe, supported by the drive to
replace plastic carrier bags with paper-
based alternatives, we have approved a
€67 million capital investment project to
convert a containerboard machine at Štětí
to be fully dedicated to the production of
speciality kraft paper with a mix of recycled
and virgin fibre content for shopping
bag applications. This will also allow us
to optimise productivity and efficiency
at Świecie, where this grade is currently
produced. The project will result in an
additional 75,000 tonnes per annum of
speciality kraft paper capacity, while
reducing our containerboard capacity by
around 30,000 tonnes per annum. Start-up
is expected by the end of 2020.
We continue to invest in our converting
plant network. We are expanding our
industrial bag plant in Abidjan (Côte d’Ivoire)
with a second line to service our customers’
growing needs. We have approved
investment plans at our corrugated plants
in Bupak to broaden its capabilities,
reduce conversion costs and focus on
growing e-commerce applications; and
in Ansbach to grow with our customers,
reduce conversion costs and secure the
plant’s long-term competitiveness as a
leading heavy-duty corrugated packaging
supplier. Our team continually seeks
capital investment opportunities across
our plant network to leverage our exposure
to faster growing regions while remaining
disciplined in our focus on investing in cost-
advantaged assets.
Inspire our people
and grow responsibly
We continue to minimise the top safety
risks in our operations to improve our
year-on-year performance. While we saw
safety improvements at our mills during
planned annual maintenance and project-
related shuts, we unfortunately noted an
increase in incidents relating to hazardous
substances as well as rotating and moving
equipment, which will be focus areas in
2019. We also regret two life-altering injuries
in 2018 – a severe injury to the lower left
arm of an employee at our Štětí mill and
a finger amputation of an employee at
Świecie. Our 2019 efforts will concentrate
on supporting underperforming operations
and keeping up the positive momentum at
those operations where we are achieving
our safety milestones. We are pleased with
the improvements in our safety performance
across our converting operations and have
identified opportunities to use digital tools to
assist us in managing machine shutdowns
and lockdowns more safely, which we will
focus on in the coming year.
We aim to be an employer of choice
focusing on attracting and retaining
employees. We also have several mills
where a number of key employees will be
retiring in the coming years and we are
therefore defining specific action plans
to attract talent, create a stronger culture
of employee recognition and ensure we
retain a high-performing workforce.
The recently completed Štětí mill
modernisation project will make the mill
energy self-sufficient and is expected to
further reduce our GHG emissions. We also
improved the condensate treatment at our
Stambolijski mill (Bulgaria) by installing a new
condenser for foul condensate stripping
including incineration of malodorous gases in
the recovery boiler. In 2019, we plan to invest
in our Frantschach mill (Austria) to reduce
malodourous gas emissions.
Our annual ‘Making a Difference Day’
provided an opportunity to engage with local
communities and educate our employees
through training programmes focusing on
the prevention of leakages and spills and the
transport of hazardous material. During the
year we also hosted a number of events
including visits by local students, family
days and community open days. We see
benefits from these activities including
improved community-site cooperation,
local environmental and safety and health
awareness, understanding of our industry,
and support for the development of a pool of
local technical skills.
Mondi Group
Integrated report and financial statements 2018
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Business reviews
Fibre Packaging
Partner with customers
for innovation
In June 2018, we completed the acquisition
of Powerflute, an integrated pulp and
paper mill with a production capacity
of 285,000 tonnes per annum of high-
performance semi-chemical fluting, for
a total consideration of €365 million on a
debt and cash-free basis. The integration
is progressing well and further broadens
our containerboard product range and
geographic reach. We also completed
two industrial bag plant acquisitions in
Egypt bolstering our presence in the fast
growing Middle East industrial bag market,
enabling us to better serve our customers
in the region.
We continue to evolve our customer
interaction and partnership using digital
solutions. We updated and enhanced our
digital technical sales service platform
‘corrugated-paper-expert.com’ which
supports our containerboard customers
24/7 in developing the most suitable
corrugated board structure and resolving
production issues they may encounter.
Our converting operations continue to
focus on partnering with our customers to
develop innovative solutions. As a producer
of both paper and plastic packaging, we
believe we are uniquely positioned to
leverage our customer relationships and
paper, bag and barriers know-how to
develop sustainable packaging solutions
for our customers. As an example, our
HYBRIDPRO bag combines a high-density
polyethylene outer ply with our Advantage
ONE sack kraft paper meaning the
packaging can resist rain and protect the
primary product yet can still be used on
conventional paper bag filling systems.
The plastic and paper plies can be easily
separated and recycled and, because the
bag uses two rather than three plies, less
material is used.
Industrial Bags won the Eurosac Grand
Prix award for MailerBAG, an innovative
light-weight, recyclable and reusable paper
bag solution for e-commerce packaging
designed to lower logistic costs and
accelerate the packaging processes.
Our corrugated business won seven 2019
WorldStar1 awards, more than any other
company worldwide, building on its success
in winning five such awards the prior year,
and consolidating our position as a truly
innovative force in the packaging industry.
Mondi Group
Integrated report and financial statements 2018
For example our WorldStar award winning
Glass7Box is a corrugated box with a
shock-absorbent structure created to
accommodate different products. It was
designed for premium glass brand Riedel
to reduce the complexity of the packaging
process and offer greater flexibility when
packing a broad range of glasses.
Mondi’s point-of-sale Baca Stand, a
previous WorldStar award winner, is an
easy forming, tape-free corrugated display
solution consisting of modular trays with a
mid-support structure that enables simple
and fast filling during production, as well as
easy access for end-consumers. It is more
efficient as it uses 46% less material and
requires 20% less handling time per pallet
compared to conventional stack boxes.
In April 2018, Mondi hosted ‘Let’s paper
the world’, the first European shopping
bag summit bringing together leading
converters, suppliers and customers to
collaboratively address the fast growing
needs for sustainable paper-based
shopping bag solutions and to showcase
our ‘shoppingworld by Mondi’ product
range. Read more in the case study
that follows.
1 The WorldStar awards are open to packaging organisations
across the world. Judges look for sustainable solutions to
packaging challenges, demonstration of enhanced user
convenience and reduced material waste. 2019 winners were
announced in December 2018
Mondi Diamond
Awards
Mondi Świecie
Don’t waste
the waste
Winner in Sustainable
Development category
Project leaders:
Hanna Glowala
Environmental specialist,
Mondi Świecie (above)
Magdalena Michalczyk-
Krakowiak
Environmental Protection
& Laboratory Manager,
Mondi Świecie
People generate a huge amount of
waste. For example, the European
Union produces up to 3 billion
tonnes of waste every year1.
Some goes to landfill, potentially
leading to hazardous compounds
in our soil and water, and some
ends up polluting our environment
or oceans. Ecosystems suffer as a
result, and each of us are exposed
to the harmful effects of waste.
This is a crisis impacting our future,
and our children’s wellbeing.
But we can all make a difference
– and at Mondi Świecie, we are
doing just that.
Our site produces a significant
amount of waste – about 200,000
tonnes a year. In 2003, 100% of
it went to landfill. So we set out to
reverse that by getting everyone
across the value chain to work
together to bring about change.
We investigated the waste
recipient market, finding
contractors able to convert our
waste into usable resources.
We did extensive research and
engaged with a wide range of
people, securing 20 to 40 partner
contracts per year between 2004
and 2017. In addition, by 2008 we
had completely discontinued ash
landfill from our coal boilers; dregs
and sludge landfill; and furnace
waste landfill.
It has taken us fourteen years, but
we have succeeded. Today just
over 1% of our waste goes to
landfill – absolutely everything else
is recycled and reused.
And that last 1%? We’re working
on it!
1 http://ec.europa.eu/environment/waste/
pdf/WASTE%20BROCHURE.pdf
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Spotlight on ‘Let’s paper the world 2018’
Challenges, opportunities
and new ways of working
were the topics of the day at
‘Let’s paper the world 2018’,
Europe’s first shopping bag
summit, hosted by Mondi.
Leading shopping bag
converters, suppliers and
customers came together
in April in Prague (Czech
Republic) for Let’s Paper the
World 2018.
Participants included global
brands Benetton, H&M
and REWE Group; bag
manufacturers; papermakers
and paper associations; ink
and glue producers; bag
machine manufacturers;
and market intelligence
leader Mintel.
There were four top takeaways
from this pivotal summit.
Gone are the days of the
‘simple’ paper bag
Today’s paper shopping bags
are engineered for specific
applications within the food and
non-food industry. For example
a shopping bag produced
by bag maker Litobal, with
a sophisticated, full-colour
flexoprint on Mondi speciality
kraft paper, is proven to carry
up to 25 kg (food retail bags
must carry at least 12 kg),
made of credibly certified
fibre, and guaranteed safe for
contact with food.
Producing high-performance
shopping bags like these is a
technical feat that takes skill,
advanced technology and the
highest quality materials.
Sustainability is no longer
an option – it’s a necessity
Shopping bags made of
credibly certified fibre and
designed to biodegrade, or
be easily recycled or reused,
are no longer a niche product
for boutique brands. Today,
sustainability is mainstream.
Richard Cope, Senior Trends
Consultant at Mintel, shared
examples from around the
world of how consumer
expectations have shifted for
sustainability and packaging:
“Consumers expect companies
to set the sustainability agenda.
They expect brands to be
ethical on their behalf.”
Demand for certified fibre
is outstripping supply –
sustainable forestry needs
more focus
While rising consumer demand
for sustainable packaging is a
good thing, a clear effect is that
demand for sustainable fibre is
growing. With just 11% of the
world’s forests being certified,
one of the biggest challenges is
meeting the increased demand
for certified fibre.
“We all want to increase the
share of certified fibre,” said
Tanja Dietrich-Hübner of REWE
International, “but while organic
and fair-trade food certifications
are widely recognised, FSC
and PEFC certifications are not
well known to consumers.”
Collaborate to meet new
challenges in the paper
bag industry
Another important takeaway
from the summit is the need
for more exchange and
partnerships to innovate for
what’s coming, including the
growth of e-commerce and the
circular economy.
More collaboration along
the supply chain between
product managers, technical
sales and service, R&D,
suppliers (including paper,
inks and glues), end users,
retailers – and even foresters
– will be needed to develop
the perfect paper bags for
tomorrow’s needs.
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Integrated report and financial statements 2018
76
Business reviews
Consumer Packaging
Our Consumer Packaging
business develops,
manufactures and sells
innovative flexible plastic-based
consumer goods packaging
solutions, technical films,
components for personal care
products, and release liners.
Operating sites
29 in 12 countries
Employees
6,000
We produce highly specialised technical
films and film-based solutions for a
variety of uses and industries. It is all
about innovating new technical features
to improve functionality and reliability.
Products include high-barrier films for
sophisticated packaging solutions, films
for demanding surfaces or technical
components in automotive and light-weight
design as well as high-quality label films.
Our personal care components prioritise
comfort in diapers, adult incontinence
and femcare products including soft
nonwovens, unique stretchy elastic films
and laminates, mechanical fastening
components and wrapping films.
In addition, Consumer Packaging also
offers a wide range of high performance
paper and film-based release liners and
advanced functional coatings for various
applications including tapes, graphic arts,
medical, fibre composites, baking and
many more.
We operate a high-quality asset base,
using proprietary processing technology
with vertical integration along the value
chain, producing products and product
components for some of the world’s
biggest brands. Our leading market
positions and culture of product innovation
provide a strong platform for growth.
Sustainable development is integral to our
responsible and profitable growth, and
part of our everyday work. Our focus is on
prioritising the responsible use of resources,
and working with customers and partners
across the value chain to find the most
useful and sustainable packaging solution
for each of their products. This means
more convenient, more comfortable, more
efficient, faster, lighter, stronger and easier
to use or recycle.
Our consumer goods packaging products
help brands communicate with customers,
extend shelf-life and improve end-user
convenience. We produce high-quality
laminates and barrier materials on reels,
capable of handling a variety of high-quality
printing techniques. We also offer a wide
range of tailor-made converted flexible
packaging solutions such as stand-up
pouches, re-closable plastic bags, paper-
based bags, and ice cream packaging.
Spotlight on sustainable packaging by design
Aluminium-free packaging
for Nestlé coffee
A lighter, recyclable spout
bag for Werner & Mertz
We supply aluminium-free barrier
laminates to Nestlé for the leading
Swedish coffee brand Zoégas.
The transparent laminate is made of
recyclable polyolefin material which
has high barrier properties that
preserve the taste and aroma of the
coffee for its entire shelf-life. We are
working on various projects to further
support the whole Nestlé Group in
meeting common short and long-
term sustainability targets including
resource optimisation, delivering
packaging solutions made from
renewable materials and ultimately
fulfilling the circular economy model.
Mondi Group
Integrated report and financial statements 2018
We’ve been working with Werner &
Mertz since 2014 to reinvent the way
they make their detergent packaging.
The project was truly ambitious.
It was not about developing flexible
plastic packaging that is only
theoretically recyclable but still likely
to end up in landfill. Rather, the
design aim was to ‘reverse-engineer’
the recycling process to create
packaging fit for every stage of the
recycling process. By moving to
a 100% recyclable mono-material
we were able to achieve a 70%
material reduction versus their rigid
packaging alternatives.
Financial review
Underlying EBITDA of €194 million was
down 13% on the prior year.
The business generated good growth
in selected value-added segments in
consumer goods packaging and technical
films, restructured the plant network and
fixed cost base, and drove continuous
improvement initiatives during the year.
This saw the sub-segment consumer
goods packaging deliver an improved
performance in what remains a challenging
trading environment. Overall Consumer
Packaging’s performance was held back
by declining volumes in personal care
components, one-off costs, rising paper
input costs in release liner and negative
currency effects.
Drive performance
along the value chain
During the year we increased our focus
on commercial excellence initiatives
to drive product mix improvements.
We also continued working on operational
improvements to reduce waste and
further improve our productivity and
efficiency. We streamlined production
across our network, and relocated
machinery to plants where they could
be better utilised. We continue to
investigate further opportunities to drive
performance and optimise our asset base.
Continuous improvement initiatives will
again be in focus during 2019.
In continuing to drive performance by
aligning capacity to current market
requirements, we restructured our UK
operations, including the closure of our
plant in Scunthorpe in the second half of
the year.
To reduce costs and further enhance
our product, service and process
quality standards for our customers, we
strengthened our quality management
systems by improving the way we measure
and report on quality related initiatives.
This helps us to ensure best-practice
sharing across our plant network so that
we can implement specific action plans
where required.
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Segment revenue
€ million
€1,611m
1,562
1,646
1,611
1,469
1,379
Underlying EBITDA
€ million
€194m
ROCE
158
%
4
0
1
.
177
%
7
0
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222
198
194
%
5
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9
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2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Production information
Consumer packaging
Financial performance
€ million
Segment revenue
Underlying EBITDA
Underlying EBITDA margin
Underlying operating profit
Special items
Capital expenditure cash payments
Operating segment net assets
ROCE
Sustainable development
TRCR2
Gender diversity
Training hours
per 200,000 hours worked
% women employed
thousand hours
Energy consumption
Scope 1 and 2 GHG emissions million tonnes CO2e
Environmental management
certification
% of operations certified to
ISO 14001 standards
million GJ
Hygiene certification
% food contact operations
certified to recognised food
hygiene standards
million m²
2018
7,278
2017
7,437
% change
(2)%
(13)%
(14)%
2018
1,611
194
12.0%
115
(32)
79
1,311
9.0%
2018
1.03
22
134
2.69
0.25
83
100
Restated1
2017
1,646
222
13.5%
134
(49)
91
1,326
10.4%
2017
1.26
24
128
2.76
0.26
84
94
1 Refer to notes 32 and 33 in the notes to the combined and consolidated financial statements for basis of restatement
2 2017 TRCR has been restated to include acquisitions completed in 2016 and 2017
Mondi Group
Integrated report and financial statements 2018
78
Business reviews
Consumer Packaging
Delivering on our strategy
Strategic value drivers
Progress in 2018
2019 priorities
Drive performance along
the value chain
Invest in assets
with cost advantage
Inspire our people and
grow responsibly
Partner with customers
for innovation
Invest in assets
with cost advantage
We have completed most of our investment
plans at our cost-advantaged locations
in central and eastern Europe, upgrading
and expanding our plant capabilities.
Our investment in the Amphor Khowyoi
plant (Thailand) is progressing well, with
completion expected by mid-2019.
In recent years, we have invested
significantly in the modernisation and
growth of our Consumer Packaging
business. While further capital investment
opportunities in this business remain an
option, we are currently focused on the
optimisation of our existing operations
including leveraging recently completed
investments as well as completing current
capital investment projects underway.
e Ongoing commercial and operational initiatives to
optimise productivity and reduce waste as well as
enhance our quality management systems
e Restructuring and relocation of assets within the plant
network to lower the cost base and optimise machine
utilisation
e Ongoing continuous improvement initiatives to
foster productivity and drive efficiency
e Investigate opportunities to optimise our plant
network
e Progressed with key expansion projects at our cost-
e Complete expansion capital investment projects
advantaged locations
currently underway
e Optimise recent investments
e Continued focus on growing our safety culture through
e Further focus on improving our safety record and
best practice sharing, training and engagement
initiatives to engage our workforce
e Ongoing drive to decrease the environmental impact
e Continue to work with stakeholders to improve the
of our products and processes and endorsed the EMF
New Plastics Economy Global Commitment
sustainability of flexible packaging products
e Developed innovative solutions in partnership with our
customers:
– with a focus on flexible packaging solutions
designed for recycling
– that deliver a successful proposition for our
customers and the end consumer
Inspire our people
and grow responsibly
In 2018 our safety focus has been on
standardising best practice processes
across our plant network and implementing
employee engagement and training
initiatives in response to safety incidents
during the year.
For example an incident in our Bekescsaba
(Hungary) operation prompted us to
increase our training on fire and explosion
risks, and we rolled this programme out
across our business to build awareness
and prevent future accidents. We are also
increasing the use of digital solutions in our
safety processes to improve quality and
efficiency throughout our operations.
Unfortunately, we saw a life-altering injury
at our Gronau (Germany) operation related
to moving and rotating equipment, which
remains one of our highest safety risks and
therefore continues to be a focus going
forward. We have implemented a number
of actions to address the issue, including
participation in the newly appointed
working group focusing on moving and
rotating equipment and isolation and
locking out of energy sources.
e Continue to partner with customers to develop
innovative and more sustainable solutions
Becoming an employer of choice is a topic
that has been at the forefront in 2018.
At our annual business unit management
conference roles of key internal stakeholder
groups were defined and 10 employee
needs, such as job security, safe work
environment, personal contribution and
training opportunities, were identified.
Specific plant action plans to address these
needs have been implemented throughout
our plant network.
The environmental impact of flexible plastic
packaging continues to gain attention,
both externally and internally. We are
working with partners across our value
chain to reinvent flexible plastic packaging
so that it is fit for a circular economy.
Evidence shows that flexible plastic is
often the most sustainable solution over
the course of its life-cycle, if it is disposed
of responsibly.
We are active participants in industry
associations including the CEFLEX project
(Circular Economy for Flexible Packaging).
In addition to stimulating increased
collection of flexible plastic packaging in
all European countries, CEFLEX aims to
develop a robust set of design guidelines
to maximise overall resource efficiency and
optimise recyclability.
Mondi Group
Integrated report and financial statements 2018
Mondi joined the Ellen MacArthur
Foundation’s (EMF) New Plastics Economy
Initiative in 2017, and in 2018 we pledged
to increase investment in research
and development, and drive deeper
collaboration throughout our supply chain
to move away from non-renewable and
non-recyclable plastic.
We are one of the first signatories of
the New Plastics Economy Global
Commitment – committing to 100% of
plastic-based packaging being reusable,
recyclable or compostable; and 25% being
from recycled content (where it does not
compromise functionality or food health
requirements) by 2025.
We also continue to work on improving our
energy efficiency and reducing our waste
to landfill.
Partner with customers
for innovation
Flexible plastic packaging, when
manufactured, used and disposed of
appropriately, delivers many benefits from
resource efficiency (by reducing material
usage and being less transport intense) to
reducing food waste by enabling correct
sized portions and extending shelf-life.
One of the most significant developments
in 2018 was the momentum gained in
the way we are working with customers
to develop innovative and sustainable
flexible plastic packaging. The New Plastics
Economy Initiative has rallied businesses
and governments behind a positive
vision of a circular economy for plastics.
It has brought together 290 signatories,
including many leading companies, who
have committed to working towards 100%
reusable, recyclable, or compostable plastic
packaging by 2025.
Mondi Diamond
Awards
Mondi Korneuburg
SHE goes
Hollywood
Winner in Safety &
Health category
Presenters:
Stephanie Schmuttermair
Continuous Improvement Manager
– HR People Development,
Mondi Korneuburg
Michael Watz
SHE coordinator,
Mondi Korneuburg
Making sure our people work
safe and get home safe is our
top priority.
With people from 24 nations
speaking 18 different languages
all working on the shop-floor
together, creating an effective
safety-training programme is
extremely challenging.
Although our safety culture had
improved, we felt our conventional
training approach had reached its
limit. We decided it was time to
take SHE to Hollywood!
With a special task force, we
created safety videos with safety
champions as screenwriters and
employees as actors. The videos
deal with very serious safety topics
using a targeted sense of humour
– and they don’t rely on text or
language. The exaggerated re-
enactments of common accidents
and appropriate safety behaviour
allow viewers to easily identify with
the correct way of doing things.
By showing our people what to
do – rather than telling them – we
enabled a real change in mindset.
As a result we have reduced
annual cut injuries from five in 2016
to zero in 2018, and sustainably
lowered the training time required
per employee as the videos are
so effective.
We are proud of creating a
sustainable safety culture that
helps all employees – regardless
of nationality or language – lead
safer professional and personal
lives. Through visual, humorous
teaching tools that employees
have helped to create, we have
implemented truly successful
safety training – which other Mondi
plants are keen to adopt.
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As part of a Mondi-led pioneer project, we
have made great progress in developing
a solution for FMCG brand owners.
Thanks to collaboration with Europe’s
leading recyclers and Mondi sites – testing
by the pilot plant of Mondi Gronau, co-
extrusion of film by Mondi Styria (Austria),
printing and lamination at Mondi Deeside
(UK) with pouching at Mondi Nelson
(UK) – we have been able to show that
it is possible to separate and recycle
polyethylene from post-consumer waste
into a fully recyclable packaging prototype.
This can now lead the market by proving
that true circularity of packaging production,
use, recycling and reprocessing is possible.
In a further collaborative project, we
continue to work on the circularity of other
products. Together with a recycling partner
(APK AG) – who have developed a process
called Newcycling® – Mondi has tested the
suitability of recycled polyethylene (PE) for
multi-layer films by designing a new plastic
packaging solution for washing powder
that replaces up to 80% of the previously
virgin PE layer with post-industrial waste.
The result is a high-quality packaging
laminate that maintains the functionality
requirements of our customer, reduces
the demand for virgin fossil based PE and
achieves a packaging solution containing
up to 50% recycled materials.
In our personal care components product
portfolio, we are developing the next
generation of back ear laminates for diapers
with the application of alternative bonding
technology. This is expected to deliver
efficiency improvements and raw material
savings while retaining the diaper’s softness
and elasticity properties. We also partnered
with our customers to develop enhanced,
cost effective personal care components
solutions, tailored for consumers in a range
of markets and regions.
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Mondi Group
Integrated report and financial statements 2018
80
Business reviews
Uncoated Fine Paper
Our Uncoated Fine Paper
(UFP) business manufactures
and sells an extensive range
of quality papers for use
in offices and professional
printing houses.
Operating sites
6 in 4 countries
Employees
6,500
Production capacity
Pulp: 1,725 ktpa
Uncoated fine paper¹: 1,915 ktpa
1 Includes 205 ktpa of newsprint
We’re a market leader in Europe, including
Russia, and South Africa. We operate
vertically integrated, well-invested, cost-
advantaged assets and continually look
for ways to improve efficiency, productivity
and sustainability.
Our extensive range of office papers is
designed to achieve optimal print results
on laser, inkjet and copy machines.
High-performance professional printing
papers are dedicated for offset presses,
high-speed inkjet presses and other digital
print technologies. With our wide range
of high-quality papers we aim to provide
customers a one-stop-shop solution for
their needs. We understand the value of
paper in communication including haptic
and optic qualities such as vibrant colours,
sharp contrast and striking visuals that
bring stories to life.
Developing cost-efficient, high-
performance, environmentally responsible
solutions is a cornerstone of our business
strategy. Our focus is on transforming
credibly sourced raw materials into
innovative paper solutions to meet
customer needs in a cost-effective and
sustainable way.
All of Mondi’s UFP mill brands are part of
the Green Range, our umbrella trademark
for sustainable paper solutions. They are
produced from FSC or PEFC certified wood
from sustainably managed forests or 100%
recycled paper, or are produced totally
chlorine free (TCF).
In addition to producing pulp and paper,
we manage 2.4 million hectares of forest in
Russia and South Africa.
Spotlight on sustainable paper by design
PERGRAPHICA® –
Premium design papers
Color Copy – The perfect paper
for digital colour printing
Our flagship office paper is by far
the most well-known brand of office
paper in Europe for colour printing
applications. Customers have relied
on it for over a quarter of a century for
perfect print results and consistent
quality. It also has an exceptional
environmental profile: CO2 neutral
and FSC, EU Ecolabel and ISO 9706
certifications. Recently we redesigned
its wrapper to be even stronger and
more convenient to handle. It’s still
the same great Color Copy, now with
packaging that is more user-friendly.
We designed our PERGRAPHICA®
portfolio of premium uncoated fine
papers for perfectionists. As a hybrid
paper, PERGRAPHICA® works well
with all printing technologies and
delivers consistent, high-quality
results that meet the exacting needs
of the creative and commercial print
industries. Available in a smooth
or rough texture, it enhances
sophisticated messaging
with an elegant look and feel.
The choice of high white,
classic or natural whiteness
brings unique style to
printed materials.
Mondi Group
Integrated report and financial statements 2018
Segment revenue
€ million
€1,877m
1,722
1,764
1,720
1,832
1,877
Underlying EBITDA
€ million
€516m
ROCE
448
%
0
7
2
.
481
464
%
3
2
3
.
%
6
6
2
.
516
%
9
1
3
.
349
%
0
7
1
.
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Production information
Uncoated fine paper
Hardwood pulp
Internal consumption
Market pulp
Softwood pulp
Newsprint
Financial performance
€ million
Segment revenue
Underlying EBITDA
Underlying EBITDA margin
Underlying operating profit
Special items
Capital expenditure cash payments
Operating segment net assets
ROCE
Sustainable development
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
% change
2%
11%
17%
TRCR
Gender diversity
Training hours
per 200,000 hours worked
% women employed
thousand hours
Energy consumption
Scope 1 and 2 GHG emissions million tonnes CO2e
Forest certification
million GJ
% managed land certified to
FSC standards2
FSC- or PEFC-certified
wood procured
%
Environmental management
certification
% operations certified to
ISO 14001 standards
CoC Certification
% operations certified to FSC
or PEFC CoC standards
2018
1,649
2017
1,644
906
338
386
207
2018
1,877
516
27.5%
395
(21)
161
1,494
31.9%
2018
0.40
23
334
91.76
3.38
100
78
100
100
950
395
375
277
Restated1
2017
1,832
464
25.3%
337
(15)
122
1,515
26.6%
2017
0.28
23
333
93.25
3.38
100
80
100
100
1 Refer to notes 32 and 33 in the notes to the combined and consolidated financial statements for basis of restatement
2 Our forestry operations in Russia are also 100% PEFC certified
Financial review
Underlying EBITDA was up 11% to
€516 million. Higher average selling prices
more than offset higher costs and negative
currency effects.
We estimate European uncoated fine paper
demand declined around 4% on a strong
prior year period, bringing the average rate
of decline over the past two years to 2%, at
the higher end of our expected long-term
trend of 1% to 2% decline per annum.
Demand in Russia and South Africa was
flat, in line with our long-term estimate.
Uncoated fine paper sales volumes were
1% higher than the prior year, despite
the ongoing structural decline in mature
markets, as we continue to benefit from our
emerging market exposure and superior
cost positioning. Average benchmark
European uncoated fine paper selling
prices were 7% higher than the prior year
and 4% up in the second half of the year
compared to the first half, following the
implementation of price increases over
the course of the year. Uncoated fine
paper selling prices in Russia and South
Africa were also increased during the year,
offsetting domestic cost inflation.
We saw an increase in input costs, most
notably for wood, energy and chemicals,
while fixed costs were higher due to
domestic inflationary cost pressures
and the impact of maintenance shuts,
partly compensated by our ongoing cost
reduction initiatives.
The forestry assets’ fair value is dependent
on a variety of external factors over which
we have limited control, the most significant
being the export price of timber, the
exchange rate and domestic input costs.
Increases in export prices, and a weaker
rand at the end of the year resulted in a
fair value gain of €43 million in line with the
prior year, but with the second half gain
€17 million above that reflected in the first
half of 2018.
A planned maintenance shut at Syktyvkar
mill (Russia) and an extended shut
at Richards Bay (South Africa) were
completed during the first half of the year.
In the second half, we completed planned
shuts at Ružomberok (Slovakia) and
Neusiedler (Austria). In 2019, our Syktyvkar
and Richards Bay shuts are planned for
the first half of the year while a project
related shut at our Ružomberok mill and
the remaining shuts are scheduled for the
second half.
Mondi Group
Integrated report and financial statements 2018
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Business reviews
Uncoated Fine Paper
Delivering on our strategy
Strategic value drivers
Progress in 2018
2019 priorities
Drive performance along
the value chain
e Improved productivity and efficiency with performance
improvement initiatives implemented across mills and
related forestry operations
e Continue to optimise performance and increase
productivity and efficiency in our mills and forestry
operations
Invest in assets
with cost advantage
e Closure of an uncoated fine paper machine in
Merebank (South Africa)
e Continued with investment projects to debottleneck
e Evaluate and execute investment projects to
production at Syktyvkar
e Completed waste water treatment plant investment
and progressed on the power plant modernisation at
Syktyvkar
e Acquisition of 11,000 hectares of well-located forestry
plantations in KwaZulu-Natal (South Africa)
increase saleable production by 100,000 tonnes
per annum in the medium term at Syktyvkar
e Investigation, and where appropriate
implementation, of investment projects to
modernise our Richards Bay facility
Inspire our people and
grow responsibly
e Ongoing focus on safety
e Investments and engagement with local communities
e Initiatives to develop talent within the organisation
e Continued focus on improving safety record
e Complete investments to reduce the environmental
footprint of our mills and increase energy efficiency
Partner with customers
for innovation
e Rolled out myMondi to include a majority of our
customers by the third quarter of 2018
e Continued enhancement of myMondi
e Continued focus on enhancing our service offering
e Reorganisation of European marketing and sales force
to customers
to product/channel focus
Due to the declining margins on unintegrated
paper production following the rapid rise
in hardwood pulp input costs, we ceased
production at one of our uncoated fine
paper machines at Merebank during
the second half of the year, which was
operating at 70,000 tonnes per annum
production capacity.
Invest in assets
with cost advantage
As part of our plan to maintain Syktyvkar’s
competitiveness and increase saleable
production by around 100,000 tonnes per
annum in the medium term, we are investing
to debottleneck production and avoid
unplanned shutdowns, including various
upgrades of the mill infrastructure, fibre lines
and pulp dryer, and a new evaporation plant.
At the end of the year, we completed the
investment in the waste water treatment
plant at Syktyvkar, which will improve waste
water quality and reduce chemical oxygen
demand and total suspended solids.
We are progressing with the rebuild of the
power plant at the same mill to replace
three existing bark boilers and four turbines
with a single new bark boiler and turbine
providing process simplification, improved
reliability, reduced costs, reduced natural
gas consumption, increased use of biomass
for energy and reduced greenhouse gas
emissions. This project is now expected to
complete in the second half of 2019. The total
capital expenditure for both projects now
amounts to €175 million.
To enhance the security of wood supply
to our Richards Bay mill and improve cost
competitiveness, we acquired around
11,000 hectares of well-located forest
plantations in KwaZulu-Natal in May 2018 for
ZAR408 million (€27 million) on a debt and
cash-free basis.
We are investigating alternatives for the
modernisation of our Richards Bay facility,
including the modernisation of the mill’s
energy and chemical plants.
Inspire our people
and grow responsibly
We remain committed to achieving a culture
where everybody works safely and returns
home safely every day. We sincerely regret
the fatality of a contractor at Syktyvkar in
April 2018 during planned maintenance
work at the woodyard, and another fatality in
January 2019 when a contractor lost his life
during drilling works at the construction site
of our new paper machine in Ružomberok.
Unfortunately, we also suffered two life-
altering injuries at our Syktyvkar logging
operations in Russia and our forests in
South Africa. Thorough investigations are
conducted after all incidents and action plans
implemented to prevent repeat incidents.
Our focus on contractor safety management,
application of Mondi’s risk assessment
methodology and roll out of the revised
Permit to Work methodology aims to ensure
safe annual maintenance and project-
related shuts.
Drive performance
along the value chain
Efforts to drive the performance of our
operations and reduce waste continued
during the year with initiatives to optimise
machine performance and increase
efficiency and productivity leading to record
production at one of our pulp mills and three
of our paper machines.
To further improve the reliability and technical
integrity of our pulp and paper operations
and reduce maintenance costs we
continue to develop our asset management
processes, including the implementation of
specific training to enhance the skills and
qualifications of our people across our mill
network. We also established a programme
to optimise the performance of our recovery
boilers, which we expect will deliver energy
savings, enable best-practice sharing
and continue to improve the reliability of
our operations.
We made further productivity improvements
at our forestry operations in Russia and, by
further strengthening our local partnerships,
improved wood availability and saw log
sales. We also focused on improving our
administrative processes at Syktyvkar.
During the year we placed special attention
on operational improvements at our
South African operations by developing
improvement plans for both our Richards
Bay and Merebank mills focusing on reliability
improvements, increased operational
efficiencies and cost reductions across the
value chain. These initiatives have delivered
initial benefits in the year.
Mondi Group
Integrated report and financial statements 2018
We are on track with our efforts to eliminate
the Top Risks, which remain a key part of our
approach to safety. The majority of our first
line managers have completed our tailor-
made safety and health programme, and all
safety and health professionals completed a
four-module in-depth specialist training.
We continually strive to improve the
environmental performance of our
operations. Odour abatement is still
a priority for our pulp mills. We have
completed the planned initiatives at our
Ružomberok mill, however, regrettably we
have had significant odour incidents at both
our Ružomberok and Richards Bay mills
affecting the surrounding communities.
We have engaged constructively with
local stakeholders around our action plans
to address the root causes and prevent
future occurrences.
Working in partnership with NGOs,
government and business is central to our
approach. We are working to increase
the long-term supply of sustainable
fibre, including collaborating with global
certification schemes to improve access
to credibly certified fibre. We are proud of
our progress in protecting Intact Forest
Landscapes as these large unfragmented
areas, undisturbed by roads or other
significant human infrastructure, are globally
recognised as priority protection areas.
In Russia, we partner with WWF Russia
and Silver Taiga to identify and protect
these areas in the Komi Republic.
We have an extensive community
engagement and investment programme
focused on areas around our mills and
people living on our forestry land. We believe
that small and medium enterprises (SMEs)
in the forestry business can help to meet
projected demand for wood-based
products. They are also crucial to supporting
local livelihoods and the wellbeing of forest
communities. In Russia, our Syktyvkar mill
supports small-scale forest enterprises
who would normally have limited access to
resources. In 2018 we continued to invest in
community engagement programmes in and
around our operations, particularly in Russia
and Slovakia, ranging from infrastructure
investments and roads to sponsorship of
sporting and other local initiatives.
We have developed programmes to ensure
we have the right talent and succession
plans to deliver on our long-term strategic
targets, even in remote locations such
as Syktyvkar.
NEXT (New thinking, Expertise and Talent)
is a Syktyvkar initiative that combines
external expertise, internal development
and promotions, leadership excellence
and university partnerships resulting in
improved talent attraction, productivity and
employee engagement. In South Africa, our
GROW (Growing Trees Developing People)
initiative is focused on developing a strong
pipeline of forester skills through accredited
training programmes that are calibrated and
benchmarked through a Forestry Learning
Centre which has resulted in a significant
increase in workforce engagement.
Partner with customers
for innovation
Following its introduction in 2017, we
rolled out myMondi to include a majority
of our customers by the third quarter of
the year. This 24/7 web shop and service
portal provides customers with detailed
product information, the ability to place
and track orders, and the functionality to
enquire and follow up on product and order
related queries. MyMondi has enabled us
to optimise our business processes and
increase efficiency. We have had very positive
feedback from our customers and plan to
further enhance the services offered though
this digital platform in 2019. With the launch
of myMondi, the number of electronic order
lines placed by our customers now exceeds
two thirds of all European order lines.
During 2018 we re-organised our European
marketing and sales organisation from a
regional to a channel focus, which allowed
us to develop more end-user and application
expertise. This change will further cement
commercial excellence, deliver improved
customer service and strengthen the
efficiency of our organisation. The new
organisation is supported by newly added
functionalities, incorporated into our cloud-
based CRM platform, which will further
enhance customer experience.
Mondi Diamond
Awards
Mondi South Africa
Jabulani Agri-
Village Model –
a model for
future success
Finalist in Sustainable
Development category
Presenter:
Thobi Mkhize
Head of Land, Mondi South Africa
Our plantation forests are integral
to meeting the timber requirements
of our Richards Bay pulp mill,
and therefore essential to the
long-term success of the business.
Our journey began eight years ago
when we had 62 impoverished
villages living in unsafe conditions
on Mondi land. The communities
were understandably frustrated,
trust levels were low and it was clear
that things needed to change.
So we set out to drive our
business success by helping our
communities thrive. The result: a
rural community transformation
model that has been adopted
countrywide to address land
tenure and reform challenges.
By amalgamating five small villages
into one sustainable agri-village we
leveraged infrastructure synergies,
improved safety, reduced risk
to our timber supply and most
importantly empowered the
community. Responding to the
project, they sang Jabulani –
meaning happiness.
The pilot Jabulani Agri-Village
Model works so effectively because
it has been developed through
multiple partnerships and is
multidimensional – looking at land
tenure, food security, sustainable
and affordable services, social
infrastructure, skills development,
and income enhancement
programmes. It is also reproducible
– our pilot project has given 110
poor and vulnerable households
from five villages a better life, and a
further eight agri-villages built on the
same principles will transform the
lives of another 724 households.
We could not be prouder of the
enormous impact and significance
of this project, which demonstrates
the vital link between the health of
business and the communities in
which they operate.
Mondi Group
Integrated report and financial statements 2018
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Being an
employer
of choice
We are determined to offer
a safe, caring, diverse
and inclusive workplace
where people can grow
to their full potential.
Communicating openly and
getting regular feedback
on how we are doing is key,
as is measuring progress
through our group-wide
employee survey.
89%
Participation rate in our
2018 employee survey
We have an ambitious
sense of purpose
and offer exciting
careers in a workplace
where digital and
human ingenuity
work together.
Michael Hakes
Group HR Director
Our diverse team at Mondi Korneuburg
developed an innovative way to involve
people in safety training.
Business review:
Consumer Packaging
Page 79
Governance
Introduction from Joint Chairs
Board of directors
Corporate governance report
DLC nominations committee
DLC audit committee
DLC sustainable development committee
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102
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Mondi Limited social and ethics committee
DLC executive committee and
company secretaries
DLC executive committee
Remuneration report
Other statutory information
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Introduction from Joint Chairs
Our commitment
to growing responsibly
Dear fellow shareholder
We would like to take this opportunity to
provide you with a more detailed look at the
Boards’ key focus areas during the year,
how our governance framework operates in
practice and supports the achievement of
our values and strategic objectives and how
we have considered the interests of our
investors and wider stakeholders.
Governance & Strategy
Our clear and consistent strategy, set
out and discussed in more detail in the
Strategic report on pages 12 to 83, is to
deliver value accretive growth by focusing
on our four strategic value drivers – to
drive performance along the value chain;
to invest in assets with cost advantage; to
inspire our people and grow responsibly;
and to partner with our customers for
innovation. After the Boards’ detailed
review of Mondi’s strategy during the year,
we continue to believe that our approach
remains appropriate and supports our
commitment to delivering long-term value
to shareholders.
The governance framework within which
the Boards operate is designed to guide
our behaviour in all areas of decision-
making; to ensure a transparent and open-
minded approach to discussions; and to
keep our culture and values at the forefront
when we consider how best to achieve our
strategy. It allows us to balance our desire
to drive the strategy forward with ensuring
that we act in the long-term interests
of the company to achieve the best
outcome for our shareholders, and that
we take seriously the views and interests
of our diverse range of stakeholders.
Robust governance procedures ensure that
we are acting ethically and safely and in line
with our duties as directors. An overview of
our engagement activities during the year
can be found on pages 98 to 100.
This approach to governance is particularly
relevant given the number of large capital
investment projects that were ongoing
during the year. Having clear policies and
processes in place to govern the way
in which we operate, from appropriate
delegations of authority, to our approach
to safety, local communities and the
environment in which we operate, to our
code of business ethics and Speakout,
allows the Boards to approve such projects
with a clear understanding of the impact
they will have on our stakeholders and in
the knowledge that they will be undertaken
in a safe and considered manner.
Further information relating to Mondi’s
strategy and developments during the year
can be found in the Strategic report on
pages 12 to 83.
Board composition
In March 2018 we announced that
John Nicholas would step down from
the Boards, and from his role as audit
committee chair, at the conclusion of the
Annual General Meetings in May 2018 after
almost nine years’ service. We thank John
for his significant contribution to Mondi
during this time, in particular his focus
on Mondi’s financial reporting and the
experience he brought to his role on the
audit committee. We wish John all the best
for the future.
In May 2018 we welcomed Stephen
Young to the Boards. Stephen brings
strong financial and general management
experience as well as an in-depth
understanding of working for an
international industrial business. It is clear
from Stephen’s first few months with us that
he is able to provide the Boards with an
invaluable fresh perspective. Stephen also
took up the role of audit committee chair
following approval at the Annual General
Meetings in May.
This led to a number of committee
membership changes, details of which
can be found on page 103, as well as the
appointment of Stephen Harris as Senior
Independent Director.
Safety
We were deeply saddened by the fatality
at our Syktyvkar mill (Russia), when a
contractor lost his life during maintenance
of a conveyor in the woodyard. Tragically,
we also experienced the fatality of a
contractor at our Ružomberok mill
(Slovakia) in January 2019 during pile drilling
activities at the construction site of our new
paper machine. In addition, we experienced
five life-altering injuries during 2018. We are
very aware of the profound impact such
incidents have, particularly on the families
of those involved, and so safety across
our business remains our highest priority.
In all instances, thorough investigations
were undertaken and we were kept
informed of the outcomes. We continue to
strive for zero harm and this goal remains
fundamental to the way we do business.
By growing responsibly we prioritise
long-term value creation.
David Williams Joint Chair (left)
Fred Phaswana Joint Chair (right)
Mondi Group
Integrated report and financial statements 2018
We continue to address the top risks in
all of our operations in order to engineer
them out of the business or, where this isn’t
possible, to implement robust controls.
We work closely with contractors to
manage their health and safety risks and
have a clearly defined six-step process
in place which is summarised in a Safe
Practice Notice providing guidance on
the management of contractors prior to
and during their time on-site at Mondi.
We also acknowledge the importance of
the behavioural aspects of safety. In 2017
we introduced the 24-hour safety mindset,
whereby safety is seen as something we do
for ourselves, for our families, and for our
colleagues and their families. In addition, we
have implemented focused safety training
for managing directors, first line managers
and safety and health professionals and
have established a number of working
groups, each one focusing on a different
risk area. Towards the end of 2018 we
launched a powerful safety campaign
aimed at the behavioural causes of
serious incidents. The campaign involves
employees who have experienced life-
altering injuries telling their stories via
videos and posters. Hearing their stories
firsthand, while difficult and emotional to
listen to, will hopefully drive home to people
the day-to-day impact of our decisions in
the workplace and the potentially severe
consequences of unsafe behaviour.
We will continue to do everything we can to
further embed a culture of safety across the
organisation and to ensure that nothing is
seen as more important than the well-being
of our colleagues.
Culture & values
The Group’s culture and values lie at the
heart of our decision-making process
and the way in which the Group operates.
We believe that clear values and a focus
on ethical behaviour allow the business to
perform more efficiently and effectively and
are supportive of our long-term strategy.
Our values are clearly defined as part of
the Mondi Way, our unique framework for
creating sustainable value. This is explained
in more detail on pages 18 and 19.
We know that our values are understood
at a senior management level but our
ongoing challenge is to ensure that they
are effectively communicated throughout
the organisation and that every person
that works for Mondi understands them
and feels confident every day that they are
coming to work for a group that genuinely
lives these values. The Boards are
committed to ensuring that this is the case
and that Mondi continues to operate in an
ethical, open and transparent manner.
This is supported by our code of
business ethics which consists of five
principles governing the way in which
we do business. The code is integrated
throughout the Group and is well
understood. The principles and our
alignment with them are subject to regular
review by the Boards.
In June, a number of our board members
attended Mondi’s Leadership Forum, an
event for senior leaders, incorporating
our regular Mondi Diamond Awards.
This provided us with an invaluable
opportunity to see our culture and values
in practice, through speaking directly
to a number of employees, observing
behaviour and participating in a number of
breakout sessions and discussion forums.
It was also impressive to meet the Mondi
Diamond Awards finalists and to see
firsthand the results of Mondi’s innovation.
More information can be found throughout
the Strategic report.
Looking ahead
Our focus during 2019 will continue to be
on moving our strategy forward within the
framework of the Mondi Way, ensuring that
the decisions we take reflect the culture and
values of the Group, our stringent approach
to safety and, wherever appropriate, the
views and interests of our key stakeholders.
Subject to the approval of our shareholders
at the Annual General Meetings in May,
the Boards will also dedicate time to
overseeing the smooth implementation
of the proposed simplification of Mondi’s
existing structure from the current dual
listed company structure into a single
holding company structure under Mondi
plc, announced in November 2018.
The simplification is expected to enhance
Mondi’s strategic flexibility, increase
transparency and remove the complexity
associated with the current structure.
Our board discussions will be influenced
by the new version of the UK Corporate
Governance Code which took effect
from 1 January 2019. Further details can
be found below. We feel that we are in a
good position to meet the requirements
of the new Code during 2019, but also
acknowledge that this will be an evolving
process. We will need to adapt to ensure
that we continue to have a fully effective
governance framework in place that
can contribute to, and support, the
continued creation of sustainable value for
our shareholders.
Fred Phaswana
Joint Chair
David Williams
Joint Chair
UK Corporate Governance Code 2019
The principles and provisions set out in the new
Code have been reviewed in detail and, where gaps
in our current practices were identified, proposals to
address these have been considered and agreed.
While we will report against the new Code in full in
our 2019 report, actions included:
e identification and agreement of our key
stakeholders (see pages 22 to 25 for more
information), the types of engagement currently
undertaken and how we can better understand
their views going forwards;
e identification of a number of ways in which the
Boards can develop their oversight of the Group’s
culture, many of which were already in place,
including site visits, access to members of senior
management beyond the executive directors,
access to employee survey results and continued
review of safety reports and Speakout statistics
and themes; and
e determining how the Boards can better
understand the views of our people, their
concerns and how our decisions affect them,
with agreement reached in relation to appropriate
engagement mechanisms.
We recognise that David Williams has been on the
Boards for more than nine years, the maximum
length of service recommended by the new Code.
However, given the proposed simplification of the
Group structure, announced in November 2018, and
in light of David’s significant experience, his in-depth
understanding of Mondi’s history and operations
and the valuable insight he continues to provide,
we are confident that it is in Mondi’s best interests
for David to remain on the Boards as Joint Chair.
David has been on the Boards since Mondi’s dual
listed structure was established and is therefore in a
position to provide invaluable support and continuity
as the simplification progresses. The position will be
kept under regular review.
Mondi Group
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Board of directors
Fred Phaswana
74
Joint Chair
Appointed
June 2013
Independent
Yes (on appointment)
Committee memberships
Nominations, social and ethics
Qualifications
MA (Unisa),
BCom (Hons) (RAU),
BA (Philosophy, Politics and
Economics) (Unisa)
Experience
Fred brings to the DLC Board a wealth of experience in African and global businesses, together with well
developed strategic and commercial skills. He was previously regional president of BP Africa, a non-executive
director of Anglo American plc and chair of Anglo American South Africa, Anglo Platinum, Transnet, Ethos
Private Equity, the South African Energy Association and the Advisory Board of the Cape Town Graduate School
of Business.
Fred was chair of Standard Bank group and The Standard Bank of South Africa between 2010 and 2015. He was
also the former vice chairman of WWF South Africa and Business Leadership of South Africa and was the
honorary president of the Cape Town Press Club.
External appointments
Chair of the South African Institute of International Affairs and non-executive director of Naspers Limited.
David Williams
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Joint Chair
Appointed
May 2007 and as Joint Chair in
August 2009
Independent
Yes (on appointment)
Committee memberships
Nominations (chair),
remuneration
Qualifications
Graduated in economics
from Manchester University,
chartered accountant (UK)
Experience
David has significant experience in senior financial roles held across a range of multinational companies, with
board experience as both an executive and non-executive director.
David served as finance director of Bunzl plc for 14 years before retiring in January 2006. He was previously a
member of the Tootal management board and Finance Director of Tootal plc and has held a number of senior
independent director and committee chair roles. David was formerly a non-executive director of the Peninsular &
Oriental Steam Navigation Company, Dewhirst Group plc, Medeva plc, George Wimpey plc, Taylor Wimpey plc,
Tullow Oil plc, Meggitt plc and Dubai-based DP World Limited.
David continues to contribute significant financial and business experience to the DLC Board and has an
extensive understanding of Mondi and its history since listing.
External appointments
None.
Peter Oswald
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Chief Executive Officer
Appointed
January 2008 and as Chief
Executive Officer in May 2017
Independent
No
Committee memberships
Executive (chair), sustainable
development, social and ethics
Qualifications
Graduated in law from the
University of Vienna and in
business administration from
WU-Vienna Business School
Experience
Peter brings significant packaging and paper experience to the DLC Board, having worked in the sector for
more than 27 years. He has detailed knowledge of operations and extensive experience in acquisitions, the
restructuring, turnaround and organic growth of businesses and inspiring large teams. Peter began his career
with Deutsche Bank and automotive company KTM. He joined the Frantschach Group in 1992 as the Head of
Internal Audit, later becoming Corporate Controller.
After serving as chief executive of the bag and flexibles business from 1995 to 2001, he was appointed chief
executive of Mondi Packaging Europe in 2002, leading its subsequent integration with Frantschach into the new
Mondi packaging division. Having held a number of senior executive roles within Mondi, Peter was appointed
Chief Executive Officer of the former Europe & International Division in January 2008 and Chief Executive Officer
of the Mondi Group in May 2017.
He was a non-executive director of Telekom Austria AG between 2008 and 2014 and of MIBA AG between 2014
and 2015 and chair of the supervisory board of OMV AG between 2015 and 2016.
External appointments
None.
Andrew King
49
Chief Financial Officer
Appointed
October 2008
Independent
No
Committee membership
Executive
Qualifications
Graduated in commerce
from the University of Cape
Town, chartered accountant
(South Africa)
Experience
Andrew has more than 16 years’ experience with Mondi in various strategy, business development and finance
roles, giving him a detailed understanding of Mondi’s strategy, capital allocation priorities, financial structure and
the environment in which the Group operates. He has played a key role in defining the Group’s strategic direction
and re-shaping the capital structure since listing.
Andrew completed articles with Deloitte & Touche in Johannesburg in 1994. In 1995 he joined Minorco, part of
Anglo American, as a financial analyst, before assuming responsibility for the group’s investment management
activities, and transferring to their corporate finance department in 1998. He worked on a number of group
M&A activities before being appointed a vice president of Anglo American Corporate Finance in 1999. He was
appointed Mondi’s Vice President of Business Development in 2002 and Corporate Development Director in
2004. He served as Chief Financial Officer of Mondi from June 2005 to May 2006. He was then appointed as
Group Strategy and Business Development Director before becoming the Chief Financial Officer of the Mondi
Group in 2008.
External appointments
None.
Mondi Group
Integrated report and financial statements 2018
Tanya Fratto
58
Non-Executive Director
Appointed
January 2017
Independent
Yes
Committee memberships
Audit, nominations,
remuneration (chair)
Qualifications
BSc in electrical engineering
Experience
Tanya has wide experience in product innovation, profit and loss, sales and marketing and engineering in a
range of sectors. This experience, together with Tanya’s extensive knowledge of operating in the US, brings a
vital perspective to the DLC Board. She was CEO of Diamond Innovations, Inc., a world-leading manufacturer of
super-abrasive products, until 2010. Before that she enjoyed a successful 20-year career with General Electric
where she ran a number of businesses and built an experience base in product management, operations,
Six Sigma and supply chain management. Prior to starting her career with General Electric, she worked at
International Paper Company.
External appointments
Non-executive director of Advanced Drainage Systems, Inc., Smiths Group plc and Ashtead Group plc.
Stephen Harris
60
Senior Independent
Director
Appointed
March 2011
Independent
Yes
Committee memberships
Audit, nominations,
remuneration, sustainable
development, social and ethics
Qualifications
Chartered engineer, graduated
in engineering from Cambridge
University, master’s degree in
business administration from
the University of Chicago, Booth
School of Business
Experience
Stephen brings to the DLC Board extensive experience in engineering and manufacturing having spent his early
career with Courtaulds plc before moving to the USA to join APV Inc, where he held several senior management
positions between 1984 and 1995. Stephen was appointed to the board of Powell Duffryn plc as an executive
director in 1995 and then went on to join Spectris plc as an executive director from 2003 until 2008. He was also
a non-executive director of Brixton plc from 2006 to 2009.
External appointments
Chief Executive Officer of Bodycote plc.
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Dominique
Reiniche
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Non-Executive Director
Appointed
October 2015
Independent
Yes
Committee memberships
Nominations, remuneration,
sustainable development (chair),
social and ethics (chair)
Qualifications
MBA from ESSEC Business
School in Paris
Experience
Dominique has extensive business understanding of operating in senior leadership positions in Europe as well as
international strategic, consumer marketing and innovation experience, allowing her to provide valuable insight to
the DLC Board.
She started her career with Procter & Gamble before moving to Kraft Jacobs Suchard as Director of Marketing
and Strategy where she was also a member of their executive committee. After helping Jacobs Suchard through
its acquisition by Kraft-Mondelez, Dominique joined The Coca-Cola System in 1992, starting as Marketing
and Sales Director and then holding various roles of increasing responsibility up to general manager France.
From 2002 to early 2005 she was CEO Europe for Coca-Cola Enterprises and from 2005 she was CEO Europe
for the Coca-Cola Company and then chair from 2013 until stepping down in 2014.
Dominique was a non-executive director of Peugeot-Citroen SA between 2012 and 2015 and of AXA SA
between 2005 and 2017.
External appointments
Non-executive director and chair of Chr. Hansen Holding A/S and a non-executive director of Paypal (Europe)
and Severn Trent Plc.
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Non-Executive Director
Appointed
May 2018
Independent
Yes
Committee memberships
Audit (chair), nominations,
sustainable development
Qualifications
Graduated in mathematics
from Southampton University,
member of the Chartered
Institute of Management
Accountants (UK)
Experience
Stephen has a strong financial and general management background with experience gained internationally across
a variety of sectors, including the industrial and engineering sectors. Stephen spent his early career in commercial
accounting and finance roles at companies including Ford Motor Company, Mars, Inc and Grand Metropolitan plc
(now Diageo plc). He was Group Finance Director of the Automobile Association until its acquisition by Centrica in
2000 before becoming Group Finance Director at Thistle Hotels plc.
In 2004 Stephen was appointed Group Finance Director at Meggitt plc, an international engineering business
specialising in aerospace equipment. He held this role for nine years before being appointed Chief Executive Officer
in 2013. Stephen stepped down from the board of Meggitt plc on 31 December 2017.
External appointments
Non-executive director and audit committee chair at Derwent London plc and at Weir Group plc
Mondi Group
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Corporate governance report
How the Boards operate
Mondi comprises Mondi Limited, registered
and listed in South Africa, and Mondi plc,
registered and listed in the UK. Each entity
has its own board of directors comprising
the same individuals. This enables the
effective management of the dual listed
company (DLC) structure as a single unified
economic enterprise with due consideration
being given to the interests of the ordinary
shareholders of both Mondi Limited and
Mondi plc.
Leadership of the Boards comes from the
Joint Chairs. Having joint chairs brings
to the Boards a diversity of knowledge,
experience and shared values. They have
agreed a rolling agenda to ensure that all
key matters reserved for the consideration
of the Boards are covered in the annual
cycle of meetings.
Agendas for each meeting are agreed
with the Joint Chairs to ensure that, in
addition to regular items, consideration is
being given to matters that may impact
the Group’s operations from the wider
economic or business environment.
During 2018 for example, among a number
of other presentations, the Boards received
a presentation from an economist updating
them on global market and economic
trends and the longer-term economic
outlook. Responding appropriately to
the changing environment in which the
Group operates is vital for Mondi’s long-
term success.
The Boards meet at least six times a
year as a DLC board plus at least once
each year as separate legal entity boards.
Fred Phaswana chairs those meetings held
in South Africa and David Williams those
held outside South Africa, together ensuring
the distribution of appropriate, accurate
and well-presented materials, with meeting
packs being circulated electronically a
week before each meeting. Each board
programme is usually held over two days
enabling the directors to spend more time
together and form a greater understanding
of each other, developing a culture that
allows each board member to feel that
they are able to be open and transparent,
encouraging discussion and challenge in
the board room. The Joint Chairs ensure
there is sufficient debate and consultation
with management and advisers as well
as between the directors themselves
during meetings, allowing them to reach
considered and effective decisions.
As appropriate, other senior executives and
advisers are invited to attend and present
at meetings, providing the non-executive
directors with a broader perspective on
matters under consideration.
Board structure
Mondi Limited
e South African operations1
e Board of directors
e Registered in South Africa
e Primary listing on the JSE
DLC
Board
Mondi plc
e Non-South African operations
e Board of directors
e Registered in the UK
e Premium listing on the LSE
e Secondary listing on the JSE
Single unified economic enterprise
1 In addition, Mondi Limited owns a 50% interest in a subsidiary in Cote D’Ivoire
Compliance statement
Mondi’s dual listed company structure requires
us to comply with the provisions of the April 2016
edition of the UK Corporate Governance Code
issued by the Financial Reporting Council (available
at www.frc.org.uk) and the principles contained
in the South African King IV Code of Corporate
Governance (available at www.iodsa.co.za).
It is the view of the Boards that Mondi has complied
throughout the year with all the provisions of the UK
Corporate Governance Code. The Boards are also
of the view that Mondi has been in compliance with
the principles of King IV.
Examples of Mondi’s application of the provisions
of the UK Corporate Governance Code and the
recommended practices set out in King IV are
found throughout this governance report.
A more detailed analysis of Mondi’s compliance
with King IV is available on the Mondi Group
website at www.mondigroup.com.
The Boards note the publication of the new UK
Corporate Governance Code, which took effect
from 1 January 2019. We have reviewed the
principles and provisions contained within the new
Code and have implemented where appropriate
changes to our policies and practices to ensure
compliance with the new Code during 2019.
More information can be found on page 87.
Mondi Group
Integrated report and financial statements 2018
Composition of the Boards
The directors holding office during the year ended 31 December 2018 are listed below,
together with their attendance at board meetings. As at 31 December 2018 there were
eight directors: the Joint Chairs, four non-executive directors, each considered by the
Boards to be independent, and two executive directors.
The size and composition of the Boards and their committees are kept under review by the
nominations committee. We are of the view that collectively there is an appropriate balance
of capabilities, business experience, independence and diversity on the Boards to meet
the Group’s current business needs. The directors have experience gained from a range of
international organisations.
Those in office as at the date of this report, together with their biographical details, can be
found on pages 88 and 89.
Directors
Fred Phaswana
David Williams
Tanya Fratto
Stephen Harris
Andrew King
John Nicholas1
Peter Oswald
Dominique Reiniche
Stephen Young2
Mondi Limited
board (one
meeting)
Mondi plc
board (one
meeting)
DLC Board
(seven meetings)
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
7
7
7
7
7
2
7
7
5
1 John Nicholas retired from the boards of Mondi Limited and Mondi plc on 16 May 2018. John attended all meetings up to the time of his
retirement from the Boards
2 Stephen Young joined the boards of Mondi Limited and Mondi plc on 1 May 2018. Stephen attended all meetings following
his appointment
In addition, the Joint Chairs and the Non-Executive Directors met twice during the year.
These meetings focus particularly on the performance of the executives although the
agendas are driven by the non-executive directors themselves and cover a variety of
topics. One of these meetings is attended by the Chief Executive Officer in order to provide
input to the discussions on executive performance and succession.
Board policies and procedures
Professional advice
A policy is in place pursuant to which each director
may obtain independent professional advice at
Mondi’s expense in the furtherance of their duties
as a director of either Mondi Limited or Mondi plc.
No requests were received during the year.
In addition, each of the committees are
empowered, through their terms of reference, to
seek independent professional advice at Mondi’s
expense in the furtherance of their duties.
D&O insurance
Throughout the year to 31 December 2018, in line
with market practice, Mondi maintained directors’
and officers’ liability insurance.
Procedure for conflicts of interest
Company law, the memorandum of incorporation
of Mondi Limited and the articles of association
of Mondi plc allow directors to manage potential
conflicts. A formal procedure is in place for the
reporting and review of any potential conflicts of
interest involving the Boards with support from the
Company Secretaries, with authorisations reviewed
on an annual basis.
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Composition
of the Boards
Joint chairs
Executive directors
Non-executive directors
2
2
4
Diversity of the Boards
%
Female
Male
25%
75%
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0–3 years
3–6 years
6–9 years
9+ years
Nationalities represented
on the Boards
South African
British
Austrian
French
American
2
1
1
0
2
3
1
1
1
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Division of responsibilities
The division of responsibilities between the Joint Chairs and the Chief Executive Officer has
been clearly defined and approved by the Boards. The functions and duties of the Senior
Independent Director, a role to which Stephen Harris was appointed during 2018, are also
set out in a separate statement.
Role
Joint Chairs
Fred Phaswana
David Williams
Biographies
Page 88
e lead and manage the Boards, setting the agenda, providing
direction and focus, ensuring effectiveness and open and
transparent debate
e undertake regular engagement with the Chief Executive
Officer in between meetings
e ensure there is a constructive relationship between the
executive and non-executive directors
e ensure high standards of corporate governance and ethical
behaviour and oversee the culture of the Group
e oversee the induction, training and development of directors
and the consideration of succession
e ensure effective communication with shareholders and
other stakeholders
e ensure the Boards receive accurate, timely and clear
information to support discussion and decision-making
Role
Chief Executive
Officer
Peter Oswald
e leads and manages the business with day-to-day
responsibility for running the operations and, in particular,
the execution of strategy within the delegated authority from
the Boards
Biography
Page 88
e ensures the communication of Mondi’s values and goals
throughout the organisation, leading by example
e chairs the DLC executive committee and leads and motivates
the management team
e ensures the Group has effective processes, controls and risk
management systems
e develops and implements Group policies, including with
regard to safety and sustainability
e together with the Chief Financial Officer, leads the relationship
with institutional shareholders
Mondi Group
Integrated report and financial statements 2018
Assessment of the
Company Secretaries
Pursuant to the Listings Requirements of
the JSE, the Boards confirm that they have
reviewed and are satisfied that each of the
Company Secretaries is competent and has
the relevant qualifications and experience.
Their biographies are on page 119.
In assessing their competence and the quality
of the corporate governance services they
provide, the Boards have considered the
expected role and duties pursuant to the
requirements of both the South African and
UK Companies’ Acts, governance codes and
continuing obligations of the stock exchanges
on which Mondi is listed, and considered their
respective compliance with each of these.
The Boards have reviewed their performance
not only during the last year but since
joining Mondi.
The Boards concluded that the Company
Secretaries have each complied with all
the requirements of the Companies Acts,
governance codes and continuing obligations
of the relevant stock exchanges and that the
arrangements in place for monitoring and
assessing their competence and performance
are effective.
Role
Executive
Director
Andrew King
Biography
Page 88
Role
Senior
Independent
Director (SID)
Stephen Harris
Biography
Page 89
Role
Independent
Non-Executive
Directors
Tanya Fratto
Dominique
Reiniche
e manages the day-to-day operations of the Group, in this case
within his remit as Chief Financial Officer, in accordance with
authority delegated by the Boards
e provides support to, and acts as a sounding board for, the
Joint Chairs and the Non-Executive Directors
e acts as a point of contact for shareholders
e available as a trusted intermediary for the other directors,
as necessary
e chairs a meeting of the Non-Executive Directors at which the
performance of the Joint Chairs is considered
e provide independent oversight of the Group’s activities
e offer an external perspective to, and constructively challenge,
management
e provide to the Boards a diversity of knowledge and experience
e monitor management performance and the development of
the organisational culture
Stephen Young
e review and agree strategic priorities and monitor the delivery of
Biographies
Page 89
the Group’s strategy
e ensure the integrity of financial reporting and the effectiveness
of internal controls and risk management
e determine executive director remuneration
Role
Company
Secretaries
Philip Laubscher
Jenny Hampshire
Biographies
Page 119
e work together on the coordination of Mondi’s DLC structure
e support the Joint Chairs in the delivery of accurate and timely
information ahead of each meeting
e ensure compliance with board and committee procedures
e act as a key point of contact for Joint Chairs and Non-
Executive Directors
e provide support to the Boards and committees, and advise
on governance, statutory and regulatory requirements,
maintaining an arm’s length relationship with the Boards
e provide advice on legal, governance and listing requirements
in both South Africa and the UK, in particular relating to
continuing obligations and directors’ duties
e appointed and removed by the Boards as a whole
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Our committees
The Boards are supported by the committees that have been established in line with governance practice and to which the Boards have
delegated specific areas of responsibility. The role of each committee is described below and in more detail later in this report.
Mondi
Limited
Mondi
plc
The
Boards
DLC
nominations
committee
Oversees the
composition of
the Boards and
committees and
considers succession
planning and
diversity, making
recommendations
to the Boards
DLC
audit
committee
Oversees the
Group’s corporate
financial reporting,
the internal control
system, risk
management and
the relationship
with the external
auditor
DLC
remuneration
committee
Responsibility for
recommending
overall remuneration
policy and the setting
of executive and
senior management
remuneration
DLC
sustainable
development
committee
Oversees the Group’s
strategy, commitments,
targets and
performance relating
to safety,
the environment
and other sustainable
development matters
Mondi Limited
social
and ethics
committee
Oversees South
African social and
ethical issues
Read more
Page 117
Read more
Page 102
Read more
Page 106
Read more
Page 122
Read more
Page 114
DLC executive
committee
Day-to-day
management
of the Group
DLC disclosure
committee
Responsibility for classifying and
overseeing the prompt disclosure of
inside information and overseeing the
creation of insider lists
Read more
Page 118
Read more
Page 121
Each committee has the authority to
make decisions according to its terms of
reference. Work programmes are agreed
by each committee that are designed
around the annual business calendar
and their respective terms of reference.
The matters reserved for the Boards
together with the terms of reference of
each of the committees are reviewed on
an annual basis and when there have been
changes in circumstances, governance
or regulation.
These are available on the Mondi Group
website. During 2018 certain of the
committee terms of reference were
updated, primarily in response to changes
introduced by the new UK Corporate
Governance Code.
The committees meet prior to meetings of
the Boards to enable the committee chairs
to report to the Boards. This facilitates
communication between directors.
It also ensures that all aspects of the
Boards’ mandate have been addressed and
enables any necessary recommendations
or advice relevant for deliberations to
be provided.
Only committee members are entitled to
attend committee meetings, although the
chair of each committee can invite, as
they consider appropriate, other directors,
management and advisers to meetings to
provide information and insights, answer
questions and to assist the committees in
carrying out their duties.
Mondi Group
Integrated report and financial statements 2018
How the Boards spent their time
The Joint Chairs agree an annual work programme for the Boards that ensures all matters reserved for review by the Boards are covered.
The Boards are satisfied that this was the case during the year. Additional matters are added to each meeting agenda as the need arises
throughout the year, usually in connection with strategic opportunities that have presented themselves or where market conditions or
operational performance discussions trigger a request for a more in-depth review.
Each meeting includes a report from the Chief Executive Officer providing an operational update; a report from the Chief Financial Officer
on the Group’s financial performance; an update on safety performance; country assessments for key geographic locations where the
Group operates; and a report from the Company Secretaries on recent governance and regulatory matters.
Other matters addressed by the Boards
Financial performance
Operational performance
Succession planning
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e Review and approval of the full and half-yearly
results and associated announcements and the
trading updates.
e Detailed reports in relation to the fatalities
and life-altering injuries and oversight of
management’s response.
e Reports from the chief executive officers of a
number of the business units (see page 97).
e Consideration of recommended changes to the
membership of the DLC executive committee.
e Consideration of succession and talent
management plans.
e Review and approval of the Mondi Group Integrated
report and financial statements, ensuring they are
fair, balanced and understandable (see page 110
for more information).
e Consideration of ordinary and special dividend
recommendations and declarations in light of
the Group’s stated dividend policy, financial
performance and strong cash generation.
e Review and approval of the Group business plan for
2019–2021 and the budget for 2019, considering
assumptions made and the reasonableness of the
plan and focusing on the operational overviews,
cash flow management and capital allocation.
e Annual reviews of the Group treasury and Group
tax functions and performance, including approval
of the Group’s tax strategy statement for publication
on Mondi’s website.
Strategy formulation and monitoring
e A strategy review session, considering where
Mondi is today, its strategic focus, options for
future growth and detailed business unit strategic
initiatives, resulting in continued support for
Mondi’s strategic direction (see page 26 for
more information).
e Regular review of potential growth opportunities
identified by management.
e Review of investor feedback (see page 98 for
more information).
e Regular review of competitor analyses.
e Regular review of shareholder analysis reports.
e Monitoring of the implementation of a number of
Other
e Consideration of the proposed
corporate simplification.
e Review of employee survey results (see page 99 for
more information).
e Consideration of a number of regular matters that
are reserved for the Boards (see schedule on the
Mondi Group website).
large capital projects.
e A presentation from the Quality Director of the
Consumer Packaging business unit.
Governance and risk management
e Regular reports from the chair of each committee.
e Review of the Group’s corporate governance
framework and specifically proposals
arising in relation to the new UK Corporate
Governance Code.
e Review and approval of the renewal of Dominique
Reiniche’s term of office.
e Review and approval of the Group’s Modern
Slavery Act statement.
e Review of the output from the internal board
evaluation process and agreement of an action plan
(see page 101 for more information).
e A review of the Group’s risk management
processes, plan and risk tolerance levels and
internal controls, with consideration of risk
monitoring, mitigation activities and independent
assurance processes (see pages 38 and 39 for
more information).
e Half-yearly presentations on IT risks and cyber
security (see page 111 for more information).
e Review of the Group insurances, ensuring an
appropriate balance of risk between the Group and
our insurers.
e Review of principal Group policies.
e Review of arrangements for the Annual General
Meetings, in particular feedback received from
shareholders and voting indications.
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Corporate governance report
Stephen Young – Induction Programme
In the lead up to and following Stephen’s
appointment as a non-executive director on 1 May
2018, a number of meetings, briefings and site
visits were organised in order to provide Stephen
with a detailed overview of the Group and to allow
him to make as full and effective a contribution
as possible to the Boards’ deliberations and
decision-making during the first few months
following his appointment. The induction process
focused particularly on the role and duties Stephen
would assume once appointed as chair of the
audit committee.
Company Secretaries
Stephen’s induction started with a briefing from
one of the company secretaries to explain the DLC
structure and its implications for the operation of
the Boards, both at a practical level and in terms
of the applicable regulatory and governance
framework. He was given access to an online
director handbook containing a number of key
documents, including guidance on the duties
and obligations for listed company directors, key
policies and the terms of reference for each of
Mondi’s committees.
Joint Chairs and
Non-Executive Directors
While Stephen met all members of the DLC
Board during the recruitment and interview
process, further meetings were arranged as
appropriate around the time of his appointment
and his first board programme. Key among these
was Stephen’s meeting with John Nicholas, the
outgoing audit committee chair.
Executive committee members and
senior management
Meetings with members of the executive
committee were held in order to give Stephen an
understanding of the Group’s business, markets,
operations and material projects, as well as risk
areas, and to give him the opportunity to hear
firsthand about the Group’s culture and operational
style. Meetings with other key members of senior
management were also held, including with the
Group Head of Reward, Group Head of Internal
Audit, the Group Heads of Tax and Treasury, the
Group Head of Strategy & Investor Relations and
the Group Heads of Sustainable Development and
Safety and Health. The meeting with the Group
Head of Internal Audit was a key one for Stephen
given his audit committee role. A meeting with the
Group’s Chief Information Officer to discuss the
information management architecture and cyber
security was also held.
External auditor
A meeting with the UK audit engagement partner
was undertaken at an early stage in order to
provide Stephen with an independent view of
Mondi’s relationship with its external auditor and
the auditor’s role at each audit committee meeting.
Site visits
During August 2018 Stephen undertook a site
visit to Mondi’s mill in Świecie, Poland. Given that
Stephen was unable to join the full Boards’
visit to Świecie earlier in the year, this provided
Stephen with a separate opportunity to meet local
management and to receive tailored presentations.
The visit also included a tour of the plant and a
dinner with members of the management team.
This allowed Stephen early on in his tenure
to see one of Mondi’s largest operations and
to observe behaviour and culture in practice.
This was followed by a visit to Mondi’s Group office
in Vienna.
While Stephen’s induction covered a significant
amount in a short space of time, we remain aware
that the induction needs to be an ongoing process,
particularly during the first year of appointment, and
so we continue to look for additional opportunities
to offer Stephen a broader perspective of
the business.
Training, development
and culture
When new directors join the Boards they
undertake an induction. While there is an
outline induction programme in place,
this is discussed with each new director
and is tailored to meet any specific
requirements, in particular any committee
responsibilities. The programme generally
includes meetings with each member of the
executive committee and key advisers as
well as site visits. The aim is to familiarise a
new director with the nature of the Group’s
business and operations, highlighting the
key challenges and opportunities as well
as the regulatory environment in which the
Group operates, and the culture and values
of the Group. Following his appointment to
the Boards on 1 May 2018, an induction
programme was undertaken by Stephen
Young, the details of which can be
found opposite.
We aim to ensure that existing directors
receive ongoing training and development
opportunities and that they are able to
keep up to speed with changes to the
environment in which Mondi operates,
economic developments and governance
and regulatory changes. It is equally
important that the directors are given the
opportunity to monitor Mondi’s culture,
to see how it is embedded into the
organisation and to ensure that practice
on the ground aligns with the culture and
values promoted by the Boards.
This is achieved in a number of ways:
Site visits
The directors are encouraged wherever
possible to visit Mondi’s key assets
and operations so that they can see
them firsthand and get a more in-depth
understanding of the business as well
as meet local management and staff.
Such visits allow the directors to see
for themselves how our safety culture
is working in practice, the outcome of
the investments they have approved
and how the Mondi Diamond is used to
frame operational behaviour. Talking to
local management during these site visits
provides an invaluable perspective to
the directors.
Mondi Group
Integrated report and financial statements 2018
Board presentations
The Boards have in place a rolling
programme of presentations from members
of the executive committee and other
senior management. These presentations
give the directors direct exposure to
members of senior management beyond
the executive directors, allowing them the
opportunity to ask questions, hear their
views and opinions and to hear how the
businesses are performing and developing.
The directors also gain valuable insight
for the purposes of succession planning.
Presenters are additionally invited to attend
board dinners, offering a more informal
setting for discussion.
The Boards also receive presentations
from external advisers in relation to a variety
of matters.
Reports and updates
Presentations and reports aimed at
providing wider context to the Group’s
activities and position in the market
are provided regularly to the Boards.
Management also provide updates on
issues affecting the packaging and paper
industry as a whole and regular feedback is
provided through the sharing of analyst and
broker reports and briefings.
Board presentations:
To ensure the directors are aware of
developing trends and future changes
in governance and regulation and the
likely impact on the Group, the Company
Secretaries report to the Boards at each
meeting. They also brief the directors on
governance and regulatory consultations
for information and to assist the directors
with context for their decision-making
during board and committee deliberations.
Other corporate function specialists,
for example from Group tax and Group
treasury, report to the Boards to enable
the directors to gain a greater insight into
the way Mondi is managed and controlled.
This provides opportunities to question
processes, resources and key risks as
well as providing context on the wider
economic environment.
External directorships
Although it is recognised that valuable
experience can be gained from executive
directors accepting appointments as non-
executive directors on other boards, it is
important to ensure the appropriateness
and number of such commitments.
Mondi has a policy setting out the
parameters regarding such appointments.
A director will retain any fee paid to them in
respect of directorships external to Mondi.
During the year the Boards heard from the chief
executive officers of Mondi’s Consumer Packaging
and Uncoated Fine Paper business units as well as
the chief executive officers of the Fibre Packaging/
Paper and South African businesses, covering
matters including safety performance and culture,
financial and operational performance, progress
with capital investment projects and challenges
faced. Mondi’s Group Communication & Marketing
Director and Consumer Packaging’s Quality
Director also presented.
Mondi’s Group HR Director presented to the
Boards on the outcome of the 2018 group-wide
employee survey, providing insight into the views
of the 89% of employees that responded to
the survey.
This feedback provides a vital source of information
to the directors on how employees feel about
Mondi and the environment and culture in which
they work. More information can be found on
page 99.
In addition, the Boards received presentations
from external advisers including in relation to global
economic and market trends, the duties of boards
in relation to environmental, social and governance
risks and investor perceptions.
The Boards have also received updates on
information technology risk through two detailed
presentations given to the DLC audit committee
during the year (see page 111 for more information).
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Neither of Mondi’s executive directors
currently holds a directorship external
to Mondi.
Each director can discuss any development
needs with one of the Joint Chairs at
any time but the opportunity arises more
formally during the annual review process
when discussions regarding individual
performance are held. In addition, all
directors are encouraged to strengthen
and refresh their knowledge by attending
workshops, seminars and courses relevant
to their respective roles, and details of the
availability of these are provided regularly.
Site visits:
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Świece, Poland
In June 2018, the directors visited Mondi’s mill
in Świecie. The visit included presentations
from the local management team, providing the
Boards with an update on matters including
safety, financial, operational and environmental
and sustainability performance. The directors
also heard about the initiative at the mill to
reduce the level of waste sent to landfill, an
initiative that won a Mondi Diamond award
earlier in the year (see page 74 for more details).
The directors undertook a tour of the mill,
giving them an opportunity to see in practice
the results of the €260m capital investment
programme completed in 2017, to observe the
culture, particularly in relation to safety, and
to talk to local management and employees.
The tour was followed by a dinner with
members of the Świecie management team.
Richards Bay
In July 2018, Tanya Fratto joined Michael
Hakes, Mondi’s Group HR Director, on a visit
to Mondi’s Richards Bay facility in South Africa.
The visit included a tour of the mill as well as a
chance to see the Kwambonambi nursery, one
of the sites at which we propagate seedlings
for our forestry plantations. Tanya also spent
time meeting with and asking questions of local
management and employees.
Site visits by the directors, either individually or
collectively, remain high on the agenda in 2019
with visits to plants in Austria and Germany
being planned for the Boards during the year.
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Stakeholder engagement
During the year, the Boards took the time
to review who they consider to be Mondi’s
key stakeholders. This gave them the
opportunity to step back and think about
those groups that are most relevant to
Mondi, to ensure that the Boards continue
to give consideration to the material
stakeholders when making decisions
and to allow engagement activities to be
focused appropriately. The stakeholders
identified and some of the engagement
activities undertaken during the year are
referred to in more detail on pages 22 to 25.
Investor engagement
While the Joint Chairs maintain
responsibility for ensuring there is effective
communication with shareholders, it is the
Chief Executive Officer and Chief Financial
Officer who undertake active engagement
with investors on a regular basis, meeting
with Mondi’s largest shareholders, analysts
and other fund managers. The Senior
Independent Director is available to meet
with shareholders as required should any
issues arise that are not resolved through
the more regular channels.
Below are details of the key investor
events that have taken place during 2018,
including meetings, investor roadshows and
participation in investor conferences.
Investor perceptions study
In the second half of the year, we
commissioned an external consultant,
Investor Perceptions, to undertake a study
to understand how a broad cross-section
of shareholders, non-holders and sell-
side analysts perceive Mondi in terms
of performance, strategy, management,
communication and willingness to engage.
Engagement levels were good, with investors
open to sharing their views on the Group and
providing valuable insight into areas of strong
performance as well as those areas offering
improvement potential. The results of the
study, which were generally very positive, were
presented to the Boards during the December
board meeting. A number of action items
were identified, with the Boards agreeing to
follow up on those it considers most relevant
during 2019.
In light of the value the directors felt the study
brought and the increased focus in the new UK
Corporate Governance Code on engagement
with, and understanding the views of, major
shareholders, it is intended to undertake similar
studies on a more regular basis.
Mondi Group
Integrated report and financial statements 2018
In addition, the executive management
and the Group Head of Strategy & Investor
Relations make themselves available to
investors on an ongoing basis in order to
maintain an open dialogue, resulting in a
number of ad hoc meetings and calls taking
place throughout the year.
It is important that we maintain this regular
engagement with shareholders and
prospective investors in order to allow
us the opportunity to further explain our
strategy and priorities. It is hoped that
such engagement and our willingness
to be transparent builds trust in Mondi’s
management and develops the investor
community’s understanding of our
business and our culture. While we accept
that our shareholders will have different
priorities and varying views on the future of
Mondi, we welcome these views and the
constructive dialogue that we aim for.
In addition, we maintain ongoing contact
with our debt providers and the Chief
Financial Officer and Group Treasurer
have held regular meetings with the credit
rating agencies, relationship banks and
debt investors.
The remuneration committee consults with
shareholders on remuneration matters
when appropriate, most recently in relation
to proposed changes to the Group’s
remuneration policy which were approved
at the Annual General Meetings in 2017.
Such consultation is key to understanding
shareholder views.
The Company Secretary’s office
is the focus for private shareholder
communications, responding to individual
shareholder correspondence, and
coordinating our engagement on corporate
governance matters.
All directors are kept informed of
shareholder views and feedback,
particularly from the full and half-year
investor roadshows, which are presented
and discussed at board meetings.
Analyst reports are shared regularly with
the Boards and consideration given to
any views both positive and negative
regarding the Group’s performance,
future direction and the perceptions of the
management team.
The Mondi Group website –
www.mondigroup.com – contains a wealth
of information including the latest news
from around the Group, announcements,
share price information and general
shareholder information as well as more
in-depth reports regarding our sustainability
commitments and progress.
Investor events
Month
March
April
May
Event
e Preliminary results announcement
e Investor roadshow in South Africa (Johannesburg and Cape Town)
e Investor roadshow in Europe (London and Edinburgh), including
Jefferies packaging conference
e Sun City BoAML conference (South Africa)
e Investor day in Munich
e Discussions with investors and advisory bodies prior to Annual
General Meetings
e Trading update
e Annual General Meetings
e Investor roadshow in the US (Boston, Chicago and New York)
August
e Half-yearly results
e Investor roadshow in South Africa (Johannesburg and Cape Town)
September
e Investor roadshow in Europe (London and Edinburgh)
October
e Trading update
November
e London UBS European conference
December
e London BoAML Paper conference
e Investor roadshow in Frankfurt
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Developing our activities in relation to
employee engagement in particular is
a priority. While we always consider the
impact on employees when we make
decisions, the Boards appreciate that they
need to understand their views in order
to do this effectively. A number of events
took place during the year to facilitate
engagement with our people, including:
e the annual meeting of our European
Communication Group, involving
representatives from our plants across
Europe, attended by Peter Oswald,
Andrew King and Mondi’s Group HR
Director, Michael Hakes;
e a senior leadership forum, attended by
120 of Mondi’s senior leaders as well as
several members of the Boards, including
the Joint Chairs, and incorporating
Mondi’s Diamond Awards ceremony; and
e the latest global employee survey, which
had a participation rate of 89% and
gave our employees the opportunity to
provide their views on a range of matters.
The results of this survey were presented
to the Boards and further updates will be
provided over the course of the next year
to allow the Boards to monitor progress
with actions agreed following the survey.
More information can be found on pages
52 and 53.
In addition, we held a virtual leadership
forum, Inspire meetings and a number of
employee briefings.
Not only do these activities facilitate
employee engagement, they are also vital
to giving the Boards clear oversight of
Mondi’s culture. The outcome from these
types of events and the views expressed
provide insight to the Boards on how well
our values are embedded and understood,
the concerns of our employees and the flow
of communication throughout the Group.
During 2019 there will be increased emphasis
on creating a clear link between these
activities and the discussions at board level.
Wider stakeholder engagement
The increasing focus on wider stakeholder
engagement reflects our awareness of
the need to consider the interests of not
just our shareholders but also our people,
customers and the communities in which
we operate. While this has always been
a focus for the Boards, the new UK
Corporate Governance Code has reminded
boards of the need to keep this high on
the agenda. Having confirmed who our
key stakeholders are, our approach to
sustainability provides the framework
within which we can engage with them
and encourages us to consider more
widely the impact that our business can
have. Our Group Head of Sustainable
Development continues to maintain a
dialogue on socially responsible investment
through focused briefings with interested
investors and stakeholders and collaborates
closely with a number of external bodies
on such matters. More information on our
engagement activities during the year can
be found on pages 22 to 25 and in our
online sustainable development report.
Review of employee survey results
In January 2018 Mondi undertook its latest group-
wide employee survey, in which 89% of employees
participated. The Boards invited Michael Hakes,
Mondi’s Group HR Director, to present the results
of the survey. The presentation included details of
the response rate relative to previous surveys, key
areas of positive and negative feedback, broken
down by job level and tenure, and comparisons to
external benchmarks. Employee engagement levels
were a key area of focus, with the results being
used to indicate the extent to which our people feel
engaged with Mondi and their role. The results of
the survey act as a significant source of information
to the Boards when they are assessing the views of
Mondi’s employees and how well Mondi’s values are
communicated, understood and felt by employees
on a day-to-day basis. The survey also looked at
a number of key culture indicators, including the
proportion of employees that were considering
leaving Mondi, how empowered employees felt
and whether they felt they were recognised for
their performance. A number of action areas were
identified and additional questions raised by the
Boards. A follow-up presentation will be given to the
Boards during 2019.
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Integrated report and financial statements 2018
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Performance evaluation
Below are the key actions reported last year following the internal evaluation undertaken
in 2017 and details of the progress we have made against those actions:
Action agreed from 2017 evaluation
Progress achieved
To continue to focus on succession
planning at board, committee and
executive level, considering cultural,
geographic and gender diversity
requirements as the business looks
to grow.
To continue to assess opportunities
for growth as and when they arise with
management providing detailed overviews
to the Boards of any potential options
when appropriate.
To maintain the high level of focus on
safety, considering in particular the
behavioural and cultural reasons behind
life altering injuries and other serious
safety incidents.
To continue to develop Mondi’s policies
and procedures in the key areas of
focus set out in the UK Modern Slavery
Act and to consider the use of certain
measurements to allow progress to
be monitored.
To monitor the outcome of the
consultation in relation to the UK
Corporate Governance Code and to
consider and implement any changes
required in order to ensure compliance
with the new Code.
Succession planning remained a key focus area during 2018
with the appointment of Stephen Young as a successor to
John Nicholas in May 2018 and detailed discussions by the
nominations committee in relation to board and executive level
succession at its meeting in June. Members of the executive
committee and other members of senior management have
presented to the Boards throughout the year, giving the
directors exposure to a wider group of people. This remains
high on the agenda in 2019.
A number of detailed presentations in relation to potential
growth opportunities have been made to the Boards during the
year. Management will continue to bring such opportunities to
the Boards for consideration as and when appropriate.
Safety remains a key focus and we strive for continuous
improvement. A ‘social psychology of behaviour’ programme is
being developed for trial implementation, focused safety training
for managing directors, first line managers and safety and
health professionals is being undertaken and a safety campaign
targeted at the behavioural causes of serious incidents has
been launched.
An overview of the actions taken to date was presented to the
sustainable development committee at its meeting in May.
Mondi’s 2018 Modern Slavery Act statement was approved at
the same meeting. An initial discussion in relation to proposed
KPIs was held. These will be developed with specialist support
and presented for approval during 2019.
The Boards have been kept up to date with developments
throughout the year and proposed actions designed to
implement certain provisions of the new Code were presented
to, and approved by, the Boards towards the end of 2018.
Annual General Meetings
At the 2018 Annual General Meetings
all resolutions were passed. Overall in
excess of 68% of the total Group shares
were voted.
The Annual General Meetings of Mondi
Limited and Mondi plc are scheduled to
be held on 9 May 2019 in Johannesburg
and London respectively, presenting an
opportunity for shareholders to question
the directors about our activities and
prospects. Directors are available to meet
informally with shareholders immediately
before and after the meetings.
Separate resolutions will be proposed for
each item of business to be considered at
the meetings with the voting conducted by
polls. It is confirmed that each director will
be standing for re-election by shareholders
at the meetings. The meetings will consist
of a number of resolutions representing
regular business usually conducted at an
annual general meeting, together with a
number of additional resolutions relating to
Mondi’s proposed corporate simplification.
The notices, which include explanations
of each resolution, are contained in
separate circulars which will be sent to all
shareholders in advance of the meetings, in
accordance with the corporate governance
codes of South Africa and the UK.
The voting results will be announced on
the JSE and LSE and made available
on the Mondi Group website as soon
as practicable following the close of
both meetings.
From left to right:
Fred Phaswana
Stephen Young
Tanya Fratto
Peter Oswald
Dominique Reiniche
Stephen Harris
David Williams
Andrew King
Mondi Group
Integrated report and financial statements 2018
2018 internal board evaluation process
In line with best practice, we have conducted external evaluations at least once
every three years, the last time being in 2016. In 2018, the Boards determined that
an internal evaluation was appropriate, recognising the opportunity this provides to
reflect on the activities and performance of the Boards, committees and individual
directors, and to consider improvements to the operation of the Boards.
The Company Secretaries facilitated the process illustrated below:
Review of prior year action plan
and progress against plan
Questionnaires issued to
and completed by directors,
senior executives and the
Company Secretaries
Review of Joint Chairs’ performance
by the SID and other directors
Report considered by the nominations
committee, proposed actions
formulated and recommendations
made to the Boards
One-on-one interviews
between the Joint Chairs
and individual directors
Results collated and
report prepared
Action plan agreed
by the Boards
The results confirmed that the Boards
continue to operate well and to a high
standard, with open and effective debate,
opportunity for challenge and full and
active participation from all members of
the Boards.
The review of the performance of the
Joint Chairs, led by Stephen Harris as the
Senior Independent Director, incorporated
feedback from the Non-Executive and
Executive directors. Consideration was
given to the effective leadership of the
Boards, how they worked together, their
time commitment and the management
of the meetings. The positive working
relationship between the Joint Chairs and
the way in which they effectively manage
their joint role was noted.
The key actions agreed by the Boards
following the 2018 evaluation are:
1. Subject to shareholder and necessary
regulatory approval, to ensure the
smooth implementation of the
corporate simplification announced in
November 2018.
2. To maintain the focus on succession
planning at board and executive
committee level, particularly in light of
Mondi’s commitment to meeting gender
and ethnic diversity targets.
3. To continue to focus on safety
performance and developing Mondi’s
safety culture, looking in particular at
new and innovative ways in which we
can communicate with employees in
this regard and continually refresh the
safety message.
4. To continue to actively consider a
variety of strategic growth options for
the Group, giving due consideration to
evolving industry trends.
5. To ensure that proposed changes
to practice to meet new regulatory
and Corporate Governance Code
requirements continue to be
implemented effectively, ensuring Mondi
is in a strong position to report against
the new requirements.
The Boards consider that they continue
to benefit from the annual review process,
the results from which help guide
the future focus of meeting agendas
and behaviours.
Mondi Group
Integrated report and financial statements 2018
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Role, terms of reference
and evaluation
The key focus of the committee is to
ensure that the composition of the
Boards is appropriate and relevant to
the Group and that the Boards are in the
best position to drive the agreed strategy.
This includes consideration of diversity and
succession matters.
The committee operates under formal
terms of reference. The committee agenda
during the year included the regular matters
reserved for its review as well as other
ad hoc matters falling within the authority
delegated to it by the Boards, including
the recruitment of a new non-executive
director and consideration of changes to
the Boards’ committees. The committee’s
performance against its terms of
reference is reviewed on an annual basis.
The committee is satisfied that it has acted
in accordance with its terms of reference
during the year.
The evaluation of the committee
was carried out as part of the 2018
internal evaluation (see page 101 for
more information).
Corporate governance
and other matters
e Considered a request from a member of the
executive committee to take on the directorship
of another company, confirming that the time
commitment would not interfere with their duties
to Mondi.
e Considered, and recommended to the Boards,
the re-election of all directors at the Annual
General Meetings.
e Review of the committee’s terms of reference,
performance and work programme.
e Considered, and agreed to, the committee’s report
for inclusion in the Group’s Integrated report and
financial statements.
DLC nominations committee
In light of John Nicholas nearing
completion of a nine-year term
on the Boards, the search for a
new non-executive director was
a priority for the committee during
the year. The committee spent
time focusing on the balance and
diversity of skills, knowledge and
experience on the Boards and
ensuring a smooth appointment
and induction process following
the decision to appoint
Stephen Young.
David Williams
Chair of the DLC
nominations committee
Composition
Members
throughout
the year
Tanya
Fratto
Stephen
Harris
John
Nicholas1
Fred
Phaswana
Dominique
Reiniche
Committee
member
since
January 2017
March 2011
October 2009
June 2013
October 2015
David Williams,
chair
May 2007
Stephen Young2 May 2018
Meeting
attendance
(five meetings in
the year)
5
5
3
5
5
5
2
1 John Nicholas stepped down from the committee on 16 May
2018. John attended all meetings up to the time of his
retirement from the Boards
2 Stephen Young joined the committee on 1 May 2018.
Stephen has missed one meeting of the committee since his
appointment as a result of a commitment made prior to him
joining the Boards
Other regular attendees
e Chief Executive Officer
Key matters addressed by the committee
Board and committee composition
Succession planning
e Considered the Boards’ succession plans, including
in relation to existing directors and the requirements
of the Boards in the longer term.
e Received a report and presentation on talent
management practices within the Group.
e Received a report and presentation on diversity
within the Group and a review of measures being
taken to improve this (see pages 104 and 105 for
more information on our approach to diversity).
e Review of the succession plans for the executive
committee members and senior management
within the Group, discussing any potential gaps and
actions to address them.
Board evaluation
e Monitored progress against the agreed action plan
from the prior year’s evaluation process (see page
100 for more information).
e Considered and agreed the process for the 2018
internal evaluation of the Boards, committees
and individual directors (see page 101 for
more information).
e Review of the output from the 2018 evaluation
process and recommendation of an action plan to
the Boards (see page 101 for more information).
e Review of the composition of the Boards to ensure
maintenance of an appropriate balance of skills and
diversity of experience to support the future growth
strategy, resulting in the appointment of Stephen
Young (see page 103 for more information).
e Review of the composition of each of the
committees and committee chairs, recommending
changes to the Boards (see page 103 for
more information).
e Consideration of the composition of the DLC
executive committee, including the skills, experience
and qualifications required, diversity and succession
planning, and proposals from management and
recommendation of new appointments to the
Boards for approval.
e Review of Dominique Reiniche’s performance
and contribution to the Boards as she completed
her three-year term in office, with the committee
concluding that Dominique remained independent
and able to contribute effectively to Mondi in the
best interests of shareholders, both in her role as a
director and as chair of both the DLC sustainable
development and Mondi Limited social and
ethics committees.
e Review of the continued independence of each
non-executive director, including consideration
of their term in office and any potential conflicts
of interest.
e Review of the time commitment required of each
non-executive director, concluding that all non-
executive directors continued to devote appropriate
time to address their duties to Mondi.
Mondi Group
Integrated report and financial statements 2018
Review of committee memberships
Appointment of Stephen Young
As a result of John Nicholas’ decision to step down
as he neared the end of his nine-year term in office,
and the appointment of Stephen Young to the
Boards, the Committee undertook a review of the
current roles and responsibilities of the directors
and in particular the committee memberships.
A number of factors were considered, including
the desire to bring new perspectives to each of
the committees and the time commitment of each
director. After consideration, it was recommended
to, and agreed by, the Boards that Stephen Harris
replace John as Senior Independent Director
upon John’s retirement. Stephen Harris’ length
of service on the Boards and his experience
of Mondi and the way in which it operates
meant he was well-placed to take on the role.
Consequently, it was also agreed that Dominique
Reiniche would replace Stephen Harris as chair
of the sustainable development and social and
ethics committees. Stephen has remained a
member of each committee, providing continuity.
Given his financial experience, Stephen Young
was proposed to shareholders for appointment
as chair of the audit committee (see page 106 for
more information). He also joined the nominations
and sustainable development committees on
appointment, providing a fresh viewpoint to each of
these committees.
Board appointments
Mondi has an agreed process in place for the recruitment and appointment of new
directors to the Boards. This process was followed in relation to the appointment of
Stephen Young and is set out below. Further details on Stephen’s appointment can
be found opposite.
Agreement of key business experience
and skills required, taking into account
diversity requirements, and candidate
specification drawn up
Agent conducts a market search
and provides a long list of potential
candidates for consideration, the long list
to include male and female candidates
from a variety of backgrounds
Short list reduced to an
agreed number of candidates for
interview by other executive and
non-executive directors
Boards consider the recommendation
and whether to proceed with
the appointment
External independent search
agent engaged to assist with the
selection process
Short list chosen from long list for
interview by one of the Joint Chairs
and SID
Nominations committee considers
the preferred candidates and makes a
recommendation to the Boards
On appointment each non-executive
director receives letters of appointment
setting out, among other things, their
term of appointment, the expected time
commitment for their duties to Mondi and
details of any committees of which they will
be a member. Non-executive directors are
initially appointed for a three-year term, after
which a review is undertaken to consider
renewal of the term for a further three
years. However, Mondi follows governance
best practice with all directors standing for
re-election by shareholders at each Annual
General Meeting.
Towards the end of 2017, the decision was taken
to start preparing for the departure of John
Nicholas, given that John was approaching
the completion of nine years of service on the
Boards. The skills and experience required of
a new non-executive director were discussed
in detail, with the committee agreeing that the
primary focus was on finding someone with a
strong financial background and the necessary
financial experience to be able to take over
John’s role as audit committee chair.
In accordance with Mondi’s established
appointment process, which is set out
opposite, the recruitment process was led by
David Williams, Joint Chair, and John in his role
as Senior Independent Director, on behalf of
the nominations committee. Russell Reynolds
Associates, an external search agency, was
engaged to assist with the selection process.
Russell Reynolds is a signatory to the Voluntary
Code of Conduct for Executive Search Firms.
While Russell Reynolds is currently assisting
Mondi with another recruitment process below
board level, it does not involve the individual
from Russell Reynolds who supported us
with Stephen Young’s appointment, thereby
ensuring the independence of the board
recruitment process.
Russell Reynolds drew up a detailed
specification based on the criteria agreed by
the committee. They then conducted a market
search and benchmarked candidates for the
role before providing detailed profiles for a
longlist of candidates. The candidates were
from a variety of backgrounds, with the focus
being on financial and business experience,
and from different nationalities, with both male
and female candidates included.
Having reviewed the profiles presented, initial
interviews were undertaken with a number
of the candidates before a shortlist of two
candidates was agreed. They were then
interviewed by other Mondi executives and
non-executives before being considered at a
full meeting of the nominations committee.
Following a rigorous selection process, the
committee, having considered the relative
merits and fit of each candidate, made a
recommendation to the Boards, which was
accepted, to appoint Stephen Young as an
independent non-executive director with effect
from 1 May 2018.
Stephen was the preferred candidate on
the basis of his strong financial and general
management background, his recent experience
as CEO of a listed international engineering
business and his audit committee experience.
Full biography
Page 89
Induction details
Page 96
Mondi Group
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The position remains stable in comparison
to 2017 which, although positive, means
we haven’t made any significant progress
towards meeting our targets in this regard.
The focus in this area and the work being
undertaken will therefore need to continue
during the coming year. Developing the
pipeline up to executive committee level
remains a priority as well as a focus on
other forms of diversity, including ethnicity.
Additional gender diversity statistics can be
found in the Strategic report on page 54.
As part of the Boards’ oversight of Mondi’s
D&I policy, a presentation was provided to
the committee during the year in relation
to D&I and succession planning, covering
new and ongoing initiatives to improve
D&I and progress made in this regard.
Regular discussions are also held at both
executive committee and operational
committee level.
One significant step taken during the
year towards meeting the goals of our
policy was the creation of a D&I taskforce.
This resulted in our first global D&I
conference, more details of which can
be found opposite. One of the first roles
of the task force will be to identify and
recommend KPIs so that we can monitor
our progress effectively.
In South Africa we are committed to making
a positive contribution to the process of
transformation. We have taken active steps
to meet the requirements of broad-based
black economic empowerment (BBBEE),
including establishing transformation
forums in our South African operations to
allow our employees to discuss equity and
training-related issues and ideas.
Diversity & Inclusion
Mondi is committed to encouraging and
promoting diversity and inclusion (D&I) in all
its forms.
As a global organisation operating in
more than 30 countries, D&I forms an
integral part of the way we do business.
We are committed to creating a culture
that embraces D&I and provides a working
environment that is flexible and non-
discriminatory, from recruitment and people
development to reward and our talent
management approach. We strive for an
inclusive environment where differences
are valued and embraced. We employ,
empower and develop competent people
with the necessary potential required to
meet our business needs and maintain a
competitive business advantage.
The Group’s formal D&I policy, which was
approved by, and has the full support of,
the Boards, is intended to help us meet
these goals and sets out guidelines for such
matters as recruitment, the use of search
firms, succession and annual reviews,
both at board level and in relation to the
wider workforce.
Key policy requirements include:
At board and executive committee level:
e For board appointments, Mondi will,
wherever possible, engage executive
search firms that have signed up to the
Voluntary Code of Conduct in relation to
the search process.
e Search firms will be requested to include
on the longlist a sufficient number
of qualified female candidates and
candidates from a variety of ethnic
backgrounds, a requirement that is
also reflected in the Voluntary Code
of Conduct.
e The nominations committee will review,
at least annually, succession plans in
relation to the Boards, the executive
committee and other senior managers in
light of D&I levels across the Group and
taking into account skills, experience and
diversity requirements.
At employee level:
e Recruitment activities are aligned with
the aims of our D&I policy, including
to promote diversity of all types and
to ensure fair and non-discriminatory
working practices.
e We aim to ensure that a sufficient
pipeline of candidates from a variety
of backgrounds are considered during
succession planning.
e We aim to ensure that the nationalities
of candidates at long and short list
stages are appropriately representative
of our international footprint, subject to
the availability of candidates with the
necessary qualifications and experience.
e We will ensure fair and equal training and
development opportunities.
The policy also confirms the Boards’
intention to work towards achieving
the Hampton-Alexander Review’s
recommended target of 33% women on
boards and across executive committees
and their direct reports by 2020 and the
Parker Review’s recommended target of
one person of colour on boards by 2021, a
target that we currently meet.
However, while gender, ethnicity, race
and other forms of D&I will always be
considered, and form a key part of
our succession planning discussions,
appointments at all levels will continue to be
made based on skill and ability. It remains
important to ensure that D&I is seen in a
broader context and that we have the right
mix of backgrounds, skills, knowledge and
experience on our Boards, and throughout
the Group, to meet our business needs and
future strategy. Additional information on
the specific process followed for board-level
appointments can be found on page 103.
At the end of 2018, we had two female
directors representing 25% of the
composition of the Boards and one director
of colour. During 2018, we also reported to
the Hampton-Alexander Review that as at
30 June 2018 we had approximately 27%
female representation across our executive
committee and its direct reports combined.
Mondi Group
Integrated report and financial statements 2018
Creating a diverse and inclusive culture
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Creating a work environment that fosters a culture
of diversity and inclusion is vital to the success of
our organisation and improves our competitive
advantage in becoming an employer of choice.
2018 marked a milestone for Mondi, with 75
colleagues from various locations around the world
meeting in Austria for our first Diversity & Inclusion
(D&I) Conference – a unique opportunity to create a
roadmap for success and a network of colleagues
all committed to progressing D&I at Mondi.
A number of external contributors shared valuable
insights on industry trends, good practices, the
implementation of change agents to foster D&I
initiatives and business cases.
Following a round of workshops, participants
translated the insights they had gained into
actionable items based on Mondi’s D&I pillars:
1. Attracting and retaining a diverse and
inclusive workforce
2. Growing and developing a diverse and
inclusive workforce
3. Leading towards a diverse and inclusive culture
at Mondi
4. Inspiring to create an inclusive mindset and
company culture
5. Enabling diversity and inclusion across Mondi
The D&I taskforce is supported by a steering
committee comprised of executive committee
members and chaired by Group Communication
& Marketing Director Sara Sizer. Mondi has made
progress on D&I in the past by establishing policies
and processes, but this renewed momentum is
important to drive greater behavioural change to
establish a truly diverse and inclusive workforce to
deliver long term, sustainable success for Mondi.
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Diversity is also an essential part of Mondi’s
leadership development programme
with the inclusion of a number of talent
management and development initiatives,
including the implementation of training
modules such as ‘Intercultural Diversity
& International Business Competence’
through The Mondi Academy to enhance
the understanding and appreciation of the
benefits of diversity within the business.
Other training schemes designed to
empower and support diversity include
‘Success management training’ with
a focus on female career strategies
for higher management positions and
training on career building for young
female employees. In addition, employee
exchanges where individuals spend
time working in different business units
and locations around the Group enable
them to gain experience of different
working practices and skills as well as
having exposure to different cultures.
Other initiatives include mentoring and
development programmes, flexible working
practices and membership of an LGBT+
network and consultancy in order to
support diversity and employee integration
across the business world.
The Mondi cultural characteristics
incorporate our aim to hire and work
effectively with people who differ in
ethnicity and race, gender, culture, age and
background. We measure our progress
through the use of tools such as our global
employee surveys and 360° feedback.
While it is recognised that there are many
challenges and there is more work to do,
Mondi believes that continually sharing
best practice, networking and sharing
experiences both internally and externally
will allow us to make good progress.
More details can be found on page 54.
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DLC audit committee
The committee’s focus on the
quality of the external audit
process continued during the
year, particularly in light of the
increasing external attention being
given to the audit market. It was
pleasing to hear that the FRC’s
Audit Quality Review team did not
identify any significant areas for
improvement during its review of
PwC’s audit of Mondi plc’s 2017
financial statements.
Composition
Members
throughout
the year
Tanya
Fratto
Stephen
Harris
Committee
member
since
May 2017
March 2011
John Nicholas,
chair1
Stephen Young
chair2
October 2009
May 2018
Meeting
attendance
(four meetings
in the year)
4
4
2
2
1 John Nicholas stepped down from the committee on 16 May
2018. John attended all meetings up to the time of his
retirement from the Boards
2 Stephen Young was appointed to the committee on
16 May 2018. Stephen attended all meetings following
his appointment
Stephen Young
Chair of the DLC audit committee
Other regular attendees
e Chief Executive Officer
e Chief Financial Officer
e Joint Chairs and Non-Executive
Directors who are not members of
the committee
e Group Controller
e Group Head of Internal Audit
e South African and UK representatives
from PwC
The committee is constituted as a
statutory committee in respect of the
duties set out in the South African
Companies Act 2008 and a DLC
committee of the Boards in respect of
other duties assigned to it by the Boards.
Composition
As a result of his retirement from the Boards
at the conclusion of the Annual General
Meetings in May 2018, John Nicholas
stepped down from the committee after
almost nine years as chair. Stephen Young,
who was appointed to the Boards on
1 May 2018, was appointed as a member
of the committee by shareholders at the
Annual General Meetings and replaced
John as chair. Stephen is a member of
the Chartered Institute of Management
Accountants and has held a number of
commercial accounting and finance roles
during his career, most notably holding the
role of Group Finance Director at Meggitt
plc for nine years before being appointed
Chief Executive Officer in 2013, a position
he held until December 2017. Stephen is
therefore considered to have recent and
relevant financial experience. His roles at a
number of international companies across
the industrial and engineering sectors also
mean that he is well placed to understand
the environment in which Mondi operates.
The committee’s other members, Stephen
Harris and Tanya Fratto, each have
appropriate knowledge and understanding
of financial matters and have commercial
expertise gained from industries with similar
capital intensive manufacturing, engineering
and technology-focused international
operations. The full biographies detailing
the experience of each member of the
committee can be found on page 89.
In accordance with the Listings
Requirements of the JSE, the committee
has considered and satisfied itself that
Andrew King, Mondi’s Chief Financial
Officer, has appropriate expertise and
experience. Andrew is a chartered
accountant and throughout his career
has held various finance and business
development roles. The committee has
also considered and satisfied itself of the
appropriateness of the expertise and
adequacy of resources of the finance
function and expertise of the senior
management responsible for the finance
function. As a result, the committee also
confirms that it is satisfied that Mondi
has appropriate financial reporting
procedures in place and that these are
operating effectively.
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Role, terms of reference
and evaluation
The committee’s primary responsibility is
to oversee the Group’s corporate financial
reporting, including the relationship with the
external auditor, as well as Mondi’s internal
control and risk management framework
and to assist the Boards with any
judgements and decision-making required
in this regard.
The committee operates under formal
terms of reference. The committee agenda
during the year included the regular matters
reserved for its review during the annual
financial reporting cycle and ensured it has
appropriately discharged its responsibilities
during the year, having operated in
compliance with relevant legal, regulatory
and other responsibilities. The committee’s
performance against its terms of
reference is reviewed on an annual basis.
The committee is satisfied that it has acted
in accordance with its terms of reference
during the year.
The committee chair regularly reports to
the Boards on the work and output from
meetings and provides any necessary
recommendations or advice on matters
of direct relevance to the deliberations of
the Boards.
The evaluation of the committee
was carried out as part of the 2018
internal evaluation (see page 101 for
more information).
Key matters addressed by the committee
Financial reporting
External audit matters
Internal audit matters
e Review of the integrity of all financial
announcements with input provided by the Group
CFO, Group Controller and PwC.
e Recommended to the Boards that the appointment
of PwC for the 2018 audit be put to shareholders at
the Annual General Meetings.
e Reviewed and agreed the internal audit plan,
confirming the focus on key risk areas and adequate
cover of all material operations.
e Review of the Mondi Group Integrated report and
financial statements for tone and consistency
and consideration as to whether the report as a
whole was fair, balanced and understandable (see
page 110 for more information).
e Reviewed and discussed PwC’s reports to
the committee.
e Reviewed accounting policies to be applied for the
year ending 31 December 2018.
e Reviewed new accounting pronouncements
and any potential impact for the Group’s
financial reporting.
e Reviewed the going concern basis of accounting
and the longer-term viability statement (see page 47
for more information).
e Reviewed the JSE’s latest report from its proactive
monitoring process setting out the results of its
reviews of financial statements during the year,
confirming that Mondi’s financial statements
were compliant.
e Reviewed the independence, objectivity
and effectiveness of PwC (see page 112 for
more information).
e Reviewed and approved the internal audit charter
which sets out the purpose, remit and authority of
the internal audit function.
e Reviewed and approved the external audit plan,
e Received reports from the Group Head of
taking account of the scope, materiality and audit
risks and agreeing the audit fees.
Internal Audit at each meeting (see page 113 for
more information).
e Received a report at each meeting of any non-audit
services performed by PwC in order to monitor
auditor independence.
e Reviewed the effectiveness of the internal
audit team.
e Held a meeting with the Group Head of Internal
e Reviewed and agreed the engagement letters and
Audit without management present.
representation letters.
e Held a meeting with PwC without management
present; the committee chair also engaged regularly
with the audit partners.
Risk management
and internal controls
e Undertook a detailed review of the Group’s risk
management policy, plan and tolerance levels and
of the process to assess the risks (see pages 38
to 46 for more information).
e Reviewed the effectiveness of the risk management
and internal control systems (see pages 38 to 46 for
more information).
e At each committee meeting undertook a more
in-depth review of a number of the most significant
Group risks.
e Half-yearly presentations on IT risk management
and cyber security (see page 111 for
more information).
Governance and other
e For JSE purposes reviewed the appropriateness
and expertise of the Chief Financial Officer and the
effectiveness of the finance function (see page 106
for more information).
e Monitored and reviewed the continued
implementation of those elements of the Group’s
Code of Business Ethics reserved for review by the
committee, as well as the supporting framework of
the Business Integrity Policy.
e Reviewed the legal and compliance risks faced by
the Group.
e Reviewed Mondi’s competition
compliance programme.
e Reviewed the committee’s terms of reference,
performance and work programme.
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Internal control
The Group’s internal control and risk management framework, embedded in all key operations, is designed to address all the significant
strategic, financial, operational and compliance risks that could undermine our ability to achieve our business objectives in the future
and is managed within risk tolerance levels defined by the Boards. In accordance with the provisions of the UK Corporate Governance
Code, the Group has in place an internal control environment to protect the business from principal risks which have been identified.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting and we have responsibility
for ensuring the effectiveness of these controls. Full details of Mondi’s internal control and risk management framework can be found in
the Strategic report on pages 38 to 46.
The committee has reviewed the risk management process and the Group’s system of internal controls. The committee considers that
the system of internal controls operated effectively throughout the financial year and up to the date on which the financial statements
were signed.
Significant issues related to the financial statements
The committee has considered each of the following items based on discussions with, and submissions by, management and satisfied
itself as to the accounting treatment and presentation thereof. The most significant items were discussed with the external auditors during
the planning stage and on completion of the audit. These issues are broadly similar to those addressed by the committee during 2017.
The key considerations in relation to the 2018 financial statements were:
Matter considered
Action
Special items are those financial items which the Group
considers should be separately disclosed on the face of the
income statement to assist in understanding the underlying
financial performance achieved by the Group as special items
affect year-on-year comparability. The classification of an item as
special is based on materiality in the context of the current year’s
financial performance and generally must exceed €10 million.
Subsequent adjustments to items previously reported as special
items continue to be reflected as special items in future periods
even if they do not exceed the quantitative reporting threshold.
The net special item charge for the year was €126 million before tax.
It included restructuring and closure costs of €45 million and related
impairments of assets of €81 million related to the discontinuation
of in-line silicone coating production at Štětí; restructuring of bags
operations in the US; a restructuring programme in Consumer
Packaging primarily in the UK operations; and closure of an
uncoated fine paper machine in South Africa.
Details of the special items are included in the Strategic report on
page 65 and in note 3 of the financial statements.
The committee has critically reviewed each item presented by
management as being special to ensure that the items are in line
with the Group’s accounting policy.
The committee considered both the quantification and
presentation of special items.
The committee has reviewed the adequacy of the descriptions
of the special items in the financial statements and the
Strategic report.
The committee has also considered whether any significant
transactions that were not classified as special were appropriately
classified in the financial statements and appropriately described
in the Strategic report.
In addition to property, plant and equipment of €4,340 million,
intangible assets of €91 million and goodwill of €942 million are
included as assets in the statement of financial position.
The committee considered a report from management describing
potential impairment indicators of tangible and intangible assets
and the outcomes of related impairment tests.
As set out in the accounting policies, the Group performs an
impairment review at least annually and whenever there is any
indication that certain of its assets may be impaired.
See notes 10, 12 and 13 of the financial statements.
The committee also considered a report from management on
the outcomes of the annual goodwill impairment test.
The critical underlying assumptions applied were reviewed by
the committee and compared with the Group’s budget and the
current macroeconomic environment.
The committee considered the sensitivities underlying the primary
assumptions to determine the consequences that reasonably
possible changes in such assumptions may have on the
recoverable amount of the underlying assets.
The committee satisfied itself that no impairment related to
goodwill was required and that the impairments in property, plant
and equipment and other intangible assets were primarily related
to the closure and restructuring of operations.
Mondi Group
Integrated report and financial statements 2018
Matter considered
Action
The Group has operations in a number of countries each with a
different tax system.
The Group is regularly subject to routine tax audits and provisions
are made based on the tax laws in the relevant country and the
expected outcomes of any negotiations or settlements.
The Group’s recognition of deferred tax assets, relating to future
utilisation of accumulated tax losses, is dependent on the future
profitability and performance of the underlying businesses.
See note 7 of the financial statements.
Significant judgement is required in determining the assumptions
to be applied for the valuation of the Group’s forestry assets and
retirement benefit obligations. Such assumptions are based, as
far as possible, on observable market data and, in the case of the
retirement benefit obligations, the input and advice of actuaries.
The most significant assumptions and sensitivities are disclosed
in note 14 for forestry assets and 23 for retirement benefits in the
financial statements.
From 1 January 2018 the Group early adopted IFRS 16, ‘Leases’.
The impact on the accounting policies and on the financial
statements are discussed in more detail in notes 32 and 33 of the
financial statements.
The committee receives regular reports from management
about new legislative developments that may impact the Group’s
tax positions.
The committee has considered reports from management outlining
the Group’s most significant tax exposures, including ongoing tax
audits and litigation, and has reviewed the related tax provisions
recognised by management, satisfying itself these are appropriate
and the risk of new unexpected exposures arising is low.
The committee has considered a report from management
outlining the key judgements relating to the recognition of deferred
tax assets and satisfied itself that the assumptions made are
reasonable and consistent from year to year.
The assumptions applied in the valuation of the forestry assets
and retirement benefits were reviewed by the committee.
The committee considered the basis on which these assumptions
were determined, and evaluated the assumptions by comparing
them with prior years and considering market developments
during 2018.
The committee satisfied itself that the assumptions, and the
changes to those assumptions when compared with the year
ended 31 December 2017, were appropriate.
The committee has considered a report from management in
relation to the restated financial information and the updated
accounting policies.
The process of restatement was discussed with management
and the committee satisfied itself that the restated financial
information was appropriate.
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During 2018, the Group concluded four business combinations,
of which the most significant was Powerflute (Finland).
The business combinations are described in note 24 of the
financial statements.
The committee considered a report from management describing
the process undertaken in conducting the identification
and valuation of assets acquired and liabilities assumed in
business combinations.
On acquisition, the Group determined the fair value of assets
acquired and liabilities assumed, based on its own experience in
the industry and the input of experts.
The committee satisfied itself that the fair values were appropriate,
that the resulting goodwill recognised in these transactions was
appropriate and that there were no unrecorded assets or liabilities.
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Fair, balanced and understandable
Oversight through the year
e Review of applicable accounting
policies and pronouncements and
their application
e Review of regular financial results
and announcements
e Reports from the Group Controller
and PwC
e Reports from internal audit
Review included
e Provision of an outline plan including
content and structure, design
concepts and timetable
e Consideration of regulatory
and governance requirements
for reporting
e Review of detailed reports from
the Group Controller and PwC
providing the opportunity for debate
and challenge
e Summaries of areas where
management judgements had
been made
e Consideration of going concern and
longer-term viability
e Separate meeting with PwC without
management present
e Sufficient opportunity to
review drafts
Conclusion
e After completion of the detailed
review, the committee was
satisfied that:
– taken as a whole, the Group’s
Integrated report and financial
statements 2018, were fair,
balanced and understandable;
– the report accurately reflected the
information shareholders would
require in order to assess the
Group’s performance, business
model and strategy; and
– the use of alternative performance
measures contained in the report
assists in presenting a fair review
of the Group’s business
Review confirmed
e Well documented planning and
procedures for the preparation of
the report
e Collaborative approach between
all parties required to contribute to
the report
e Basis of preparation consistent with
financial reporting throughout the year
e All significant issues had
been considered
e Messaging was consistent particularly
the narrative reflecting the financials
Recommendation
e The committee reported its findings
and conclusion to the Boards
A key role of the committee is to ensure
that the interests of shareholders are
protected, in particular that there is
robust financial reporting with good
internal controls in place and appropriate
accounting practices and policies
combined with sound judgement.
Although oversight and review of material
financial reporting matters are considered
throughout the year, at the request of
the Boards, the committee assessed the
integrity of the Group’s Integrated report
and financial statements 2018 and the
clarity, completeness and consistency
of disclosures.
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Integrated report and financial statements 2018
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The committee continually reviews its
approach to financial reporting, being
aware of the need for transparency and
maintaining a focus on long-term value
creation. This has included, in particular,
consideration of the continued practice
of publishing a quarterly update on
trading conditions. Having considered
the cyclical nature of our business, our
competitor reporting cycles and our
desire to keep the market informed, we
are of the view that we should continue
with this practice. We also took into
account feedback received from some
of the Group’s largest shareholders
who have indicated their support for this
approach as they find that it bridges the
gap between the full reporting periods
and provides an update on important
market dynamics that affect the sector
in which Mondi operates. We continue
to monitor market practice and to keep
the position under review.
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Approach to regular financial reporting
Information technology risk
The committee undertakes, on a
half-yearly basis, a detailed review
of information technology risk and
mitigation actions. The Group’s IT
risk management framework has
been explained to the committee,
with comfort obtained that it is holistic
and robust, having been audited by
independent third parties.
While these reviews cover all relevant
aspects of IT risk, including security,
compliance and availability, the focus
is increasingly on cyber security, with
the top five IT risks being in this area.
Cyber security drives the principal
mitigation activities, particularly in
the areas of network design and
security architecture.
During the year, a detailed audit
of Mondi’s operational assets was
undertaken by KPMG with the aim
of identifying key risks to Mondi’s
production sites and assessing the level
of protection in place.
An independent audit of Mondi’s
cyber security framework was
also undertaken. The results and
recommendations were reported to
the committee. The risks posed by
increasing levels of digitalisation and
the use of cloud-based business
applications were also discussed
during the year. These risks, together
with continued development of
Mondi’s networks to protect against
fraud attempts, will remain the focus
during 2019.
The committee was encouraged
by the level of focus being given to
cyber security across the Group.
The emphasis being placed on
employee awareness, education
and testing was welcomed by the
committee. Overall the committee
concluded that the Group’s IT risk
management was effective and that
management ensured that it was
subject to continuous monitoring
and improvement (see page 46 for
more information).
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External audit
PricewaterhouseCoopers Inc and
PricewaterhouseCoopers LLP (together
‘PwC’) were first appointed as auditors
by shareholders at the Annual General
Meetings in May 2017, replacing Deloitte
& Touche and Deloitte LLP respectively
(together ‘Deloitte’).
This followed a full tender process
undertaken in 2015 and a transition
process during 2016, which allowed PwC
to work together with Mondi and Deloitte to
ensure a smooth handover.
Andy Kemp was appointed as the UK audit
partner and Michal Kotzé as the South
Africa audit partner. The 2018 audit was
their second for Mondi.
The committee confirms its compliance
for the financial year ended 31 December
2018 with the provisions of The Statutory
Audit Services for Large Companies
Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014.
The committee also confirms that
PricewaterhouseCoopers Inc is included in
the JSE list of accredited auditors.
External audit independence, objectivity and effectiveness
A formal framework for the assessment
of the effectiveness of the external audit
process and quality of the audit has been
adopted by the committee, covering all
aspects of the audit service provided
by PwC. While part of the assessment
is managed annually, it is treated as an
ongoing review throughout the cycle.
Evaluation focus
e Robustness of audit process
e Audit quality, including quality controls
e Audit partners and team, including skills,
character and knowledge
e Independence and objectivity
e Formal reporting
Inputs
Audit committee
e Continual monitoring of audit
performance throughout the year
e Reviewed and agreed the audit plan
e Reviewed the quality of reporting to
the committee, the level of challenge
and professional scepticism and the
understanding demonstrated by PwC of
the business of the Group
e Reviewed the coordination between the
South African and UK audit partners, the
quality of the audit team, technical skills
and experience and the allocation of
resources during the audit
e Considered the interaction with
management and the level of challenge
e Regular meetings held between the
chair of the committee and the audit
engagement partners
e Reviewed feedback from committee
members including views on how
PwC has supported the work of the
committee and their communication
with the committee
e Considered the effectiveness of Mondi’s
policies and procedures for maintaining
auditor independence
Management
e Feedback from engagement with the
Chief Financial Officer, Group Controller
and Group Head of Internal Audit
e Feedback from questionnaires issued
at corporate and business unit level to
those personnel involved with the audit
PwC
e Provided the committee with
confirmation that they operate in
accordance with the ethical standards
required of audit firms
e Confirmed the policies and procedures
they have in place to maintain
their independence
Regulators
e The UK Financial Reporting Council’s
(FRC) 2017/18 report on Audit Quality
Inspections included a review of audits
carried out by PwC. A specific review
of PwC’s audit of the Mondi Group was
undertaken by the FRC (see below for
more information).
Key outputs
e The quality of the audit partners and
team were confirmed with no material
issues raised in the feedback received
e The audit had been well planned and
delivered with work completed on
schedule and management comfortable
that any key findings had been raised
appropriately, active engagement
on misstatements and appropriate
judgements on materiality
e PwC demonstrated a good
understanding of the Group and had
identified and focused on the areas of
greatest risk
e PwC’s reporting to the committee was
clear, open and thorough, including
explanations of the rationale for
particular conclusions as appropriate
e It was confirmed that there had been an
appropriate level of challenge
Conclusion
The committee, having considered all
relevant matters, has concluded that it
is satisfied that auditor independence,
objectivity and effectiveness have
been maintained.
UK Financial Reporting Council (FRC) Audit Quality Review
The FRC’s Audit Quality Review team
selected to review the audit of the
2017 Mondi plc financial statements as
part of their 2017 annual inspection of
audit firms.
The focus of the review and their
reporting is on identifying areas where
improvements are required. The chair
of the audit committee had discussions
with the FRC both before and after the
process and received a full copy of the
findings of the Audit Quality Review team
which have been discussed with PwC.
The audit committee confirms that there
were no significant areas for improvement
identified within the report. The audit
committee is also satisfied that there is
nothing within the report which might
have a bearing on the audit appointment.
Mondi Group
Integrated report and financial statements 2018
Non-audit services
A policy is in place that governs the
provision of non-audit services provided by
PwC to Mondi, including the requirements
for the approval of such services. The policy
was last updated in 2016 to reflect the new
EU audit framework regulations.
Where approval is required the business
must submit a formal request setting out
the objectives, scope of work, likely fee
level and the rationale for requiring the
work to be carried out by the Group’s
external auditor rather than another service
provider. Sufficient information must also
be provided to allow an assessment of
materiality and the impact the service
might have on the financial statements.
Each request is reviewed, and where
appropriate challenged, before being
passed for approval.
The committee monitors compliance
with the policy, receiving reports at each
meeting detailing all approved non-audit
services. This enables regular consideration
and oversight of a key threat to auditor
independence and objectivity.
The majority of non-audit services are audit-
related assurance services. During 2018
examples were the verification of certain
matters required from the statutory auditor
in relation to subsidy applications, the
provision of a comfort letter for the Euro
Medium Term Note Programme and the
review of the interim results announcement.
Non-audit related work being undertaken
by PwC on behalf of Powerflute was also
assessed in the lead up to the acquisition
of Powerflute by Mondi to ensure that all
such work ceased within the required
timeframes and had no impact on PwC’s
independence as auditor to the Group.
The breakdown of the fees paid to PwC,
including the split between audit and
non-audit fees, is included in note 4 to the
financial statements on page 168. The non-
audit fees for 2018 represent 10% of the
audit fee paid.
Internal audit
The Boards have established an internal
audit function, which forms an integral
part of Mondi’s governance and risk
management and internal control
frameworks. The primary purpose of
the internal audit function is to ensure
that the Group’s principal risks are
being managed effectively. The function
forms a key part of Mondi’s approach to
independent assurance.
The audit committee has primary
responsibility for monitoring and reviewing
the scope and effectiveness of the Group’s
internal audit function and appoints and
discharges the Group Head of Internal
Audit (the equivalent of the chief audit
executive as envisaged by the King Code).
The Group Head of Internal Audit has
direct access to, and responsibility to, the
committee and works closely with the
committee in liaison with PwC.
An internal audit charter, approved by the
committee, is in place. The charter sets
out the purpose, remit and authority of
the internal audit function. Each year the
committee considers and approves the
internal audit plan which is designed to
focus on the Group’s key risks to ensure
that they are managed effectively within
the context of our business objectives
and that appropriate internal controls are
in place. The committee ensures that all
material operations are covered and that
there is an appropriate degree of financial
and geographical coverage. Every Mondi
operation is visited at least once every five
years with all major plants audited annually.
Reports are given at each committee
meeting providing an update on activities,
progress against plan, results from audits
carried out and management’s response
to address any areas highlighted for
improvement. The committee will consider
deviations from plan as the need arises
during the year, usually in response to
a material acquisition or change in the
Group’s risk profile highlighted through
audit reports and through matters raised via
the confidential reporting hotline, Speakout.
The committee regularly challenges the
nature and speed of management’s
response to issues raised in audits and
to Speakout messages in order to be
satisfied that this has been appropriate
to the circumstances. Maintaining sound
oversight and control of activities through
the use of internal audit reviews is
considered by the committee to be a key
element of its work.
The committee also monitors the staffing
and resources available to the internal
audit function and the quality of those
resources. In 2015 an external review of
the internal audit function was undertaken
by Ernst & Young LLP with a full report
presented to the committee. The review
concluded that the internal audit function is
fit for purpose and meeting its mandate to
provide assurance primarily in the financial
and operational areas. Of particular
note was the clear affirmation that the
function is independent and objective.
Some recommendations were put forward
mainly in the areas of knowledge sharing
and the greater use of technology by the
team. The way in which the team has been
addressing the recommendations in the
report has been monitored and reviewed
by the committee. The committee has
concluded that the Group Head of Internal
Audit provides appropriate leadership of
the internal audit function which remains
effective in carrying out its remit.
This audit committee report was approved
by the Boards on 27 February 2019 and is
signed on their behalf.
Stephen Young
Chair of the DLC audit committee
Speakout
The Group has a confidential reporting hotline
called ‘Speakout’ operated by an independent
third party. Speakout, monitored by the Boards
and audit committee, is a simple, accessible
and confidential channel through which our
employees, customers, suppliers, managers
or other stakeholders can raise concerns
about conduct that seems contrary to Mondi’s
values. It makes communication channels
available to any person in the world who has
information about unethical practices in the
Group’s operations. Any type of concern can
be raised via Speakout. More details can
be found on page 63. The Boards and the
audit committee receive regular reports of
Speakout messages received and ensure that
appropriate investigation into each message
has been undertaken and responses given
with actions taken where any allegation proves
to have some foundation. This will continue to
be an area of focus, with such reports being
key to understanding where further work may
be required to reinforce Mondi’s ethical and
cultural values.
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Integrated report and financial statements 2018
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DLC sustainable development committee
We are uniquely positioned to play
a leading role in ensuring that the
future of packaging is sustainable
by design. It is our responsibility
to provide the answers our
customers and society are
looking for, while delivering
competitive advantage for our
business through our sustainability
performance. We take our
commitments seriously and
recognise that although we have
made good progress in 2018,
there is still more work to do to
future-proof and build a safe
business for all.
Dominique Reiniche
Chair of the DLC sustainable
development committee
Composition
Members
throughout
the year
Stephen Harris,
chair1
Committee
member
since
March 2011
Peter Oswald
May 2017
Dominique
Reiniche, chair2
May 2017
Stephen Young3 May 2018
Meeting
attendance
(six meetings
in the year)
6
6
6
4
1 Stephen Harris was chair of the committee from 1 October
2015 until 16 May 2018. Stephen stepped down as chair,
but remained a member of the committee, at the time of his
appointment as Senior Independent Director
2 Dominique Reiniche was appointed as chair of the committee
on 16 May 2018
3 Stephen Young joined the committee on 1 May 2018.
Stephen has missed one meeting of the committee since his
appointment as a result of a commitment made prior to him
joining the Boards
Other regular attendees
e Chief Financial Officer
e Joint Chairs and Non-Executive
Directors who are not members of
the committee
e Group Technical & Sustainability Director
e Group Head of Sustainable Development
e Group Head of Safety and Health
Role, terms of reference
and evaluation
The committee oversees and monitors the
progress of our sustainable development
(SD) approach, commitments, targets
and performance within a global context.
It provides guidance in relation to
sustainability matters generally, reviewing
and updating the Group’s framework
of sustainability policies and strategies,
ensuring they are aligned with global
best practice. A summary report from
the directors on the Group’s sustainability
practices is set out on pages 48 to 63.
The committee works together with the
Mondi Limited social and ethics committee
in addressing social and ethical values.
The Group Technical & Sustainability
Director together with the Group Heads
of Sustainable Development and Safety
and Health attend all meetings of the
committee and provide the link between
the committee, management and
the operations.
The committee operates under formal
terms of reference. The committee agenda
during the year included the regular matters
reserved for its review together with other
ad hoc matters falling within the authority
delegated to it by the Boards, including
consideration of a long-term greenhouse
gas target calculated using the science-
based methodology and participation
in a number of key global initiatives.
The committee’s performance against its
terms of reference is reviewed on an annual
basis. The committee is satisfied that it
has acted in accordance with its terms of
reference during the year.
The committee chair regularly reports to
the Boards on the work and output from
meetings and provides any necessary
recommendations or advice on matters
of direct relevance to the deliberations of
the Boards.
The evaluation of the committee
was carried out as part of the 2018
internal evaluation (see page 101 for
more information).
Mondi Group
Integrated report and financial statements 2018
Key matters addressed by the committee
Safety performance
and serious incidents
Environmental performance
Product stewardship
e Received regular reviews on performance against
e Received a report on the Group’s product
stewardship practices.
e Considered the increased focus on supply chain
management, including the impact of the UK
Modern Slavery Act and the requirement to report
on the steps we have taken to ensure that slavery
and human trafficking are not present in our
supply chain.
e Reviewed the steps being implemented as part of
the responsible procurement initiative to support
Mondi’s response to sustainability performance in
its supply chain.
e Reviewed detailed reports on the fatalities
at our Syktyvkar and Ružomberok mills and
received follow up reports on the outcome of the
investigations into each incident, management’s
response and actions taken.
e Reviewed detailed reports of selected incidents,
for example those resulting in life-altering injuries
or having a high risk potential and reviewed
management’s response.
e Received regular reports on safety performance at
Group and business unit level, including individual
mill performance, classification of incidents and
peer comparisons.
e Considered the safety milestones and leading and
lagging indicators for the next reporting period.
SD governance and risks
e Reviewed those elements of the Group’s Code
of Business Ethics reserved for review by
the committee.
e Reviewed the material SD issues, risks
and opportunities.
e Reviewed and approved the Group’s human
trafficking and modern slavery statement.
e Received a presentation from an external expert
providing an independent perspective on the duties
of boards in relation to ESG risks.
e Reviewed and approved the annual SD reporting.
e Reviewed the committee’s terms of reference
and performance.
e Considered and agreed the committee’s annual
work programme.
each of the environmental key performance
indicators and commitments.
e Received information on any material environmental
incidents and considered management’s response.
Policies and commitments
e Reviewed the achievements against the
2020 commitments (see pages 51 to 63 for
more information).
e Considered and agreed a proposed long-term
GHG target calculated using the science-based
methodology (see page 57 for more information).
e Considered and agreed Mondi’s commitment to key
global initiatives (see page 116 for more information).
e Reviewed Group SD policies and approved
amendments to reflect best practice.
e Received an update on the review and amendment
of Mondi’s Sustainable Development Management
System operating standards.
Forestry
e Reviewed an update on the forestry operations
in Russia.
e Reviewed an update on the forestry operations in
South Africa.
Community and other relationships
e Reviewed the Group’s relationships and
engagement with key stakeholders, including
governments, NGOs and analysts and changing
regulation and governance in this area.
e Reviewed the ongoing WWF global partnership
and initiatives.
e Reviewed our social and community engagement,
including community investments and initiatives
at our pulp and paper mills, and the outcome of
the SEAT (Socio-economic Assessment Toolbox)
undertaken at our Frantschach operation during
2018 (see page 61 for more information).
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Safety
The safety of our employees and contractors
continued to be a priority during the year with
safety performance being reviewed in detail at each
meeting. Despite this, we were deeply saddened
by the fatality we experienced during the year at
our Syktyvkar mill (Russia). Tragically, we also
experienced the fatality of a contractor at our
Ružomberok mill (Slovakia) in January 2019.
It was extremely important for the committee
to understand the findings of the resulting
investigations and the actions taken by
management in response. We also experienced
five life-altering injuries during the year. While safety
has always been high on the agenda, this was a
reminder that when it comes to the safety of our
people, we must maintain our focus on ensuring
that safe working practices and a clear safety
culture are embedded throughout the Group.
The 24-hour safety mindset approach was
introduced during 2017 and we continue to build on
this. In addition, we have established a number of
working groups to review and address behaviour
in those areas where we see the most significant
safety risk. The behavioural and cultural reasons
behind life altering injuries were identified as a focus
area in our 2017 board evaluation process – the
actions taken in response to this are set out on
page 100.
Towards the end of 2018 we also launched a
powerful safety campaign targeting the behavioural
causes of serious incidents. This will continue into
2019 and is designed to drive home the potentially
severe consequences of unsafe behaviour.
Review of material issues
Commitment to
key global initiatives
The outcome of an independent review of
those sustainability issues of most importance
to our stakeholders was a key area of
discussion during the year. A number of internal
and external stakeholders were invited to
participate, either via questionnaire or interview,
with the results used to identify and prioritise
key material issues and to get a deeper
understanding of what matters most to our
stakeholders. The outcome will shape our work
programme going forwards and is intended to
assist the directors with their duty to consider
the interests of our wider stakeholder base.
Further information can be found in our online
sustainability report.
During the year the committee considered
its commitment to several global initiatives,
in particular The New Plastics Economy
Initiative’s Global Commitment. Signing up
required Mondi to make a number of public
commitments, resulting in lengthy discussion
by the committee in relation to the required
commitments, including Mondi’s ability to meet
them, public perception and how we could
monitor progress against the commitments.
In light of recent public debate around the
use of plastics, stakeholder expectations in
this regard and Mondi’s desire to provide
leadership on the issue and to drive forward
sustainable packaging solutions for its
customers, the committee agreed that Mondi
should sign up to the Global Commitment.
Given the increasing importance of these types
of issues to our stakeholders, it is likely that
similar discussions will form a regular part of
the agenda of the committee going forwards.
More in our online
sustainability report
www.mondigroup.com
More in our online
sustainability report
www.mondigroup.com
Mondi Group
Integrated report and financial statements 2018
Mondi Limited social and ethics committee
Mondi continued to demonstrate
a high level of compliance with
statutory requirements and
a significant commitment to
community-focused programmes.
Highlights during the period under
review were Mondi Zimele’s
forestry contractor development
programme and timber sourcing
from small growers.
Dominique Reiniche
Chair of the Mondi Limited social and
ethics committee
Composition
Members
throughout
the year
Stephen Harris,
chair1
Committee
member
since
February 2012
Peter Oswald
May 2017
Fred Phaswana
October 2015
Dominique
Reiniche, chair2
May 2018
Meeting
attendance
(two meetings
in the year)
2
2
2
1
The composition of the committee is
in accordance with the requirements
of section 72(8) of the South African
Companies Act 2008 and its
associated regulations.
1 Stephen Harris was chair of the committee from 1 October
2015 until 16 May 2018. Stephen stepped down as chair,
but remained a member of the committee, at the time of his
appointment as Senior Independent Director
2 Dominique Reiniche was appointed as a member and chair
of the committee on 16 May 2018. Dominique attended all
meetings following her appointment
Other regular attendees
e Joint Chair and Non-Executive
Directors who are not members of
the committee
e Group Technical &
Sustainability Director
e Group Head of
Sustainable Development
e Executive management who present
on relevant topics
Role, terms of reference
and evaluation
The committee’s primary responsibility is
to monitor compliance by Mondi Limited
with the activities listed in Regulation 43(5)
made under the South African Companies
Act 2008, based on applicable legislation,
other legal requirements or prevailing codes
of best practice relating to its operations in
South Africa.
In order to minimise duplication
between its obligations and that of the
DLC audit committee and the DLC
sustainable development committee, the
committee considers reports from these
two committees as they relate to the
environment, labour, human rights, product
responsibility, risk management, whistle
blowing, fraud and business integrity and
monitors compliance by Mondi Limited on
overlapping matters.
The committee’s remit is set out in terms
of reference adopted by the Boards.
The committee’s performance against
these terms of reference is kept under
review and the committee is satisfied that
it has acted in accordance with its terms of
reference during the year.
The evaluation of the committee
was carried out as part of the 2018
internal evaluation (see page 101 for
more information).
Key matters addressed by the committee
Corporate citizenship
e Community development and corporate social
investment initiatives. Initiatives included coaching
and mentoring of over 30 contractors as part of
Mondi Zimele’s forestry contractor development
programme. Over 2,200 small grower participants
were involved in growing and harvesting with over
87,000 tonnes of timber supplied by emerging
growers. Continued operation of the Mondi
Zimele Jobs Fund with over 200 community
enterprises supported.
Employment Equity and Broad Based
Black Economic Empowerment
(BBBEE)
e Good progress continued to be made in
employment equity at all management levels with an
increasing focus placed on representation of black
women in middle management levels.
e Monitoring of Mondi Limited’s BBBEE status.
In March 2018 Mondi was certified at a level 3
contributor status against the new Forestry Sector
Code, with the 2018 audit planned in the first
quarter of 2019.
Consumer relations
e Mondi Limited’s customer relations initiatives as well
as the levels of certification of its products used for
food packaging.
Labour and employment matters
Environment, health and public safety
e Compliance by Mondi Limited with South African
labour legislation which incorporates the decent
work requirements prescribed by the International
Labour Organization (ILO). The committee noted
specifically the various areas of employer/employee
interface and the progress made in addressing
focus areas arising from the last employee survey.
e Training and development activities. The committee
noted the approximately 1,057 training
initiatives embarked on during 2018, 84.1% of
employees received training during the year
under consideration.
e Various initiatives and procedures were undertaken
to achieve Mondi Limited’s transformation and
diversity management objectives, including
diversity training.
e Mondi Limited’s environmental performance,
including effluent quality, malodorous gas, specific
contact water and waste to landfill.
e Mondi Limited’s performance relating to CO2e
emissions, carbon-based energy consumption,
use of renewable resources for primary energy and
electrical self-sufficiency.
Anti-corruption
e The requirements of the King IV Code of Good
Practice with regard to the principles relating to
ethical leadership, and Mondi Limited’s activities
relating to the eradication of corruption, including
with reference to the UN Global Compact and the
OECD Recommendations.
Mondi Group
Integrated report and financial statements 2018
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Corporate governance report
DLC executive committee and company secretaries
Peter Oswald
56
Chief Executive Officer
See full biography
Page 88
Andrew King
49
Chief Financial Officer
See full biography
Page 88
Markus Gärtner
41
Chief Executive Officer,
Fibre Packaging/Paper
Appointed
October 2018
Committee membership
Executive
Qualifications
Doctorate of Technical Sciences
from ETH Zürich and a Master of
Science in Electrical Engineering
from Stanford University
Experience
Markus has significant industrial and international business experience. He started his career at McKinsey &
Company, working on numerous operational and strategic projects with a primary focus on product development
and manufacturing processes across a variety of industries.
Markus went on to join Novelis AG, a leading producer of rolled aluminium products, as Director of Strategy &
Business Development for Europe. After a series of commercial and technical roles with growing responsibility,
he eventually headed one of Novelis’ three businesses as Vice President & General Manager Specialities. In this
capacity, he was responsible for a diverse range of applications, including consumer packaging solutions and
industrial products.
Markus joined Mondi in September 2018.
External appointments
None.
Michael Hakes
53
Group HR Director
John Lindahl
59
Group Technical &
Sustainability Director
Appointed
April 2018
Committee membership
Executive
Qualifications
Human Resources
Management Degree from
Chamber of Commerce
and Industry of the Lower
Rhine Region, member of
the Advanced HR Executive
Programme at the University
of Michigan and the Global
Leadership Programme
at INSEAD
Appointed
August 2011
Committee membership
Executive
Qualifications
Graduated in pulp and paper
engineering from the Technical
University of Helsinki in 1985
and an MBA from Jyvaskyla
University in 1996
Experience
Michael has more than 30 years of international HR experience gained across the automotive, manufacturing and
industrial services sectors.
Michael began his career in various HR roles at companies across Europe including the Mitsubishi Electric Group,
Johnson Controls and Faurecia. In 2007 he was appointed Group Chief HR Officer at LM Wind Power, a Danish-
based supplier of rotor blades to the wind industry.
Michael went on to become Group Senior Vice President Human Resources at Germanischer Lloyd until its merger
with Det Norske Veritas in 2013. Following the merger, he was appointed Executive Vice President HR of the maritime
division of the newly-formed organisation DNV GL, an international ship and offshore classification society.
Michael joined Mondi in April 2018 as Group HR Director.
External appointments
None.
Experience
John has had an extensive career in the international forest industry, working in different operational managerial
positions in Finland, the US and France in companies including M-real, Myllykoski and UPM. At UPM he then moved
on to roles within corporate technology and investment coordination.
From the industry he moved on to consulting and engineering company Pöyry, where he held a number of executive
positions in the forest industry business group, being involved in advisory services, pre-engineering studies and
major implementation projects for the global pulp and paper industry until 2011 when he joined Mondi as Group
Technical Director.
External appointments
None.
Georg
Kasperkovitz
52
Chief Executive Officer,
Consumer Packaging
Appointed
May 2017
Committee membership
Executive
Qualifications
Masters and doctorate in
mechanical engineering from
Vienna University of Technology
and an MBA from Harvard
Business School
Experience
Georg has more than 23 years of international experience having been Chief Financial Officer and Chief Operating
Officer of Rail Cargo Austria and a consultant and partner with McKinsey & Company.
Georg started his career as an engineer, working for five years in eastern Europe with Eléctricité de France / A.S.A.
After graduating from Harvard Business School, he went on to work for 13 years for McKinsey & Company, focusing
particularly on the industrial sector. He gained international operations, transformation and corporate finance
experience in western and eastern Europe, North America, Australia, Singapore, China, and Africa.
In August 2012 Georg joined Rail Cargo Austria AG executive management and successfully implemented the
turnaround programme he had shaped as a consultant. He went on to join Mondi in 2016.
In addition to his role as Chief Executive Officer of the Consumer Packaging business unit, Georg is also chair of
Mondi’s operational committee.
External appointments
Member of the supervisory board of SBB CFF FFS AG (Swiss Federal Railways).
Mondi Group
Integrated report and financial statements 2018
Vivien
McMenamin
55
Chief Executive Officer,
South Africa
Appointed
October 2017
Committee membership
Executive
Qualifications
MSc in Economics from
the University of London and
certificate in Advanced High
Performance Leadership from
IMD Switzerland
Peter Orisich
59
Chief Executive Officer,
Uncoated Fine Paper
Appointed
May 2017
Committee membership
Executive
Qualifications
Graduated in business
administration from the WU-
Vienna business school
Experience
Viv has over 15 years’ experience in the pulp and paper industry having held executive responsibility in Mondi
South Africa for marketing and sales, human resources, corporate affairs and transformation. Viv’s roles have
included Mondi Group Head of Sustainable Development and Director Land and Forestry. In October 2017, she was
appointed Chief Executive Officer of Mondi South Africa.
Viv was instrumental in the establishment of Mondi Zimele, Mondi’s small business development organisation and
crafting Mondi’s innovative approach to land reform.
Prior to Mondi, Viv worked in government and the anti-apartheid movement in South Africa, serving Nelson Mandela
as a member of the President’s Task Force on Local Economic Development and as a member of President Thabo
Mbeki’s Economic Advisory Panel.
Viv previously served on the boards of SiyaQhubeka Forests, South African Association for Marine Biological
Research (SAAMBR) and Durban Girls College.
External appointments
Non-executive director of Transnet SOC Ltd.
Experience
Peter has extensive experience in the industrial and consumer packaging industry, having started his career
at Unilever where he spent 14 years. He held management roles in a number of divisions across central and
eastern Europe.
In 1998 he joined Lafarge Perlmooser as Chief Financial Officer, later going on to become Chief Executive Officer and
leading the Austrian and Slovenian cement subsidiaries of Lafarge, a global manufacturer of building materials.
After 10 years at Lafarge Perlmooser, Peter joined Mondi as Chief Executive Officer of Mondi Industrial Bags, taking
responsibility for the strategy and operations of Mondi’s industrial bags business. He went on to be appointed as
Chief Executive Officer of Mondi’s Uncoated Fine Paper business in 2012.
Peter is also responsible for overseeing Mondi’s Group procurement function.
External appointments
None.
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Sara Sizer
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Group Communication
& Marketing Director
Appointed
September 2017
Committee membership
Executive
Qualifications
Degree in Business
Administration from
Loughborough University
Experience
Sara has more than 30 years’ experience in communication and marketing, having held senior positions at a number
of large international industrial companies.
In 1997, she joined Rolls-Royce plc as Head of Communication before being appointed as Head of Group
Communications at Shell International. Sara went on to become Group Head of Marketing at BG Group.
In 2010, Sara joined Mondelēz International (formerly Kraft Foods Inc), the multinational food and beverage
company, where she held the role of Director Corporate & Government Affairs Europe and then Vice President
Global Communication.
Sara joined Mondi in September 2017 as Group Communication & Marketing Director. She also chairs Mondi’s
Diversity & Inclusion steering committee.
External appointments
None.
Philip
Laubscher
63
Company Secretary
Mondi Limited
Experience
Philip Laubscher, who holds BProc and LLB degrees and is an attorney of the High Court of South Africa, was in-
house counsel with national power utility Eskom for 15 years before joining Mondi in 1999 as Head of Legal Services.
He was appointed Company Secretary of Mondi Limited in January 2001.
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Hampshire
35
Company Secretary
Mondi plc
Experience
Jenny Hampshire, a fellow of the Institute of Chartered Secretaries & Administrators, joined Mondi in May 2007 and
has held various roles in the company secretariat, including five years as Assistant Company Secretary. She was
appointed Company Secretary of Mondi plc in December 2016. Prior to joining Mondi Jenny worked for The BOC
Group plc in its company secretariat.
Philip and Jenny work together on the coordination of Mondi’s DLC structure.
Mondi Group
Integrated report and financial statements 2018
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Diversity of the executive committee
%
Female
Male
22%
78%
Nationalities represented
on the executive committee
South African
Austrian
German
British
Finnish
2
3
2
1
1
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Corporate governance report
DLC executive committee
In 2018 we continued to make
strong progress on our major
capital projects, while maintaining
our day-to-day operational focus
on safety, quality and efficiency.
Our discussions centred around
our ambitions on digitalisation,
D&I and opportunities to grow our
packaging and paper solutions
in a way that meets the needs of
our customers, their products and
the planet.
Peter Oswald
Chair of the DLC executive committee
Composition
Members
throughout
the year
Committee
member
since
Erik Bouts1
May 2017
Markus Gärtner2 October 2018
Michael Hakes3
April 2018
Georg
Kasperkovitz4
May 2017
Andrew King
May 2007
John Lindahl
August 2011
Vivien
McMenamin
October 2017
Peter Orisich
May 2017
Peter Oswald,
chair
Sara Sizer
May 2007
September
2017
Clemens Willée5 May 2017
Meeting
attendance
(nine meetings
in the year)
9
2
6
8
9
9
9
9
9
9
7
1 Erik Bouts stepped down from the committee on
23 December 2018. Erik attended all meetings up to the time
of his departure
2 Markus Gärtner was appointed to the committee on
1 October 2018. Markus attended all meetings following
his appointment
3 Michael Hakes was appointed to the committee on
1 April 2018. Michael attended all meetings following
his appointment
4 Georg Kasperkovitz was unable to attend one meeting during
the year due to a meeting with a significant customer
5 Clemens Willée stepped down from the committee on
30 September 2018. Clemens attended all meetings up to the
time of his departure
Other regular attendees
e Representatives from corporate
functions, each of whom present on
relevant topics
Key responsibilities
e Day-to-day management of the
Group within the limits set by the
Boards, including implementation of
operational decisions
e Strategy implementation, including a
more in-depth annual strategy session
e Risk identification and the management
of mitigation of those risks
e Monitoring financial, operational and
safety performance, in particular
monitoring the achievement of budgets,
forecasts and targets
e Policy implementation
Mondi Group
Integrated report and financial statements 2018
The disclosure committee meets regularly
throughout the year.
All dealings by directors and persons
discharging managerial responsibilities
and their closely associated persons are
announced to the JSE and the LSE when
they occur. Details of the directors’ interests
in the shares of both Mondi Limited and
Mondi plc can be found on pages 137
and 138.
Business ethics
Mondi continues to have a stated policy of
zero tolerance of bribery and corruption.
Ethical decision-making and behaviour both
at board level and throughout the business
is fundamental to Mondi’s governance.
The Boards have adopted a Code of
Business Ethics that governs our corporate
conduct and which applies throughout the
Group. The code sets out five fundamental
principles that govern the way in which
Mondi and its employees conduct
business. Three of the principles are
monitored and reviewed by the sustainable
development committee (human rights,
stakeholders and sustainability) and two by
the audit committee (legal compliance and
honesty and integrity). More information
about Mondi’s approach to anti-bribery and
anti-corruption can be found on page 63.
Other than as set out in our online
sustainability report, Mondi has not
received any material fines or non-monetary
sanctions for non-compliance with laws
and regulations.
Key policies
Dealing in securities
The Boards have adopted a share dealing
code for dealing in the securities of Mondi
Limited and Mondi plc. The code is
based on regulatory and governance best
practice in South Africa and the UK and
sets out in detail the restrictions placed on
directors, senior management and other
key employees with regard to their share
dealing to ensure that they do not abuse
their access to information about the Group
pending its public release and availability to
shareholders. The code is accompanied by
clear procedures and guidelines.
The code is reviewed regularly to ensure
continued compliance with regulation
and best practice. A thorough review
and revision of the code was undertaken
in 2016 to reflect the introduction of
the EU Market Abuse Regulation.
Relevant employees are regularly reminded
of their obligations and the procedures they
are required to follow.
Mondi has established a disclosure
committee, of which the Chief Executive
Officer, the Chief Financial Officer and the
Company Secretaries of Mondi Limited and
Mondi plc are members, to monitor Mondi’s
obligations in this regard.
The committee is responsible for
determining whether information should
be classified as inside information in
accordance with regulation and for
procuring the prompt release of such
information, or agreeing a delay in
disclosure, as appropriate. If disclosure is
delayed, the committee will ensure that
the conditions set out in regulation are
met, including to maintain confidentiality
of information. The committee will oversee
the creation and maintenance of insider
lists, minimising the risk of an accidental
leak or share dealing by employees while in
possession of inside information.
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Integrated report and financial statements 2018
122
Remuneration report
Statement from the DLC Remuneration
Committee Chair
I am committed to overseeing a
transparent and open approach
regarding our framework and
policy for remuneration.
Tanya Fratto
Chair of the DLC
remuneration committee
Fellow shareholder, it is with pleasure
that I present the committee’s report on
directors’ remuneration.
Due to Mondi’s DLC structure we are
required to comply with both UK and South
African voting regulations. The Directors’
Remuneration Policy (DRP)1 remains
unchanged, having been approved by
shareholders under the required triennial
binding vote of Mondi plc shareholders
at the AGM in 2017 with a vote of over
95% in favour, and endorsed by Mondi
Ltd shareholders in 2017 and 2018 with
votes of over 95% and 98% in favour.
The same policy will be tabled for the usual
annual advisory vote by Mondi Limited
shareholders in 2019, in accordance with
South African regulations. The remainder of
this Directors’ Remuneration Report, which
describes how the policy was implemented
in 2018, will be put to the usual advisory
vote by shareholders of both Mondi Limited
and Mondi plc.
1 The full policy can be found on pages 123 to 129 of this report,
and in the 2016 and 2017 integrated reports on Mondi’s website
2 The 2017 figures have been restated for adoption of IFRS 16
‘Leases’ as disclosed in notes 32 and 33 of the combined and
consolidated financial statements
Mondi Group
Integrated report and financial statements 2018
Remuneration principles
Remuneration for our executive directors
is based on the principles of pay for
performance, alignment with shareholders
and simplicity. Annual bonuses are
dependent on a scorecard of mainly financial
and some non-financial elements, and 50%
of any bonus is deferred into Mondi shares
for three years. The Long-Term Incentive
Plan (LTIP) is aligned to sustained, 3-year
performance, measured through percentage
Return on Capital Employed (ROCE), and
our relative total shareholder return (TSR)
compared to other international companies
in our sector. Executive directors are also
required to build a personal shareholding in
Mondi of 200% of their base salary.
Performance and
remuneration for 2018
As described in the Strategic report,
Mondi’s financial performance, which has
a weighting of 70% of the annual bonus
(compared with a weighting of 60% in
2017), was strong. ROCE performance
was 23.6% and underlying EBITDA was
€1,764 million, relative to 19.3% and
€1,482 million in 20172. Bonus performance
outcomes against the targets that were
set are outlined in the annual report
on remuneration.
Following feedback from shareholders,
underlying EBITDA and ROCE ranges
that bonuses are based on are now
being disclosed for the year under review.
In previous years this was done on a prior
year, retrospective basis. This brings the
disclosure of financial bonus ranges into
line with the disclosure of the safety and
personal objectives elements.
Performance outcomes are reflected in the
remuneration received by directors:
e Annual bonuses of 88% of the
maximum have been awarded in
respect of performance in 2018 for Peter
Oswald and 89% for Andrew King.
This recognises the Group’s financial
performance as well as performance for
the personal, operational and strategic
objectives that were set at the start of
the year. In terms of safety performance,
the total recordable case rate (TRCR) in
2018 was 0.68, within the range set. As a
result of the tragic and unacceptable
fatality of a contractor engaged in Mondi
operations the payment under the safety
element of the bonus was limited to the
portion which was attributable to total
recordable incidents.
e The performance period for the 2016
LTIP ended on 31 December 2018.
Half of the award was based on ROCE
performance and the other half on
relative TSR performance. ROCE for
the three-year performance period was
21.2%, above the stretch performance
requirement of 16%. The Group’s TSR
over the period was 10.3% for Mondi
plc and 13.3% for Mondi Limited,
which placed it above the median of
the comparator group. As a result of
this performance, 100% of the ROCE
element, and 53.1% of the TSR element,
and therefore 76.6% of the overall LTIP
award, vested.
2019 implementation
Base salary increases of 2.7%
were implemented with effect from
1 January 2019, after consideration
of percentage increases for the wider
employee population.
The committee will continue to operate
an annual bonus and LTIP in 2019 within
the limits set by the DRP and subject to
challenging performance requirements.
The ROCE metric which applies to 50% of
the LTIP award currently has a performance
range of 10% at threshold and 18% at
stretch. The committee has decided
to further increase the performance
requirements at threshold under this
metric to 12% ROCE, with effect from the
2019 awards.
UK Corporate
Governance Code
The committee has monitored
developments in corporate governance,
both in the UK and South Africa.
We have considered the changes to the
UK Corporate Governance Code and
the amendments to the UK directors’
remuneration report requirements under the
UK Companies Act. Requirements under
both of these apply from the 2019 financial
year, and will be reflected in Mondi’s
Integrated report for 2019. Many of the new
requirements Mondi already complies with,
for example:
e the remuneration committee’s
scope of responsibilities already
includes all members of the DLC
executive committee, and the
committee has oversight of the wider
workforce remuneration;
Directors’ remuneration policy
123
e a two-year, post-vesting holding period
for LTIP awards to executive directors
already applies to awards which were
granted from 2017 onwards. This holding
period continues to apply post cessation
of employment;
e malus and clawback rules are already in
place for executives’ incentive plans and
have been further enhanced with effect
from 2019 onwards; and
e the committee already provides
information in the Remuneration Report
on the impact of share price growth
on the vesting value for LTIP awards,
and this year has included the potential
impact of share price appreciation on
remuneration outcomes in the scenarios
chart in the policy section of the report.
The committee is also considering
the impact of changes to the Code in
relation to pension and post-employment
shareholding requirements for the
executive directors.
Conclusion
Our remuneration policy and practices
are designed to drive achievement of
the Group’s business objectives and
deliver sustainable shareholder value.
The remuneration for 2018 reflects Mondi’s
success in the continued delivery of
our strategy.
Thank you for the strong support you
have given for our remuneration approach
in prior years. I hope that you will give
your support again for the 2019 Annual
General Meetings.
Tanya Fratto
Chair of the DLC remuneration committee
The report
The report has been prepared by the
DLC remuneration committee and
approved by the boards of Mondi
Limited and Mondi plc (together ‘the
Boards’). PricewaterhouseCoopers Inc.
and PricewaterhouseCoopers LLP have
independently audited the items stipulated
in the regulations:
e executive directors’ and non-executive
directors’ remuneration and associated
footnotes on page 130;
e the table of share awards granted to
executive directors and associated
footnotes on page 139; and
e the statement of directors’ shareholdings
and share interests in Mondi on pages
137 and 138.
Directors’ remuneration policy
This part of the directors’ remuneration
report sets out the remuneration policy
for the Group and has been prepared in
accordance with The Large and Medium-
sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations
2013. The policy has been developed
taking into account the principles of
the governance codes in South Africa
and the UK and the views of our major
shareholders. The policy was approved by
a binding shareholder vote at the Mondi plc
Annual General Meeting on 11 May 2017,
and endorsed at Mondi Limited’s Annual
General Meetings in 2017 and 2018.
The Group’s remuneration policy
has been set with the objective of
attracting, motivating and retaining
high-calibre directors, in a manner that
promotes the long-term success of the
Group, is consistent with best practice
and aligned with the interests of the
Group’s shareholders.
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Remuneration policy for executive directors is framed
around the following key principles:
e remuneration packages should be
e a significant proportion of the
set at levels that are competitive in the
relevant market;
e the structure of remuneration
remuneration of executive directors
should be performance-based;
e the performance-based element of
packages and, in particular, the
design of performance-based
remuneration schemes, should be
aligned with shareholders’ interests
and should support the achievement
of the Group’s business strategy and
the management of risk;
remuneration should be appropriately
balanced between the achievement of
short-term objectives and longer-term
objectives; and
e the remuneration of executive
directors should be set taking
appropriate account of remuneration
and employment conditions
elsewhere in the Group.
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124
Directors’ remuneration policy
Executive directors’ remuneration policy table
The following table summarises key elements of the remuneration of executive directors in accordance with reporting regulations:
Base salary
Benefits
Pension
Bonus Share Plan (BSP)
To provide incentive and reward for
annual performance achievements.
To also provide sustained alignment
with shareholders through a deferred
component.
Awards are based on annual
performance against a balanced
scorecard of metrics as determined by
the committee from time to time such
as underlying EBITDA and percentage
ROCE and safety. These have the
highest weighting (currently 80% of the
total). Individual performance is also
assessed against suitable objectives,
and currently has a 20% weighting.
The policy gives the committee
the authority to select suitable
performance metrics, aligned to
Mondi’s strategy and shareholders’
interests, and to assess the
performance outcome.
Half of the award is delivered in cash
and half in deferred shares which
normally vest after three years (subject
to service conditions), and with no
matching element. On vesting of
deferred shares, participants receive
a bonus of equivalent value to the
dividends that would have been
payable on those shares between the
date when the awards were granted
and when they vest.
Malus and clawback provisions apply
to awards made since January 2011.
The maximum annual bonus is 175%
of base salary.
The committee applied a limit of 165%
for the Chief Executive Officer and
135% for other executive directors for
the 2017 and 2018 performance years
(i.e. below the policy maximum).
Purpose
and link to
strategy
To recruit and reward
executives of a suitable
calibre for the role and
duties required.
To provide market
competitive benefits.
To provide market
competitive pension
contributions.
Defined contribution
to pension, or cash
allowance of equivalent
value. Only base salary is
pensionable.
Operation
Reviewed annually by
the committee, taking
account of Group and
individual performance,
changes in responsibility
and levels of increase for
the broader employee
population.
The Group typically
provides:
e car allowance or
company car;
e medical insurance;
e death and
disability insurance;
Reference is also made
to market median levels in
companies of similar size
and complexity.
The committee considers
the impact of any base
salary increase on
the total remuneration
package.
Salaries (and other
elements of the
remuneration package)
may be paid in different
currencies as appropriate
to reflect their geographic
location.
e limited personal taxation
and financial advice;
and
e other ancillary benefits,
including relocation
and assistance with
expatriate expenses
(as required).
The policy authorises
the committee to make
minor changes to
benefits provision from
time to time, including if
appropriate implementing
all-employee share plans
up to the limits approved
by tax authorities.
Maximum values are
determined by reference
to market practice,
avoiding paying more
than is necessary.
The maximum company
pension contribution for
executive directors is
25% of base salary.
Maximum
opportunity
There is no prescribed
maximum salary
or annual increase.
However, increases will
normally be no more
than the general level of
increase in the UK market
or the market against
which the executive’s
salary is determined.
On occasions a larger
increase may be needed
to recognise, for example,
development in role or
change in responsibility.
Details of the outcome of
the most recent review
are provided in the annual
report on remuneration.
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Integrated report and financial statements 2018
125
Long-Term Incentive Plan (LTIP)
Share ownership policy
Purpose
and link to
strategy
To provide incentive and reward for the delivery of the
Group’s strategic objectives, and provide further alignment
with shareholders through the use of shares.
Operation
Individuals are considered each year for an award of shares
that vest after three years to the extent that performance
conditions are met and in accordance with the terms of the
plan approved by shareholders.
Under the plan rules, in exceptional circumstances,
the committee has the ability to cash-settle awards, if
necessary. There is no current intention for awards to the
executive directors to be delivered in this way.
Awards are granted subject to continued employment and
satisfaction of stretching performance conditions measured
over three years, which are set by the committee before
each grant.
For awards to be granted in 2019, metrics comprise TSR
against a suitable peer group, and percentage ROCE, each
with a 50% weighting. The vesting outcome can also be
reduced, if necessary, to reflect the underlying or general
performance of the Group. Performance is measured over
three calendar years, starting with the year of grant.
For awards granted from 2013 onwards, an amount
equivalent to dividends that would have been payable on
the unvested share awards are rolled up and paid out (in
cash and/or additional shares) at the end of the vesting
period based on the proportion of the award that actually
vests.
Malus and clawback provisions apply to awards made
since January 2011.
A post-vesting holding period applies to executive directors
for awards made from 2017 onwards. Executive directors
are required to retain the LTIP shares that vest (net of tax)
for a period of two years. The two-year holding requirement
will continue if they leave employment during the holding
period. The shares held will count towards the executive
director’s normal holding requirement.
To align the interests of executive directors with those of
shareholders.
Executive directors are required to acquire and maintain
shareholdings in Mondi Limited or Mondi plc to a minimum
of 200% of base salary.
The maximum shareholding requirement must be met within
no more than five years from the date of appointment.
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While the executive director is building to the required
shareholding level, deferred bonus awards under the BSP,
net of the expected tax liability that will apply on vesting,
will count towards the requirement. Once the required
shareholding has been met, such shares will not count
unless the committee, at its sole discretion, determines
that a number of deferred shares may count towards the
entitlement of a director.
Unvested LTIP awards (i.e. those awards where
performance targets and/or a service requirement must
still be met for awards to vest) will not count towards the
entitlement. LTIP shares that have vested and on which tax
has been paid and that are within the two-year post-vesting
holding period will count towards the entitlement.
Previously compliant directors who do not meet the
minimum requirements on annual assessment are to
achieve compliance by 31 December of the same year.
In order to allow the committee to deal with unexpected
circumstances, the committee retains discretion on how
to operate the Policy and may make exceptions and
allowances if it sees fit.
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Maximum
opportunity
The maximum grant limit is 225% of base salary (face value
of shares at grant), to any individual in a single year.
Not applicable.
For the awards made in 2017 and 2018, the committee
made awards, below the policy maximum, of 210% of base
salary to the Chief Executive Officer and 175% to other
executive directors.
25% of the grant is available for threshold performance,
rising on a straight-line scale to 100% of the grant for
performance at the ‘stretch’ level.
Individual awards, up to the policy limit, are determined
each year by the committee. The committee’s practice has
historically been to make grants below the policy maximum
as detailed in the annual report on remuneration.
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Integrated report and financial statements 2018
126
Directors’ remuneration policy
Choice of performance measures and approach to target setting
Bonus Share Plan (BSP)
The table below shows the metrics for 2018, why they were chosen and how targets are set.
Metric
Underlying EBITDA
KPI
Page 37
ROCE (%)
Safety
KPI
Page 36
KPI
Page 37
Personal performance
Why chosen?
How targets are set
Underlying EBITDA provides a measure of
the cash-generating ability of the business
that is comparable from year to year.
A key indicator of the efficient and effective
use of capital.
Targets and ranges are set each year by
the committee taking account of required
progress towards strategic goals, and the
prevailing market conditions.
Targets and ranges are set each year by the
committee taking account of the required
progress towards strategic goals, and the
prevailing market conditions.
One of the key indicators of whether the
business is meeting its sustainability goal of
zero harm.
The committee considers input from the
DLC sustainable development committee,
and sets appropriate standards and goals.
An indicator of the contribution each
executive director is making to the overall
success of the management team.
Targets are set each year by the committee,
based on the specific priorities, and areas of
responsibility, of the role.
The policy gives the committee the authority to select suitable performance metrics, aligned to Mondi’s strategy and shareholders’
interests.
Long-Term Incentive Plan (LTIP)
The table below shows the metrics for 2018 grants, why they were chosen and how targets are set.
Metric
Why chosen?
How targets are set
TSR, relative to a peer group of competitors TSR measures the total returns to Mondi’s
shareholders, so provides close alignment
with shareholder interests.
ROCE (%)
KPI
Page 36
A key indicator of the efficient and effective
use of capital.
The committee sets the performance
requirements for each grant. A peer group
of packaging and paper sector companies
is used. Nothing vests below median. 25%
vests for median performance; 100% vests
for upper quartile performance, with a
straight-line scale between these two points.
The committee sets threshold and stretch
levels, aligned to the Group’s strategic
targets for ROCE.
Nothing vests below threshold. 25% vests
for threshold performance; 100% vests for
stretch performance, with a straight-line
scale between these two points.
The policy gives the committee the authority to select suitable performance metrics, aligned to Mondi’s strategy and shareholders’
interests.
Remuneration policy for executive directors compared to other employees
The remuneration policy for the executive directors and employees varies, which is necessary to reflect the different levels of responsibility
and market practices. The key difference is the increased emphasis on performance-related pay in senior roles. Lower maximum
incentive pay opportunities apply below executive level, driven by market benchmarks and the relative impact of the role. Only the most
senior executives in the Group participate in the LTIP and the BSP as these plans are targeted on those individuals who have the greatest
accountability for Group performance.
Mondi Group
Integrated report and financial statements 2018
Executive directors’ existing service contracts, and policy on loss of office
CEO
Peter Oswald was recruited, and is based, in Austria. His service contract is required under Austrian law to be for a fixed period, which
renewable fixed period expires on 30 April 2022. However, the contract has also been structured as far as possible to conform to the
accepted practice for directors in the UK, and can be terminated on one year’s notice by either party. Prior to 2008, he did not have a
notice period, and was entitled to receive compensation on termination equivalent to remuneration for the unexpired term of the five-
year fixed term contract. The committee re-negotiated this contract in 2008 to substantially reduce the Group’s potential liabilities, and
introduced a standard 12-month notice period, together with an accompanying lump sum payment on termination, which was necessary
to facilitate the transition from the previous contract. In the event of termination by Mondi, other than for ‘cause’, the current contract
provides for payment of base salary, benefits and pension contribution in respect of the 12-month notice period and eligibility for annual
bonus in respect of the period he has worked. He would also be eligible for a lump sum amount calculated as €908,800 plus interest on
this amount accrued at the Euribor interest rate for the period since 1 January 2008.
CFO
The service contract for Andrew King provides for one year’s notice by either party. It includes pay in lieu of notice provisions which may
be invoked at the discretion of the Group. The payment in lieu of notice would comprise base salary, benefits and pension contributions
for the notice period and an amount in compensation for annual bonus only for that part of the financial year the individual has worked.
Any share-based entitlements granted to an executive director under the Group’s share plans will be determined based on the relevant
plan rules. The default treatment is that any outstanding awards lapse on cessation of employment. However, in certain prescribed
circumstances, such as death, disability, retirement or other circumstances at the discretion of the committee (taking into account the
individual’s performance and the reasons for their departure) ‘good Ieaver’ status can be applied. For good leavers, vesting of BSP
awards that are not subject to performance conditions is accelerated to as soon as practical after employment termination. LTIP awards
remain subject to performance conditions (measured over the original time period) and are reduced pro rata to reflect the proportion of
the performance period actually served. The committee has the discretion to disapply the application of performance conditions and/or
time pro rating if it considers it appropriate to do so. However, it is envisaged that this would only be applied in exceptional circumstances.
In determining whether an executive should be treated as a good Ieaver or not, the committee will take into account the performance of
the individual and the reasons for their departure.
Notice periods for the executive directors who served during the period under review are as follows:
Executive director
Peter Oswald
Andrew King
Unexpired term/notice period
A fixed term expiring on 30 April 2022 but terminable at any time on 12 months’ notice
Terminable on 12 months’ notice
A director’s service contract may be terminated without notice and without any further payment or compensation, except for sums
accrued up to the date of termination, on the occurrence of certain events such as gross misconduct.
Service contracts for new appointments
Normally, for any new executive director appointments, the Group’s policy is that the service contracts should provide for one year’s notice
by either party. The contract would provide that, in the event of termination by the company, other than for ‘cause’, the executive would be
eligible for:
e payment of the base salary, pension contribution and benefits in respect of the unexpired portion of the 12-month notice period;
e annual bonus only in respect of the period they have served, payable following the relevant performance year end and subject to the
normal performance conditions for annual bonus; and
e share-based awards they hold, subject to the plan rules, which include arrangements for pro ration of LTIP awards and continued
application of performance conditions.
The Group would seek to apply the principle of mitigation to the termination payment by, for example, making payments in instalments
that can be reduced or ended if the former executive wishes to commence alternative employment during the payment period.
In exceptional circumstances, such as to secure for the Group the appointment of a highly talented and experienced executive in a market
such as Germany or Austria where it is common for the most senior executives to have three-year or five-year fixed term contracts,
the committee may need to offer a longer initial notice period that reduces progressively to one year over a set time period. In such
exceptional circumstances, the committee would seek to ensure that any special contract provisions are not more generous than is
absolutely necessary to secure the appointment. The committee would also take account of the remuneration and contract features that
the executive may be foregoing or relinquishing in order to join Mondi, in comparison with the overall remuneration package that Mondi is
able to offer.
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Integrated report and financial statements 2018
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Directors’ remuneration policy
Approach to remuneration for new executive director appointments
The remuneration package for a newly appointed executive director would be set in accordance with the terms of the Group’s approved
remuneration policy in force at the time of appointment. The variable remuneration for a new executive director would be determined in the
same way as for existing executive directors, and would be subject to the maximum limits on variable pay referred to in the policy table on
pages 124 and 125.
For an internal appointment, any legacy pay elements awarded in respect of the prior role would be allowed to pay out according to
their terms.
For internal and external appointments, the Group may meet certain relocation expenses, as appropriate.
For external appointments, the committee may also offer additional cash and/or share-based elements when it considers these to be in
the best interests of Mondi and shareholders, to replace variable remuneration awards or arrangements that an individual has foregone in
order to join the Group. This includes the use of awards made under section 9.4.2 of the UK Listing Rules. Any such payments would take
account of the details of the remuneration foregone including the nature, vesting dates and any performance requirements attached to
that remuneration.
Remuneration scenarios at different performance levels1,2
CEO
CFO
Fixed pay
BSP cash
BSP shares
LTIP
Fixed pay
BSP cash
BSP shares
LTIP
€7,000,000
€6,000,000
€5,000,000
€4,000,000
€3,000,000
€2,000,000
€1,000,000
52%
14%
14%
20%
42%
16%
16%
26%
€4,000,000
€3,500,000
€3,000,000
€2,500,000
€2,000,000
€1,500,000
€1,000,000
€500,000
30%
17%
17%
36%
100%
50%
13%
13%
24%
40%
15%
15%
30%
28%
15%
15%
42%
100%
Minimum Target Maximum Share
price
growth3
Minimum Target Maximum Share
price
growth3
The charts above illustrate the total potential remuneration for each executive director at three performance levels.
1 Assumptions:
Minimum = fixed pay only (salary + benefits + pension)
On-target = 70% vesting of the annual bonus and 50% for LTIP awards
Maximum = 100% vesting of the annual bonus and LTIP awards
Salary levels (on which other elements of the package are calculated) are based on those applying on 1 January 2019
2 Benefit values for both the Chief Executive Officer and the Chief Financial Officer exclude the costs of business travel and accommodation
3 To reflect the impact of a share price increase between award and vesting, the LTIP value in the ‘Maximum’ column has been increased by 50% in the ‘Share Price Growth’ column
Mondi Group
Integrated report and financial statements 2018
Remuneration policy for non-executive directors
Remuneration policy for non-executive directors
Element
Purpose and link to strategy
Operation
Maximum opportunity
Non-executive
chair fees
To attract and retain high-calibre
chairs, with the necessary experience
and skills. To provide fees which take
account of the time commitment and
responsibilities of the role.
Other non-
executive fees
To attract and retain high-calibre
non-executives, with the necessary
experience and skills. To provide
fees which take account of the time
commitment and responsibilities of
the role.
The Joint Chairs each receive an all-
inclusive fee.
The Joint Chairs’ fees are reviewed
periodically by the committee.
While there is not a maximum fee level,
fees are set by reference to market
median data for companies of similar
size and complexity to Mondi.
Non-executive directors’ fees are
reviewed periodically by the Joint
Chairs and executive directors.
While there is not a maximum fee level,
fees are set by reference to market
median data for companies of similar
size and complexity to Mondi.
The non-executives are paid a
basic fee.
Attendance fees are also paid to reflect
the requirement for non-executive
directors to attend meetings in various
international locations.
The chairs of the main board
committees and the senior
independent director are paid additional
fees to reflect their extra responsibilities.
The Group may reimburse the reasonable expenses of board directors that relate to their duties on behalf of Mondi (including tax thereon
if applicable). The Group may also provide advice and assistance with board directors’ tax returns where these are impacted by the duties
they undertake on behalf of Mondi.
All non-executive directors have letters of appointment with Mondi Limited and Mondi plc for an initial period of three years. In accordance
with best practice, non-executive directors are subject to annual re-election at the Annual General Meetings. Appointments may be
terminated by either party with six months’ notice. No compensation is payable on termination, other than accrued fees and expenses.
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Statement of consideration of employment conditions elsewhere in the Group
The Group’s remuneration policy for the remuneration of executive directors and other senior executives is set taking appropriate account
of remuneration and employment conditions of other colleagues in the Group.
The committee annually receives a report from management on pay practices across the Group, including salary levels and trends,
collective bargaining outcomes and bonus participation. At the time that salary increases are considered the committee additionally
receives a report on the approach management proposes to adopt for general staff increases. Both these reports are taken into account
in the committee’s decisions about the remuneration of executive directors and other senior executives.
The Group does not engage in formal consultation with employees on directors’ remuneration policy. However, employees of the Group
are encouraged to provide feedback on the Group’s general employment policies. In some countries where the Group operates, more
formal consultation arrangements with employee representatives are in place relating to employment terms and conditions, in accordance
with local custom and practice. The Group also conducts periodic employee engagement surveys which gauge employees’ satisfaction
with their working conditions. The Boards receive feedback on these survey results.
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Shareholder context
The committee considers the views of shareholders in its deliberations about the remuneration of executive directors and other senior
executives, and consults directly with major shareholders when any material changes to policy are being considered.
In the event that either the remuneration policy or implementation resolutions receive a significant proportion of votes against, the
committee will seek to further engage with shareholders to understand the reasons behind these votes and any particular concerns they
may have.
Legacy arrangements
For the avoidance of doubt, in approving this policy report, authority is given to the Group to honour any commitments entered into with
current or former directors that have been disclosed to shareholders in previous remuneration reports. Details of any payments to former
directors will be set out in the annual report on remuneration as they arise.
Mondi Group
Integrated report and financial statements 2018
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Annual report on remuneration
2018 remuneration of directors (audited)
This table reports executive and non-executive directors’ remuneration in accordance with UK reporting regulations applicable to financial
reporting periods ending on or after 1 October 2013.
Base salary/
NED fees3
Benefits
Pension
contribution11
Annual bonus
including
grant
value
of BSP
award
Value of LTIP
vesting in the
performance
year5
Value of LTIP
vesting at
date of
grant6
Share price
gain on
vesting
LTIP award
between
grant and
vest dates7
Other8
Total
2018 €1,076,000
€46,962
€269,015 €1,562,352
€1,397,953 €1,162,023
€235,930
€44,361 €4,396,643
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
€1,016,194
€41,594
€254,801
€992,320 €1,218,852 €1,001,597
€217,255
€156,028 €3,679,789
€654,467
€64,001
€163,617
€786,326 €1,040,983
€830,806
€210,177
€80,113 €2,789,507
€643,405 €1,338,0764 €160,851
€548,352
€958,503
€785,762
€172,741
€120,361 €3,769,548
€331,159
€326,590
€331,159
€326,590
€111,773
€105,842
€109,625
€108,896
€44,546
€107,384
€107,127
€97,839
€66,950
–
€2,035
€333,194
€2,054
€328,644
€331,159
€326,590
€111,773
€105,842
€109,625
€108,896
€44,546
€107,384
€109,162
€99,893
€66,950
–
€2,035
€2,054
Peter
Oswald1
Andrew
King2
Fred
Phaswana
David
Williams
Tanya
Fratto
Stephen
Harris
John
Nicholas9
Dominique
Reiniche
Stephen
Young10
1
For 2018, Peter Oswald’s maximum annual bonus was 165% of base salary. For the period 1 January 2017 to 11 May 2017, as Chief Executive Officer Europe & International, Peter Oswald’s maximum annual
bonus was 135% of base salary and was determined with reference to his base salary in that role. For the period from 12 May 2017 to 31 December 2017, his maximum annual bonus was 165% of base salary.
His maximum bonus for 2018 was 165% of salary
2 Andrew King’s salary is denominated in pound sterling and his 2018 salary was £579,000
3
The non-executive directors’ fees are also denominated in pound sterling. Euro amounts are reported based on exchange rates on the dates actual payments were made. Non-executive director fees were
increased by circa 2.5% with effect from 16 May 2018 following the passing of a resolution at the Annual General Meetings of Mondi Limited and Mondi plc. See the table on page 137 for current fee levels
4 Mondi asked Andrew King to relocate to the UK from South Africa, to be based closer to the Group’s principal centre of operations in Europe. In accordance with the DRP, Andrew was eligible for assistance
5
6
7
with relocation expenses. These expenses, and the cost of the grossed-up income tax amount payable to HMRC, amounted to €1,299,029 of the benefits total for 2017. These expenses reflect the cost of
stamp duty on the purchase of a UK property, estate agent’s commission on disposal of the South African property, return flights for purpose of house-hunting, school search and orientation and packing and
removal of household effects to the UK
For 2018, the three-year performance cycle of the 2016 LTIP award ended on 31 December 2018. The award value shown has been based on the average share price over the last three months of the financial
period. The 2018 LTIP vesting value includes cash amounts of equivalent value to all dividends (including ordinary dividends and, where applicable, special dividends) on vested LTIP awards during the year.
For the 2017 LTIP dividend equivalents, these are included in the 2017 ‘other’ column as reported last year. For 2017, the three-year performance cycle of the 2015 LTIP award ended on 31 December 2017.
The award value shown in the 2017 remuneration report was an estimate based on the average share price over the last three months of the financial period which was £18.45 for Mondi plc LTIP awards and
ZAR 333.46 for Mondi Limited LTIP awards. The actual award price on vesting was £19.81 for Mondi plc LTIP awards and ZAR 327.48 for Mondi Limited LTIP awards. The award values for 2017 have been
restated on this basis
For 2018, the value is shown of the 2016 LTIP award made at the start of the three-year performance cycle, and for 2017, the value of the 2015 LTIP award made at the start of the three-year performance cycle
For 2018, the enhanced value is shown of the 2016 LTIP based on the share price gain between grant and the average share price over the last three months of the financial period. The value of Mondi plc’s
shares increased from £12.88 to £16.34, and the value of Mondi Limited shares from ZAR 282.00 to ZAR 309.57 during this time. For 2017, the enhanced value is shown of the 2015 LTIP that vested based on
share price appreciation during the holding period. The value of Mondi plc’s shares increased from £13.30 to £19.81, and the value of Mondi Limited shares from ZAR 234.44 to ZAR 327.48
Includes cash amounts of equivalent value to all dividends (including ordinary dividends and, where applicable, special dividends) on vested BSP shares during the year. See table of share awards granted
to executive directors on page 139. Accommodation cost for some of Peter Oswald’s business trips is, for reasons of UK tax regulation, subject to UK income tax, and is therefore required to be included in
the disclosure. The figure for Peter Oswald in the ‘Other’ column includes €1,960.70 in respect of accommodation cost for this business travel and the cost of any grossed up income tax paid during the year.
Accommodation costs in Vienna for Andrew King’s business trips are, for reasons of Austrian and UK tax regulation, subject to income tax, and are therefore required to be included in the disclosure. The figure
for Andrew King in the ‘Other’ column includes €58,030.02 in respect of accommodation costs for his business travel and the cost of any grossed up income tax paid during the year. For Fred Phaswana and
Dominique Reiniche the taxable values of the UK tax returns are shown
9
John Nicholas’ fees for 2018 cover the period to his retirement from the Boards on 16 May 2018
10 Stephen Young’s fees for 2018 cover the period from his appointment to the Boards on 1 May 2018
11 None of the executive directors has entitlements under a defined benefit pension scheme. No retrospective payments were made to past directors in respect of the period during which they served as directors
8
and no payments were made to past directors for loss of office
Mondi Group
Integrated report and financial statements 2018
Annual bonus
Approach to disclosure of bonus targets
Since its 2012 report, Mondi has disclosed the performance measures used for the annual bonus as well as outcomes against
these measures.
In the 2015, 2016 and 2017 reports we went substantially further in providing details of the performance against safety objectives that were
set for the year under review. In the case of executives’ personal objectives we described the achievements of our executives against key
focus areas, together with the ratings awarded to each executive.
In the case of financial performance, we provided retrospective disclosure of the financial bonus ranges and outcomes for the year prior to
the year under review. We additionally provided outline disclosure of financial bonus outcomes for the year under review.
Following feedback from shareholders we are, for this report, providing disclosure of the financial bonus ranges for the year under review.
In addition to this we are retrospectively providing the financial target ranges and outcomes for 2017 as we indicated we would do in the
2017 remuneration report.
2017 ranges and outcomes (audited)1
Entry level
Underlying EBITDA (€m)
€1,196m
Bonus outcome (points)
7.5
ROCE (%)
17.1%
Bonus outcome (points)
7.5
Outcome
€1,482m
20.7
Outcome
19.3%
17.3
Ceiling
€1,618m
30.0
23.1%
30.0
131
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1 The audited annual financial statements for the year ended 31 December 2017 were restated due to the adoption of IFRS 16, ‘Leases’, which has been disclosed in notes 32 and 33 of the combined and consolidated
financial statements. The bonus outcomes were calculated based on the reported 2017 annual financial statements before they were restated. However, restated figures are shown in the graph for consistency with the
rest of this Integrated report
2018 bonus outcomes (audited)
For the annual bonus in respect of 2018 performance, the performance measures and achievement levels were:
Weight
Outcomes:
Peter Oswald
Andrew King
BSP performance measures
Underlying EBITDA
ROCE
35
35
35
35
35
35
Safety
10
3
3
Personal
20
15
16
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Integrated report and financial statements 2018
132
Annual report on remuneration
Financial element of 2018 bonus (audited)
Financial performance was assessed against the underlying EBITDA and ROCE ranges that were set for 2018. The ranges and
outcomes were:
2018 Financial bonus elements
Threshold
Underlying EBITDA (€m)
€1,286m
Bonus outcome (points)
8.75
ROCE (%)
16.6%
Bonus outcome (points)
8.75
Maximum
Outcome
€1,764m
€1,740m
35.0
Maximum
22.4%
35.0
Outcome
23.6%
Safety element of 2018 bonus (audited)
A maximum of 10 points are awarded for safety. Up to five points are awarded, based on the assessment of the Total Recordable Case
Rate (TRCR), as follows:
2018 Safety bonus elements
TRCR
Threshold
0.73
Bonus outcome (points)
1
Outcome
0.68
3
Maximum
0.65
5
The other five points were payable if there were no fatalities within the Mondi Group. If there is one fatality then these five points are
forfeited. If there are two fatalities during the year then the entire 10 points attributable to safety are forfeited.
The TRCR that was achieved for 2018 was 0.68 and three points were therefore awarded for this part of the safety element. As a result of
the tragic and unacceptable fatality of a contractor engaged in Mondi’s operations as reported on page 51, no payment was made under
this part of the safety element.
Mondi Group
Integrated report and financial statements 2018
Personal objectives of executives for 2018 bonus (audited)
Key objectives and achievements
The executive directors share many key objectives and also have individual objectives that are specific to their roles. Key objectives, and
achievements against these objectives during 2018, included:
Strategy development
and execution
e Kraft paper footprint improved with successful modernisation and expansion of cost-advantaged Štětí mill
(Czech Republic) and divestiture of high cost mill in the US
e Progressing with investment in new kraft top white machine at Ružomberok (Slovakia), after having
received final permits during the year. Pulp mill upgrade in progress
e Investigation and evaluation of alternatives for the modernisation of the Richards Bay mill (South Africa)
e Industrial bags footprint optimised via two acquisitions in Egypt and closure of plants in the US and Europe
e Corporate simplification announced and in progress
e Acquisition of Powerflute (Finland) completed and a number of acquistions considered
e Strong operational performance across the Group
e Continued good progress on cost management
e Integration of acquisitions on track and synergies above plan
e Selective digitalisation projects across all business units in progress
e Maintained upgraded Moody’s Baa1 rating and Standard & Poor’s BBB+
e €600 million Eurobond successfully launched, ensuring strong Group liquidity
e Further progress on tax risk mitigation
e Key senior appointments made during the year
e Reorganisation of the Packaging Paper and Fibre Packaging business units to improve strategic alignment
and operational coordination across the fibre-based packaging value chain
e Record participation of 1,200 people at the Mondi Academy, celebrating its 20th anniversary
e Extensive roadshows and individual meetings held throughout the year with existing and potential investors
e In-depth investor perception study undertaken and action plan developed to further enhance
shareholder engagement
e Virtual leadership meetings introduced to enhance group-wide communication with employees
Organisational
performance
Financial efficiency
and financing
Organisational structure
and resourcing
Stakeholder relationships
The ratings of the two
executive directors were:
Peter Oswald 15/20
Andrew King 16/20
Detail of annual bonus awarded in the year
Name
Peter Oswald
Andrew King
Awarded in cash Awarded in shares
Total
€781,176
€393,163
€781,176
€393,163
€1,562,352
€786,326
Malus and clawback
Under Mondi’s BSP and LTIP rules, malus and clawback can be applied to awards made on or after 1 January 2011 if there has been
a misstatement of financial results, or misstatement of performance relative to the conditions that are relevant to the Plans, that had the
effect that awards were larger than they would have been had such errors not been made. This may at the committee’s discretion take the
form of a demand for the participant to repay amounts to Mondi, a reduction of future bonus payments to the participant, and a reduction
in the number of conditional share awards held by a participant. For awards from 2019 onwards the potential malus and clawback triggers
have been extended to include gross or serious misconduct, corporate failure, a severe downturn in financial or operational performance
or severe reputational damage where this is as a result of management failure. In the case of employment termination Mondi is able to
cancel subsisting but unvested share awards, withhold payments that would otherwise be due to the participant, and where appropriate
initiate legal proceedings to recover funds to which the Group is legally entitled.
The committee considered whether there were any circumstances in the year that would have required clawback and agreed that such
circumstances did not exist.
133
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Integrated report and financial statements 2018
134
Annual report on remuneration
Long-Term Incentive Plan (LTIP) (audited)
Vesting of the 2016 awards
The LTIP awards that were made in 2016, with a three-year performance period ending on 31 December 2018, were assessed by the
committee in February 2019, against the (equally weighted) relative TSR and ROCE performance conditions.
The three-year ROCE that was achieved was 21.2% (20.3% in 2016, 19.3% in 2017 and 23.6% in 2018). As this exceeded the 10% to 16%
ROCE target range for these awards, 100% of the shares attributable to the ROCE performance condition vested in March 2019.
Vesting of the 2016 awards
Threshold
Three-year ROCE (%)
10%
Maximum
16
Outcome
21.2%
Mondi plc achieved a TSR of 10.3%, and Mondi Limited 13.3%, over the performance period and Mondi’s rank within the TSR peer group
was 7th. This was above the median position required for vesting of 25% of the relevant shares, but below the upper quartile required
for full vesting. Based on the performance calculation performed for the committee by Aon, 53.1% of the shares attributable to this
element vested.
TSR peer group ranking
Mondi’s rank in
the TSR peer group
Vesting
(% of relevant shares)
Threshold
Median
25%
Outcome
7th
53.1%
Maximum
Upper
quartile
100%
Overall, 76.6% of the 2016 LTIP shares under award therefore vested with the remainder lapsing. For Peter Oswald, 65,932 of the 86,073
shares under award vested. For Andrew King, 33,721 of the 44,022 Mondi plc shares under award and 14,579 of the 19,032 Mondi
Limited shares vested. No discretion was exercised by the committee in determining the vesting outcomes.
As shares vested on 7 March 2019, after the finalisation of this report, the average share price, and average exchange rates, over the last
three months of the financial year were used to estimate the value for the purpose of the table on page 130. The average share price was
£17.65 for the Mondi plc LTIP awards and ZAR329.45 for the Mondi Limited LTIP awards.
Mondi Group
Integrated report and financial statements 2018
Awards granted in 2018
The maximum award that can be made to any LTIP participant in any year under the policy approved at the 2017 AGMs is equal to 225%
of base salary. For 2018, the award made to Peter Oswald was 210% of base salary and the award made to Andrew King was 175% of
base salary.
For the LTIP awards made in 2018, the performance conditions are based on two performance measures of equal weight – relative TSR
and ROCE – measured over a three-year performance period ending on 31 December 2020. This combination of metrics provides an
appropriate means of aligning the operation of the LTIP with shareholders’ interests and the Group’s business strategy.
The TSR performance condition is based on the Group’s TSR relative to a group of competitor companies. Since the 2013 LTIP awards,
the following companies were selected:
Amcor
Bemis
BillerudKorsnäs
Domtar
DSSmith
Holmen
Huhtamaki (2017)4
International Paper
Mayr-Melnhof
MeadWestvaco1
Metsä Board
RPC (2017)4
Sappi
Smurfit Kappa
Stora Enso
The Navigator Company2
UPM
WestRock3
1 MeadWestvaco was included in LTIP awards until its merger with Rock Tenn in 2015 when it was, in accordance with committee practice, removed from the peer group for all subsisting awards
2 Portucel Soporcel Group rebranded in February 2016 as The Navigator Company
3 WestRock, the company that was formed by the merger of MeadWestvaco and Rock Tenn, has been included in the peer group for 2016 and subsequent awards
4 Huhtamaki and RPC were added to the peer group for 2017 and subsequent awards
For the 50% of awards attributable to TSR: If the Group’s TSR is below the median when ranked against the comparator group, this part
of the award will lapse in full. For TSR at the median, 25% of this part of the award (i.e. 12.5% of the total award) will vest, with a straight-
line progression to the upper quartile, at which point 100% of this part of the award (i.e. 50% of the total award) will vest.
For the 50% of awards attributable to ROCE: This part will lapse in full if ROCE is below 10%. 25% of this part of the award (i.e. 12.5%
of the total award) will vest for achievement of ROCE of 10%, with a straight-line progression to full vesting of this part of the award for
achievement of ROCE of 18% (i.e. 50% of the total award).
For the 2019 awards, the peer group remains unchanged from 2018.
Details of the awards granted in 2018 can be found on page 139.
Mondi’s TSR performance over the last ten years
The following graphs set out the comparative TSR of Mondi Limited relative to the JSE All-Share Index, and Mondi plc relative to the FTSE
All-Share Index, for the period between 31 December 2008 and 31 December 2018 as required in the reporting regulation. Those indices
were chosen because they are broad equity market indices of which Mondi Limited and Mondi plc, respectively, are members.
JSE All-Share Index
Total shareholder return
Source: Thomson Reuters (Datastream)
FTSE All-Share Index
Total shareholder return
Source: Thomson Reuters (Datastream)
Mondi Limited
JSE All-Share
Mondi plc
FTSE All-Share
)
£
(
l
e
u
a
V
1,400
1,200
1,000
800
600
400
200
)
£
(
l
e
u
a
V
1,400
1,200
1,000
800
600
400
200
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
This graph shows the value, by 31 December 2018 of R100 invested in Mondi Limited on
31 December 2008, compared with the value of R100 invested in the JSE All-Share Index on the same date
This graph shows the value, by 31 December 2018 of £100 invested in Mondi plc on
31 December 2008, compared with the value of £100 invested in the FTSE All-Share Index on the same date
135
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Mondi Group
Integrated report and financial statements 2018
136
Annual report on remuneration
CEO remuneration from 2009
Year
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
Total remuneration
% of maximum bonus earned
% of LTI vested
€4,396,643
€3,828,0771,2
€5,786,958
€7,016,785
€7,763,908
€5,900,140
€6,305,794
€12,824,1123
€3,160,318
€2,627,196
88
63
68.7
89.6
91.6
73
80
78
89
83
76.6
72.5
92.5
100
100
100
100
92
33
12
1 For 2017 the CEO remuneration reflects David Hathorn’s remuneration up to his retirement from the Boards on 11 May 2017, including the pro rata CEO annual bonus, and Peter Oswald’s base salary, pension,
benefits and pro rata CEO annual bonus, as well as the 2015 LTIP vesting amount, with effect from 11 May 2017
2 In 2017, the three-year performance cycle of the 2015 LTIP award ended on 31 December 2017. The award value shown in the 2017 Remuneration report was an estimate based on the average share price over
the last three months of the financial year which was £18.45 for Mondi plc LTIP awards and ZAR 333.46 for Mondi Limited LTIP awards. The actual share price on vesting was £19.81 for Mondi plc LTIP awards
and ZAR 327.48 for Mondi Limited LTIP awards. The total remuneration for 2017 has been restated on this basis
3 David Hathorn’s remuneration in 2011 included €3.9 million from the proceeds of a one-off, shareholder approved, share award under a Co-Investment Plan he participated in at the time of the Group’s demerger
from Anglo American plc in 2007. Under this plan, he invested £1 million from his own funds in Mondi plc shares in August 2007. He was eligible to receive a match of up to 250% of the number of investment
shares based on a relative TSR performance measure over a four-year period. As the TSR achieved by Mondi plc was better than the upper quintile – Mondi was the top-performing company in the comparator
group – the committee approved the maximum vesting in accordance with the Plan rules
Comparison of 2018 and 2017 remuneration of CEO with other employees
CEO1
Mondi Group2
Percentage change in remuneration elements from 2017 to 2018
Salary
2.6%
3.1%
Benefits
-5.8%
N/A3
Bonus
54.1%
13.4%4
1 For 2017 the CEO remuneration reflects David Hathorn’s remuneration up to his leaving the Boards on 11 May 2017, and Peter Oswald’s base salary, pension, benefits and pro rata CEO annual bonus
remuneration thereafter. Remuneration is reported in euros but denominated in pound sterling for David Hathorn. See the table on page 130. Change percentages are for euros values
2 Includes salaries and bonuses (where applicable) for all employees of Mondi Group excluding the CEO with year-on-year movements reported in per capita terms
3 In most of the Group the majority of benefits are provided through social security. Additional benefits represent less than 5% of the salary bill
4 Aggregate bonuses paid during 2018 are compared with those paid in 2017. This includes annual bonuses that are paid in arrears and periodic bonuses that are paid more frequently. Each year’s numbers
therefore include some payments attributable to that year and some that reflect performance in the previous year. Bonuses are often based on specific objectives that are set at the level of local operations that
do not necessarily correlate with group-wide metrics that underpin the CEO’s bonus
Relative importance of spend on pay
€ million
Dividends
Overall remuneration expenditure1
1 Remuneration expenditure for all Mondi Group employees
2 This includes ordinary and special dividends. Ordinary dividends €309 million and special dividends €484 million
2018
7932
1,039
2017
273
1,053
% change
190.8%
-1.4%
Mondi Group
Integrated report and financial statements 2018
Non-executive directors’ remuneration (audited)
Current fee levels are as follows:
Role
Joint chair fee1
Non-executive base fee
Additional fees:
Supplement for DLC audit committee chair
Supplement for DLC remuneration committee chair fee
Combined supplement for DLC sustainable development committee & Mondi Limited social & ethics committee chair
Supplement for senior independent director
Supplement for senior independent director role if held by a non-executive who already chairs a committee
Attendance fee per meeting (outside country of residence)
Attendance fee per day (inside country of residence)
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Annual fee2
£296,500
£47,350
£11,840
£11,270
£11,270
£11,270
£6,150
£5,920
£1,770
1 No supplement is payable for additional commitments in relation to this role
2 Fees are determined in pound sterling. In the remuneration table on page 130, euro amounts are reported based on exchange rates on the dates actual payments were made
The joint chairs and the other non-executive directors are appointed by Mondi Limited and Mondi plc. The terms of their appointment
provide for the appointment to be terminable on six months’ notice.
Statement of directors’ shareholdings and share interests (audited)
Until the Annual General Meetings in May 2017, the CEO was required to achieve and maintain a shareholding equivalent to 150% of
base salary, and other executive directors a shareholding of at least 100% of base salary. From the AGMs in 2017, all executive directors
are required to build a holding of a minimum of 200% of base salary, normally within a period of not more than five years from joining the
Boards. As at 31 December 2018, Peter Oswald was compliant. Despite increasing his shareholding year-on-year by 5,000 shares, due
to a number of factors, Andrew King was not compliant as at 31 December 2018. To remain compliant with the minimum requirement,
Andrew will retain sufficient of the shares released to him under the BSP vesting in March 2019 to meet the policy.
The beneficial and non-beneficial share interests of the directors and their connected persons as at 1 January 2018 (or, if later, on
appointment), and as at 31 December 2018 (or as at their date of resignation if earlier) were as follows:
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Shareholding
at 1 Jan
2018
Shareholding
at 31 Dec
2018
Total
shareholding
as multiple of
salary (%)
Deferred
BSP shares
outstanding
at 31 Dec
20181
Deferred
BSP shares as
multiple
of salary
(%)
Deferred
LTIP shares
outstanding
at 31 Dec
20182
Deferred
LTIP shares as
multiple
of salary
(%)
Peter Oswald
Mondi plc
Andrew King
Mondi plc
Mondi Limited
Total
154,872
172,391
294%
71,018
121%
290,507
495%
60,000
208
60,208
65,000
208
65,208
36,527
10,352
46,879
133,635
34,828
168,463
133%
186%
479%
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2 LTIP shares subject to service and performance conditions
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Integrated report and financial statements 2018
138
Annual report on remuneration
Non-executive directors (audited)
Mondi plc
Fred Phaswana
David Williams
Stephen Harris
Tanya Fratto
John Nicholas
Dominique Reiniche
Stephen Young
Shareholding at
1 Jan 2018
Shareholding at
31 Dec 2018
5,482
5,000
1,000
1,000
6,000
1,000
–
5,773
5,000
1,000
1,000
6,000 as at
resignation
1,000
2,026
There has been no change in the interests of the directors and their connected persons between 31 December 2018 and the date of
this report.
Remuneration committee governance
The DLC remuneration committee
The DLC remuneration committee is a formal committee of the Boards. Its remit is set out in terms of reference adopted by the Boards.
A copy of the terms of reference is available on the Group’s website at www.mondigroup.com. The committee’s performance against
these terms of reference is reviewed on an annual basis and the committee is satisfied that it has acted in accordance with its terms of
reference during the year.
The primary purposes of the committee, as set out in its terms of reference, are:
e to make recommendations to the Boards on the Group’s framework of executive remuneration;
e to determine individual remuneration packages within that framework for the executive directors and certain senior executives;
e to determine the remuneration of the joint chairs; and
e to oversee the operation of the Group’s share schemes.
Composition
Members throughout the year:
Tanya Fratto, chair
Stephen Harris
Dominique Reiniche
David Williams
Committee
member
since:
January 2017
March 2011
October 2015
May 2007
Meeting
attendance
(five meetings in
the year):
5
5
5
5
Other regular attendees
e Chief Executive Officer
e Joint Chair who is not a member of the committee (Fred Phaswana)
e Group Head of Reward
e External remuneration consultant
The committee is authorised to seek information from any director and employee of the Group and to obtain external advice.
The committee is solely responsible for the appointment of external remuneration advisers and for the approval of their fees and other
terms. No director or other attendee takes part in any discussion regarding his or her personal remuneration.
In the year to 31 December 2018, New Bridge Street (NBS), part of Aon, provided remuneration advice and benchmarking data to
the committee. NBS is appointed by the committee, taking account of their experience and expertise in remuneration advisory work.
The committee expects the advisers to provide independent advice. NBS does not undertake any other work for the Group. However,
Aon provides actuarial advice to the trustees of Mondi’s three UK pension schemes and pension administration services. NBS is a
signatory to The Code of Conduct of the Remuneration Consultants Group, which requires the advice NBS provides to be objective and
impartial. Total fees paid to NBS in respect of the year under review were £94,337 based on consulting time required by the committee.
Mondi Group
Integrated report and financial statements 2018
Sums paid to third parties in respect of a director’s services
No consideration was paid or became receivable by third parties for making available the services of any person as a director of
Mondi Limited or Mondi plc (‘the Companies’), or while a director of the Companies, as a director of any of the Companies’ subsidiary
undertakings, or as a director of any other undertaking of which he/she was (while a director of the Companies) a director by virtue of
the Companies’ nomination, or otherwise in connection with the management of the Companies or any undertaking during the year to
31 December 2018.
Share awards granted to executive directors (audited)
The following tables set out the share awards granted to the executive directors. All share awards are determined by the three day average
share price commencing the day Mondi announces its results.
Mondi Limited
Andrew King
Awards held
at beginning
of year or on
appointment
to the
Boards
6,543
6,744
3,608
17,985
19,032
15,796
Type of
award1
BSP
BSP
BSP
LTIP
LTIP
LTIP
Awards
granted
during
year
Shares
lapsed
Awards
exercised
during
year
6,543
4,945
13,040
Award
price
basis
(ZAc)
23444
28200
30352
23444
28200
30352
Awards
held as at
31 December
2018
6,744
3,608
19,032
15,796
Date of
award
Mar 15
Mar 16
Mar 17
Mar 15
Mar 16
May 17
1 For note 1 please refer to the table below
Mondi plc
Peter Oswald
Andrew King
Awards held
at beginning
of year or on
appointment
to the
Boards
Type of
award1
27,029
30,258
17,730
75,910
86,073
99,555
15,164
15,599
8,427
41,685
44,022
36,894
BSP
BSP
BSP
BSP
LTIP
LTIP
LTIP
LTIP
BSP
BSP
BSP
BSP
LTIP
LTIP
LTIP
LTIP
Awards
granted
during
year
Shares
lapsed
Awards
exercised
during
year
27,029
20,875
55,035
15,164
11,463
30,222
23,030
104,879
12,501
52,719
Award
price
basis
(GBp)
Awards
held as at
31 December
2018
Date of
award
1330
1288
1876
1922
1330
1288
1876
1922
1330
1288
1876
1922
1330
1288
1876
1922
Mar 15
Mar 16
Mar 17
Mar 18
Mar 15
Mar 16
May 17
Mar 18
Mar 15
Mar 16
Mar 17
Mar 18
Mar 15
Mar 16
May 17
May 18
30,258
17,730
23,030
86,073
99,555
104,879
15,599
8,427
12,501
44,022
36,894
52,719
Release
date
Mar 18
Mar 19
Mar 20
Mar 18
Mar 19
Mar 20
Release
date
Mar 18
Mar 19
Mar 20
Mar 21
Mar 18
Mar 19
Mar 20
Mar 21
Mar 18
Mar 19
Mar 20
Mar 21
Mar 18
Mar 19
Mar 20
Mar 21
1 The value on award of the 2018 BSP awards set out in this table were:
Mondi plc: £240,269.22
Peter Oswald
The LTIP performance measures for the awards made in 2018 as set out in this table are detailed on page 135 of this report. The face values of the 2018 LTIP awards (granted as conditional share awards) were:
Peter Oswald
2 In addition to the number of shares that vested as shown in the table above in respect of the BSP and in respect of the LTIP awards that vested in 2018, the executive directors also received the following cash
Mondi plc: £2,015,774.38
Mondi plc: £1,013,259.18
Mondi plc: £442,636.60
Andrew King
Andrew King
amounts of equivalent value to dividends on vested shares over the vesting period, in accordance with the plan rules:
€97,871.23 (£85,559.03)
€128,733.79
Andrew King
Peter Oswald
Mondi Group
Integrated report and financial statements 2018
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Annual report on remuneration
All-employee share plans
The Group currently operates one HM Revenue & Customs approved all-employee share plan in the UK:
Share Incentive Plan (SIP) (audited)
Employees resident in the UK are eligible to participate in the SIP. Contributions of up to £150 are taken from participants’ gross salary and
used to purchase ordinary shares in Mondi plc each month. Participants receive one matching Mondi plc ordinary share free of charge
for each share purchased. The shares are placed in trust and the matching shares are forfeited if participants resign from the Group’s
employment within three years. If the shares are left in trust for at least five years, they can be removed free of UK income tax and National
Insurance contributions.
SIP
Shares held at
beginning of year or
on appointment to
the Boards
Partnership shares
acquired during
the year
Matching shares
awarded during
the year
Shares released
during year
Total shares held
as at 31 December
2018
Andrew King1
5,574
93
93
—
5,760
1 Since 1 January 2019 up to the date of this report Andrew King acquired 16 partnership shares and was awarded 16 matching shares
Mondi Limited and Mondi plc share prices
The closing price of a Mondi Limited ordinary share on the JSE Limited on 31 December 2018 was ZAR309.57 and the range during the
period between 1 January 2018 and 31 December 2018 was ZAR288.14 (low) to ZAR421.21 (high).
The closing price of a Mondi plc ordinary share on the London Stock Exchange on 31 December 2018 was £16.34 and the range during
the period between 1 January 2018 and 31 December 2018 was £15.84 (low) to £22.36 (high).
Statement of voting at Annual General Meetings
The Annual General Meetings of Mondi Limited and Mondi plc were both held on 16 May 2018. As required by the dual listed company
structure, all resolutions were treated as joint electorate actions and were decided on a poll. All resolutions at both meetings were passed.
The voting results of the joint electorate actions are identical and are given below. Overall in excess of 68% of the total Group shares
were voted.
Resolution
Mondi Limited business
Votes for
% Votes against
%
Votes total
Votes
withheld
13. To endorse the remuneration policy
328,740,064 98.29
5,714,924
1.71 334,454,988
3,015,489
14. To endorse the remuneration report (other than the policy)
315,849,371 94.88
17,027,679
5.12
332,877,050
4,594,427
15. To authorise a maximum increase of 2.5% in
non-executive director fees1
336,730,379 99.95
182,015 0.05 336,912,394
558,084
16. To rationalise the non-executive director fee structure1
336,715,280 99.97
108,793
0.03
336,824,073
646,405
Mondi plc business
27. To approve the remuneration report (other than the policy)
319,396,446 95.49
15,080,136 4.51 334,476,582
2,993,895
1 Special resolution
The remuneration policy was last approved as Mondi plc business at the AGM held on 11 May 2017, with a 95.57% vote for the resolution
and 4.43% against, with 3,898,672 votes withheld.
Mondi Group
Integrated report and financial statements 2018
Statement of implementation of directors’ remuneration policy in 2019
Current salary levels, and increases awarded in January 2019, are as follows:
Name
Peter Oswald
Andrew King
Base salary
effective 1 Jan 2019
Previous base
salary
€1,105,000
£594,500
€1,076,000
£579,000
% change
2.7
2.7
The executive directors’ base salaries were reviewed at the normal 1 January 2019 review date. Peter Oswald’s (Group Chief Executive
Officer) and Andrew King’s (Group Chief Financial Officer) salaries were increased by 2.7%, which is in line with the average percentage
increase for Mondi’s wider workforce.
BSP and LTIP structure for 2019
Half of any bonus earned in respect of 2019 performance will be paid out in cash and the other half will be deferred for three years in
conditional Mondi shares. The bonus structure for 2019 will remain as it was for 2018. A maximum of 70 points will be attributable to
financial performance (35 on underlying EBITDA and 35 on ROCE), 20 points on personal objectives and 10 points on safety. The Boards
consider the 2019 annual bonus performance targets to be commercially sensitive. Targets will be disclosed in next year’s report.
LTIP awards that are made in 2019 will continue to have two performance conditions of equal weight – TSR and ROCE, measured over a
three-year performance period commencing on 1 January 2019.
For the 50% of the awards attributable to TSR: If the Group’s TSR is below the median when ranked against the comparator group on
page 135, this part of the award will lapse in full. For TSR at the median, 25% of this part of the award (i.e. 12.5% of the total award) will
vest, with a straight-line progression to the upper quartile, at which point 100% of this part of the award (i.e. 50% of the total award)
will vest.
For the 50% of the awards attributable to ROCE: This part will lapse in full if ROCE is below 12%. 25% of this part of the award (i.e. 12.5%
of the total award) will vest for achievement of ROCE of 12%, with a straight-line progression to full vesting of this part of the award for
achievement of ROCE of 18% (i.e. 50% of the total award).
Non-executive directors’ fees
Current non-executive directors’ fees, and increases proposed for implementation with effect from the date of the Annual General
Meetings of Mondi Limited and Mondi plc to be held on 9 May 2019 are shown in the table below. Increases of circa 2.7% are proposed.
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Role
Joint chair fee1
Non-executive base fee
Additional fees:
Supplement for DLC audit committee chair
Supplement for DLC remuneration committee chair
Combined supplement for DLC sustainable development committee & Mondi
Limited social & ethics committee chair
Supplement for senior independent director
Supplement for senior independent director role if held by a non-executive who
already chairs a committee
Attendance fee per meeting (outside country of residence)
Attendance fee per meeting (inside country of residence)
1 No supplement is payable for additional commitments in relation to this role
Annual fee
£296,500
£47,350
£11,840
£11,270
£11,270
£11,270
£6,150
£5,920
£1,770
Proposed with
effect from
9 May 2019
£304,500
£48,630
£12,160
£11,570
£11,570
£11,570
£6,320
£6,080
£1,820
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Percentage
increase
proposed
2.7%
2.7%
2.7%
2.7%
2.7%
2.7%
2.8%
2.7%
2.8%
This report was approved by the Boards on 27 February 2019 and is signed on their behalf.
Tanya Fratto
Chair of the DLC remuneration committee
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Integrated report and financial statements 2018
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Other statutory information
For the purposes of the UK Companies Act, the disclosures below, including those incorporated by reference, together with the
Corporate governance report set out on pages 84 to 121, form the Directors’ report.
In addition, disclosures relating to the following items, which also form part of the Directors’ report, have been included in the Strategic
report which can be found on pages 12 to 83:
e Dividends
e Financial risk management objectives and policies
e Principal risks
e Likely future developments in the business
e Research and development activities
e Greenhouse gas (GHG) emissions
e Employees
Information required to be disclosed under UK Listing Rule 9.8.4 R
The UK Listing Authority listing rules require the disclosure of certain specified information in the annual financial report of Mondi plc.
The information required under rule 9.8.4 (1) in relation to interest capitalised and related tax relief can be found on page 174.
The information required under rules 9.8.4 (12) and (13) in relation to dividend waivers can be found on page 185. This information is
incorporated by reference into this Directors’ report.
Besides the above, the information required to be disclosed under rule 9.8.4 R is not applicable to Mondi plc and therefore no disclosures
have been made in this regard.
Share capital
Full details of the Group’s share capital can be found in note 21 to the financial statements.
Substantial interests
Mondi Limited
Based on the Mondi Limited share register as at 31 December 2018, the directors are aware of the following shareholders holding directly
5% or more of the issued share capital of Mondi Limited:
Shareholder
Public Investment Corporation Limited
GIC
Shares
16,008,777
6,652,379
%
13.53
5.62
Save as indicated above, the directors have not been advised of and have no certainty whether any of the shareholders could be
beneficially interested in 5% or more of the issued share capital of Mondi Limited.
Mondi plc
As at 31 December 2018, the Group had received notifications from the following parties in the voting rights of Mondi plc. The number of
voting rights and percentage interests shown are as disclosed at the date on which the holding was notified.
Shareholder
BlackRock, Inc
Coronation Asset Management Proprietary Limited
Public Investment Corporation Limited
Investec Asset Management Limited
AXA S.A.
Standard Life Investments Limited
Norges Bank
Old Mutual Plc
Sanlam Investment Management Proprietary Limited
There have been no changes in interests notified between 1 January 2019 and the date of this report.
Mondi Group
Integrated report and financial statements 2018
Number of voting
rights
21,530,677
18,505,096
18,390,224
18,352,708
17,210,471
16,476,021
14,424,171
11,978,984
10,936,128
%
5.86
5.04
5.01
4.99
4.69
4.49
3.93
3.26
3.00
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Additional information for Mondi plc shareholders
The information for Mondi plc shareholders required pursuant to the UK Companies Act 2006 can be found on pages 232 to 234 of
this report.
Political donations
No political donations were made during 2018 and it is Mondi’s policy not to make such donations.
Auditors
Each of the directors of Mondi Limited and Mondi plc at the date when this report was approved confirms that:
e so far as each of the directors is aware, there is no relevant audit information of which the Group’s auditors are unaware; and
e each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any
relevant audit information and to establish that the Group’s auditors are aware of that information.
PricewaterhouseCoopers Inc and PricewaterhouseCoopers LLP (together ‘PwC’) have indicated their willingness to continue as auditors
of Mondi Limited and Mondi plc respectively. The Boards have decided that resolutions to reappoint them will be proposed at the Annual
General Meetings of Mondi Limited and Mondi plc scheduled to be held on 9 May 2019.
The reappointment of PwC has the support of the DLC audit committee, which will be responsible for determining their audit fee on behalf
of the directors (see page 112 for more information).
Note 4 to the financial statements sets out the auditors’ fees both for audit and non-audit work.
Events occurring after 31 December 2018
With the exception of the proposed final ordinary dividend for 2018, included in note 9 to the financial statements, there have been no
material reportable events since 31 December 2018.
Annual General Meetings
The Annual General Meeting of Mondi Limited will be held at 11:30 (SA time) on Thursday 9 May 2019 at The Venue, 17 The High Street,
Melrose Arch, Melrose, Johannesburg 2019, Republic of South Africa and the Annual General Meeting of Mondi plc will be held at
10:30 (UK time) on Thursday 9 May 2019 at Haberdashers’ Hall, 18 West Smithfield, London EC1A 9HQ, UK. The notices convening
each meeting, which are sent separately to shareholders, detail the business to be considered and include explanatory notes for each
resolution. The notices are available on the Mondi Group website at: www.mondigroup.com.
This Directors’ report was approved by the Boards on 27 February 2019 and is signed on their behalf.
Philip Laubscher
Company Secretary
Mondi Limited
4th Floor, No. 3 Melrose Boulevard
Melrose Arch 2196
PostNet Suite #444
Private Bag X1
Melrose Arch 2076
Gauteng
Republic of South Africa
Jenny Hampshire
Company Secretary
Mondi plc
Building 1, 1st Floor
Aviator Park
Station Road
Addlestone
Surrey
KT15 2PG
Registration No. 1967/013038/06
Registered No. 6209386
27 February 2019
27 February 2019
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Mondi Group
Integrated report and financial statements 2018
144
Financial
statements
Directors’ responsibility statement
Independent auditors’ report
Financial statements
Production statistics and exchange rates
Group financial record
147
148
158
229
230
Additional information
for Mondi plc shareholders
Shareholder information
Glossary of terms
232
235
240
Setting
industry
standards
Our ambition is to be the
industry benchmark for
productivity, quality, innovation
and customer service.
This means maintaining a
relentless focus on operational
and commercial excellence,
investing in our world-class
manufacturing network,
and being disciplined in the
acquisitions we make.
€5.9bn
invested in asset base
since listing in 2007
We see digitalisation
as a key enabler.
Harnessing technology
will give us a strong
competitive edge.
John Lindahl
Group Technical &
Sustainability Director
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Our modernisation project at Mondi
Štětí is making it a global benchmark
for kraft paper mills.
Strategic performance
Page 31
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Financial statements
Directors’ responsibility statement
Independent auditors’ report to the members of Mondi plc and
the shareholders of Mondi Limited
Combined and consolidated income statement
Combined and consolidated statement of comprehensive income
Combined and consolidated statement of financial position
Combined and consolidated statement of changes in equity
Combined and consolidated statement of cash flows
Notes to the combined and consolidated financial statements:
Note 1
Note 2
Notes 3–7
Basis of preparation
Operating segments
Notes to the combined and consolidated
income statement
Notes 8–9
Per share measures
Notes 10–18 Notes to the combined and consolidated statement
of financial position
Notes 19–22 Capital management
Note 23
Retirement benefits
Notes 24–25 Notes to the combined and consolidated statement
of cash flows
Notes 26–31 Other disclosures
Note 32
Note 33
Accounting policies
Restatement of comparative information
Mondi Limited parent company statement of financial position
Mondi Limited parent company statement of changes in equity
Extract of the notes to the audited Mondi Limited parent company
financial statements
Mondi plc parent company balance sheet
Mondi plc parent company statement of changes in equity
Notes to the Mondi plc parent company financial statements
147
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158
159
160
161
162
163
163
168
172
174
181
187
191
197
205
214
217
218
219
221
221
222
Mondi Group
Integrated report and financial statements 2018
Directors’ responsibility statement
The directors are responsible for preparing the Integrated report, Remuneration report and Financial statements in accordance with
applicable laws and regulations.
South African and UK company law require the directors to prepare financial statements for each financial year.
e Under the Companies Act of South Africa 2008, the directors are required to prepare financial statements in accordance with
International Financial Reporting Standards (IFRS) and the requirements of the Act for each financial year, giving a true and fair view of
the Mondi Limited parent company’s and the Group’s state of affairs at the end of the year and profit or loss for the year.
e Under the UK Companies Act 2006, the directors are required to prepare the Group financial statements in accordance with IFRS as
adopted by the European Union (EU) and Article 4 of the IAS Regulation, and have elected to prepare the Mondi plc parent company
financial statements in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101). Furthermore,
under UK company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing the Group’s financial statements and the Mondi Limited parent company financial statements, International Accounting
Standard 1, ‘Presentation of Financial Statements’, requires that the directors:
e properly select and apply accounting policies;
e present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
e provide additional disclosure when compliance with the specific requirements in IFRS are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
e make an assessment of the Group’s and Company’s ability to continue as a going concern.
In preparing the Mondi plc parent company financial statements, the directors are required to:
e select suitable accounting policies and then apply them consistently;
e make judgements and accounting estimates that are reasonable and prudent;
e state whether FRS 101 has been followed, subject to any material departures disclosed and explained in the financial statements; and
e prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue
in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and parent
companies’ transactions; disclose with reasonable accuracy, at any time, the financial position of the Group and parent companies; and
enable them to ensure that the financial statements comply with the requirements of the Companies Act of South Africa 2008 and the UK
Companies Act 2006 respectively. They are also responsible for safeguarding the assets of the Group and parent companies and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Report on the financial statements
These financial statements have been prepared under the supervision of the Group Chief Financial Officer, Andrew King CA (SA), and
have been audited in accordance with the applicable requirements of the Companies Act of South Africa 2008 and the UK Companies
Act 2006.
The Boards confirm that to the best of their knowledge:
e the financial statements of the Group and Mondi Limited, prepared in accordance with IFRS and, in respect of the Group financial
statements only, also IFRS as adopted by the EU, and Mondi plc, prepared in accordance with FRS 101, give a true and fair view of the
assets, liabilities, financial position and profit or loss of Mondi Limited, Mondi plc and the undertakings included in the consolidation
taken as a whole;
e the Strategic report includes a fair review of the development and performance of the business and the position of Mondi Limited,
Mondi plc and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face; and
e the Integrated report and financial statements 2018, taken as a whole, are fair, balanced and understandable, and provide the
information necessary for shareholders to assess the Group’s performance, business model and strategy.
The Group’s combined and consolidated financial statements, and related notes 1 to 33, were approved by the Boards and authorised for
issue on 27 February 2019, and were signed on their behalf by:
Peter Oswald
Director
Andrew King
Director
Mondi Group
Integrated report and financial statements 2018
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Independent auditors’ report of PricewaterhouseCoopers LLP
to the members of Mondi plc and of PricewaterhouseCoopers Inc.
to the shareholders of Mondi Limited
Mondi plc and Mondi Limited operate under a dual listed company structure as a single economic entity. The “Group” consists of Mondi
plc, Mondi Limited and their respective subsidiaries. The Group financial statements combine and consolidate the financial statements of
the Group and include the Group’s share of joint arrangements and associates.
PricewaterhouseCoopers LLP is the appointed auditor of Mondi plc, a company incorporated in the United Kingdom in terms of the
United Kingdom Companies Act 2006. PricewaterhouseCoopers Inc. is the appointed auditor of Mondi Limited, a company incorporated
in South Africa in terms of the Companies Act of South Africa. PricewaterhouseCoopers LLP and PricewaterhouseCoopers Inc. (each
separately the “Group engagement team”) audited the financial statements of the Group.
PricewaterhouseCoopers LLP audited the Group financial statements and Mondi plc parent company financial statements for the year
ended 31 December 2018.
PricewaterhouseCoopers Inc. audited the Group financial statements for the year ended 31 December 2018.
For the purpose of this report, the terms “we” and “our” denote PricewaterhouseCoopers LLP in relation to UK legal, professional and
regulatory responsibilities and reporting obligations to the members of Mondi plc and PricewaterhouseCoopers Inc. in relation to South
African legal, professional and regulatory responsibilities and reporting obligations to the shareholders of Mondi Limited. For the purposes
of the “Our audit approach” section of this report, “we” and “our” refer to the Group engagement team, except for the purposes of the
table on pages 150 to 152 that sets out the key audit matters and how our audit addressed the key audit matters, where the terms “we”
and “our” refer to PricewaterhouseCoopers LLP and/or PricewaterhouseCoopers Inc. and/or our component teams.
Report on the audit of the financial statements
Opinion
Opinion of PricewaterhouseCoopers LLP on the financial statements to the members of Mondi plc
In our opinion:
e the financial statements, defined below, give a true and fair view of the state of the Group’s and of Mondi plc parent company’s affairs as
at 31 December 2018 and of the Group’s profit and cash flows for the year then ended;
e the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union;
e the Mondi plc parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and
applicable law); and
e the financial statements have been prepared in accordance with the requirements of the UK Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion of PricewaterhouseCoopers LLP in relation to the Group financial statements prepared in accordance
with IFRSs as issued by the International Accounting Standards Board (“IASB”)
As explained in note 1 to the Group financial statements, the Group, in addition to applying IFRSs as adopted by the European Union, has
also applied IFRSs as issued by the IASB.
In our opinion, the Group financial statements have been properly prepared in accordance with IFRSs as issued by the IASB.
Opinion of PricewaterhouseCoopers Inc. on the Group financial statements to the shareholders of Mondi Limited
In our opinion, the Group financial statements present fairly, in all material respects, the combined and consolidated financial position of
the Group as at 31 December 2018 and its combined and consolidated financial performance and its combined and consolidated cash
flows for the year then ended in accordance with IFRSs as issued by the IASB and the provisions of the Companies Act of South Africa.
What we have audited
PricewaterhouseCoopers LLP and PricewaterhouseCoopers Inc. have audited the Group financial statements set out on pages 158 to
216 of the Mondi Group Integrated report and financial statements 2018 (the “Integrated Report”), which comprise:
e the combined and consolidated statement of financial position as at 31 December 2018;
e the combined and consolidated income statement for the year then ended;
e the combined and consolidated statement of comprehensive income for the year then ended;
e the combined and consolidated statement of changes in equity for the year then ended;
e the combined and consolidated statement of cash flows for the year then ended; and
e the notes to the combined and consolidated financial statements, which include a summary of the significant accounting policies.
Mondi Group
Integrated report and financial statements 2018
PricewaterhouseCoopers LLP has audited the Mondi plc parent company financial statements set out on pages 221 to 228 of the
Integrated Report, which comprise:
e the Mondi plc parent company balance sheet as at 31 December 2018;
e the Mondi plc parent company statement of changes in equity for the year then ended; and
e the notes to the Mondi plc parent company financial statements, which include a summary of the significant accounting policies.
The Group financial statements and the Mondi plc parent company financial statements are referred to in this report as the
“financial statements”.
Basis for opinion
PricewaterhouseCoopers LLP conducted their audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and
applicable law. PricewaterhouseCoopers Inc. conducted their audit in accordance with International Standards on Auditing (“ISAs”).
Our responsibilities under ISAs and ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Independence
PricewaterhouseCoopers LLP remained independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we
declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or Mondi plc. Other than those
disclosed in note 4 to the Group financial statements, we have provided no non-audit services to the Group or Mondi plc in the period
from 1 January 2018 to 31 December 2018.
PricewaterhouseCoopers Inc. is independent of the Group in accordance with the Independent Regulatory Board for Auditors Code
of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits
of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in
accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the
International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B).
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Our audit approach
Overview
Overall Group materiality: €55 million (2017: €45 million), based on approximately 5% of profit before tax adjusted for special items.
Overall Mondi plc parent company materiality: €29 million (2017: €30 million), based on 1% of total assets.
We identified three components (2017: one) as individually significant components which required an audit of their complete financial
information due to their financial significance to the Group and a further seven components (2017: nine) where we have concluded
that the component engagement leader is a Key Audit Partner (as defined under ISAs (UK)). These ten components are located
in Austria, the Czech Republic, Germany, Poland, Russia, Sweden, Slovakia and South Africa (2017: Austria, the Czech Republic,
Germany, Poland, Russia, Slovakia and South Africa).
We obtained full scope audit reporting from an additional 18 components (2017: 18), including operating units and treasury
operations. Specified audit procedures or specified procedures on certain balances and transactions were performed at a further 19
components (2017: 26).
We assessed the risks of material misstatement in the Group financial statements and determined the following key audit matters
for 2018:
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e Taxation;
e Impairment of goodwill and property, plant and equipment;
e Acquisition of Powerflute Group Holdings Oy (Powerflute); and
e Adoption of IFRS 16 ‘Leases’.
Valuation of forestry assets and capital expenditure were considered key audit matters for 2017, but were not areas of most
significance in the audit of the financial statements in 2018. No key audit matters specific to the Mondi plc parent company financial
statements were identified.
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The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain.
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Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and the industry in which it operates, we identified that the principal risks of non-compliance
with laws and regulations related to breaches of environmental regulations and unethical and prohibited business practices (see pages 45
and 46 of the Integrated Report), and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the UK
Companies Act 2006, the Companies Act of South Africa 2008, the UK Listing Rules and the Johannesburg Stock Exchange Limited
Listings Requirements.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue
and management bias in accounting estimates. We shared this risk assessment with the component auditors referred to in the
scoping section of our report below, so that they could include appropriate audit procedures in response to such risks in their work.
Audit procedures performed by the Group engagement team and/or component auditors included:
e Discussions with management, internal audit and the Group’s legal advisors, including consideration of potential instances of non-
compliance with laws and regulation and fraud;
e Assessment of matters reported through the Group’s whistleblowing helpline and the results of management’s investigation of such
matters; and
e Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to
taxation, assessment of indicators of impairment of property, plant and equipment and the acquisition of Powerflute (see related key
audit matters below).
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period. In terms of ISAs (UK), they include the most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results
of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
Taxation
The Group has operations in a number of
geographical locations and as such is subject to
multiple tax jurisdictions, giving rise to complexity in
accounting for the Group’s taxation.
In particular, the interpretation of complex tax
regulations and the unknown future outcome of
any pending judgements by the tax authorities
results in the need to provide against a number of
uncertain tax positions. There are also cross-border
transactions which give rise to transfer pricing
related risks that require judgement to determine
the appropriate tax charge and any associated
provisions, and for these reasons we considered it
to be a key audit matter.
Refer to notes 7 and 32, and the Audit Committee’s
views set out on page 109.
How our audit addressed the key audit matter
Our audit work, which involved taxation audit specialists at Group and in specific
locations where local tax knowledge was considered necessary, included the
assessment of the Group’s uncertain tax positions. As part of our audit challenge,
we also involved transfer pricing experts to consider the appropriateness of the
Group’s assessment of its exposure to transfer pricing related risks and related
corporate tax provisions.
Our assessment included reading correspondence with tax authorities to
understand the current status of tax assessments and investigations and to
monitor developments in ongoing disputes. We also read recent rulings by
local tax authorities, as well as external tax advice received by the Group where
relevant, to satisfy ourselves that the tax provisions had been appropriately
recorded or adjusted to reflect the latest tax legislative developments.
In assessing the adequacy of the tax provisions, we considered factors such
as possible penalties and interest which could be imposed by the local tax
authorities. We also determined whether the tax provisions are recognised in
accordance with the relevant accounting standards.
We considered the appropriateness of the related disclosures in note 7 and
note 32 to the financial statements.
Based on the procedures performed, we noted no material issues from our work.
Mondi Group
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Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill and property, plant and equipment
The Group has goodwill of €942 million (2017:
€698 million) and property, plant and equipment
of €4,340 million (2017 restated: €4,128 million)
as at 31 December 2018. Impairment charges to
property, plant and equipment of €74 million
(2017: €50 million) have been recognised in the
current year.
For property, plant and equipment, management
is required to determine the recoverable amount
of an asset, or the cash-generating unit (CGU) to
which the asset relates, when an impairment trigger
is identified. The identification as to whether an
impairment or impairment reversal trigger exists
involves management judgement.
For those items of property, plant and equipment
where an indicator of impairment was identified,
and for the groups of CGUs to which goodwill
relates (which require an annual impairment test),
the determination of the recoverable amount,
being the higher of value in use (VIU) and fair
value less costs of disposal (FVLCD), requires
judgement and estimation by management. This
is because the determination of a recoverable
amount includes management’s consideration of
key internal inputs and external market conditions
such as future paper prices, customer demand
and forecast growth rates, which all impact future
discounted cash flows and the determination of
the most appropriate discount rate. Therefore, we
considered it to be a key audit matter.
Refer to notes 1, 10, 12 and 32, and the Audit
Committee’s views set out on page 108.
We satisfied ourselves as to the appropriateness of the judgement related to
the level at which impairment is assessed for property, plant and equipment,
being the lowest level at which largely independent cash inflows can be
identified (the CGUs). We also assessed the level at which goodwill is
monitored for impairment.
For property, plant and equipment, we evaluated management’s assessment
of impairment indicators, as well as indicators of impairment reversal, including
the conclusions reached. Our evaluation included assessing management’s
process to identify impairment triggers, together with an assessment of
business performance in the year, including specific consideration of the
impact of the business restructurings and plant closures announced during
2018.
Where impairment tests were performed, including on goodwill, we
challenged the basis for management’s estimates of growth rates and
future cash flows with reference to historical trading performance, market
expectations and management forecasts. We used our internal valuation
experts to independently recalculate the discount rates applied and checked
the mathematical accuracy of management’s valuation models.
For the groups of CGUs that have goodwill attached to them, we also
compared the Group’s market capitalisation with the aggregate enterprise
value reflected in management’s impairment models.
We recalculated management’s assessment of the sensitivity of the Group’s
goodwill impairment models to reasonably possible changes in the key
assumptions and considered the appropriateness of disclosures provided by
the Group in relation to its impairment reviews.
We focused our procedures on property, plant and equipment at those
sites where there was a decline in performance year-on-year and on the
Consumer Packaging goodwill balance. We also tested the impairments of
property, plant and equipment recorded in special items in the year ended
31 December 2018.
Based on the procedures performed, we noted no material issues from our
work.
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Key audit matter
How our audit addressed the key audit matter
Acquisition of Powerflute Group Holdings Oy (Powerflute)
The Group acquired 100% of the outstanding
share capital of Powerflute on 1 June 2018 for a
total consideration of €365 million. The acquisition
resulted in goodwill of €242 million.
The fair value accounting for the acquisition
was determined by management, with support
from an external expert, on a provisional basis in
accordance with IFRS 3, Business Combinations.
The determination of the fair value of assets
and liabilities is a complex subject matter
and management has applied estimates and
judgements in determining the net assets acquired
and, therefore, we considered it to be a key audit
matter. Key estimates and judgements involve
the identification of the assets acquired and
liabilities assumed, determination of any separately
identifiable intangible assets and the valuation of
assets and liabilities that are recognised.
Refer to notes 12, 24 and 32, and the Audit
Committee’s views set out on page 109.
Adoption of IFRS 16 ‘Leases’
The Group elected to early adopt IFRS 16 ‘Leases’
fully retrospectively. This new accounting standard
requires a lessee to recognise a right-of-use asset
representing its right to use the underlying leased
asset, and a lease liability representing its obligation
to make lease payments.
Management has applied judgement in assessing
whether new arrangements contain a lease,
determining the lease terms, calculating the discount
rate and concluding whether any service or lease
components of lease arrangements need to be
separated. Therefore, we considered it to be a key
audit matter.
As at 31 December 2018 the Group has recorded a
right-of-use asset of €148 million (2017: €169 million)
and lease liabilities of €184 million (2017: €208 million).
The depreciation charge recognised on the right-
of-use assets was €27 million (2017: €27 million)
and the interest on lease liabilities €14 million (2017:
€14 million).
Refer to notes 6, 11, 32 and 33, and the Audit
Committee’s views set out on page 109.
We evaluated the underlying acquisition agreements for the appropriate
accounting treatment in terms of IFRS 3 and the Group’s accounting policy.
We held discussions with management to obtain an understanding of
management’s process for identifying all separately identifiable assets acquired
and liabilities assumed and inspected management’s documented process.
In assessing the completeness and appropriateness of the identification
of assets acquired and liabilities assumed we read the Group’s Board and
Executive Committee minutes to understand the rationale for the acquisition,
critically evaluated the underlying acquisition agreements, utilised the
experience of our internal valuation experts and conducted a site visit to the
acquired operations in Kuopio, Finland, with specific focus on the inspection
of the integrated pulp and paper mill.
We also assessed the independence, professional competence, objectivity
and capabilities of management’s external valuations expert involved in
determining the fair value of the net assets acquired.
In assessing the work performed by management’s external valuation expert
we utilised our internal valuation expertise to:
e Assess the adequacy and appropriateness of the valuation methodologies
used to value the recognised assets and liabilities;
e Assess the appropriateness of the assumptions used in determining the fair
value of assets acquired and liabilities assumed with specific focus on the
replacement cost values and remaining useful lives assumed in the valuation of
property, plant and equipment; and
e Recompute the resulting goodwill recognised on acquisition.
We considered the appropriateness of the related disclosure in notes 12, 24
and 32 to the financial statements.
Based on the procedures performed, we noted no material issues from
our work.
We obtained the Group’s calculation of the right-of-use asset, lease liability,
depreciation charge and interest on the lease liability based on the lease data
for the population of leases identified.
We performed procedures to assess the completeness of management’s
listing of the lease contracts in place, including reading new contracts and
management meeting minutes and assessing expense accounts.
We tested the accuracy of the lease data compiled by management by
agreeing key inputs to the underlying arrangements to ensure the accuracy of
key data points used in determining the IFRS 16 accounting entries.
Where appropriate, we evaluated the relevant IT systems and tested the
operating effectiveness of the internal controls over the recording of the IFRS
16 accounting entries. Our testing included an evaluation of the mathematical
accuracy of the underlying calculations.
We also involved our internal valuation experts to consider the appropriateness
of the Group’s assessment of the discount rates used in the lease calculations.
We assessed the rationale and approach in determining the discount rates
applied for a sample of the leases.
Based on the procedures performed, we noted no material issues from
our work.
PricewaterhouseCoopers LLP have determined that there are no additional key audit matters to communicate in our report with regard to
the audit of the Mondi plc parent company financial statements for the current period.
Mondi Group
Integrated report and financial statements 2018
How we tailored the audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the Group financial statements
as a whole, taking into account the structure of the Group and the parent companies, the accounting processes and controls, and the
industry in which they operate.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at components by
us, as the Group engagement team, or component auditors operating under our instruction.
We identified three components (2017: one) as significant components (as defined within ISAs (UK) and ISAs) which, in our view, required
an audit of their complete financial information, due to their financial significance to the Group. Outside of these components, we obtained
full scope audit reporting from a further seven components (2017: nine), where we concluded that the component engagement leader is
a Key Audit Partner (as defined under ISAs (UK)), and an additional 18 components where full scope audits were performed (2017: 18).
Together, these components were in 11 countries (2017: nine), representing the Group’s principal businesses, and accounted for 67%
(2017: 66%) of the Group’s revenue.
Specified audit procedures or specified procedures on certain balances and transactions were performed at a further 19 (2017: 26)
components and central testing was performed on selected items, such as goodwill, primarily to ensure appropriate audit coverage.
In aggregate, the locations subject to audit procedures represented 81% (2017: 84%) of the Group’s revenue.
The components included within our scope of audit were determined based on the individual component’s contribution to the group key
financial statement line items (in particular revenue and profit or loss before tax), and considerations relating to aggregation risk within
the Group.
Where work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those
components to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the
Group financial statements as a whole.
We issued formal written instructions to all component auditors setting out the audit work to be performed by each of them and
maintained regular communication with them throughout the audit cycle. These interactions included attending certain component
clearance meetings, as well as reviewing and assessing any matters reported. The Group engagement team also reviewed selected audit
working papers for certain in-scope component teams.
In addition, senior members of the Group engagement team from the UK and/or South Africa visited component teams in Austria,
the Czech Republic, Finland, Germany, Poland, Russia, Slovakia, South Africa and Sweden. These visits included meetings with local
management and with the component auditors, and typically involved operating site tours.
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Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures, and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
€55 million (2017: €45 million).
€29 million (2017: €30 million).
Group financial statements
Mondi plc parent company financial statements
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How we determined it
Rationale for benchmark
applied
Based on approximately 5% of profit before
tax adjusted for special items as described in
note 3 to the financial statements.
For overall Group materiality, we chose an
adjusted profit before tax measure as the
benchmark. The adjusted profit before tax
measure removes the impact of significant
items which do not recur from year to year
or otherwise significantly affect the underlying
trend of performance from continuing
operations. This is the metric against which
the performance of the Group is most
commonly assessed by management and
reported to members. We chose 5%, which
is consistent with quantitative materiality
thresholds used for profit-oriented companies
in this sector.
1% of total assets.
For overall Mondi plc parent company materiality,
PricewaterhouseCoopers LLP determined the
materiality based on total assets, which is more
appropriate than a performance-related measure
as the company is an investment holding company
for the Group. Using professional judgement,
PricewaterhouseCoopers LLP determined materiality
for this year at €29 million (2017: €30 million), which
equates to approximately 1% of the current year’s total
assets.
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Integrated report and financial statements 2018
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For each component in the scope of our Group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between €2 million (2017: €1.5 million) and €40 million (2017: €37 million).
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €2 million
(2017: €2 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) PricewaterhouseCoopers LLP report as follows:
Reporting obligation
Outcome
ISAs (UK) require us to report to you when:
e the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
e the directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt
about the Group’s and Mondi plc’s ability to continue to adopt
the going concern basis of accounting for a period of at least
twelve months from the date when the financial statements are
authorised for issue.
We are required to report if the directors’ statement relating
to Going Concern in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit.
We have nothing material to add or to draw attention to. However,
because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Group’s and Mondi plc’s
ability to continue as a going concern. For example, the terms
on which the United Kingdom may withdraw from the European
Union, which is currently due to occur on 29 March 2019, are not
clear, and it is difficult to evaluate all of the potential implications on
the company’s trade, customers, suppliers and the wider economy.
We have nothing to report.
Other information
Reporting on other information by PricewaterhouseCoopers LLP
The other information comprises all of the information in the Integrated Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and the Directors’ Report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the UK Companies Act 2006, (CA06),
ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as
described below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and the
Directors’ Report for the year ended 31 December 2018 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Mondi plc parent company and their environment obtained in the
course of the audit, we did not identify any material misstatements in the Strategic Report and the Directors’ Report. (CA06)
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The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency
or liquidity of the Group
We have nothing material to add or draw attention to regarding:
e The directors’ confirmation on page 39 of the Integrated Report that they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.
e The disclosures in the Integrated Report that describe those risks and explain how they are being managed or mitigated.
e The directors’ explanation on page 47 of the Integrated Report as to how they have assessed the prospects of the Group, over
what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of
their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment
of the principal risks facing the Group and the statement in relation to the longer-term viability of the Group. Our review was
substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting
their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code
(the ‘Code’); and considering whether the statements are consistent with the knowledge and understanding of the Group and
Mondi plc parent company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
e The statement given by the directors, on page 147, that they consider the Integrated Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Mondi plc parent company’s
position and performance, business model and strategy is materially inconsistent with our knowledge of the Group and Mondi plc
parent company obtained in the course of performing our audit.
e The section of the Integrated Report on pages 108 and 109 describing the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee.
e The directors’ statement relating to Mondi plc’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
UK Companies Act 2006. (CA06)
Reporting on other information by PricewaterhouseCoopers Inc.
The directors are responsible for the other information. The other information comprises the contents of the Mondi Group Integrated
Report listed on page 3 outside of the Group financial statements being the Overview, the Strategic report, the Governance section,
the Directors’ responsibility statement, the Mondi plc parent company financial statements, the extracted financial information of Mondi
Limited parent company audited financial statements, the Group financial record, Production statistics, Exchange rates, Additional
information for Mondi plc shareholders, Shareholder information, and the Glossary of terms and the contents of the Mondi Limited audited
annual financial statements. Other information does not include the Group financial statements and our auditor’s report thereon.
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Our opinion on the Group financial statements does not cover the other information and we do not express an audit opinion or any form of
assurance conclusion thereon.
In connection with our audit of the Group financial statements, our responsibility is to read the other information identified above and, in
doing so, consider whether the other information is materially inconsistent with the Group financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
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Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ responsibility statement set out on page 147, the directors are responsible for the preparation
of the financial statements in accordance with the applicable framework, and for being satisfied that they give a true and fair view.
The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and Mondi plc’s ability to continue as a going
concern, disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group and/or Mondi plc or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of PricewaterhouseCoopers LLP’s responsibilities for the audit of the financial statements in accordance with ISAs
(UK) is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
As part of an audit in accordance with ISAs, PricewaterhouseCoopers Inc. exercise professional judgement and maintain professional
scepticism throughout the audit. We also:
e Identify and assess the risks of material misstatement of the Group financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for
our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
e Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
e Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the directors.
e Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the Group financial statements or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern. For example, the terms on which the United Kingdom may withdraw
from the European Union, which is currently due to occur on 29 March 2019, are not clear, and it is difficult to evaluate all of the potential
implications on the Group’s trade, customers, suppliers and the wider economy.
e Evaluate the overall presentation, structure and content of the Group financial statements, including the disclosures, and whether the
Group financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
e Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the Group financial statements. We are responsible for the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and
to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the Group
financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Mondi Group
Integrated report and financial statements 2018
Use of the independent auditors’ report of PricewaterhouseCoopers LLP
The independent auditors’ report of PricewaterhouseCoopers LLP, including the opinions issued by PricewaterhouseCoopers LLP, has
been prepared for and only for the members of Mondi plc as a body in accordance with Chapter 3 of Part 16 of the UK Companies Act
2006 and for no other purpose. PricewaterhouseCoopers LLP does not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by
PricewaterhouseCoopers LLP’s prior consent in writing.
Report on other legal and regulatory requirements
Other required reporting by PricewaterhouseCoopers LLP
UK Companies Act 2006 exception reporting
Under the UK Companies Act 2006 we are required to report to you if, in our opinion:
e we have not received all the information and explanations we require for our audit; or
e adequate accounting records have not been kept by the Mondi plc parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
e certain disclosures of directors’ remuneration specified by law are not made; or
e the Mondi plc parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 11 May 2017 to audit the financial
statements for the year ended 31 December 2017 and subsequent financial periods. The period of total uninterrupted engagement for
PricewaterhouseCoopers LLP auditing Mondi plc is two years, covering the years ended 31 December 2017 to 31 December 2018.
Other required reporting by PricewaterhouseCoopers Inc.
In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that
PricewaterhouseCoopers Inc. has been the auditor of Mondi Limited for two years.
Andrew Kemp (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom
PricewaterhouseCoopers Inc.
Director: JFM Kotzé
Registered Auditor
Johannesburg, South Africa
27 February 2019
27 February 2019
157
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Mondi Group
Integrated report and financial statements 2018
158
Combined and consolidated income statement
for the year ended 31 December 2018
€ million
Group revenue
Materials, energy and consumables used
Variable selling expenses
Gross margin
Maintenance and other indirect expenses
Personnel costs
Other net operating expenses
EBITDA
Depreciation, amortisation and impairments
Operating profit
Net profit from equity accounted investees
Total profit from operations and equity
accounted investees
Net finance costs
Profit before tax
Tax (charge)/credit
Profit for the year
Attributable to:
Non-controlling interests
Shareholders
Earnings per share (EPS) attributable
to shareholders
(euro cents)
Basic EPS
Diluted EPS
Basic underlying EPS
Diluted underlying EPS
Basic headline EPS
Diluted headline EPS
Note:
2018
Special
items
(note 3)
—
—
—
—
—
(15)
(30)
(45)
(81)
(126)
—
(126)
—
(126)
34
(92)
Notes Underlying
2
7,481
(3,526)
(534)
3,421
(346)
5
(1,039)
(272)
1,764
(446)
1,318
1
1,319
(88)
1,231
(273)
958
42
916
2
6
7a
30
8
8
8
8
8
8
Restated1
2017
Special
items
(note 3)
—
—
—
—
—
(9)
(14)
(23)
(38)
(61)
—
(61)
—
(61)
8
(53)
Total Underlying
7,481
(3,526)
(534)
3,421
(346)
7,096
(3,452)
(525)
3,119
(319)
(1,054)
(1,053)
(265)
1,482
(453)
1,029
1
1,030
(85)
945
(181)
764
43
721
(302)
1,719
(527)
1,192
1
1,193
(88)
1,105
(239)
866
42
824
170.1
170.0
189.1
189.0
184.8
184.7
Total
7,096
(3,452)
(525)
3,119
(319)
(1,062)
(279)
1,459
(491)
968
1
969
(85)
884
(173)
711
43
668
137.9
137.8
148.9
148.8
145.4
145.3
1 The audited annual financial statements for the year ended 31 December 2017 were restated due to the adoption of IFRS 16, ‘Leases’, which has been disclosed in
notes 32 and 33 of these combined and consolidated financial statements
Mondi Group
Integrated report and financial statements 2018
Combined and consolidated statement of comprehensive income
for the year ended 31 December 2018
159
2018
Restated
2017
Before tax
amount
Tax
charge
Net of tax
amount
Before tax
amount
Tax
charge
Net of tax
amount
€ million
Profit for the year
Items that may subsequently be reclassified to the
combined and consolidated income statement
Fair value gains arising from cash flow hedges
Exchange differences on translation of foreign operations
Share of other comprehensive expense of equity
accounted investees
Items that will not subsequently be reclassified to the
combined and consolidated income statement
Remeasurements of retirement benefits plans:
Return on plan assets
Actuarial losses arising from changes in
demographic assumptions
Actuarial gains arising from changes in
financial assumptions
Actuarial gains/(losses) arising from
experience adjustments
1
(219)
—
(12)
(6)
(24)
16
2
866
1
(219)
—
—
—
—
(1)
(13)
—
(71)
(2)
9
8
—
4
(3)
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711
—
(71)
(2)
—
—
—
(1)
8
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Other comprehensive expense for the year
(230)
(1)
(231)
(64)
(1)
(65)
Other comprehensive expense attributable to:
Non-controlling interests
Shareholders
Total comprehensive income attributable to:
Non-controlling interests
Shareholders
Total comprehensive income for the year
(12)
(218)
—
(1)
(12)
(219)
(2)
(62)
—
(1)
(2)
(63)
30
605
635
41
605
646
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Mondi Group
Integrated report and financial statements 2018
160
Combined and consolidated statement of financial position
as at 31 December 2018
€ million
Property, plant and equipment
Goodwill
Intangible assets
Forestry assets
Investment in equity accounted investees
Financial instruments
Deferred tax assets
Net retirement benefits asset
Total non-current assets
Inventories
Trade and other receivables
Current tax assets
Financial instruments
Cash and cash equivalents
Assets held for sale
Total current assets
Total assets
Short-term borrowings
Trade and other payables
Current tax liabilities
Provisions
Financial instruments
Total current liabilities
Medium and long-term borrowings
Net retirement benefits liability
Deferred tax liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Combined share capital and stated capital
Retained earnings and other reserves
Total attributable to shareholders
Non-controlling interests in equity
Total equity
Notes
10
12
13
14
7b
23
15
16
25b
20
17
18
20
23
7b
18
21
2018
4,340
942
91
340
9
21
49
6
5,798
968
1,190
22
9
52
3
2,244
8,042
(268)
(1,186)
(140)
(61)
(13)
(1,668)
(2,002)
(234)
(253)
(46)
(14)
(2,549)
(4,217)
Restated
2017
4,128
Restated
At 1 January
2017
3,961
698
111
325
3
23
26
7
5,321
867
1,106
29
14
38
1
2,055
7,376
(291)
(1,074)
(126)
(50)
(8)
(1,549)
(1,280)
(232)
(248)
(41)
(19)
(1,820)
(3,369)
681
120
316
9
25
27
1
5,140
850
1,049
32
8
404
1
2,344
7,484
(673)
(1,100)
(95)
(49)
(23)
(1,940)
(1,309)
(240)
(260)
(44)
(26)
(1,879)
(3,819)
3,825
4,007
3,665
542
2,943
3,485
340
3,825
542
3,141
3,683
324
4,007
542
2,820
3,362
303
3,665
The Group’s combined and consolidated financial statements, and related notes 1 to 33, were approved by the Boards and authorised for
issue on 27 February 2019 and were signed on their behalf by:
Peter Oswald
Director
Mondi Limited company registration number: 1967/013038/06
Mondi plc company registered number: 6209386
Andrew King
Director
Mondi Group
Integrated report and financial statements 2018
Combined and consolidated statement of changes in equity
for the year ended 31 December 2018
€ million
At 1 January 2017, as previously reported
Impact of change in accounting policy (see note 33)
Restated balance at 1 January 2017
Total comprehensive income/(expense) for the
year (restated)
Dividends
Purchases of treasury shares
Distribution of treasury shares
Mondi share schemes’ charge
Issue of shares under employee share schemes
Put option held by non-controlling interests
Other movements in non-controlling interests
Restated balance at 31 December 2017
Impact of change in accounting policy1
Restated balance at 1 January 2018
Total comprehensive income/(expense) for
the year
Dividends
Purchases of treasury shares
Distribution of treasury shares
Mondi share schemes’ charge (see note 22)
Issue of shares under employee share schemes
Put option held by non-controlling interests
Other movements in non-controlling interests
Combined
share capital
and stated
capital
Treasury
shares
Retained
earnings
Other
reserves
Equity
attributable
to
shareholders
Non-
controlling
interests
542
—
542
—
—
—
—
—
—
—
—
542
—
542
—
—
—
—
—
—
—
—
(24)
—
(24)
—
—
(24)
21
—
—
—
—
(27)
—
(27)
—
—
(15)
16
—
—
—
—
3,217
(30)
3,187
668
(273)
—
(21)
—
14
(5)
(2)
3,568
3
3,571
824
(793)
—
(16)
—
11
(4)
(4)
(343)
—
(343)
(63)
—
—
—
15
(14)
5
—
(400)
(3)
(403)
(219)
—
—
—
11
(13)
4
—
3,392
(30)
3,362
605
(273)
(24)
—
15
—
—
(2)
3,683
—
3,683
605
(793)
(15)
—
11
(2)
—
(4)
304
(1)
303
41
(22)
—
—
—
—
—
2
324
—
324
30
(18)
—
—
—
—
—
4
Total
equity
3,696
(31)
3,665
646
(295)
(24)
—
15
—
—
—
4,007
—
4,007
635
(811)
(15)
—
11
(2)
—
—
At 31 December 2018
542
(26)
3,589
(620)
3,485
340
3,825
Note:
1 IFRS 9, ‘Financial Instruments’, was adopted without restating comparative information. The reclassification arising from the change of classification categories from
‘available-for-sale’ to ‘at fair value through profit or loss’ is recognised in the opening balance sheet on 1 January 2018
Other reserves
€ million
Cumulative translation adjustment reserve
Post-retirement benefits reserve
Share-based payment reserve
Cash flow hedge reserve
Merger reserve
Put option liability reserve
Other sundry reserves
Total other reserves
2018
(820)
(75)
22
—
259
—
(6)
(620)
Restated
2017
(604)
(71)
23
(1)
259
(4)
(2)
(400)
161
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Mondi Group
Integrated report and financial statements 2018
162
Combined and consolidated statement of cash flows
for the year ended 31 December 2018
Notes
2018
Restated
2017
25a
13
1,654
1
(248)
1,407
(709)
(10)
(53)
(7)
13
—
24
(402)
3
—
8
1,363
1
(151)
1,213
(611)
(16)
(49)
—
14
1
(37)
—
1
3
(1,157)
(694)
165
—
600
—
9
(25)
(73)
(793)
(18)
(15)
(25)
(8)
25
(11)
—
(500)
23
(27)
(97)
(273)
(22)
(24)
(47)
(5)
(183)
(958)
67
(66)
67
7
8
(439)
377
(439)
(4)
(66)
25c
25c
25c
25c
25c
11
9
25c
25c
25b
€ million
Cash flows from operating activities
Cash generated from operations
Dividends received from other investments
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Investment in property, plant and equipment
Investment in intangible assets
Investment in forestry assets
Investment in equity accounted investees
Proceeds from the disposal of property, plant and equipment
Proceeds from the disposal of financial asset investments
Acquisition of businesses, net of cash and cash equivalents
Proceeds from the disposal of businesses, net of cash and cash equivalents
Loan repayments from external parties
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from medium and long-term borrowings
Repayment of medium and long-term borrowings
Proceeds from Eurobonds
Repayment of Eurobonds
Net proceeds from short-term borrowings
Repayment of lease liabilities
Interest paid
Dividends paid to shareholders
Dividends paid to non-controlling interests
Purchases of treasury shares
Net cash outflow from derivatives
Other financing activities
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash movement in the year
Effects of changes in foreign exchange rates
Cash and cash equivalents at end of year
Mondi Group
Integrated report and financial statements 2018
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
1 Basis of preparation
Dual listed structure
The Group has two separate legal parent entities, Mondi Limited and Mondi plc, which operate under a dual listed company (DLC)
structure. The substance of the DLC structure is such that Mondi Limited and its subsidiaries, and Mondi plc and its subsidiaries, operate
together as a single economic entity through a sharing agreement, with neither parent entity assuming a dominant role. Accordingly,
Mondi Limited and Mondi plc are reported on a combined and consolidated basis as a single reporting entity.
The Group’s combined and consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB); the South African Institute of Chartered Accountants
(SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee; Financial Pronouncements as issued by the
Financial Reporting Standards Council and the requirements of the Companies Act of South Africa 2008. The principal accounting
policies adopted are set out in note 32.
There are no differences for the Group in applying IFRS as issued by the IASB and IFRS as adopted by the European Union (EU) and,
therefore, the Group also complies with Article 4 of the EU IAS Regulation.
The combined and consolidated financial statements have been prepared on a going concern basis as discussed in the Strategic report
within ‘Principal risks’ under the heading ‘Going concern’ on page 47.
Critical accounting judgements and key estimates
The preparation of the Group’s combined and consolidated financial statements includes the use of estimates and assumptions.
Although the estimates used are based on management’s best information about current circumstances and future events and actions,
actual results may differ from those estimates.
The most significant estimates and judgements are:
Key estimates
e Discount rates for initial measurement of lease liabilities – refer to note 11
e Fair value of forestry assets – refer to note 14
e Actuarial valuations of retirement benefit obligations – refer to note 23
e Fair value of assets acquired and liabilities assumed in business combinations – refer to note 24
Critical accounting judgements and other accounting estimates
e Impairment of goodwill – refer to notes 12 and 32
e Impairment of property, plant and equipment, and intangible assets – refer to notes 10, 13 and 32
e Residual values and useful economic lives of property, plant and equipment – refer to notes 10 and 32
e Taxation – refer to notes 7 and 32
2 Operating segments
Effective from 1 August 2018, the Group reorganised its business units to achieve improved strategic alignment and operational
coordination across the fibre-based packaging value chain. The changes to the Group’s business units, and consequently to the Group’s
segmental reporting, are as follows:
e Packaging Paper and Fibre Packaging were replaced by a single business unit called Fibre Packaging; and
e there were no changes to the Consumer Packaging or Uncoated Fine Paper business units.
Prior year figures have been restated to reflect the new organisational structure. The reorganisation has no impact on the overall
Group result.
The Group generates revenue from the sale of manufactured products across the packaging and paper value chain. Revenue is generally
recognised at a point in time, typically when the goods have been delivered to a contractually agreed location. Customer payment terms
do not contain significant financing components.
The Group provides transport services after control of certain goods has passed to the customer. The Group generated transport revenue
of €57 million (2017: €57 million) in the current financial year.
Mondi Group
Integrated report and financial statements 2018
163
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164
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
2 Operating segments
The material product types from which the Group’s externally reportable segments derive their internal and external revenues are
as follows:
Operating segments
Fibre Packaging
Consumer Packaging
Uncoated Fine Paper
Product types
Containerboard
Kraft paper
Pulp
Corrugated packaging
Industrial bags
Extrusion coatings
Consumer goods packaging
Personal care components
Technical films
Release liner
Uncoated fine paper
Newsprint
Pulp
Year ended 31 December 2018
€ million, unless otherwise stated
Fibre Packaging
Consumer
Packaging
Uncoated
Fine Paper
Corporate
Intersegment
elimination
Segment revenue
Internal revenue
External revenue
Underlying EBITDA
Depreciation and impairments
Amortisation
Underlying operating profit/(loss)
Special items
Operating segment assets
Operating segment net assets
Additions to non-current
non-financial assets
Capital expenditure cash payments
Underlying EBITDA margin (%)
Return on capital employed (%)
Average number of employees
(thousands)1
Note:
1 Presented on a full time employee equivalent basis
4,108
(62)
4,046
1,086
(231)
(14)
841
(73)
4,394
3,804
882
469
26.4
26.8
13.5
1,611
(5)
1,606
194
(61)
(18)
115
(32)
1,552
1,311
84
79
12.0
9.0
6.0
1,877
(48)
1,829
516
(119)
(2)
395
(21)
1,852
1,494
280
161
27.5
31.9
6.5
—
—
—
(32)
(1)
—
(33)
—
4
(9)
—
—
—
—
0.1
(115)
115
—
—
—
—
—
—
(68)
—
—
—
—
—
—
Total
7,481
—
7,481
1,764
(412)
(34)
1,318
(126)
7,734
6,600
1,246
709
23.6
23.6
26.1
Mondi Group
Integrated report and financial statements 2018
165
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Total
7,096
—
7,096
1,482
(420)
(33)
1,029
(61)
7,122
6,095
788
611
20.9
19.3
26.3
Year ended 31 December 2017 (restated)
€ million, unless otherwise stated
Fibre Packaging
Consumer
Packaging
Uncoated
Fine Paper
Corporate
Intersegment
elimination
3,735
(64)
3,671
833
(227)
(10)
596
3
3,794
3,246
451
398
22.3
20.6
13.4
1,646
(5)
1,641
222
(67)
(21)
134
(49)
1,552
1,326
146
91
13.5
10.4
6.0
1,832
(48)
1,784
464
(125)
(2)
337
(15)
1,826
1,515
191
122
25.3
26.6
6.8
—
—
—
(37)
(1)
—
(38)
—
17
8
—
—
—
—
0.1
(117)
117
—
—
—
—
—
—
(67)
—
—
—
—
—
—
Segment revenue
Internal revenue
External revenue
Underlying EBITDA
Depreciation and impairments
Amortisation
Underlying operating profit/(loss)
Special items
Operating segment assets
Operating segment net assets
Additions to non-current
non-financial assets
Capital expenditure cash payments
Underlying EBITDA margin (%)
Return on capital employed (%)
Average number of employees
(thousands)1
Note:
1 Presented on a full time employee equivalent basis
Reconciliation of operating segment assets
€ million
Group total
Unallocated
Investment in equity accounted investees
Deferred tax assets/(liabilities)
Other non-operating assets/(liabilities)
Group capital employed
Financial instruments/(net debt)
Total assets/equity
2018
Segment
assets
7,734
9
49
189
7,981
61
8,042
Restated
2017
Segment
net assets
6,600
Segment
assets
7,122
Segment
net assets
6,095
9
(204)
(360)
6,045
(2,220)
3,825
3
26
178
7,329
47
7,376
3
(222)
(337)
5,539
(1,532)
4,007
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Integrated report and financial statements 2018
166
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
2 Operating segments
External revenue by location of production and by location of customer
€ million
Africa
South Africa
Rest of Africa
Africa total
Western Europe
Austria
Germany
United Kingdom
Rest of western Europe
Western Europe total
Emerging Europe
Poland
Rest of emerging Europe
Emerging Europe total
Russia
North America
South America
Asia and Australia
Group total
External revenue
by location of production
External revenue
by location of customer
2018
2017
2018
2017
609
43
652
1,106
887
64
623
2,680
1,161
1,435
2,596
944
525
—
84
617
19
636
1,043
891
75
532
2,541
992
1,348
2,340
907
583
—
89
459
264
723
160
985
233
1,470
2,848
636
1,050
1,686
694
731
100
699
426
206
632
146
952
241
1,340
2,679
592
954
1,546
720
747
71
701
7,481
7,096
7,481
7,096
There were no external customers which account for more than 10% of the Group’s total external revenue in either year.
There are no material contract assets and contract liabilities as at 31 December 2018 (2017: €nil). No contract costs were capitalised in
either year presented.
The Group does not disclose information about remaining performance obligations that have original expected durations of one year or
less, as permitted under IFRS 15.
Mondi Group
Integrated report and financial statements 2018
Net assets by location
€ million
Africa
South Africa
Rest of Africa
Africa total
Western Europe
Austria
United Kingdom
Rest of western Europe
Western Europe total
Emerging Europe
Poland
Slovakia
Rest of emerging Europe
Emerging Europe total
Russia
North America
Asia and Australia
Group total
Average number of employees1
thousands
By principal locations of employment
South Africa
Rest of Africa
Western Europe
Emerging Europe
Russia
North America
Asia and Australia
Group total
Note:
1 Presented on a full time employee equivalent basis
167
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Restated
2017
Non-current
non-financial
assets
Segment
assets
Segment
net assets
Non-current
non-financial
assets
Segment
assets
Segment
net assets
724
56
780
508
44
1,243
1,795
793
440
986
2,219
653
166
100
5,713
869
103
972
883
65
1,687
2,635
1,022
500
1,293
2,815
793
346
173
755
100
855
601
53
1,500
2,154
916
415
1,103
2,434
693
303
161
725
19
744
539
62
868
1,469
861
407
876
2,144
641
175
89
883
44
927
888
95
1,271
2,254
1,066
451
1,150
2,667
788
340
146
774
42
816
668
79
1,085
1,832
955
374
984
2,313
702
297
135
7,734
6,600
5,262
7,122
6,095
2018
2017
1.5
0.3
7.3
8.9
5.5
1.9
0.7
1.8
0.1
7.3
8.7
5.6
2.2
0.6
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26.3
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Mondi Group
Integrated report and financial statements 2018
168
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
3 Special items
€ million
Impairment of assets
Reversal of impairment of assets
Restructuring and closure costs:
Personnel costs
Other restructuring and closure costs
Total special items before tax
Tax credit (see note 7)
Total special items
2018
(83)
2
(15)
(30)
(126)
34
(92)
2017
(52)
14
(9)
(14)
(61)
8
(53)
Restructuring and closure costs and related impairments during the year comprise:
e Fibre Packaging
– Discontinuation of in-line silicone coating production at Štětí (Czech Republic). Restructuring costs of €4 million and related
impairment of assets of €51 million were recognised.
– Restructuring of industrial bags operations in the US. Restructuring costs of €9 million and related impairment of assets of €9 million
were recognised.
e Consumer Packaging
– Restructuring of operations, primarily in the UK. Restructuring costs of €13 million and impairment of assets of €16 million
were recognised.
– Following the discontinuation of in-line silicone coating production at Štětí (Czech Republic), restructuring costs of €3 million and
related impairment of assets of €2 million were recognised. Reversal of impairment of assets of €2 million was recognised.
e Uncoated Fine Paper
– Closure of an uncoated fine paper machine at Merebank (South Africa). Restructuring costs of €16 million and related impairment of
assets of €5 million were recognised.
4 Auditors’ remuneration
€ million
Fees payable to the auditors for the audit of Mondi Limited’s and Mondi plc’s annual financial
statements
UK
South Africa
Fees payable to the auditors and their associates for the audit of Mondi Limited’s and Mondi plc’s
subsidiaries
Total audit fees1
Audit-related assurance services
Total fees
Note:
2018
2017
0.6
0.4
0.2
3.5
4.1
0.4
4.5
0.4
0.3
0.1
3.6
4.0
0.3
4.3
1 Total audit fees related to the 2017 financial year estimated at €3.6 million in the prior year have been updated to the final audit fees incurred of €4.0 million. There is no
change in non-audit fees
Mondi Group
Integrated report and financial statements 2018
5 Personnel costs
€ million, unless otherwise stated
Within operating costs
Wages and salaries
Social security costs
Defined contribution retirement plan contributions (see note 23)
Defined benefit retirement plan service costs and loss from settlement (see note 23)
Share-based payments (see note 22)
Total within operating costs
Within special items
Personnel costs relating to restructuring (see note 3)
Within net finance costs
Retirement benefit medical plan net interest costs
Retirement benefit pension plan net interest costs
Total within net finance costs (see note 6)
Group total
Average number of employees (thousands)1
Note:
1 Presented on a full time employee equivalent basis
6 Net finance costs
Net finance costs are presented below:
€ million
Investment income
Investment income
Net foreign currency losses
Net foreign currency losses
Finance costs
Interest expense
Interest on bank overdrafts and loans
Interest on lease liabilities (see note 11)
Net interest expense on net retirement benefits liability (see note 23)
Total interest expense
Less: Interest capitalised (see note 10)
Total finance costs
Net finance costs
169
2018
2017
835
172
13
8
11
848
170
14
6
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1,053
15
5
3
8
9
5
4
9
1,062
1,071
26.1
26.3
2018
Restated
2017
S
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8
(4)
(77)
(14)
(8)
(99)
7
(92)
(88)
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4
(2)
(65)
(14)
(9)
(88)
1
(87)
(85)
Net interest expense for the year was €83 million (2017 restated: €75 million). The effective interest rate was 4.19% (2017 restated: 4.77%)
based on trailing 12-month average net debt of €1,979 million (2017 restated: €1,572 million).
The weighted average interest rate applicable to capitalised interest on general borrowings for the year ended 31 December 2018 was
4.08% (2017: 4.05%) and was related to investments in the Czech Republic and South Africa (2017: Poland, the Czech Republic and
South Africa).
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Mondi Group
Integrated report and financial statements 2018
170
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
7 Taxation
(a) Analysis of tax charge for the year
The Group’s effective rate of tax before special items for the year ended 31 December 2018 was 22% (2017: 19%). The increase in
effective tax rate is partly due to the full utilisation of tax incentives in Poland in 2017.
€ million
UK corporation tax at 19.00% (2017: 19.25%)
South Africa corporation tax at 28% (2017: 28%)
Overseas tax
Current tax in respect of prior years
Current tax
Deferred tax in respect of the current year
Deferred tax in respect of prior years
Deferred tax attributable to a change in the rate of domestic income tax
Tax charge before special items
Current tax on special items
Deferred tax on special items
Tax credit on special items (see note 3)
Tax charge for the year
Factors affecting tax charge for the year
2018
1
21
244
—
266
15
(8)
—
273
(2)
(32)
(34)
239
Restated
2017
1
28
153
5
187
16
(23)
1
181
(2)
(6)
(8)
173
The Group’s total tax charge for the year can be reconciled to the tax on the Group’s profit before tax at the weighted average UK and SA
corporation tax rate of 19.67%1 (2017: 20.10%), as follows:
€ million
Profit before tax
Tax on profit before tax calculated at the weighted average UK and SA corporation
tax rate of 19.67% (2017: 20.10%)
Tax effects of:
Expenses not deductible for tax purposes
Special items not tax deductible
Other non-deductible expenses
Non-taxable income
Temporary difference adjustments
Current year tax losses and other temporary differences not recognised
Prior year tax losses and other temporary differences not previously recognised
Attributable to a change in the rate of domestic income tax
Other adjustments
Current tax prior year adjustments
Tax incentives2
Effect of differences between local rates and UK and SA rates
Other adjustments
Tax charge for the year
Notes:
2018
1,105
217
Restated
2017
884
178
10
—
10
(1)
(6)
12
(18)
—
19
—
(11)
15
15
9
2
7
(1)
(6)
13
(20)
1
(7)
5
(29)
13
4
239
173
1 The weighted average tax rate has been determined by weighting the profit before tax after special items of Mondi Limited and its subsidiaries and Mondi plc and
its subsidiaries
2 The tax incentives principally relate to capital investments in Russia and Slovakia (2017: Poland and Russia)
Mondi Group
Integrated report and financial statements 2018
Deferred tax assets
Deferred tax liabilities
(b) Deferred tax
€ million
At 1 January
Credited/(charged) to combined and consolidated income statement
Credited/(charged) to combined and consolidated statement of
comprehensive income
Acquired through business combinations (see note 24)
Reclassification
Currency movements
At 31 December
2018
Restated
2017
26
19
1
—
3
—
49
27
(1)
(1)
—
2
(1)
26
The amount of deferred tax credited/(charged) to the combined and consolidated income statement comprises:
2018
(248)
6
(2)
(24)
(3)
18
Restated
2017
(260)
13
—
(3)
(4)
6
(253)
(248)
2018
8
(10)
10
17
25
Restated
2017
2
—
(7)
17
12
€ million
Capital allowances in excess of depreciation
Fair value adjustments
Tax losses recognised/(derecognised)
Other temporary differences
Total credit
Deferred tax comprises:
€ million
Capital allowances in excess of depreciation
Fair value adjustments
Tax losses1
Other temporary differences1
Total
Note:
Deferred tax assets
Deferred tax liabilities
2018
(20)
—
21
48
49
Restated
2017
(15)
—
8
33
26
2018
(241)
(89)
14
63
(253)
Restated
2017
(244)
(89)
18
67
(248)
1 Based on forecast data, the Group considers it probable that there will be sufficient future taxable profits available in the relevant jurisdictions to utilise these tax losses
and other temporary differences
The current expectation regarding the maturity of deferred tax balances is:
€ million
Recoverable/(payable) within 12 months
Recoverable/(payable) after 12 months
Total
Deferred tax assets
Deferred tax liabilities
2018
23
26
49
Restated
2017
18
8
26
2018
(1)
(252)
(253)
Restated
2017
(1)
(247)
(248)
171
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Mondi Group
Integrated report and financial statements 2018
172
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
7 Taxation
The Group has the following amounts in respect of which no deferred tax asset has been recognised due to the low probability of future
profit streams or gains against which these could be utilised:
€ million
Tax losses – revenue
Tax losses – capital
Other temporary differences
Total
There were no significant changes in the expected future profit streams or gains.
Included in unrecognised tax losses are losses that will expire as follows:
€ million
Expiry date
Within one year
One to five years
After five years
No expiry date
Total
2018
1,406
16
11
2017
1,389
16
63
1,433
1,468
2018
2017
2
25
53
1,342
1,422
8
30
89
1,278
1,405
No deferred tax liability is recognised on gross temporary differences of €760 million (2017: €856 million) relating to the unremitted
earnings of overseas subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is probable
that they will not reverse in the foreseeable future. UK tax legislation largely exempts, from UK tax, overseas dividends received on or after
1 July 2009. As a result, the gross temporary differences at 31 December 2018 represent only the unremitted earnings of those overseas
subsidiaries where remittance to the UK of those earnings would still result in a tax liability, principally as a result of dividend withholding
taxes levied by the overseas tax jurisdictions in which these subsidiaries operate and non-UK corporate taxes on dividends.
8 Earnings per share (EPS)
The calculation of basic and diluted EPS, basic and diluted underlying EPS and basic and diluted headline EPS is based on the
following data:
€ million
Profit for the year attributable to shareholders
Special items (see note 3)
Related tax (see note 3)
Underlying earnings for the year
Special items not excluded from headline earnings
(Gain)/loss on disposal of property, plant and equipment
Net loss on disposal of businesses and equity accounted investees
Impairments not included in special items (see note 10)
Related tax
Headline earnings for the year
million
Basic number of ordinary shares outstanding
Effect of dilutive potential ordinary shares
Diluted number of ordinary shares outstanding
Mondi Group
Integrated report and financial statements 2018
Earnings
2018
824
126
(34)
916
(45)
(1)
3
2
20
895
Restated
2017
668
61
(8)
721
(23)
1
—
4
1
704
Weighted average number of
shares
2018
484.4
0.2
484.6
2017
484.3
0.3
484.6
9 Dividends
Dividends paid to the shareholders of Mondi Limited and Mondi plc are presented on a combined basis.
euro cents per share
Final ordinary dividend paid (in respect of prior year)
Special dividend paid (in respect of prior year)
Interim ordinary dividend paid
Final ordinary dividend proposed for the year ended 31 December
Special dividend proposed for the year ended 31 December
Total final ordinary and special dividends proposed for the year ended 31 December
€ million
Final ordinary dividend paid (in respect of prior year)
Special dividend paid (in respect of prior year)
Interim ordinary dividend paid
Total ordinary and special dividends paid
Final ordinary dividend proposed for the year ended 31 December
Special dividend proposed for the year ended 31 December
Total final ordinary and special dividends proposed for the year ended 31 December
Declared by Group companies to non-controlling interests
2018
42.90
100.00
21.45
54.55
—
54.55
2018
207
484
102
793
264
—
264
18
2017
38.19
—
19.10
42.90
100.00
142.90
2017
180
—
93
273
208
485
693
22
The final ordinary dividend proposed has been recommended by the Boards and is subject to the approval of the shareholders of Mondi
Limited and Mondi plc at the respective Annual General Meetings scheduled for 9 May 2019.
173
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Mondi Group
Integrated report and financial statements 2018
174
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
10 Property, plant and equipment
€ million
Net carrying value
At 1 January 2017, as previously reported
Impact of change in accounting policy (see note 33)
Restated balance at 1 January 2017
Acquired through business combinations
Additions (restated)
Disposal of assets
Depreciation charge for the year (restated)
Impairment losses recognised2
Impairment losses reversed3
Transfer from assets under construction
Reclassification
Currency movements (restated)
Restated balance at 31 December 2017
Cost (restated)
Accumulated depreciation and impairments
(restated)
Acquired through business combinations (see note 24)
Additions
Disposal of assets
Disposal of businesses
Depreciation charge for the year
Impairment losses recognised2
Impairment losses reversed3
Transfer from assets under construction
Reclassification
Currency movements
At 31 December 2018
Cost
Accumulated depreciation and impairments
Notes:
Land and
buildings1
Plant and
equipment
Assets under
construction
Other
Total
1,032
142
1,174
1
69
(2)
(67)
(13)
1
59
(2)
(13)
1,207
2,031
2,427
18
2,445
3
163
(9)
(309)
(35)
13
200
(25)
(17)
2,429
6,739
(824)
(4,310)
32
42
(6)
(3)
(69)
(20)
1
43
(3)
(44)
1,180
2,033
(853)
97
167
(6)
(3)
(304)
(51)
1
142
(2)
(96)
2,374
6,765
(4,391)
245
—
245
3
402
(2)
—
(1)
—
(279)
10
(1)
377
385
(8)
5
512
(3)
(2)
—
—
—
(198)
—
(24)
667
674
(7)
84
13
97
2
42
(1)
(40)
(1)
—
17
2
(3)
115
378
3,788
173
3,961
9
676
(14)
(416)
(50)
14
(3)
(15)
(34)
4,128
9,533
(263)
(5,405)
2
41
(4)
—
(37)
(3)
—
9
2
(6)
119
394
(275)
136
762
(19)
(8)
(410)
(74)
2
(4)
(3)
(170)
4,340
9,866
(5,526)
1 The land carrying value included in ‘Land and buildings’ is €171 million (2017: €159 million)
2 Impairment losses include €72 million (2017: €46 million) classified as special items and €2 million (2017: €4 million) of other impairments
3 Impairment losses reversed are classified as special items
Included in the cost above is €7 million (2017: €1 million) of interest incurred on qualifying assets which has been capitalised during the
year. These amounts are deductible for tax purposes either when incurred or included in the amount permitted to be deducted for capital
expenditure, depending on the jurisdiction in which they are capitalised.
The recoverable amount of property, plant and equipment is determined based on the use of the asset within the current business plans.
Any change in future intentions could result in an impairment of varying magnitude, depending on the assets affected.
Mondi Group
Integrated report and financial statements 2018
11 Leases
From 1 January 2018 the Group early adopted IFRS 16, ‘Leases’. Refer to notes 32 and 33 for the accounting policy and restatements,
respectively. The right-of-use assets recognised on adoption of the new leasing Standard are reflected in the underlying asset classes of
Property, plant and equipment, and related lease liabilities are reflected as Borrowings.
Mondi has entered into various lease agreements. Leases over land and buildings have a weighted average term of 39 years, plant and
equipment a weighted average term of 12 years and other assets a weighted average term of four years.
The principal lease agreements in place include the following:
South African land lease
The Group entered into a land lease agreement on 1 January 2001 for a total term of 70 years. The lease commitment and annual
escalation rate is renegotiated every five years. The lease does not contain any clauses with regard to contingent rent or an option to
purchase the land at the end of the lease term, and does not impose any significant restrictions on the Group as a lessee. There are 52
years remaining on the lease.
Russian forestry leases
The forestry lease agreements were entered into by the Group on 1 November 2007 for a total term of 47 years, on 30 June 2008 for a
total term of 49 years and on 10 March 2015 for a total term of 49 years. The leases are not renewable. Rental escalates on an annual
basis by the consumer price index of the local jurisdiction. The leases do not contain any clauses with regard to contingent rent or options
to purchase the forestry assets at the end of the lease term, and do not impose any significant restrictions on the Group as a lessee.
The Group applied the practical expedient per IFRS 16 not to separate non-lease components from lease components.
Office building
The Group entered into an office building lease agreement for a total term of 20 years from October 2013. The lease may only be
terminated by the Group, after six months’ notice, in September 2023 and again in September 2028. Rent escalates on an annual basis
by the consumer price index of the local jurisdiction. The lease does not contain any option to purchase the building at the end of the lease
term and does not impose any significant restrictions on the Group as a lessee. Variable lease payments are included in the lease liability
and calculated at the consumer price index.
175
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Right-of-use assets
€ million
Land and buildings
Plant and equipment
Other
Total
Additions to the right-of-use assets during 2018 were €25 million (2017 restated: €27 million).
Lease liabilities
€ million
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted cash flows
Total lease liabilities
Current
Non-current
The total cash outflow for leases during 2018 was €41 million (2017 restated: €41 million).
Right-of-use assets
Depreciation charge
2018
120
19
9
148
Restated
2017
138
19
12
169
2018
(14)
(7)
(6)
(27)
2018
34
84
267
385
184
22
162
Restated
2017
(14)
(7)
(6)
(27)
Restated
2017
40
105
300
445
208
25
183
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Mondi Group
Integrated report and financial statements 2018
176
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
11 Leases
Amounts recognised in the combined and consolidated income statement
€ million
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets
12 Goodwill
(a) Reconciliation
€ million
Net carrying value
At 1 January
Acquired through business combinations (see note 24)
Currency movements
At 31 December
(b) Assumptions
2018
(14)
(1)
(1)
Restated
2017
(14)
—
—
2018
2017
698
257
(13)
942
681
26
(9)
698
Goodwill acquired through business combinations is allocated to the group of cash-generating units (CGUs) that are expected to benefit
from the synergies of the combination and represents the lowest level at which goodwill is monitored for internal management purposes.
The recoverable amounts of these groups of CGUs are the higher of fair value less costs to dispose and value-in-use. Goodwill is allocated
to the groups of CGUs as follows:
€ million, unless otherwise stated
Consumer Packaging
Containerboard
Kraft Paper
Industrial Bags
Corrugated Packaging
Uncoated Fine Paper
Extrusion Coatings
Total goodwill
Key assumptions
Weighted
average pre-tax
discount rate
Growth rate
9.3%
10.2%
9.2%
9.9%
9.7%
11.2%
8.9%
2.0%
2.7%
1.0%
1.0%
2.7%
0.0%
0.0%
Carrying value
2018
419
304
83
62
36
31
7
2017
428
63
83
47
38
32
7
942
698
The key assumptions in the value-in-use calculations are:
e cash flow forecasts which are derived from the budgets most recently approved by the Boards covering the three-year period to
31 December 2021;
e sales volumes, sales prices and variable input cost assumptions in the budget period are derived from a combination of economic
forecasts for the regions in which the Group operates, industry forecasts for individual product lines, internal management projections,
historical performance, and announced industry capacity changes;
e cash flow projections beyond three years are based on internal management projections taking into consideration industry forecasts
and growth rates in the regions in which the Group operates. Growth rates (as per the table above) are applied to the groups of CGUs
for each of the following seven years beyond the budget period and zero thereafter into perpetuity; and
e capital expenditure forecasts are based on historical experience and include expenditure necessary to maintain the projected cash
flows from operations at current operating levels.
The pre-tax discount rate is derived from the Group’s weighted average cost of capital. In determining the discount rate applicable to each
group of CGUs, adjustments are made to reflect the impacts of country risk and tax.
Mondi Group
Integrated report and financial statements 2018
Sensitivity analyses
Expected future cash flows are inherently uncertain and could change materially over time. They are affected by a number of factors,
including market and production estimates, together with economic factors such as prices, discount rates, currency exchange rates,
estimates of production costs, and future capital expenditure.
Sensitivity analyses of reasonably possible changes in the underlying assumptions for each group of CGUs included:
e 1% increase in discount rate;
e 0% growth rate assumed for cash flow projections beyond three years;
e 5% decrease in sales prices in the Containerboard and Kraft Paper groups of CGUs and Uncoated Fine Paper; and
e 3% decrease in gross margin in the Corrugated Packaging, Industrial Bags and Extrusion Coatings groups of CGUs and
Consumer Packaging.
None of these downside sensitivity analyses in isolation indicated the need for an impairment.
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13 Intangible assets
€ million
Net carrying value
At 1 January
Acquired through business combinations (see note 24)
Additions
Impairment charge for the year
Amortisation charge for the year
Reclassification
Currency movements
At 31 December
Cost
Accumulated amortisation and impairments
The carrying value of intangible assets comprises:
€ million
Internally generated
Software development costs
Acquired through business combinations
Customer relationships
Patents and trademarks
Other
Total intangible assets
2018
2017
111
14
10
(11)
(34)
4
(3)
91
316
(225)
120
12
16
(3)
(33)
3
(4)
111
311
(200)
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2017
40
28
18
5
91
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41
45
19
6
111
Research and development expenditure incurred by the Group and charged to the combined and consolidated income statement during
the year amounted to €22 million (2017: €23 million).
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Integrated report and financial statements 2018
178
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
14 Forestry assets
€ million
At 1 January
Capitalised expenditure
Acquisition of assets
Acquired through business combinations (see note 24)
Fair value gains
Impairment losses recognised
Felling costs
Currency movements
At 31 December
Comprising
Mature
Immature
Total forestry assets
2018
325
46
7
14
43
—
(60)
(35)
340
197
143
340
2017
316
46
3
—
43
(3)
(73)
(7)
325
190
135
325
In total, the Group has 254,328 hectares (2017: 245,163 hectares) of owned and leased land available for forestry activities, all of which is
in South Africa. 80,144 hectares (2017: 79,159 hectares) are set aside for conservation activities and infrastructure needs. 1,045 hectares
(2017: 1,664 hectares) relate to non-core activities. The balance of 173,139 hectares (2017: 164,340 hectares) are under afforestation which
forms the basis of the valuation set out above.
Mature forestry assets are those plantations that are harvestable, while immature forestry assets have not yet reached that stage of
growth. Timber is harvested according to a rotation plan, once trees reach maturity. This period ranges from 6.5 to 14.5 years, depending
on species, climate and location.
The fair value of forestry assets is a level 3 measure in terms of the fair value measurement hierarchy, consistent with prior years.
The following assumptions have a significant impact on the valuation of the Group’s forestry assets:
e The net selling price, which is defined as the selling price less the costs of transport, harvesting, extraction and loading. The net selling
price is based on third-party transactions and is influenced by the species, maturity profile and location of timber. In 2018, the net selling
price used ranged from the South African rand equivalent of €15 per tonne to €38 per tonne (2017: €17 per tonne to €47 per tonne) with
a weighted average of €26 per tonne (2017: €29 per tonne).
e The conversion factor used to convert hectares of land under afforestation to tonnes of standing timber, which is dependent on the
species, the maturity profile of the timber, the geographic location, climate and a variety of other environmental factors. In 2018, the
conversion factors ranged from 8.4 to 24.5 (2017: 8.4 to 24.8).
e The risk premium of 13.0% (2017: 13.0%) is based on an assessment of the risks associated with forestry assets in South Africa.
The valuation of the Group’s forestry assets is determined in rand and converted to euro at the closing exchange rate on 31 December of
each year.
The reported value of owned forestry assets would change as follows should there be a change in these underlying assumptions on the
basis that all other factors remain unchanged:
€ million
Effect of €1/tonne increase in net selling price
Effect of 1% increase in conversion factor (hectares to tonnes)
Effect of 1% increase in risk premium
Effect of 1% increase in EUR/ZAR exchange rate
2018
12
3
(4)
(3)
Mondi Group
Integrated report and financial statements 2018
15 Inventories
€ million
Valued using the first-in-first-out cost formula
Raw materials and consumables
Work in progress
Finished products
Total valued using the first-in-first-out cost formula
Valued using the weighted average cost formula
Raw materials and consumables
Work in progress
Finished products
Total valued using the weighted average cost formula
Total inventories
Of which, held at net realisable value
Combined and consolidated income statement
Cost of inventories recognised as an expense (restated)
Write-down of inventories to net realisable value
Aggregate reversal of previous write-downs of inventories
Green energy sales and disposal of emissions credits
16 Trade and other receivables
€ million
Trade receivables
Allowance for doubtful debts
Net trade receivables
Other receivables
Tax and social security
Prepayments and accrued income
Total trade and other receivables
Trade receivables: credit risk
2018
2017
35
11
26
72
392
116
388
896
968
127
34
13
27
74
333
109
351
793
867
119
(3,104)
(3,053)
(21)
13
88
2018
1,052
(35)
1,017
30
114
29
(22)
19
62
2017
993
(32)
961
32
90
23
1,190
1,106
The Group has a large number of unrelated customers and does not have any significant credit risk exposure to any particular customer.
The Group considers that there is no significant geographical or customer concentration of credit risk.
Each business segment manages its own exposure to credit risk according to the economic circumstances and characteristics of the
relevant markets that they serve. The Group considers that management of credit risk on a decentralised basis enables it to assess and
manage credit risk more effectively. However, broad principles of credit risk management are observed across all business segments,
such as the use of credit rating agencies, credit guarantee insurance, where appropriate, and the maintenance of a credit control function.
€ million
Credit risk exposure
Gross trade receivables
Credit insurance
Total exposure to credit risk
2018
2017
1,052
(861)
191
993
(815)
178
The insured cover is presented gross of contractually agreed excess amounts. In addition, the Group is in possession of bank guarantees
and letters of credit securing trade and other receivables to the value of €8 million (2017: €16 million).
Credit periods offered to customers vary according to the credit risk profiles of, and invoicing conventions established by, participants
operating in the various markets in which the Group operates. Interest is charged at appropriate market rates on balances which are
considered overdue in the relevant market.
Mondi Group
Integrated report and financial statements 2018
179
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180
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
16 Trade and other receivables
To the extent that recoverable amounts are expected to be less than their associated carrying values, impairment charges have been
recorded in the combined and consolidated income statement and the carrying values have been written down to their expected
recoverable amounts. The total gross carrying value of trade receivables that were subject to impairment during the year is €55 million
(2017: €64 million).
Included within the Group’s aggregate trade receivables balance are specific debtor balances with customers totalling €35 million
(2017: €30 million) which are past due but not impaired at the reporting date. The Group has assessed these balances for recoverability
and considers that their credit quality remains intact.
An ageing analysis of net trade receivables is provided as follows:
€ million
Trade receivables within terms
Past due by less than one month
Past due by one to two months
Past due by two to three months
Past due by more than three months
At 31 December
Movement in the allowance account for bad and doubtful debts
€ million
At 1 January
Increase in allowance recognised in combined and consolidated income statement
Amounts written-off or recovered
Currency movements
At 31 December
17 Trade and other payables
€ million
Trade payables
Capital expenditure payables
Tax and social security
Other payables
Accruals and deferred income
Total trade and other payables
2018
982
23
4
3
5
2017
931
20
3
2
5
1,017
961
2018
32
11
(6)
(2)
35
2018
601
113
57
52
363
1,186
2017
32
6
(5)
(1)
32
2017
532
93
56
48
345
1,074
Mondi Group
Integrated report and financial statements 2018
18 Provisions
€ million
At 1 January 2018
Charged to combined and consolidated income
statement
Acquired through business combinations (see note 24)
Disposal of businesses
Released to combined and consolidated income
statement
Amounts applied
Reclassification
Currency movements
At 31 December 2018
Restructuring
costs
Employee
related
provisions
Environmental
restoration
Other
22
36
—
—
(1)
(20)
—
—
37
33
10
—
—
(1)
(7)
—
—
35
5
—
—
(1)
—
—
—
—
4
Maturity analysis of total provisions on a discounted basis at 31 December 2018:
€ million
Current
Non-current
Total provisions
Restructuring
costs
Employee
related
provisions
Environmental
restoration
32
5
37
8
27
35
—
4
4
31
10
2
—
(5)
(9)
3
(1)
31
Other
21
10
31
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Total
91
56
2
(1)
(7)
(36)
3
(1)
107
Total
61
46
107
Other provisions are mainly attributable to potential claims against the Group and onerous contracts, none of which are individually
significant. All non-current provisions are discounted using a discount rate relevant in the local countries, based on a pre-tax yield on long-
term bonds.
19 Capital management
The Group defines its capital employed as equity, as presented in the combined and consolidated statement of financial position, plus
net debt.
€ million
Equity attributable to shareholders
Equity attributable to non-controlling interests
Total equity
Net debt (see note 25c)
Capital employed
2018
3,485
340
3,825
2,220
6,045
Restated
2017
3,683
324
4,007
1,532
5,539
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Capital employed is managed on a basis that enables the Group to continue trading as a going concern, while delivering acceptable
returns to shareholders. The Group is committed to managing its cost of capital by maintaining an appropriate capital structure, with a
balance between equity and net debt.
The Group utilises its capital employed to fund the growth of the business and to finance its liquidity needs.
The primary sources of the Group’s net debt include its €2.5 billion Guaranteed Euro Medium Term Note Programme, its €750 million
Syndicated Revolving Credit Facility and financing from various banks and other credit agencies, thus providing the Group with access to
diverse sources of debt financing.
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Mondi Group
Integrated report and financial statements 2018
182
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
19 Capital management
The principal loan arrangements in place are the following:
€ million
Financing facilities
Maturity
Interest rate %
2018
2017
Syndicated Revolving Credit Facility
July 2021
EURIBOR/LIBOR + margin
€500 million Eurobond
€500 million Eurobond
€600 million Eurobond
European Investment Bank Facility
Export Credit Agency Facility
Other
Total committed facilities
Drawn
Total committed facilities available
September 2020
April 2024
April 2026
June 2025
June 2020
Various
3.375%
1.500%
1.625%
EURIBOR + margin
EURIBOR + margin
Various
750
500
500
600
62
15
60
2,487
(1,871)
616
750
500
500
—
71
34
132
1,987
(1,196)
791
In April 2018 the Group issued a €600 million Eurobond maturing in 2026 at a coupon rate of 1.625% per annum. The Eurobond has been
issued under the Group’s Guaranteed Euro Medium Term Note Programme.
The €500 million Eurobond maturing in 2020 contains a coupon step-up clause whereby the coupon will be increased by 1.25% per
annum if the Group fails to maintain at least one investment grade credit rating from either Moody’s Investors Service or Standard &
Poor’s. Mondi currently has investment grade credit ratings from both Moody’s Investors Service (Baa1, outlook stable) and Standard &
Poor’s (BBB+, outlook stable).
Short-term liquidity needs are met through the Syndicated Revolving Credit Facility.
The Group reviews its capital employed on a regular basis and makes use of several indicative ratios which are appropriate to the nature of
its operations and consistent with conventional industry measures. The principal ratios used include:
e pre-tax weighted average cost of capital;
e gearing, defined as net debt divided by capital employed;
e net debt to 12-month trailing underlying EBITDA; and
e return on capital employed.
Pre-tax weighted average cost of capital (%)
Gearing (%)
Net debt to 12-month trailing underlying EBITDA (times)
Return on capital employed (%)
2018
10.5
36.7
1.3
23.6
Restated
2017
10.5
24.7
1.0
19.3
In order to manage its cost of capital, maintain an appropriate capital structure and meet its ongoing cash flow needs, the Group may
issue new debt instruments; adjust the level of dividends paid to shareholders; issue new shares to, or repurchase shares from, investors;
or dispose of assets to reduce its net debt exposure.
The Group operates a DLC structure, the terms of which require that the capital supplied by, or made available to, the shareholders of
Mondi Limited and Mondi plc be constrained by the equality of treatment mechanism. This serves to maintain and protect the economic
interests of both sets of shareholders.
The Group is subject to certain exchange control conditions as agreed with the South African Ministry of Finance. These conditions do
not infringe upon the Group’s ability to manage optimally its capital structure. The Group has continuously met the exchange control
provisions in the past and management is committed to ensuring that the Group continues to meet these provisions in the future.
Mondi Group
Integrated report and financial statements 2018
20 Borrowings
€ million
Secured
Bank loans and overdrafts
Lease liabilities (see note 11)
Total secured
Unsecured
Bonds
Bank loans and overdrafts
Other loans
Total unsecured
Total borrowings
2018
Restated
2017
Current
Non-current
Total
Current
Non-current
Total
2
22
24
—
237
7
244
268
—
162
162
1,592
245
3
1,840
2,002
2
184
186
1,592
482
10
2,084
2,270
—
25
25
—
255
11
266
291
—
183
183
995
94
8
1,097
1,280
The Group’s borrowings as at 31 December are analysed by nature and underlying currency as follows:
2018/€ million
Euro
South African rand
Turkish lira
US dollar
Russian rouble
Other currencies
Carrying value
Fair value
2017/€ million (restated)
Euro
South African rand
Turkish lira
US dollar
Russian rouble
Other currencies
Carrying value
Fair value
Floating rate
borrowings
Fixed rate
borrowings
Total carrying
value
196
6
52
11
1
203
469
469
1,640
1,836
28
14
20
71
28
1,801
1,818
34
66
31
72
231
2,270
Floating rate
borrowings
Fixed rate
borrowings
Total carrying
value
129
103
56
10
4
53
355
355
1,051
32
1
22
83
27
1,216
1,265
1,180
135
57
32
87
80
1,571
The fair values of the Eurobonds are estimated with reference to the last price quoted in the secondary market. All other financial liabilities
are estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar
financial instruments.
—
208
208
995
349
19
1,363
1,571
Fair value
1,853
34
65
31
73
231
2,287
Fair value
1,243
135
57
32
69
84
1,620
183
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Mondi Group
Integrated report and financial statements 2018
184
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
20 Borrowings
The maturity analysis of the Group’s borrowings, presented net of interest, is as follows:
2018/€ million
Bonds
Bank loans and overdrafts
Lease liabilities (see note 11)
Other loans
Total borrowings
Effective interest on borrowings net of amortised costs
and discounts
Total undiscounted cash flows
2017/€ million (restated)
Bonds
Bank loans and overdrafts
Lease liabilities
Other loans
Total borrowings
Effective interest on borrowings net of amortised costs
and discounts
Total undiscounted cash flows
Note:
1,221
2,270
< 1 year
1–2 years
2–5 years
> 5 years
—
239
22
7
268
63
331
499
31
18
—
548
36
584
—
200
30
3
233
79
312
1,093
14
114
—
180
1,401
< 1 year
1–2 years
2–5 years
> 5 years
—
255
25
11
291
51
342
—
24
20
3
47
40
87
499
46
35
—
580
78
658
496
24
128
5
653
191
844
Total1
1,592
484
184
10
358
2,628
Total1
995
349
208
19
1,571
360
1,931
1 It has been assumed that, where applicable, interest and foreign exchange rates prevailing at the reporting date will not vary over the time periods remaining for future
cash outflows
In addition to the above, the Group swaps euro and pound sterling debt into other currencies through the foreign exchange market as
disclosed in note 28.
21 Share capital and stated capital
Number of shares
Mondi Limited ordinary shares with no par value
Mondi Limited special converting shares with no par value
Authorised
250,000,000
650,000,000
Mondi plc is not restricted in the number of shares that can be issued. Any issue of shares is subject to shareholder approval.
2018 & 2017
Called up, allotted and fully paid/€ million
Number of
shares
Share capital
Stated capital
Mondi Limited ordinary shares with no par value issued on the JSE
118,312,975
Mondi plc €0.20 ordinary shares issued on the LSE
Total ordinary shares in issue
Mondi Limited special converting shares with no par value
Mondi plc €0.20 special converting shares
Total special converting shares
Mondi plc €0.04 deferred shares
Total shares
367,240,805
485,553,780
367,240,805
118,312,975
485,553,780
146,896,322
—
74
74
—
24
24
5
103
431
—
431
8
—
8
—
439
Total
431
74
505
8
24
32
5
542
Mondi Group
Integrated report and financial statements 2018
185
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The special converting shares are held in trust and do not carry dividend rights. These shares provide a mechanism for equality of
treatment on termination of the DLC agreement for both Mondi Limited and Mondi plc ordinary shareholders. The deferred shares are
held in trust and do not carry any dividend or voting rights.
Treasury shares represent the cost of shares in Mondi Limited (held by the Mondi Incentive Schemes Trust) and Mondi plc (held by the
Mondi Employee Share Trust) purchased in the market to satisfy share awards under the Group’s employee share schemes (see note 22).
These costs are reflected in the combined and consolidated statement of changes in equity.
at 31 December
Mondi Incentive Schemes Trust
Treasury shares held
2018
2017
Number of
shares held
Average price
per share
Number of
shares held
Average price
per share
Mondi Limited ordinary shares with no par value
355,471
ZAR230.96
349,642
ZAR243.22
Mondi Employee Share Trust
Mondi plc €0.20 ordinary shares
810,641
GBP19.07
869,054
GBP18.42
A dividend waiver is in place in respect of shares held by the Mondi Employee Share Trust.
22 Share-based payments
Mondi share awards
The Group has established its own share-based payment arrangements to incentivise employees. Full details of the Group’s share
schemes are set out in the Remuneration report.
The fair values of the share awards granted under the Mondi schemes are calculated with reference to the facts and assumptions
presented below:
Mondi Limited (ZAR) & Mondi plc (GBP)
BSP 2018
BSP 2017
BSP 2016
Date of grant
Vesting period (years)
Expected leavers p.a. (%)
Grant date fair value per instrument (GBP)
Grant date fair value per instrument (ZAR)
Number of shares conditionally awarded
27 March 2018
24 March 2017
22 March 2016
3
5
19.31
316.76
266,721
3
5
19.29
300.25
301,175
3
5
13.35
291.30
499,943
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Integrated report and financial statements 2018
186
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
22 Share-based payments
Mondi Limited (ZAR) & Mondi plc (GBP)
Date of grant
Vesting period (years)
Expected leavers p.a. (%)
Expected outcome of meeting performance criteria (%)
ROCE component
TSR component
Grant date fair value per instrument (GBP) – Mondi plc
ROCE component
TSR component2
Grant date fair value per instrument (ZAR) – Mondi Limited
ROCE component
TSR component2
Number of shares conditionally awarded
Notes:
LTIP 2018
LTIP 20171
LTIP 2016
27 March 2018
24 March 2017
22 March 2016
3
5
100
25
19.31
4.83
3
5
100
25
19.52
4.88
316.76
79.19
450,955
312.04
78.01
554,944
3
5
100
25
13.35
3.34
291.30
72.83
690,140
1 All participants, except the Group CEO and CFO, were granted an award on 24 March 2017. The Group CEO and CFO were granted an award on 12 May 2017 after
the remuneration policy approval at the Mondi Limited and Mondi plc AGMs. The weighted average grant date fair value is reflected in the table. All performance
requirements are identical for all 2017 LTIP awards
2 The base fair value has been adjusted for contractually-determined market-based performance conditions
All of these schemes are settled by the award of ordinary shares in either Mondi Limited or Mondi plc. The Group has no obligation to
settle the awards made under these schemes in cash. An amount equal to the dividends that would have been paid on Bonus Share Plan
(BSP) and Long-Term Incentive Plan (LTIP) share awards during the holding period are paid to participants upon vesting.
The total fair value charge in respect of all the Mondi share awards for the year ended 31 December is made up as follows:
€ million
Bonus Share Plan
Long-Term Incentive Plan
Total share-based payment expense
The weighted average share price of share awards that vested during the period:
Mondi Limited
Mondi plc
2018
6
5
11
2017
8
7
15
2018
2017
ZAR327.48
ZAR306.79
GBP19.81
GBP18.74
A reconciliation of share award movements for the Mondi share schemes is shown below:
number of shares
At 1 January 2017
Mondi Ltd
Mondi plc
Total
Mondi Ltd
Mondi plc
Total
203,668
1,095,021
1,298,689
258,579
1,721,605
1,980,184
BSP
LTIP
Shares conditionally awarded
37,913
263,262
301,175
Shares vested
Shares lapsed
At 31 December 2017
Shares conditionally awarded
Shares vested
Shares lapsed
At 31 December 2018
(116,155)
(506,618)
(622,773)
(5,914)
119,512
20,930
(46,841)
(8,202)
85,399
(61,162)
790,503
245,791
(67,076)
910,015
266,721
(302,829)
(349,670)
(15,324)
718,141
(23,526)
803,540
60,758
(85,951)
(48,954)
494,186
(537,535)
(265,643)
554,944
(623,486)
(314,597)
184,432
1,412,613
1,597,045
19,165
(75,283)
(11,063)
431,790
450,955
(499,002)
(574,285)
(16,365)
(27,428)
117,251
1,329,036
1,446,287
Mondi Group
Integrated report and financial statements 2018
187
23 Retirement benefits
The Group operates post-retirement defined contribution, post-retirement defined benefit pension plans and post-retirement medical
plans for many of its employees.
Defined contribution plans
The assets of the defined contribution plans are held separately in independently administered funds. The charge in respect of these
plans of €13 million (2017: €14 million) is calculated on the basis of the contribution payable by the Group in the financial year. There were
no material outstanding or prepaid contributions recognised in relation to these plans as at the reporting dates presented. The expected
contributions to be paid to defined contribution plans during 2019 are €13 million.
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Defined benefit pension plans and post-retirement medical plans
The Group operates in excess of 100 defined benefit retirement plans across its global operations. A large proportion of the Group’s
defined benefit plans are closed to new members.
The majority of these plans are unfunded and provide pensions and severance benefits to members of those plans.
The most significant unfunded defined benefit plans are operated in Austria, Germany and Russia and funded plans are operated
primarily in the UK. These plans are established in accordance with applicable local labour legislation and/or collective agreements with
participating employees.
The benefits are based on a variety of factors, the most significant of which are a combination of pensionable service and final salary.
A number of these plans also provide additional benefits in the event of death in service, disability or ill-health retirement which are derived
from the final salary benefit formula.
The assets of the funded plans are held separately in independently administered funds, in accordance with statutory requirements or
local practice where those funds are operated. The boards of trustees of these plans are required to act in the best interest of the plans
and all relevant stakeholders of the plans (active employees, inactive employees, retirees and employers), and are responsible for the
investment policy with regard to the assets of the plans.
The post-retirement medical plans provide health benefits to retired employees and certain of their dependants. Eligibility for cover is
dependent upon certain criteria. The South African plan is unfunded and has been closed to new participants since 1 January 1999.
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Developments in 2018
On 13 December 2018 a change in the Austrian Social Security Law was enacted into law. Effective 1 January 2020, the law proposes
that the plan assets and liabilities of the Group’s Austrian health insurance fund be assumed by the Republic of Austria. The law provides
options to the Group on how to comply with this change. The Group is currently assessing the options available and the impact expected.
Due to a ruling in the High Court of the UK, an equalisation for the effect of unequal Guaranteed Minimum Pensions (GMPs) was required
to address inequality. An equalisation has been performed by the Group’s actuaries in respect of the UK pension scheme which resulted
in the recognition of €1 million as a past service cost in the current year.
Except for the actuarial risks set out below, the Group has not identified any additional specific risks in respect of these plans.
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Integrated report and financial statements 2018
188
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
23 Retirement benefits
Defined benefit plans typically expose the Group to the following actuarial risks:
Investment risk (Asset volatility)
Interest risk
Longevity risk
Salary risk
Medical cost inflation risk
The present value of the net retirement benefit liability/asset is calculated using a
discount rate determined by reference to high-quality bond yields. If the return on
plan assets is below this rate, it will create a plan deficit that needs to be funded/
guaranteed by the employer. Currently the plan assets have a relatively balanced
investment in equity and bonds. Due to the long-term nature of the plan liabilities,
the boards of trustees consider it appropriate that a reasonable portion of the plan
assets should be invested in equities.
A decrease in the bond interest rate will increase plan liabilities, however this will be
partially offset by an increase in the value of the plan’s fixed rate debt instruments.
The present value of the net retirement benefit liability/asset is calculated by
reference to the best estimate of the mortality of plan participants both during and
after their employment. An increase in the life expectancy of the plan participants
will increase the plan liabilities.
The present value of the net retirement benefit liability/asset is calculated by
reference to the expected future salaries of plan participants. An increase in the
salary of the plan participants will increase the plan liabilities.
The present value of the post-retirement medical plans is calculated by reference
to expected future medical costs. An increase in medical cost inflation will increase
the plan liabilities.
Independent qualified actuaries carry out full valuations every year using the projected unit credit method.
Actuarial assumptions
The weighted average principal assumptions used in the actuarial valuations are detailed below:
%
Discount rate
Rate of inflation
Rate of increase in salaries
Rate of increase of pensions in payment
Expected average increase of medical costs
2018
2017
South
Africa
Europe
Other
regions
South
Africa
Europe
Other
regions
9.8
6.3
7.3
—
7.8
2.1
2.3
2.8
2.9
3.7
10.1
5.9
7.2
4.0
—
9.5
6.8
7.8
—
8.3
1.9
2.3
2.8
2.9
3.7
7.8
4.3
5.5
4.0
—
The assumption for the discount rate for plan liabilities is based on AA corporate bonds, which are of a suitable duration and currency.
In South Africa, the discount rate assumption has been based on the zero coupon government bond yield curve.
Mortality assumptions
The assumed remaining life expectancies on retirement at age 65 are:
years
Retiring today
Males
Females
Retiring in 20 years
Males
Females
2018
2017
South
Africa
Europe
Other
regions
South Africa
Europe
Other
regions
16.2
20.2
21.7
25.8
14.1–22.9
15.1–20.7
17.7–27.4
17.7–25.3
14.1–25.4
15.1–21.0
17.7–27.8
17.7–25.3
16.1
20.2
21.5
25.7
14.1–22.8
15.1–20.8
17.6–27.1
18.6–25.3
14.1–25.0
15.1–21.2
17.6–27.7
18.6–25.3
The mortality assumptions have been based on published mortality tables in the relevant jurisdictions.
Mondi Group
Integrated report and financial statements 2018
The amounts recognised in the combined and consolidated statement of financial position are determined as follows:
€ million
Present value of unfunded liabilities
Present value of funded liabilities
Present value of plan liabilities
Fair value of plan assets
Net retirement benefits liability
Amounts reported in combined and
consolidated statement of financial
position
Defined benefit pension plans
Net retirement benefits asset
Defined benefit pension plans
Post-retirement medical plans
Net retirement benefits liability
2018
2017
South
Africa
Europe
Other
regions
(45)
—
(45)
—
(45)
—
—
—
(45)
(45)
(126)
(173)
(299)
135
(164)
6
6
(149)
(21)
(170)
(16)
(3)
(19)
—
(19)
—
—
(19)
—
(19)
Total
(187)
(176)
(363)
135
(228)
6
6
(168)
(66)
(234)
South
Africa
Europe
Other
regions
(52)
—
(52)
—
(52)
—
—
—
(52)
(52)
(124)
(172)
(296)
142
(154)
7
7
(155)
(6)
(161)
(19)
—
(19)
—
(19)
—
—
(19)
—
(19)
Total
(195)
(172)
(367)
142
(225)
7
7
(174)
(58)
(232)
The changes in the present value of defined benefit liabilities and fair value of plan assets are as follows:
189
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€ million
At 1 January
Included in combined and consolidated income statement
Current service cost
Past service cost
Loss from settlement
Interest
Included in combined and consolidated statement
of comprehensive income
Remeasurement (losses)/gains
Return on plan assets
Acquired through business combinations
(see note 24)
Contributions paid by scheme members
Contributions paid by employer
Benefits paid
Currency movements
At 31 December
Defined benefit
liabilities
Fair value of
plan assets
2018
(367)
2017
(377)
2018
142
2017
138
Net liability
2018
(225)
2017
(239)
(5)
(1)
(2)
(11)
(6)
—
(1)
(3)
—
24
9
(6)
—
—
(12)
1
—
—
(3)
—
22
8
(363)
(367)
—
—
—
3
—
(6)
—
3
3
(10)
—
135
—
—
—
3
—
8
—
3
3
(9)
(4)
(5)
(1)
(2)
(8)
(6)
(6)
(1)
—
3
14
9
(6)
—
—
(9)
1
8
—
—
3
13
4
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142
(228)
(225)
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Mondi Group
Integrated report and financial statements 2018
190
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
23 Retirement benefits
The expected maturity analysis of undiscounted retirement benefits is as follows:
€ million
Less than a year
Between one and two years
Between two to five years
After five years
2018
2017
Defined benefit
pension plans
Post-retirement
medical plans
Total
Defined benefit
pension plans
Post-retirement
medical plans
10
13
31
248
11
4
13
133
21
17
44
381
10
10
31
261
8
11
21
198
Total
18
21
52
459
The change in the maturity analysis of undiscounted retirement benefits for post-retirement medical plans is due to the change in the
Austrian Social Security Law which resulted in the future expected cash flows for the Group’s Austrian health insurance fund being limited
to one year, with no further cash flows expected after 1 January 2020.
The weighted average duration of the defined retirement benefits liability for South Africa is nine years (2017: 10 years), Europe 15 years
(2017: 15 years) and other regions 13 years (2017: 13 years).
It is expected that the Group’s share of contributions will increase as the schemes’ members age. The expected contributions to be paid
to defined benefit pension plans and post-retirement medical plans during 2019 are €19 million.
The market values of the plan assets in these plans are detailed below:
€ million
External equity
Bonds
Insurance contracts
Cash
Liability driven investment (LDI) portfolio
Fair value of plan assets
2018
2017
Quoted
Unquoted
Total
Quoted
Unquoted
Total
12
51
—
8
47
118
—
—
17
—
—
17
12
51
17
8
47
135
40
83
—
2
—
125
—
—
17
—
—
17
40
83
17
2
—
142
The majority of the Group’s plan assets are located in Austria and the UK and the following asset-liability matching/investing strategies
are applied:
Austria
UK
The investment strategy is based on Austrian Social Security Law which stipulates that investments can only be
made in high-quality euro bonds or deposits in euro in highly rated financial institutions. No investments in equity or
equity funds are allowed. Due to legal and market restrictions asset-liability matching is not possible.
The trustees invest in diverse portfolios of pooled funds. The long-term objective is to ensure that each plan can
continue to meet the benefit payments without exposing either the plan or the Group to an undue level of risk. The
mix of investments in each plan is determined taking into account the maturity, currency and nature of the expected
benefit payments required. The LDI portfolio is constituted of bonds and derivatives and is a UK plan asset which is
designed to hedge the interest rate risk of the pension fund liabilities.
There are no other financial instruments or property owned by the Group included in the fair value of plan assets.
The fair values of equity, bonds and cash are determined based on quoted prices in active markets. The fair value of insurance contracts
is determined in accordance with IAS 19.
The actual return on plan assets in respect of defined benefit plans was a loss of €3 million (2017: gain of €11 million).
Mondi Group
Integrated report and financial statements 2018
The market value of assets is used to determine the funding level of the plans and is sufficient to cover 77% (2017: 83%) of the benefits
which have accrued to members, after allowing for expected increases in future earnings and pensions. Companies within the Group
are paying contributions at rates agreed with the plans’ trustees and in accordance with local independent actuarial advice and
statutory provisions.
In certain jurisdictions, Group plans are subject to minimum funding requirements. At 31 December 2018, these minimum funding
requirements did not give rise to the recognition of any additional liabilities.
Sensitivity analyses
The sensitivity analyses below have been determined based on reasonably possible changes to the respective assumptions occurring at
the end of the reporting period, while holding all other assumptions constant.
The sensitivity analyses may not be representative of the actual changes in the net retirement benefits asset/(liability) as it is unlikely that
the changes in assumptions would occur in isolation of one another and some of the assumptions may be inter-related. The projected unit
credit method was used to calculate the sensitivity analyses below.
A 1% change in the assumptions would have the following effects on the net retirement benefits plans:
191
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€ million
Discount rate
(Decrease)/increase in current service cost
(Decrease)/increase in net retirement benefits liability
Rate of inflation
Increase/(decrease) in current service cost
Increase/(decrease) in net retirement benefits liability
Rate of increase in salaries
Increase/(decrease) in current service cost
Increase/(decrease) in net retirement benefits liability
Rate of increase of pensions in payment
Decrease in current service cost
Increase/(decrease) in net retirement benefits liability
Medical cost trend rate
Increase/(decrease) in aggregate of the current service cost and interest cost
Increase/(decrease) in net retirement benefits liability
Mortality rates
Increase in current service cost
Increase in net retirement benefits liability
24 Business combinations
To 31 December 2018
Acquisition of Powerflute Group Holdings Oy
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1% increase
1% decrease
(1)
(50)
1
31
1
14
—
10
1
24
1
66
(1)
(27)
(1)
(13)
—
(10)
(1)
(19)
1 year increase
—
14
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Mondi acquired 100% of the outstanding share capital of Powerflute Group Holdings Oy (Powerflute) on 1 June 2018 for a total
consideration of €365 million on a debt and cash-free basis.
Powerflute operates an integrated pulp and paper mill in Kuopio, Finland, with an annual production capacity of 285,000 tonnes of
high-performance semi-chemical fluting. Powerflute’s premium semi-chemical fluting is sold to a diverse range of customers, primarily
for packaging fresh fruit and vegetables, but also other end-uses such as electronics, chemicals and pharmaceuticals. The provisional
goodwill arising on the acquisition is attributable to the anticipated synergies from integrating Powerflute into the Group, the benefits from
the skilled workforce and the expansion of the product range and geographic reach of Mondi’s containerboard business.
Powerflute’s revenue for the year ended 31 December 2018 was €170 million with a profit after tax of €17 million. Powerflute’s revenue of
€99 million and profit after tax of €8 million since the date of acquisition have been included in the combined and consolidated
income statement.
Mondi Group
Integrated report and financial statements 2018
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Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
24 Business combinations
Details of the net assets acquired, as adjusted from book to fair value, are as follows:
€ million
Net assets acquired
Property, plant and equipment
Intangible assets
Other non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other current assets
Total assets
Trade and other payables
Income tax liabilities
Other current liabilities
Deferred tax liabilities
Other provisions
Total liabilities (excluding debt)
Short-term borrowings
Debt assumed
Net assets acquired
Goodwill arising on acquisition
Total consideration
Comprising
Consideration paid in cash
€ million
Net cash outflow arising on acquisition
Consideration paid in cash
Cash acquired
Transaction costs paid
Net cash paid per combined and consolidated statement of cash flows
Book value
Revaluation
Fair value
64
7
1
14
48
6
1
141
(35)
(3)
(1)
(11)
—
(50)
(31)
(31)
60
42
3
—
5
—
—
—
50
—
—
—
(10)
(1)
(11)
—
—
39
106
10
1
19
48
6
1
191
(35)
(3)
(1)
(21)
(1)
(61)
(31)
(31)
99
242
341
341
Fair value
341
(6)
6
341
Other acquisitions
Mondi acquired the operating business and the underlying assets and liabilities of World Hardwood Proprietary Limited (World Hardwood)
on 1 May 2018 for a consideration of ZAR408 million (€27 million) on a debt and cash-free basis. World Hardwood is a supplier of wood
and operates forest plantations in KwaZulu-Natal, South Africa. The acquisition increases the level of secure wood supply.
World Hardwood’s revenue for the year ended 31 December 2018 was €nil with a profit after tax of €1 million. World Hardwood’s
revenue of €nil and profit after tax of €1 million since the date of acquisition have been included in the combined and consolidated
income statement.
Mondi acquired 100% of the outstanding shares in National Company for Paper Products and Import & Export (S.A.E.) (NPP) on 20 June
2018 for a total consideration of EGP510 million (€25 million) on a debt and cash-free basis. NPP is an industrial bags producer, operating
one plant in Giza near Cairo, Egypt, serving mostly regional customers.
NPP’s revenue for the year ended 31 December 2018 was €36 million with a profit after tax of €3 million. NPP’s revenue of €18 million and
profit after tax of €1 million since the date of acquisition have been included in the combined and consolidated income statement.
Mondi Group
Integrated report and financial statements 2018
Mondi acquired control of Suez Bags Company (S.A.E.) (Suez Bags) for EGP26.01 per share (€1.26 per share) on 6 August 2018, which
implies an equity value of EGP284 million (€14 million) on a 100% basis. Mondi now owns 96% of the company. Suez Bags is an industrial
bags producer, operating one plant near Cairo, Egypt, serving mostly regional customers. Suez Bags, together with NPP, complement the
Group’s network of plants in the growing Middle East region, and provide the Group with a leading position in Egypt to grow the business
and better serve customers.
Suez Bags’ revenue for the year ended 31 December 2018 was €23 million with a profit after tax of €nil. Suez Bags revenue of €10 million
and profit after tax of €nil since the date of acquisition have been included in the combined and consolidated income statement.
Details of the net assets acquired in relation to World Hardwood, NPP and Suez Bags, as adjusted from book to fair value, are as follows:
193
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€ million
Net assets acquired
Property, plant and equipment
Intangible assets
Forestry assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Trade and other payables
Income tax liabilities
Net retirement benefits liability
Deferred tax liabilities
Other provisions
Total liabilities (excluding debt)
Short-term borrowings
Medium and long-term borrowings
Debt assumed
Net assets acquired
Goodwill arising on acquisitions
Total consideration
Comprising
Consideration paid in cash
Fair value of associate interest previously held
€ million
Net cash outflow arising on acquisition
Consideration paid in cash
Transaction costs paid
Net cash paid per combined and consolidated statement of cash flows
Book value
Revaluation
Fair value
18
—
13
7
9
4
51
(5)
(2)
—
—
—
(7)
(4)
—
(4)
40
12
4
1
—
—
—
17
(2)
—
(1)
(3)
(1)
(7)
—
(1)
(1)
9
30
4
14
7
9
4
68
(7)
(2)
(1)
(3)
(1)
(14)
(4)
(1)
(5)
49
15
64
60
4
Fair value
60
1
61
€ million
World Hardwood
NPP
Suez Bags
Acquisitions total
Purchase price allocation adjustment (TSP)
Acquisitions total including adjustments
Goodwill
Net assets
Consideration
—
11
3
14
1
15
27
13
10
50
(1)
49
27
24
13
64
—
64
The Group incurred transaction costs of €9 million relating to the acquisitions completed in 2018. The transaction costs were expensed to
the combined and consolidated income statement.
Mondi Group
Integrated report and financial statements 2018
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Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
24 Business combinations
The fair value accounting of these acquisitions is provisional in nature. The nature of these businesses is such that further adjustments to
the carrying values of acquired assets and/or liabilities, and adjustments to the purchase price, are possible as the detail of the acquired
businesses is evaluated post acquisition. If necessary, any adjustments to the fair values recognised will be made within 12 months of the
acquisition dates.
In respect of trade and other receivables, the gross contractual amounts receivable less the best estimates at the acquisition dates of the
contractual cash flows not expected to be collected approximate the book values and the revaluation amounts respectively as presented.
Goodwill arising on the above business combinations is not tax deductible.
To 31 December 2017
Mondi acquired 100% of the outstanding share capital of Excelsior Technologies Limited (Excelsior) on 3 February 2017 for a total
consideration of GBP34 million (€40 million) on a debt and cash-free basis. Excelsior is a vertically-integrated producer of innovative flexible
packaging solutions, mainly for food applications.
Mondi acquired 100% (51% effective share) of the outstanding share capital of Smurfit Kappa Recycling CE, s.r.o. (SK Recycling)
on 8 March 2017 for a consideration of €1 million on a debt and cash-free basis. SK Recycling operates eight paper recycling sites
in Slovakia.
Mondi acquired the remaining shares of Mondi TSP Co., Ltd. (TSP) that it did not already own (representing an interest of 50%) on 26 July
2017 for a consideration of THB143 million (€4 million) on a debt and cash-free basis. TSP operates a plant near Bangkok, Thailand, and
produces consumer goods packaging products with a focus on retort stand-up pouches for the food and pet food industry.
The provisional fair values at acquisition of TSP have been adjusted. Property, plant and equipment reduced by €1 million, goodwill
increased by €1 million. The net effect of this adjustment is €nil and has been recorded during the year ended 31 December 2018.
Details of the net assets acquired, as adjusted from book to fair value, are as follows:
€ million
Net assets acquired
Property, plant and equipment
Intangible assets
Share of joint venture
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Trade and other payables
Deferred tax liabilities
Total liabilities (excluding debt)
Short-term borrowings
Medium and long-term borrowings
Debt assumed
Net assets acquired
Goodwill arising on acquisitions
Total consideration
Comprising
Consideration paid in cash
Deferred acquisition consideration
Fair value of associate interest previously held
Mondi Group
Integrated report and financial statements 2018
Book value
Revaluation
Fair value
7
—
1
5
14
2
29
(13)
—
(13)
(2)
(8)
(10)
6
2
12
—
2
(3)
—
13
1
(3)
(2)
—
—
—
11
9
12
1
7
11
2
42
(12)
(3)
(15)
(2)
(8)
(10)
17
26
43
38
1
4
€ million
Net cash outflow arising on acquisition
Consideration paid in cash
Cash acquired net of overdrafts
Transaction costs paid
Net cash paid per combined and consolidated statement of cash flows
€ million
Excelsior
SK Recycling
TSP
Acquisitions total
Purchase price adjustment (Uralplastic)
Acquisitions total including adjustments
Transaction costs of €1 million were charged to the combined and consolidated income statement.
25 Consolidated cash flow analysis
(a) Reconciliation of profit before tax to cash generated from operations
€ million
Profit before tax
Depreciation and amortisation
Impairment of property, plant and equipment (not included in special items)
Share-based payments
Net cash flow effect of current and prior year special items
Net finance costs
Net profit from equity accounted investees
Decrease in provisions and net retirement benefits
Increase in inventories
Increase in operating receivables
Increase/(decrease) in operating payables
Fair value gains on forestry assets
Felling costs
(Profit)/loss on disposal of property, plant and equipment
Net loss from disposal of businesses and equity accounted investees
Other adjustments
Cash generated from operations
(b) Cash and cash equivalents
€ million
Cash and cash equivalents per combined and consolidated statement of financial position
Bank overdrafts included in short-term borrowings
Cash and cash equivalents per combined and consolidated statement of cash flows
The fair value of cash and cash equivalents approximate their carrying values presented.
195
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Fair value
38
(2)
1
37
Goodwill
Net assets
Consideration
21
—
3
24
2
26
12
1
4
17
—
17
2018
1,105
444
2
11
97
88
(1)
(7)
(112)
(84)
79
(43)
60
(1)
3
13
33
1
7
41
2
43
Restated
2017
884
449
4
15
40
85
(1)
(16)
(19)
(87)
(16)
(43)
73
1
—
(6)
1,654
1,363
2018
52
(44)
8
2017
38
(104)
(66)
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s
The Group operates in certain countries (principally South Africa) where the existence of exchange controls may restrict the use of certain
cash balances. These restrictions are not expected to have any material effect on the Group’s ability to meet its ongoing obligations.
Mondi Group
Integrated report and financial statements 2018
196
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
25 Consolidated cash flow analysis
(c) Movement in net debt
The Group’s net debt position is as follows:
€ million
At 1 January 2017, as previously
reported
Impact of change in accounting
policy (see note 33)
Restated balance at 1 January
2017
Cash flow (restated)
Additions to lease liabilities
(restated)
Acquired through business
combinations
Movement in unamortised loan
costs
Net movement in derivative
financial instruments
Reclassification (restated)
Currency movements (restated)
Restated balance at 31
December 2017
Cash flow
Additions to lease liabilities
Disposal of lease liabilities
Acquired through business
combinations (see note 24)
Movement in unamortised loan
costs
Net movement in derivative
financial instruments
Reclassification
Currency movements
At 31 December 2018
Cash and
cash
equivalents
Current
financial
asset
investments Total assets
Debt due
within one
year
Debt due
after one
year
Debt-related
derivative
financial
instruments
Total debt
Total net
debt
377
—
377
(439)
—
—
—
—
—
(4)
(66)
67
—
—
—
—
—
—
7
8
2
—
2
(1)
—
(1)
—
—
1
—
1
—
—
—
—
—
—
—
—
1
379
(624)
(1,119)
(19)
(1,762)
(1,383)
—
(22)
(190)
379
(440)
(646)
504
—
(1)
—
—
1
(4)
(5)
(2)
—
—
(54)
16
(1,309)
(14)
(22)
(8)
(2)
—
54
21
(65)
(187)
(1,280)
67
—
—
—
—
—
—
7
9
16
(5)
2
(31)
—
—
(39)
20
(765)
(19)
4
(1)
(2)
—
42
19
(224)
(2,002)
—
(19)
—
—
—
—
20
—
(1)
—
—
—
—
—
—
(2)
—
(1)
(3)
(212)
(212)
(1,974)
(1,595)
490
(27)
(10)
(2)
20
—
36
50
(27)
(11)
(2)
20
1
32
(1,467)
(1,532)
(749)
(24)
6
(682)
(24)
6
(32)
(32)
(2)
(2)
3
38
(2)
(2)
3
45
(2,229)
(2,220)
Mondi Group
Integrated report and financial statements 2018
(d) Cash flow generation
€ million
Net cash generated from operating activities
Investing activities
Net cash used in investing activities
Investment in property, plant and equipment
Investment in equity accounted investees
Proceeds from the disposal of businesses, net of cash and cash equivalents
Acquisition of businesses, net of cash and cash equivalents
Financing activities
Interest paid
Dividends paid to non-controlling interests
Purchases of treasury shares
Net cash outflow from derivatives
Other financing activities
Cash flow generation
26 Capital commitments
€ million
Contracted for but not provided
Approved, not yet contracted for
Total capital commitments
These capital commitments relate to the following categories of non-current non-financial assets:
€ million
Intangible assets
Property, plant and equipment
Total capital commitments
The expected maturity of these capital commitments is:
€ million
Within one year
One to two years
Two to five years
2018
1,407
(42)
(1,157)
709
7
(3)
402
(139)
(73)
(18)
(15)
(25)
(8)
1,226
2018
434
1,606
2,040
2018
40
2,000
2,040
2018
842
663
535
Restated
2017
1,213
(46)
(694)
611
—
—
37
(195)
(97)
(22)
(24)
(47)
(5)
972
2017
393
1,545
1,938
2017
47
1,891
1,938
2017
740
672
526
Total capital commitments
2,040
1,938
Capital commitments are based on capital projects approved by the end of the financial year and the budget approved by the Boards.
Major capital projects still require further approval before they commence and are not included in the above analysis. The Group’s capital
commitments are expected to be financed from existing cash resources and borrowing facilities.
27 Contingent liabilities
Contingent liabilities comprise aggregate amounts as at 31 December 2018 of €6 million (2017: €6 million) in respect of loans and
guarantees given to banks and other third parties. No acquired contingent liabilities have been recorded in the Group’s combined and
consolidated statement of financial position for either year presented.
197
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The Group is subject to certain legal proceedings, claims, complaints and investigations arising out of the ordinary course of business.
Legal proceedings may include, but are not limited to, alleged breach of contract and alleged breach of environmental, competition, securities
and health and safety laws. The Group may not be insured fully, or at all, in respect of such risks. The Group cannot predict the outcome
of individual legal actions or claims or complaints or investigations. The Group may settle litigation or regulatory proceedings prior to a final
judgment or determination of liability. The Group may do so to avoid the cost, management efforts or negative business, regulatory or
reputational consequences of continuing to contest liability, even when it considers it has valid defences to liability. The Group considers that
no material loss to the Group is expected to result from these legal proceedings, claims, complaints and investigations. Provision is made
for all liabilities that are expected to materialise through legal and tax claims against the Group.
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Mondi Group
Integrated report and financial statements 2018
198
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
28 Financial instruments
The Group’s trading and financing activities expose it to various financial risks that, if left unmanaged, could adversely impact current or future
earnings. Although not necessarily mutually exclusive, these financial risks are categorised separately according to their different generic risk
characteristics and include market risk (foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group is actively engaged in
the management of all of these financial risks in order to minimise their potential adverse impact on the Group’s financial performance.
The principles, practices and procedures governing the group-wide financial risk management process have been approved by the
Boards and are overseen by the DLC executive committee. In turn, the DLC executive committee delegates authority to a central treasury
function (Group treasury) for the practical implementation of the financial risk management process across the Group and for ensuring
that the Group’s entities adhere to specified financial risk management policies. Group treasury continually reassesses and reports on the
financial risk environment; identifying, evaluating and hedging financial risks by entering into derivative contracts with counterparties where
appropriate. The Group does not take speculative positions on derivative contracts.
(a) Financial instruments by category
The Group has adopted IFRS 9, ‘Financial instruments’, on 1 January 2018 and in accordance with the transitional provisions in IFRS 9,
comparative figures have not been restated. The classification categories previously defined under IAS 39 were replaced in IFRS 9 with
the categories ‘amortised cost’, ‘fair value through profit or loss’ and ‘fair value through OCI’.
Financial assets previously held as ‘available-for-sale’ and ‘loans and receivables’ were transferred to the categories ‘at fair value through
profit or loss’ and ‘at amortised cost’ respectively, effective from 1 January 2018. The transfer in financial asset categories did not have a
material impact on the measurement of the financial assets.
2018/€ million
Financial assets
Trade and other receivables1
Financial asset investments
Derivative financial instruments
Cash and cash equivalents
Total
2017/€ million
Financial assets
Trade and other receivables1
Financial asset investments
Derivative financial instruments
Cash and cash equivalents
Total
Note:
Fair value
hierarchy
At amortised
cost
At fair value
through profit
or loss
At fair value
through OCI
Level 2
Level 2
1,047
3
—
52
1,102
—
18
8
—
26
—
—
1
—
1
Fair value
hierarchy
Available-
for-sale
investments
Loans and
receivables
At fair value
through profit
or loss
At fair value
through OCI
Level 2
Level 2
—
18
—
—
18
993
6
—
38
1,037
—
—
10
—
10
—
—
3
—
3
1 Excludes tax, social security, prepayments and accrued income
The fair values of financial assets investments represent the published prices of the securities concerned.
2018/€ million
Financial liabilities
Borrowings – bonds
Borrowings – loans and overdrafts
Lease liabilities
Trade and other payables1
Derivative financial instruments
Other non-current liabilities
Total
Note:
1 Excludes tax, social security, accruals and deferred income
Mondi Group
Integrated report and financial statements 2018
Fair value
hierarchy
At amortised
cost
At fair value
through profit
or loss
At fair value
through OCI
Level 1
Level 2
Level 3
Level 2
Level 2/3
(1,592)
(494)
(184)
(766)
—
(14)
(3,050)
—
—
—
—
(12)
—
(12)
—
—
—
—
(1)
—
(1)
Total
1,047
21
9
52
1,129
Total
993
24
13
38
1,068
Total
(1,592)
(494)
(184)
(766)
(13)
(14)
(3,063)
199
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Fair value
hierarchy
At amortised
cost
At fair value
through profit
or loss
Level 1
Level 2
Level 3
Level 2
Level 2/3
(995)
(368)
(208)
(673)
—
(19)
(2,263)
—
—
—
—
(8)
—
(8)
Total
(995)
(368)
(208)
(673)
(8)
(19)
(2,271)
2017/€ million (restated)
Financial liabilities
Borrowings – bonds
Borrowings – loans and overdrafts
Lease liabilities
Trade and other payables1
Derivative financial instruments
Other non-current liabilities
Total
Note:
1 Excludes tax, social security, accruals and deferred income
(b) Fair value measurement
There have been no transfers of assets or liabilities between levels of the fair value hierarchy during the year.
Except as detailed below, the carrying values of financial instruments at amortised cost as presented in the combined and consolidated
financial statements approximate their fair values.
€ million
Financial liabilities
Borrowings
(c) Financial risk management
Market risk
Carrying amount
Fair value
2018
Restated
2017
2018
Restated
2017
2,270
1,571
2,287
1,620
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The Group’s activities expose it primarily to foreign exchange and interest rate risk. Both risks are actively monitored on a regular basis
and managed through the use of foreign exchange contracts and interest rate swaps as appropriate. Although the Group’s cash flows
are exposed to movements in key input and output prices, such movements represent commercial rather than financial risk inherent to
the Group.
Foreign exchange risk
The Group operates globally and is exposed to foreign exchange risk in the normal course of its business. Multiple currency exposures
arise from commercial transactions denominated in foreign currencies, recognised financial assets and liabilities (monetary items)
denominated in foreign currencies and translational exposure on net investments in foreign operations.
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Foreign exchange contracts
The Group’s treasury policy requires subsidiaries to actively manage foreign currency transactional exposures against their functional
currencies by entering into foreign exchange contracts. For segmental reporting purposes, each subsidiary enters into, and accounts
for, foreign exchange contracts with Group treasury or with counterparties that are external to the Group, whichever is more
commercially appropriate.
Only material balance sheet exposures and highly probable forecast capital expenditure transactions are hedged.
Foreign currency sensitivity analysis
Foreign exchange risk sensitivity analysis has been performed on the foreign currency exposures inherent in the Group’s financial assets
and financial liabilities at the reporting dates presented, net of related foreign exchange contracts. The sensitivity analysis provides an
indication of the impact on the Group’s reported earnings of reasonably possible changes in the currency exposures embedded within the
functional currency environments that the Group operates in. In addition, an indication is provided of how reasonably possible changes in
foreign exchange rates might impact on the Group’s equity, as a result of fair value adjustments to foreign exchange contracts designated
as cash flow hedges. Reasonably possible changes are based on an analysis of historical currency volatility, together with any relevant
assumptions regarding near-term future volatility.
Mondi Group
Integrated report and financial statements 2018
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200
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
28 Financial instruments
Net monetary foreign currency exposures by functional currency zone
€ million
Functional currency zones2
Euro
South African rand
Czech koruna
Polish zloty
Russian rouble
Swedish krona
Turkish lira
Other
Notes:
Net monetary foreign currency
exposures – assets/(liabilities)1
2018
EUR
Other
—
(6)
14
(7)
13
(26)
(22)
(66)
(10)
(4)
—
2
(11)
—
(2)
17
1 Presented in euro, the presentation currency of the Group
2 Net monetary exposures represent financial assets less financial liabilities denominated in currencies other than the applicable functional currency, adjusted for the
effects of foreign exchange risk hedging, excluding cash flow hedging of non-monetary assets and liabilities
Resultant impacts of reasonably possible changes to foreign exchange rates
The Group considers that for each functional to foreign currency net monetary exposure it is reasonable to assume a 5% appreciation/
depreciation of the functional currency. If all other variables are held constant, the table below presents the impacts on the Group’s
combined and consolidated income statement if these currency movements had occurred.
€ million
Functional currency zones
Czech koruna
Swedish krona
Other
Income/(expense)
2018
+5%
1
1
5
-5%
(1)
(1)
(5)
The corresponding fair value impact on the Group’s equity, resulting from the application of these reasonably possible changes to the
valuation of the Group’s foreign exchange contracts designated as cash flow hedges, would have been €1 million. It has been assumed
that changes in the fair value of foreign exchange contracts designated as cash flow hedges of non-monetary assets and liabilities are fully
recorded in equity and that all other variables are held constant.
Interest rate risk
The Group holds cash and cash equivalents, which earn interest at a variable rate and has variable and fixed rate debt in issue.
Consequently, the Group is exposed to interest rate risk. Although the Group has fixed rate debt in issue, the Group’s accounting policy
stipulates that all borrowings be held at amortised cost. As a result, the carrying value of fixed rate debt is not sensitive to changes in credit
conditions in the relevant debt markets and there is, therefore, no exposure to fair value interest rate risk.
Management of cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with short-term highly liquid investments which have
a maturity of three months or less from the date of acquisition. Centralised cash pooling arrangements are in place, which ensure that
cash is utilised most efficiently for the ongoing working capital needs of the Group’s operating units and, in addition, to ensure that the
Group earns the most advantageous rates of interest available.
Mondi Group
Integrated report and financial statements 2018
Management of variable rate debt
The Group has multiple variable rate debt facilities, of which the most significant is the Syndicated Revolving Credit Facility (see note 19).
When deemed necessary, Group treasury uses interest rate swaps to hedge certain exposures to movements in the relevant interbank
lending rates, primarily the London Interbank Offered Rate (LIBOR) and the Johannesburg Interbank Agreed Rate (JIBAR).
The Group’s cash and cash equivalents act as a natural hedge to movements in the relevant interbank lending rates on its variable rate
debt, subject to any interest rate differentials that exist between the Group’s corporate saving and lending rates.
Net variable rate debt sensitivity analysis
The net variable rate exposure represents variable rate debt less the future cash outflows swapped from variable-to-fixed via interest
rate swap instruments and cash and cash equivalents. Reasonably possible changes in interest rates have been applied to the net
variable rate exposure, denominated by currency, in order to provide an indication of the possible impact on the Group’s combined and
consolidated income statement.
Interest rate risk sensitivities on variable rate debt
€ million
Total debt
Less:
Fixed rate debt
Lease liabilities
Cash and cash equivalents
Net variable rate debt and exposure
Interest rate risk exposures
EUR
1,836
(1,593)
(47)
(10)
186
2018
Other
434
(24)
(137)
(42)
231
Total
2,270
(1,617)
(184)
(52)
417
Restated
2017
Other
391
(9)
(156)
(32)
194
EUR
1,180
(999)
(52)
(6)
123
Total
1,571
(1,008)
(208)
(38)
317
Included in other is net variable exposure to various currencies, the most significant of which are ZAR and TRY (2017: ZAR and TRY).
The Group did not have any outstanding interest rate swaps at 31 December 2018 (2017: €nil).
The potential impact on the Group’s combined and consolidated equity resulting from the application of +50 basis points to the variable
interest rate exposure would be a gain of €2 million and vice versa for a -50 fall in basis points.
In addition to the above, the Group swaps euro and pound sterling debt into other currencies through the foreign exchange market using
foreign exchange contracts which has the effect of exposing the Group to the interest rates of these currencies. The currencies swapped
into/(out of) and the amounts as at 31 December were as follows:
€ million
2018
2017
Short-dated contracts with tenures of less than 12 months
Pound sterling
Czech koruna
Polish zloty
Russian rouble
Swedish krona
US dollar
Other
Total swapped
Credit risk
(145)
378
285
(91)
39
54
118
638
7
251
297
(164)
31
96
89
607
The Group’s credit risk is mainly confined to the risk of customers defaulting on sales invoices raised. The Group’s exposure to the credit
risk inherent in its trade receivables and the associated risk management techniques that the Group deploys in order to mitigate this risk
are discussed in note 16.
Several Group entities have also issued certain financial guarantees to external counterparties in order to achieve competitive funding
rates for specific debt agreements entered into by other Group entities. None of these financial guarantees contractually obligates the
Group to pay more than the recognised financial liabilities in the entities concerned. As a result, these financial guarantee contracts have
no bearing on the credit risk profile of the Group as a whole.
Mondi Group
Integrated report and financial statements 2018
201
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202
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
28 Financial instruments
Liquidity risk
Liquidity risk is the risk that the Group could experience difficulties in meeting its commitments to creditors as financial liabilities fall due for
payment. The Group manages its liquidity risk by using reasonable and retrospectively assessed assumptions to forecast the future cash-
generative capabilities and working capital requirements of the businesses it operates and by maintaining sufficient reserves, committed
borrowing facilities and other credit lines as appropriate.
The following table shows the amounts available to draw down on the Group’s committed loan facilities:
€ million
Expiry date
Within one year
Two to five years
Total credit available (see note 19)
2018
2017
48
568
616
58
733
791
Forecast liquidity represents the Group’s expected cash inflows, principally generated from sales made to customers, less the Group’s
expected cash outflows, principally related to the payment of employees, supplier payments and the repayment of borrowings plus the
payment of any interest accruing thereon. The matching of these cash inflows and outflows rests on the expected ageing profiles of the
underlying assets and liabilities.
Short-term financial assets and financial liabilities are primarily represented by the Group’s trade receivables and trade payables.
The matching of the cash flows that result from trade receivables and trade payables typically takes place over a period of three to
four months from recognition in the combined and consolidated statement of financial position and is managed to ensure the ongoing
operating liquidity of the Group.
Financing cash outflows may be longer-term in nature. The Group does not hold long-term financial assets to match against these
commitments, but is significantly invested in long-term non-financial assets which generate the sustainable future cash inflows, net of
future capital expenditure requirements, needed to service and repay the Group’s borrowings.
(d) Derivative financial instruments
At 31 December 2018, the Group recognised total derivative assets of €9 million (2017: €13 million) and derivative liabilities of €13 million
(2017: €8 million). The full net liability of €4 million (2017: net asset of €5 million) will mature within one year.
The notional amount of €1,725 million (2017: €1,605 million) is the aggregate face value of all derivatives outstanding at the reporting
date. They do not indicate the contractual future cash flows of the derivative instruments held or their current fair value and, therefore,
do not indicate the Group’s exposure to credit or market risks. Of the €1,725 million (2017: €1,605 million) aggregate notional amount,
€1,300 million (2017: €1,305 million) relates to the economic hedging of foreign exchange exposures on short-term inter-company funding
balances, which are fully eliminated on consolidation.
Derivative financial instruments are subject to International Swaps and Derivatives Association (ISDA) master netting agreements.
The amounts are not offset in the statement of financial position.
Hedging
Cash flow hedges
The Group designates certain derivative financial instruments as cash flow hedges. The fair value gains/(losses) are reclassified from the
cash flow hedge reserve to the combined and consolidated income statement in the period when the hedged transaction affects profit
and loss. For non-current non-financial assets, these gains/(losses) are included in the carrying value of the asset and depreciated over the
same useful life as the cost of the asset.
No fair value gains/(losses) (2017: €nil) were reclassified from the cash flow hedge reserve to property, plant and equipment during the
current year. There was no ineffectiveness recognised in the combined and consolidated income statement arising on cash flow hedges
for both years presented.
Mondi Group
Integrated report and financial statements 2018
203
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29 Related party transactions
The Group and its subsidiaries, in the ordinary course of business, enter into various sale, purchase and service transactions with equity
accounted investees and others in which the Group has a material interest. These transactions are under terms that are no less favourable
than those arranged with third parties. These transactions, in total, are not considered to be significant.
Transactions between Mondi Limited, Mondi plc and their respective subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
€ million
Sales to related parties
Purchases from related parties
Receivables due from related parties
Payables due to related parties
Associates
2018
18
208
2
44
2017
22
194
2
30
Compensation for the Boards and key management
In accordance with IAS 24, ‘Related Party Disclosures’, key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group, directly or indirectly, and includes directors (both Executive and Non-
Executive) of Mondi Limited and Mondi plc. The Boards and those members of the DLC executive committee who are not directors
comprise the key management personnel of the Group. The remuneration of the directors is disclosed in the Remuneration report.
€ million
Salaries and short-term employee benefits
Non-Executive Directors
Defined contribution plan payments
Social security costs
Share-based payments
Total
2018
8.4
1.1
0.9
0.7
5.1
16.2
2017
8.5
1.1
0.9
1.2
6.6
18.3
The information presented in the table above, in conjunction with the audited information included in the Remuneration report, satisfies
the disclosure requirements of the Companies Act of South Africa 2008 Section 30(4) to (6) with regard to the remuneration of prescribed
officers of the Group.
Details of the transactions between the Group and its pension and post-retirement medical plans are disclosed in note 23.
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Mondi Group
Integrated report and financial statements 2018
204
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
30 Group companies
Composition of the Group
The subsidiaries of the Group as at 31 December 2018 are set out in note 6 of the Mondi Limited parent company financial statements
and note 11 of the Mondi plc parent company financial statements. All of these interests are combined and consolidated within the
Group’s financial statements.
The Group has no material joint ventures or associates.
Refer to Mondi’s global footprint on pages 6 and 7 of the overview to the Integrated report for more information on the places of operation.
Details of non-wholly-owned subsidiaries
Proportion of ownership interests
and voting rights held by non-
controlling interests (%)
Profit attributable to non-
controlling interests
Equity attributable to non-
controlling interests
€ million, unless otherwise stated
Mondi SCP a.s.
Individually immaterial subsidiaries with
non-controlling interests
Total
2018
49
2017
49
2018
30
12
42
Restated
2017
32
11
43
Summarised financial information of the Group’s material non-controlling interest is as follows:
Mondi SCP a.s.
€ million
Statement of financial position
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Equity attributable to owners of the company
Equity attributable to non-controlling interests
Income statement and statement of comprehensive income
Revenue
Operating costs (including taxation)
Profit for the year
Attributable to owners of the company
Attributable to non-controlling interests
Profit and total comprehensive income for the year
Dividends paid to non-controlling interests
Statement of cash flows
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net cash inflow
The summarised financial information represents amounts before intra-group eliminations.
Mondi Group
Integrated report and financial statements 2018
2018
278
62
340
2018
542
352
(193)
(126)
575
297
278
806
(743)
63
33
30
63
15
113
(79)
(34)
—
Restated
2017
263
61
324
Restated
2017
509
343
(223)
(83)
546
283
263
770
(699)
71
39
32
71
20
115
(37)
(38)
40
31 Events occurring after 31 December 2018
With the exception of the final ordinary dividend proposed for 2018 (see note 9), there have been no material reportable events since
31 December 2018.
32 Accounting policies
Basis of consolidation
The combined and consolidated financial statements incorporate the revenues, expenses, assets, liabilities, equity and cash flows of
Mondi Limited and Mondi plc, and of their respective subsidiaries (together ‘the Group’), and the Group’s share of equity accounted
investees drawn up to 31 December each year. All intra-group balances and transactions are eliminated.
A subsidiary is an entity over which the Group has control. Control is evident where the Group is exposed to, or has rights to, variable
returns from its involvement with that entity and has the ability to affect those returns through its power over that entity. The results of
subsidiaries acquired or disposed of during the years presented are included in the combined and consolidated income statement from
the effective date of acquiring control or up to the effective date of disposal.
Non-controlling interests are measured, at initial recognition, as the non-controlling proportion of the fair values of the assets and liabilities
recognised at acquisition.
After initial recognition, non-controlling interests are measured as the aggregate of the value at initial recognition and their subsequent
proportionate share of profits and losses less any distributions made.
Changes in the Group’s interests in subsidiaries that do not result in a change in control are accounted for as equity transactions.
Any resulting difference between the amount by which the non-controlling interests is adjusted and the fair value of the consideration
payable or receivable is recognised directly in equity and attributed to the shareholders.
Foreign currency transactions and translation
Foreign currency transactions
Foreign currency transactions are translated into the functional currency of the entity that has undertaken the transaction using the
exchange rates ruling on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in
foreign currencies are translated at the rates prevailing on the reporting date. Gains and losses arising on translation are included in
the combined and consolidated income statement and are classified as either operating or financing consistent with the nature of the
monetary item giving rise to them.
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Translation of overseas operations
The Group’s results are presented in euro, the currency in which most of its business is conducted. On consolidation, the assets and
liabilities of the Group’s overseas operations are translated into the presentation currency of the Group at exchange rates prevailing on
the reporting date. Income and expense items are translated at the average exchange rates for the month in which they occur where
these approximate the rates on the dates of the underlying transactions. Exchange differences, if any, are recognised directly in other
comprehensive income, and accumulated in equity. Such translation differences are reclassified to profit and loss only on disposal or
partial disposal of the overseas operation.
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Fair value measurement
Assets and liabilities that are measured at fair value, or where the fair value of financial instruments has been disclosed in notes to the
combined and consolidated financial statements, are based on the following fair value measurement hierarchy:
e level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
e level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices); and
e level 3 – inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The assets measured at fair value on level 3 of the fair value measurement hierarchy are the Group’s forestry assets as set out in note 14
and certain assets acquired or liabilities assumed in business combinations.
The fair values of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) are determined
using generally accepted valuation techniques. These valuation techniques maximise the use of observable market data and rely as little
as possible on Group specific estimates.
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Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
32 Accounting policies
Specific valuation methodologies used to value financial instruments include:
e the fair values of interest rate swaps and foreign exchange contracts are calculated as the present value of expected future cash flows
based on observable yield curves and exchange rates;
e the fair values of the Group’s commodity price derivatives are calculated as the present value of expected future cash flows based on
observable market data; and
e other techniques, including discounted cash flow analysis, are used to determine the fair values of other financial instruments.
Segmental reporting (note 2)
The Group’s operating segments are reported in a manner consistent with the internal reporting provided to the DLC executive committee,
the chief operating decision-making body. The operating segments are managed based on the nature of the underlying products
produced by those businesses and comprise three distinct segments.
Measurement of operating segment revenues, profit and loss, assets and non-current non-financial assets
Each of the reportable segments derives its income from the sale of manufactured products.
The operating segment measures adhere to the recognition and measurement criteria presented in the Group’s accounting policies
and are presented on an underlying basis, excluding special items. The Group has presented certain non-IFRS measures (Alternative
Performance Measures) by segment to supplement the user’s understanding. All intra-group transactions are conducted on an arm’s
length basis.
The Group’s measure of net segment assets includes the allocation of net retirement benefits assets and liabilities. The measure of
segment results exclude, however, the financing effects of the Group’s defined benefit retirement plans. In addition, the Group’s measure
of net segment assets does not include an allocation for derivative assets and liabilities, non-operating receivables and payables and
assets held for sale and associated liabilities. The measure of segment results includes the effects of certain movements in these
unallocated balances.
There has been no change in the basis of measurement of segment profit and loss in the financial year.
Revenue from contracts with customers
Sale of goods (note 2)
Revenue is recognised from the sale of goods and is measured at the amount of the transaction price received in exchange for
transferring goods. The transaction price is the expected consideration to be received, to the extent that it is highly probable that there
will not be a significant reversal of revenue in future, after deducting discounts, volume rebates, value added tax and other sales taxes.
When the period of time between delivery of goods and subsequent payment by the customer is less than one year, no adjustment for a
financing component is made.
Control of the goods is passed when title and insurance risk have passed to the customer, which is typically when the goods have been
delivered to a contractually agreed location.
The incremental costs of obtaining a contract are recognised as an expense when the period of amortisation over which the costs would
have been recognised is one year or less. If not, these costs are capitalised and amortised on a basis consistent with the transfer of goods
to the customer to which the asset relates.
Transport revenue (note 2)
Transport revenue is considered distinct when the Group provides transport services beyond the point in time when control of goods has
passed to the customer. Such revenue is recognised over time.
Transitional application
The Group has elected to adopt IFRS 15, ‘Revenue from Contracts with Customers’, with the retrospective transitional option per IFRS 15
C3 (a), in accordance with IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, subject to expedients. The Group
has used the following practical expedients as permitted by IFRS 15:
e for completed contracts that began and ended in the same annual reporting period, no restatement has been done;
e for completed contracts that have variable consideration, the transaction price at the date on which the contract was completed has
been used; and
e for the comparative 2017 period, the amount of the transaction price allocated to remaining performance obligations is not disclosed.
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Other income
Sale of green energy and CO2e credits (note 15)
Income generated from the sale of green energy and CO2e credits issued under international trading schemes is measured at the
consideration received in exchange for transferring such credits. The income is recorded within other net operating expenses in the
combined and consolidated income statement when ownership rights pass to the buyer. Any unsold green energy credits are recorded
in inventory.
Investment income (note 6)
Interest income, which is derived from cash and cash equivalents and other interest-bearing financial assets, is accrued on a time
proportion basis, by reference to the principal outstanding and at the applicable effective interest rate. Interest income is included in net
finance costs.
Taxation (note 7)
The tax expense represents the sum of the current tax charge and the deferred tax charge.
Current tax
The current tax charge is based on taxable profit for the year. The Group’s asset/liability for current tax is calculated using tax rates that
have been enacted or substantively enacted by the reporting date. The Group is regularly subjected to routine tax audits. Provision is
made based on the tax laws in the relevant country and the expected outcomes of any negotiations or settlements.
The Group is subject to corporate taxes in a number of jurisdictions and a degree of estimation and judgement is required in determining
the appropriate tax provision for transactions where the tax treatment is uncertain. In these circumstances, the Group recognises
provisions for taxes based on information available where the anticipated liability is both probable and estimable.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amount of assets and
liabilities in the Group’s combined and consolidated financial statements and the corresponding tax bases used in the computation of
taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences
arise from the initial recognition of goodwill or from the initial recognition, other than in a business combination, of other assets and
liabilities in a transaction that affects neither the tax profit nor accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except
where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse
in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date. The carrying amount is reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered within a reasonable period of
time. Similarly, it is increased to the extent that it becomes probable that sufficient taxable profit will be available in the future for all or part
of the deferred tax asset to be recovered within a reasonable period of time.
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Deferred tax is calculated at the tax rates that have been enacted or substantively enacted and are expected to apply in the year when the
liability is settled or the asset is realised. Deferred tax is charged or credited to the combined and consolidated income statement, except
when it relates to items charged or credited directly to other comprehensive income and accumulated in equity, in which case the deferred
tax is also taken directly to other comprehensive income and accumulated in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same tax authority and the Group intends to
settle its current tax assets and liabilities on a net basis.
The Group applies the initial recognition exemption model to account for any investment tax credits. Deferred tax is not recognised for
temporary differences relating to investment tax credits due to the availability of the initial recognition exemption.
Earnings per share (EPS) (note 8)
Basic EPS
Basic EPS is calculated by dividing net profit attributable to ordinary shareholders by the weighted average number of the sum of ordinary
Mondi Limited and Mondi plc shares in issue during the year, net of treasury shares.
Diluted EPS
For diluted EPS, the weighted average number of the sum of Mondi Limited and Mondi plc ordinary shares in issue, net of treasury
shares, is adjusted to assume conversion of all dilutive potential ordinary shares. At present these only include share awards granted to
employees. Potential or contingent share issues are treated as dilutive when their conversion to shares would decrease EPS.
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Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
32 Accounting policies
Non-current non-financial assets excluding goodwill, deferred tax and net retirement benefits asset
Property, plant and equipment (note 10)
Property, plant and equipment principally comprise land and buildings, plant and equipment and assets in the course of construction.
Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Land and assets in the course of
construction are carried at cost less impairment. Cost includes site preparation, the purchase price of the equipment and directly
attributable labour and installation costs. Borrowing costs are capitalised on qualifying assets. The capitalisation of costs ceases when the
asset is in the location and condition necessary for it to be capable of commercial operation. Start-up and ongoing maintenance costs are
not capitalised.
Depreciation is charged to the combined and consolidated income statement so as to write off the cost of assets, other than freehold land
and assets in the course of construction, over their estimated useful lives on a straight-line basis to their estimated residual values.
Residual values and useful lives are reviewed at least annually. Depreciation commences when the assets are ready for their intended use.
Estimated useful lives range from three years to 20 years for items of plant and equipment and other categories and to a maximum of 50
years for buildings.
Leases (note 11)
To the extent that a right-of-control exists over an asset subject to a lease, with a lease term exceeding one year, a right-of-use asset,
representing the Group’s right to use the underlying leased asset, and a lease liability, representing the Group’s obligation to make lease
payments, are recognised in the combined and consolidated statement of financial position at the commencement of the lease.
The right-of-use asset is measured initially at cost and includes the amount of initial measurement of the lease liability, any initial direct
costs incurred, including advance lease payments, and an estimate of the dismantling, removal and restoration costs required in terms of
the lease. Depreciation is charged to the combined and consolidated income statement so as to depreciate the right-of-use asset from
the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The lease term
shall include the period of an extension option where it is reasonably certain that the option will be exercised. Where the lease contains
a purchase option the asset is written off over the useful life of the asset when it is reasonably certain that the purchase option will
be exercised.
The lease liability is measured at the present value of the future lease payments, including variable lease payments that depend on an
index and the exercise price of purchase options where it is reasonably certain that the option will be exercised, discounted using the
interest rate implicit in the lease, if readily determinable. If the rate cannot be readily determined, the lessee’s incremental borrowing rate is
used. Finance charges are recognised in the combined and consolidated income statement over the period of the lease.
Lease expenses for leases with a duration of one year or less and low-value assets are charged to the combined and consolidated
income statement when incurred. Low-value assets are based on qualitative and quantitative criteria.
Transitional application
The Group has elected to early adopt IFRS 16, ‘Leases’, with effect from 1 January 2018, with the retrospective transitional option per
IFRS 16 C5 (a), applying IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’. The Group has elected to apply
the practical expedient per IFRS 16 C3, such that the IFRS 16 definition of a lease would only be applied to assess whether contracts
entered into after the date of initial application are, or contain, leases. All contracts previously assessed not to contain leases have not
been reassessed.
Intangible assets and research and development expenditure (note 13)
Intangible assets are measured initially at purchase consideration and are amortised on a straight-line basis over their estimated useful
lives. Estimated useful lives vary between three years and 10 years and are reviewed at least annually.
Research expenditure is expensed in the year in which it is incurred. Development costs are capitalised when the completion of the asset
is both commercially and technically feasible and are amortised on a systematic basis over the economic life of the related development.
Development costs are recognised immediately as an expense if they do not qualify for capitalisation.
Impairment of property, plant and equipment and intangible assets
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine
whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is
estimated. If the recoverable amount of an asset, or cash-generating unit (CGU) to which the asset relates, is less than its carrying amount,
the carrying amount of the asset, or CGU, is reduced to its recoverable amount and an impairment recognised as an expense.
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The recoverable amount of the asset, or CGU, is the higher of its fair value less costs to dispose and its value-in-use. In assessing value-
in-use, the estimated future cash flows generated by the asset are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows
have not been adjusted. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the smallest CGU to which the asset belongs.
Where the underlying circumstances change such that a previously recognised impairment subsequently reverses, the carrying amount
of the asset, or CGU, is increased to the revised estimate of its recoverable amount. Such a reversal is limited to the carrying amount that
would have been determined had no impairment been recognised for the asset, or CGU, in prior years. A reversal of an impairment is
recognised in the combined and consolidated income statement.
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Agriculture – owned forestry assets (note 14)
Owned forestry assets are biological assets measured at fair value less costs to sell, calculated by applying the expected selling price,
less costs to harvest and deliver, to the estimated volume of timber on hand at each reporting date. The fair value less costs to sell
is determined using a market approach. The estimated volume of timber on hand is determined based on the maturity profile of the
area under afforestation, the species, the geographic location and other environmental considerations and excludes future growth.
The product of these is then adjusted for risks associated with forestry assets.
Changes in fair value are recognised in the combined and consolidated income statement within other net operating expenses. At point of
felling, the carrying value of forestry assets is transferred to inventory.
Directly attributable costs incurred during the year of biological growth and investments in standing timber are capitalised and presented
within cash flows from investing activities.
Business combinations (note 24)
Identifiable net assets
At the date of acquisition, the identifiable assets, liabilities and contingent liabilities of an acquiree, are recorded at their fair values on
acquisition date. Assets and liabilities which cannot be measured reliably are recorded at provisional fair values, which are finalised within
12 months of the acquisition date.
Cost of a business combination
The cost of a business combination includes the fair value of assets provided, liabilities incurred or assumed, and any equity instruments
issued by a Group entity, in exchange for control of an acquiree. The directly attributable costs associated with a business combination
are expensed as incurred.
Goodwill (note 12)
Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is attributed to goodwill. Goodwill is
subsequently measured at cost less any impairment.
Impairment of goodwill
Goodwill acquired through business combinations is allocated to the group of CGUs that is expected to benefit from the synergies of the
combination and represents the lowest level at which goodwill is monitored for internal management purposes. The recoverable amount
of the group of CGUs to which goodwill has been allocated is tested for impairment annually in the fourth quarter of each financial year
and when events or changes in circumstances indicate that it may be impaired.
The recoverable amount of a group of CGUs is determined based on value-in-use calculations. Value-in-use calculations use cash flow
projections based on financial budgets covering a three-year period that are based on the latest forecasts for revenue and costs as
approved by the Boards. Projected revenues and costs are determined taking into consideration relevant industry forecasts for individual
product lines, management’s projections, historical performance and announced industry capacity changes.
Cash flow projections beyond three years are based on internal management projections. Growth rates in the countries in which the
Group operates are determined with reference to published gross domestic product information, and for specific product lines are
determined with reference to published industry studies.
The discount rate is determined as the Group’s weighted average cost of capital using published market data and published borrowing
rates and adjusted for country risk and tax.
Any impairment is recognised in the combined and consolidated income statement. Impairments of goodwill are not
subsequently reversed.
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Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
32 Accounting policies
Current non-financial assets
Inventories (note 15)
Inventories are valued at the lower of cost and net realisable value. Cost is determined on the first-in-first-out (FIFO) or weighted average
cost basis, as appropriate. Costs comprise direct materials and, where applicable, direct labour costs and those overheads that have
been incurred in bringing the inventories to their present location and condition. Net realisable value is defined as the selling price less any
estimated costs to sell.
Assets held for sale
Assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing
use. Assets classified as held for sale are measured at the lower of carrying amount and fair value less costs of disposal from the date on
which these conditions are met.
Any resulting impairment is reported in the combined and consolidated income statement. On classification as held for sale, the assets are
no longer depreciated or amortised. Comparative amounts are not adjusted.
Provisions (note 18)
Provisions are recognised when the Group has a present obligation as a result of a past event, which it is probable it will be required to
settle. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the reporting date,
and are discounted to present value using country specific discount rates for periods matching the duration of the underlying liability
where the effect of discounting is material.
Equity instruments
Treasury shares (note 21)
The purchase by any Group entity of either Mondi Limited’s or Mondi plc’s equity instruments results in the recognition of treasury shares.
The consideration paid or payable is deducted from equity. Where treasury shares are subsequently sold, reissued or otherwise disposed
of, any consideration received or receivable is included in equity attributable to the shareholders of either Mondi Limited or Mondi plc, net
of any directly attributable incremental transaction costs and the related tax effects.
Dividend payments (note 9)
Dividend distributions to Mondi Limited’s and Mondi plc’s ordinary shareholders are recognised as a liability when the dividends are
declared and approved. Final dividends are accrued when approved by both Mondi Limited’s and Mondi plc’s ordinary shareholders at
their respective Annual General Meetings and interim dividends are recognised when approved by the Boards.
Share-based payments (note 22)
The Group operates a number of equity-settled, share-based compensation schemes. The fair value of the employee services received
in exchange for the grant of share awards is recognised concurrently as an expense and an adjustment to equity. The total amount to
be expensed over the vesting period is determined by reference to the fair value of the share awards granted, as adjusted for market
performance conditions and non-market vesting conditions. Vesting conditions are included in assumptions about the number of awards
that are expected to vest. At each reporting date, the Group revises its estimates of the number of share awards that are expected to
vest as a result of changes in non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the
combined and consolidated income statement, with a corresponding adjustment to equity.
Financial instruments (note 28)
Financial assets and financial liabilities are recognised in the Group’s combined and consolidated statement of financial position when the
Group becomes party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss)
are added to or deducted from the fair value of the financial assets or financial liabilities on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the
combined and consolidated income statement.
Cash and cash equivalents (note 25b)
Cash and cash equivalents comprise cash on hand and demand deposits, together with short-term, highly liquid investments of a maturity
of three months or less from the date of acquisition that are readily convertible to a known amount of cash and that are subject to an
insignificant risk of changes in value. Bank overdrafts are shown within short-term borrowings in current liabilities in the combined and
consolidated statement of financial position. Cash and cash equivalents presented in the combined and consolidated statement of cash
flows and in net debt (note 25c) are net of overdrafts.
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Trade receivables (note 16)
Trade receivables are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest rate
method, less allowance for impairments.
Impairment of trade receivables (note 16)
A simplified lifetime Expected Credit Loss (ECL) model is used to assess trade receivables for impairment. ECL is the present value of
all cash shortfalls over the expected life of a trade receivable. Expected credit losses are based on historical loss experience on trade
receivables, adjusted to reflect information about current economic conditions and reasonable and supportable forecasts of future
economic conditions. At the date of initial recognition, the credit losses expected to arise over the lifetime of a trade receivable are
recognised as an impairment.
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Trade payables (note 17)
Trade payables are initially recognised at fair value and are subsequently carried at amortised cost using the effective interest rate method.
Borrowings (note 20)
Interest-bearing loans and overdrafts are initially recognised at fair value, net of direct transaction costs. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds, net of transaction costs, and the redemption value is recognised in
the combined and consolidated income statement over the term of the borrowings using the effective interest rate method.
Borrowing costs (note 6)
Interest on borrowings directly relating to the acquisition, construction or production of qualifying assets is capitalised until such time
as the assets are substantially ready for their intended use or sale. Where funds have been borrowed specifically to finance a project,
the amount capitalised represents the actual borrowing costs incurred. Where the funds used to finance a project form part of general
borrowings, the amount capitalised is calculated using a weighted average of rates applicable to relevant general borrowings of the Group
during the construction period.
All other borrowing costs are recognised in the combined and consolidated income statement in the period in which they are incurred.
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Derivative financial instruments and hedge accounting (note 28d)
The Group enters into forward, option and swap contracts in order to hedge its exposure to foreign exchange, interest rate and
commodity price risks.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and subsequently measured at fair value in
the combined and consolidated statement of financial position within financial instruments, and are classified as current or non-current
depending on the maturity of the derivative.
Changes in the fair value of derivative financial instruments that are not formally designated in hedge relationships are recognised
immediately in the combined and consolidated income statement and are classified within operating profit or net finance costs, depending
on the type of risk to which the derivative relates.
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Cash flow hedges
The effective portion of changes in the fair value of derivative financial instruments that are designated as hedges of future cash flows
are recognised directly in other comprehensive income and accumulated in equity. The gain or loss relating to the ineffective portion is
recognised immediately in the combined and consolidated income statement. If the cash flow hedge of a forecast transaction results
in the recognition of a non-financial asset then, at the time the asset is recognised, the associated gains or losses on the derivative that
had previously been recognised in the Group’s cash flow hedge reserve in equity are included in the initial measurement of the asset.
For hedges that do not result in the recognition of a non-financial asset, amounts deferred in the Group’s cash flow hedge reserve in
equity are recognised in the combined and consolidated income statement in the same period in which the hedged item affects profit and
loss on a proportionate basis.
Hedge accounting is discontinued when the hedge relationship is revoked or the hedging instrument expires or is sold, terminated,
exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss deferred in equity remains in equity and
is recognised in the combined and consolidated income statement when the forecast transaction is ultimately recognised. If a hedge
transaction is no longer expected to occur, the net cumulative gain or loss deferred in equity is included immediately in the combined and
consolidated income statement.
Transitional application
The Group has adopted IFRS 9, ‘Financial Instruments’, on 1 January 2018 and in accordance with the transitional provisions in IFRS 9,
comparative figures have not been restated. The comparative information provided continues to be accounted for in accordance with the
Group’s previous accounting policy. Refer to the accounting policies of the Mondi Group Integrated report and financial statements 2017
for details of the previous policy.
Mondi Group
Integrated report and financial statements 2018
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Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
32 Accounting policies
Retirement benefits (note 23)
The Group operates defined benefit pension plans and defined contribution pension plans for the majority of its employees as well as
post-retirement medical plans.
Defined contribution plans
For defined contribution plans, the amount charged to the combined and consolidated income statement is the contributions paid or
payable during the reporting period.
Defined benefit pension plans and post-retirement medical plans
For defined benefit pension and post-retirement medical plans, actuarial valuations are performed at each financial year end using the
projected unit credit method. The average discount rate for the plans’ liabilities is based on investment grade rated corporate bonds
or similar government bonds of a suitable duration and currency. Plans’ assets are measured using market values at the end of the
reporting period.
The net retirement benefits liability recognised in the combined and consolidated statement of financial position represents the present
value of the defined benefit liability as reduced by the fair value of any plan assets.
Any increase in the present value of plan liabilities expected to arise from employee service during the year is charged to personnel costs
as service costs. Past service costs resulting from plan amendments or curtailments and gains or losses on settlements are charged to
personnel costs. A net interest expense or net interest income is calculated by applying the discount rate, on a per plan basis, to the net
defined benefit liability or asset and recognised in the combined and consolidated income statement within net finance costs.
Remeasurements comprising actuarial gains and losses and the return on plan assets (after recognising the net finance charge)
are charged or credited to equity in other comprehensive income, net of deferred tax, in the reporting period in which they occur.
Remeasurements recorded in other comprehensive income are not recycled to the combined and consolidated income statement,
but those amounts recognised in other comprehensive income may be transferred within equity.
Alternative Performance Measures
The Group presents certain measures of financial performance, position or cash flows in the combined and consolidated financial
statements that are not defined or specified according to IFRS. These measures, referred to as Alternative Performance Measures (APMs),
are prepared on a consistent basis for all periods presented in this report.
The most significant APMs are:
Net debt (note 25c)
A measure comprising short, medium, and long-term interest-bearing borrowings and the fair value of debt-related derivatives less
cash and cash equivalents and current financial asset investments. Net debt provides a measure of the Group’s net indebtedness or
overall leverage.
Return on capital employed (ROCE) (notes 2 and 19)
Trailing 12-month underlying operating profit, including share of equity accounted investees’ net profit/(loss), divided by trailing 12-month
average capital employed. Capital employed is adjusted for spend on major capital expenditure projects which are not yet in production.
Segments’ 12-month average capital employed has been extracted from management reports. ROCE provides a measure of the efficient
and effective use of capital in the business.
Special items (note 3)
Those financial items which the Group considers should be separately disclosed on the face of the combined and consolidated income
statement to assist in understanding the underlying financial performance achieved by the Group. Such items are generally material
by nature and exceed €10 million and the Group, therefore, excludes these items when reporting underlying earnings and related
measures in order to provide a measure of the underlying performance of the Group on a basis that is comparable from year to year.
Subsequent adjustments to items previously recognised as special items continue to be reflected as special items in future periods even if
they do not exceed the quantitative reporting threshold.
Underlying EBITDA (combined and consolidated income statement)
Operating profit before special items, depreciation, amortisation and impairments not recorded as special items. Underlying EBITDA
provides a measure of the cash-generating ability of the business that is comparable from year to year.
Mondi Group
Integrated report and financial statements 2018
Underlying operating profit (combined and consolidated income statement)
Operating profit before special items. Underlying operating profit provides a measure of operating performance that is comparable from
year to year.
Underlying profit before tax (combined and consolidated income statement)
Profit before tax and special items. Underlying profit before tax provides a measure of the Group’s profitability before tax that is
comparable from year to year.
Underlying earnings (and per share measure) (note 8)
Net profit after tax attributable to shareholders, before special items. Underlying earnings (and the related per share measure based on
the basic, weighted average number of ordinary shares outstanding), provides a measure of the Group’s earnings that is comparable from
year to year.
Headline EPS (note 8)
The presentation of headline EPS is mandated under the Listings Requirements of the JSE Limited and is calculated in accordance with
Circular 4/2018, ‘Headline Earnings’, as issued by the South African Institute of Chartered Accountants.
Cash flow generation (note 25d)
A measurement of the Group’s cash generation before considering deployment of cash towards investment in property, plant and
equipment (‘capex’ or ‘capital expenditure’), acquisitions and disposals of businesses, investment in equity accounted investees and
payment of dividends to shareholders. Cash flow generation is a measure of the Group’s ability to generate cash through the cycle before
considering deployment of such cash.
Underlying EBITDA margin (note 2)
Underlying EBITDA expressed as a percentage of revenue provides a measure of the cash-generating ability relative to revenue.
Underlying operating profit margin
Underlying operating profit expressed as a percentage of revenue provides a measure of the profitability of the operations relative
to revenue.
213
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Ordinary dividend cover
Basic underlying EPS divided by total ordinary dividend per share paid and proposed provides a measure of the Group’s earnings relative
to its deployment towards ordinary dividend payments.
Net debt to 12-month trailing underlying EBITDA (note 19)
Net debt divided by trailing 12-month underlying EBITDA. A measure of the Group’s net indebtedness relative to its cash-generating ability.
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Net interest expense (note 6)
Net interest expense comprises interest expense on bank overdrafts, loans and lease liabilities net of investment income providing an
absolute measure of the cost of borrowings.
Effective interest rate (note 6)
Net interest expense expressed as a percentage of trailing 12-month average net debt provides a measure of the cost of borrowings.
Effective tax rate (note 7a)
Underlying tax charge expressed as a percentage of underlying profit before tax. A measure of the Group’s tax charge relative to its profit
before tax expressed on an underlying basis.
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Working capital, defined as the sum of trade and other receivables and inventories less trade and other payables, expressed as a
percentage of trailing 12-month Group revenue. A measure of the Group’s effective use of working capital relative to revenue.
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Capex and investment in intangible assets as a percentage of depreciation, amortisation and impairments
Capex and investment in intangible assets divided by depreciation, amortisation and non-special impairments provides a measure of
reinvestment into the Group’s asset base relative to depreciation, amortisation and impairments.
Mondi Group
Integrated report and financial statements 2018
214
Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
32 Accounting policies
New accounting policies, early adoption and future requirements
Amendments to published Standards effective during 2018
The following amendments to Standards have been adopted for the financial year beginning on 1 January 2018, and their impact on the
Group’s results are detailed in note 33:
e IFRS 9 – Financial Instruments
e IFRS 15 – Revenue from Contracts with Customers
e IFRS 16 – Leases
The following amendments to Standards and a new Interpretation have been adopted for the financial year beginning on 1 January 2018,
and have had no significant impact on the Group’s results:
e Annual improvements 2014–2016 cycle
e Amendments to IAS 40 – Investment Property
e Amendments to IFRS 2 – Share Based Payments
e Amendments to IFRS 4 – Insurance Contracts
e IFRIC 22 – Foreign Currency Transactions and Advance Consideration
New Standards and amendments to published Standards that are not yet effective
The following amendments to Standards and a new Interpretation will be effective for the financial year beginning on 1 January 2019 and,
while the Group’s assessment of the impact is ongoing, are not expected to have a significant impact on the Group’s results:
e Annual improvements 2015–2017 cycle
e Amendments to IAS 19 – Employee Benefits
e Amendments to IAS 28 – Investments in Associates and Joint Ventures
e Amendments to IFRS 9 – Financial Instruments
e IFRIC 23 – Uncertainty over Income Tax Treatments
33 Restatement of comparative information
The following tables summarise the material impacts resulting from the changes in accounting policies on the Group’s combined and
consolidated income statement, combined and consolidated statement of comprehensive income, combined and consolidated statement
of financial position and combined and consolidated statement of cash flows. The effect of restatement is purely attributable to the
adoption of the new accounting standard IFRS 16, ‘Leases’. IFRS 15, ‘Revenue from Contracts with Customers’, which has been applied
retrospectively has no material impact and therefore is not included in any restatement of comparatives.
IFRS 16 introduces a single lease accounting model, requiring a lessee to recognise assets and liabilities for all leases with a term of more
than 12 months, unless the underlying asset is of low value. The lessee is required to recognise a right-of-use asset representing its right
to use the underlying leased asset, and a lease liability representing its obligation to make lease payments. Previously rental costs under
operating leases were charged to the combined and consolidated income statement in equal annual amounts over the lease term unless
another systematic basis was more representative of the pattern of use.
Mondi Group
Integrated report and financial statements 2018
Combined and consolidated income statement
€ million
Group revenue
Materials, energy and consumables used
Variable selling expenses
Gross margin
Maintenance and other indirect expenses
Personnel costs
Other net operating expenses
EBITDA
Depreciation, amortisation and impairments
Operating profit
Net profit from equity accounted investees
Total profit from operations and equity accounted investees
Net finance costs
Profit before tax
Tax charge
Profit for the year
Attributable to:
Non-controlling interests
Shareholders
2017
As previously
reported
(Audited)
Effect of
restatement
As restated
7,096
(3,456)
(525)
3,115
(319)
(1,062)
(313)
1,421
(464)
957
1
958
(71)
887
(173)
714
43
671
—
4
—
4
—
—
34
38
(27)
11
—
11
(14)
(3)
—
(3)
—
(3)
7,096
(3,452)
(525)
3,119
(319)
(1,062)
(279)
1,459
(491)
968
1
969
(85)
884
(173)
711
43
668
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The restatement had no impact on special items.
Earnings per share (EPS) attributable to shareholders
2017
(euro cents)
Basic EPS
Diluted EPS
Basic underlying EPS
Diluted underlying EPS
Basic headline EPS
Diluted headline EPS
As previously
reported
(Audited)
Effect of
restatement
As restated
138.6
138.5
149.5
149.4
146.0
145.9
(0.7)
(0.7)
(0.6)
(0.6)
(0.6)
(0.6)
137.9
137.8
148.9
148.8
145.4
145.3
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Combined and consolidated statement of comprehensive income
€ million
Profit for the year
Items that may subsequently be reclassified to the combined and consolidated income
statement
Items that will not subsequently be reclassified to the combined and consolidated
income statement
Other comprehensive expense for the year
Total comprehensive income for the year
Attributable to:
Non-controlling interests
Shareholders
2017
As previously
reported
(Audited)
Effect of
restatement
As restated
714
(75)
8
(67)
647
41
606
(3)
2
—
2
(1)
—
(1)
711
(73)
8
(65)
646
41
605
Mondi Group
Integrated report and financial statements 2018
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Notes to the combined and consolidated financial statements
for the year ended 31 December 2018
33 Restatement of comparative information
Combined and consolidated statement of financial position
€ million
2017
At 1 January 2017
As previously
reported
(Audited)
Effect of
restatement
As restated
As previously
reported
(Audited)
Effect of
restatement
As restated
Property, plant and equipment
3,962
166
4,128
3,788
173
3,961
Goodwill
Intangible assets
Forestry assets
Deferred tax assets
Other non-current assets
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other current assets
Total current assets
Total assets
Short-term borrowings
Trade and other payables
Other current liabilities
Total current liabilities
Medium and long-term borrowings
Net retirement benefits liability
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Combined share capital and stated
capital
Retained earnings and other reserves
Total attributable to shareholders
Non-controlling interests in equity
Total equity
698
111
325
25
33
5,154
867
1,106
38
44
2,055
7,209
(267)
(1,074)
(184)
(1,525)
(1,098)
(232)
(255)
(60)
(1,645)
(3,170)
4,039
542
3,172
3,714
325
4,039
—
—
—
1
—
167
—
—
—
—
—
167
(24)
—
—
(24)
(182)
—
7
—
(175)
(199)
(32)
—
(31)
(31)
(1)
(32)
698
111
325
26
33
5,321
867
1,106
38
44
2,055
7,376
(291)
(1,074)
(184)
(1,549)
(1,280)
(232)
(248)
(60)
(1,820)
(3,369)
4,007
542
3,141
3,683
324
4,007
681
120
316
26
35
4,966
850
1,049
404
41
2,344
7,310
(651)
(1,100)
(167)
(1,918)
(1,119)
(240)
(267)
(70)
(1,696)
(3,614)
3,696
542
2,850
3,392
304
3,696
—
—
—
1
—
174
—
—
—
—
—
174
(22)
—
—
(22)
(190)
—
7
—
(183)
(205)
(31)
—
(30)
(30)
(1)
(31)
681
120
316
27
35
5,140
850
1,049
404
41
2,344
7,484
(673)
(1,100)
(167)
(1,940)
(1,309)
(240)
(260)
(70)
(1,879)
(3,819)
3,665
542
2,820
3,362
303
3,665
Combined and consolidated statement of cash flows
€ million
Net cash generated from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Mondi Group
Integrated report and financial statements 2018
2017
As previously
reported
(Audited)
Effect of
restatement
As restated
1,175
(694)
(920)
(439)
38
—
(38)
—
1,213
(694)
(958)
(439)
Mondi Limited parent company statement of financial position1
as at 31 December 2018
ZAR million
Property, plant and equipment
Forestry assets
Investment in and loans to subsidiaries
Total non-current assets
Inventories
Trade and other receivables
Investment in and loans to subsidiaries
Current tax asset
Financial asset investments
Financial instruments
Cash and cash equivalents
Total current assets
Total assets
Short-term borrowings
Trade and other payables
Current tax liability
Provisions
Financial instruments
Total current liabilities
Medium and long-term borrowings
Retirement benefits liability
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Stated capital
Retained earnings and other reserves
Total equity
Note:
Notes
2
2
2018
6,125
4,533
92
10,750
1,085
1,912
—
19
124
—
25
Restated
2017
5,770
3,863
52
9,685
1,039
1,781
96
—
165
45
4
3,165
13,915
3,130
12,815
(555)
(1,391)
—
(180)
(4)
(1,997)
(1,102)
(86)
(65)
—
(2,130)
(3,250)
(258)
(742)
(1,682)
(79)
(2,761)
(4,891)
(290)
(773)
(1,626)
(2)
(2,691)
(5,941)
9,024
6,874
3
4,188
4,836
9,024
4,188
2,686
6,874
1 The above statement of financial position is an extract of the audited Mondi Limited parent company financial statements for the year ended 31 December 2018.
The full set of audited financial statements for Mondi Limited parent company is available on the Group’s website
The statement of financial position and statement of changes in equity of Mondi Limited and related notes were approved by the board
and authorised for issue on 27 February 2019 and were signed on its behalf by:
Peter Oswald
Director
Andrew King
Director
Mondi Limited company registration number: 1967/013038/06
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Integrated report and financial statements 2018
218
Mondi Limited parent company statement of changes in equity1
for the year ended 31 December 2018
ZAR million
At 1 January 2017, as previously reported
Impact of change in accounting policy2
Restated balance at 1 January 2017
Total comprehensive income for the year (restated)
Dividends
Shares vested from Mondi Incentive Schemes Trust
Mondi share schemes’ charge
Issue of shares under employee share schemes
Acquisition of business
Restated balance at 31 December 2017
Impact of change in accounting policy3
Restated balance at 1 January 2018
Total comprehensive income for the year
Dividends
Shares vested from Mondi Incentive Schemes Trust
Mondi share schemes’ charge
Issue of shares under employee share schemes
Transfer from Mondi plc4
At 31 December 2018
Notes:
Stated capital
Retained
earnings Other reserves
4,188
—
4,188
—
—
—
—
—
—
4,188
—
4,188
—
—
—
—
—
—
4,188
2,825
(46)
2,779
939
(973)
(30)
—
35
(168)
2,582
41
2,623
1,021
(2,862)
(44)
—
18
4,000
4,756
62
—
62
44
—
—
34
(36)
—
104
(41)
63
26
—
—
12
(21)
—
80
Total
equity
7,075
(46)
7,029
983
(973)
(30)
34
(1)
(168)
6,874
—
6,874
1,047
(2,862)
(44)
12
(3)
4,000
9,024
1 The above statement of changes in equity is an extract of the audited Mondi Limited parent company financial statements for the year ended 31 December 2018.
The full set of audited financial statements for Mondi Limited parent company is available on the Group’s website
2 The impact of change in accounting policy is due to the adoption of the new ‘Leases’ accounting standard, IFRS 16
3 IFRS 9, ‘Financial Instruments’, was adopted without restating comparative information. The reclassification arising from the change of classification categories
‘available-for-sale’ to ‘at fair value through profit or loss’ is recognised in the opening balance sheet on 1 January 2018
4 This represents a corporate cash transfer from Mondi plc to Mondi Limited
Mondi Group
Integrated report and financial statements 2018
Extract of the notes to the audited Mondi Limited
parent company financial statements
for the year ended 31 December 2018
1 Accounting policies
Basis of preparation
The statement of financial position and selected notes of Mondi Limited have been prepared in accordance with applicable International
Financial Reporting Standards (IFRS) under the historical cost convention.
Principal accounting policies
The principal accounting policies applied by Mondi Limited are the same as those presented in notes 1 and 32 to the combined and
consolidated Group financial statements, to the extent that the Group’s transactions and balances are applicable to the company financial
statements. Principally, the accounting policies which are not directly relevant to Mondi Limited parent company financial statements are
those relating to consolidation accounting and the recognition and subsequent measurement of goodwill.
The accounting policy, which is additional to those applied by the Group, is stated as follows:
Investments
Investments in subsidiaries and associates are reflected at cost less amounts written off and provisions for any impairments. Any potential
impairment is determined on a basis consistent with the accounting policy on the impairment of goodwill.
Accounting estimates and critical judgements
The accounting estimates and critical judgements applied by the key management of Mondi Limited are discussed in the Group’s
combined and consolidated financial statements (see note 1). In addition, the carrying value of investments is considered a
critical judgement.
2 Investment in and loans to subsidiaries
ZAR million
Unlisted
Shares at cost
Loans advanced
Impairment
Total investments in subsidiaries
Repayable within one year classified as a current asset
Total long-term investments in subsidiaries
2018
2017
60
42
(10)
92
—
92
62
96
(10)
148
(96)
52
3 Stated capital
Full disclosure of the stated capital of Mondi Limited is set out in note 21 of the Group’s combined and consolidated financial statements.
4 Contingent liabilities
There were no contingent liabilities to be disclosed and no acquired contingent liabilities to be recorded in Mondi Limited’s statement of
financial position for either year presented. Mondi Limited has issued financial guarantees to suppliers for services rendered in the ordinary
course of business of ZAR73 million (2017: ZAR72 million). The likelihood of these financial guarantees being called is considered to be
remote and therefore the estimated financial effect of issuance is ZARnil (2017: ZARnil).
Mondi Limited is subject to certain legal proceedings, claims, complaints and investigations arising out of the ordinary course of business.
Legal proceedings may include, but are not limited to, alleged breach of contract and alleged breach of environmental, competition,
securities and health and safety laws. Mondi Limited may not be insured fully, or at all, in respect of such risks. Mondi Limited cannot
predict the outcome of individual legal actions or claims or complaints or investigations. Mondi Limited may settle litigation or regulatory
proceedings prior to a final judgment or determination of liability. Mondi Limited may do so to avoid the cost, management efforts or
negative business, regulatory or reputational consequences of continuing to contest liability, even when it considers it has valid defences
to liability. Mondi Limited considers that no material loss to Mondi Limited is expected to result from these legal proceedings, claims,
complaints and investigations. Provision is made for all liabilities that are expected to materialise through legal and tax claims against
Mondi Limited.
Mondi Group
Integrated report and financial statements 2018
219
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Extract of the notes to the audited Mondi Limited
parent company financial statements
for the year ended 31 December 2018
5 Events occurring after 31 December 2018
With the exception of the proposed final ordinary dividend for 2018, included in note 9 of the Group’s combined and consolidated financial
statements, there have been no material reportable events since 31 December 2018.
6 List of subsidiaries and associated undertakings and other significant holdings as at 31 December 2018
All shares are held directly except where noted. All shares held are ordinary shares.
Company
Côte d’Ivoire
La Sacherie Moderne SA1
South Africa
Registered office
% of shares
held by Group
Zone Industrielle de Yopougon 01, Abidjan, BP 5676
50.0
50.0
100.0
49.0
30.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
56.0
100.0
51.0
100.0
Arctic Sun Trading 17 Proprietary Limited1
Unit 4, 57 St. Andrews Drive, Durban North, 4051
Bongani Development Close Corporation
4th Floor, No 3 Melrose Boulevard, Melrose Arch, 2196
Golden Pond Trading 250 Proprietary Limited1
3 Joyner Road, Prospecton, 4110
Khulanathi Forestry Proprietary Limited1
Lakeside Terrace, 3rd Floor, ABSA Building, Richards Bay, 3900
Mondi Africa Holdings Proprietary Limited
4th Floor, No 3 Melrose Boulevard, Melrose Arch, 2196
Mondi Forests Partners Programme Proprietary Limited1 380 Old Howick Road, Mondi House, Hilton, 3245
Mondi Newsprint Proprietary Limited
4th Floor, No 3 Melrose Boulevard, Melrose Arch, 2196
Mondi Sacherie Moderne Holdings Proprietary Limited 4th Floor, No 3 Melrose Boulevard, Melrose Arch, 2196
Mondi Timber (Wood Products) Proprietary Limited
4th Floor, No 3 Melrose Boulevard, Melrose Arch, 2196
Mondi Zimele Job Funds Proprietary Limited1
380 Old Howick Road, Mondi House, Hilton, 3245
Mondi Zimele Proprietary Limited
380 Old Howick Road, Mondi House, Hilton, 3245
MZ Business Services Proprietary Limited1
128 Lansdowne Road, Jacobs, 4052
MZ Technical Services Proprietary Limited1
128 Lansdowne Road, Jacobs, 4052
Professional Starch Proprietary Limited1
380 Old Howick Road, Mondi House, Hilton, 3245
Siyaqhubeka Forests Proprietary Limited1
4th Floor, No 3 Melrose Boulevard, Melrose Arch, 2196
Zimshelf Eight Investment Holdings Proprietary Limited 4th Floor, No 3 Melrose Boulevard, Melrose Arch, 2196
Note:
1 These companies are held indirectly
Mondi Group
Integrated report and financial statements 2018
Mondi plc parent company balance sheet
as at 31 December 2018
€ million
Fixed asset investments
Debtors: due within one year
Cash and cash equivalents
Total assets
Total creditors: due within one year
Total provisions: due after more than one year
Total liabilities
Net assets
Capital and reserves
Share capital
Profit or loss account
Share-based payments reserve
Total shareholders’ funds
221
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5
6
7
8
2018
2,938
3
—
2,941
(451)
(2)
(453)
2,488
103
2,367
18
2,488
2017
2,938
16
132
3,086
(11)
(1)
(12)
3,074
103
2,952
19
3,074
Mondi plc reported a profit of €292 million (2017: profit of €56 million) for the year ended 31 December 2018. The balance sheet and
statement of changes in equity of Mondi plc and related notes were approved by the board and authorised for issue on 27 February 2019
and were signed on its behalf by:
Peter Oswald
Director
Andrew King
Director
Mondi plc company registered number: 6209386
Mondi plc parent company statement of changes in equity
for the year ended 31 December 2018
€ million
At 1 January 2017
Total comprehensive income for the year
Dividends
Issue of shares under employee share schemes
Purchases of treasury shares
Mondi share schemes’ charge
At 31 December 2017
Total comprehensive income for the year
Dividends
Issue of shares under employee share schemes
Purchases of treasury shares
Mondi share schemes’ charge
Transfer to Mondi Limited1
At 31 December 2018
Note:
1 This represents a corporate cash transfer from Mondi plc to Mondi Limited
Share capital
Profit or loss
account
Share-based
payments
reserve
103
—
—
—
—
—
103
—
—
—
—
—
—
103
3,116
56
(208)
12
(24)
—
2,952
292
(603)
11
(16)
—
(269)
2,367
18
—
—
(12)
—
13
19
—
—
(11)
—
10
—
18
Total
equity
3,237
56
(208)
—
(24)
13
3,074
292
(603)
—
(16)
10
(269)
2,488
Mondi Group
Integrated report and financial statements 2018
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222
Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2018
1 Accounting policies
Basis of preparation
Mondi plc meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting
Council. Accordingly, the financial statements have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced
Disclosure Framework’ (FRS 101) as issued by the Financial Reporting Council.
As permitted by FRS 101, Mondi plc has taken advantage of the disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management, presentation of comparative information in respect of certain items,
presentation of a cash flow statement, standards not yet effective, impairment of assets and related party transactions.
Where required, equivalent disclosures are given in the Group accounts of Mondi plc, which are publicly available. The results, assets and
liabilities of Mondi plc are included in the publicly available combined and consolidated Group financial statements.
Mondi plc has made use of the exemption from presenting a profit and loss account, in accordance with Section 408 of the UK
Companies Act 2006.
The financial statements have been prepared on the going concern basis. This is discussed in the Strategic report within ‘Principal risks’
under the heading ‘Going concern’.
The financial statements are prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration
given in exchange for the assets. The principal accounting policies adopted are described below. They have all been applied consistently
throughout the year and the preceding year.
Principal accounting policies
The principal accounting policies applied by Mondi plc are the same as those presented in notes 1 and 32 to the combined and
consolidated Group financial statements, to the extent that the Group’s transactions and balances are applicable to the company financial
statements. Principally, the accounting policies which are not directly relevant to the Mondi plc parent company financial statements are
those relating to consolidation accounting and the recognition and subsequent measurement of goodwill.
The accounting policy, which is additional to those applied by the Group, is stated as follows:
Investments
Fixed asset investments are stated at cost, less, where appropriate, provisions for impairment. Any potential impairment is determined on
a basis consistent with the Group accounting policy on the impairment of goodwill.
Critical accounting judgements and key estimates
The preparation of the financial statements of Mondi plc includes the use of estimates and assumptions. Although the estimates used
are based on management’s best information about current circumstances and future events and actions, actual results may differ from
those estimates.
The most significant estimates and judgements are:
Key estimates
e Valuation of fixed asset investments – refer to note 5
Critical accounting judgements and other accounting estimates
e Taxation – refer to note 4
2 Auditor’s remuneration
Disclosure of the audit fees payable to the auditor for the audit of Mondi plc’s financial statements is set out in note 4 of the Group’s
combined and consolidated financial statements.
3 Share-based payments
The share schemes and the underlying assumptions used to estimate the associated fair value charge are set out in note 22 of the
Group’s combined and consolidated financial statements.
Mondi Group
Integrated report and financial statements 2018
223
4 Deferred tax
A deferred tax asset of €2 million (2017: €3 million) has not been recognised in relation to temporary differences regarding the share-
based payment arrangements. A deferred tax asset has not been recognised in relation to tax losses brought forward of €25 million
(2017: €26 million) due to the low probability of future profit streams or gains against which these could be utilised.
5 Fixed asset investments
€ million
Unlisted
Shares at cost
2018
2017
2,938
2,938
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The investment is in Mondi Investments Limited (incorporated in the UK), a wholly-owned subsidiary which acts as an investment
holding company.
6 Cash and cash equivalents
Amounts held on deposit in a cash pool facility with a subsidiary of €nil (2017: €132 million) are included within cash equivalents.
7 Total creditors: due within one year
€439 million (2017: €nil) is owed in relation to a cash pool facility with a subsidiary.
8 Share capital
Full disclosure of the share capital of Mondi plc is set out in note 21 of the Group’s combined and consolidated financial statements.
9 Contingent liabilities
Mondi plc has issued financial guarantees in respect of the UK pension schemes of its subsidiaries, obligations incurred in the ordinary
course of business and the borrowings of other Group undertakings. The likelihood of these financial guarantees being called is
considered to be remote and, therefore, the estimated financial effect of issuance is €nil (2017: €nil). The fair value of these issued financial
guarantees is deemed to be immaterial.
€ million
Pension scheme guarantees
Guarantees of obligations of subsidiaries of Mondi plc
– Incurred in the ordinary course of business
– In favour of banks and bondholders
At 31 December
2018
79
29
2,826
2,934
2017
79
35
2,252
2,366
Mondi plc is subject to certain legal proceedings, claims, complaints and investigations arising out of the ordinary course of business.
Legal proceedings may include, but are not limited to, alleged breach of contract and alleged breach of environmental, competition,
securities and health and safety laws. Mondi plc may not be insured fully, or at all, in respect of such risks. Mondi plc cannot predict the
outcome of individual legal actions or claims or complaints or investigations. Mondi plc may settle litigation or regulatory proceedings
prior to a final judgment or determination of liability. Mondi plc may do so to avoid the cost, management efforts or negative business,
regulatory or reputational consequences of continuing to contest liability, even when it considers it has valid defences to liability. Mondi plc
considers that no material loss to Mondi plc is expected to result from these legal proceedings, claims, complaints and investigations.
Provision is made for all liabilities that are expected to materialise through legal and tax claims against Mondi plc.
10 Events occurring after 31 December 2018
With the exception of the proposed final ordinary dividend for 2018, included in note 9 of the Group’s combined and consolidated financial
statements, there have been no material reportable events since 31 December 2018.
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Integrated report and financial statements 2018
224
Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2018
11 List of subsidiaries and associated undertakings and other significant holdings as at 31 December 2018
All shares are held indirectly through a subsidiary or associated undertaking except where noted. Except where stated, the shares held
are ordinary shares.
Registered office
Principal activities
% of
shares
held by
Group
Company
Bulgaria
Registered office
Principal activities
Murmühlweg 2,
8112 Gratwein
Service,
Kraft paper
25.00
Mondi Stambolijski
E.A.D
1 Zavodska Street,
Stambolijski 4210,
Plovdiv Region
Production, Kraft
paper
% of
shares
held by
Group
100.00
Company
Austria
Future Lignin & Pulp
Processing Research
Projekt GmbH
Mondi AG
Marxergasse 4A,
1030 Vienna
Mondi Bags Austria
GmbH
Bahnhofstrasse 3,
8740 Zeltweg
Mondi Coating Zeltweg
GmbH
Bahnhofstrasse 3,
8740 Zeltweg
Mondi Coatings GmbH Marxergasse 4A,
Mondi Consumer
Packaging GmbH
Mondi Corrugated
Holding Österreich
GmbH
1030 Vienna
Marxergasse 4A,
1030 Vienna
Marxergasse 4A,
1030 Vienna
Holding,
Corporate
Production,
Industrial bags
Production,
Extrusion coatings
Holding,
Extrusion coatings
Holding,
Consumer packaging
Holding,
Corrugated packaging
Mondi Corrugated
Services GmbH
Marxergasse 4A,
1030 Vienna
Service,
Corrugated packaging
Mondi Frantschach
GmbH
Frantschach 5,
9413 St. Gertraud
Production,
Kraft paper
Mondi Grünburg GmbH Steyrtalstrasse 5,
4594 Grünburg
Production,
Corrugated packaging
Mondi Holdings Austria
GmbH
Marxergasse 4A,
1030 Vienna
Mondi Industrial Bags
GmbH
Marxergasse 4A,
1030 Vienna
Holding,
Corporate
Holding,
Industrial bags
Mondi Korneuburg
GmbH
Stockerauer Strasse 110,
2100 Korneuburg
Production,
Consumer packaging
Mondi Neusiedler
GmbH
Theresienthalstrasse
50, 3363 Ulmerfeld-
Hausmening
Production,
Uncoated fine paper
Mondi Oman Holding
GmbH
Marxergasse 4A,
1030 Vienna
Holding,
Industrial bags
Mondi Paper Sales
GmbH
Marxergasse 4A,
1030 Vienna
Distribution,
Containerboard,
Kraft paper,
Uncoated fine paper
Mondi Release Liner
Austria GmbH
Waidhofnerstrasse 11,
3331 Hilm
Production,
Consumer packaging
Mondi Styria GmbH
Bahnhofstrasse 3,
8740 Zeltweg
Production,
Consumer packaging
Mondi Uncoated Fine &
Kraft Paper GmbH
Marxergasse 4A,
1030 Vienna
Papierholz Austria
GmbH
Frantschach 5,
9413 St. Gertraud
Sulbit Handels GmbH Marxergasse 4A,
1030 Vienna
Theresienthalstrasse
50, 3363 Ulmerfeld-
Hausmening
Ybbstaler Zellstoff
GmbH
Belgium
Mondi Belcoat N.V.
Holding,
Containerboard,
Kraft paper,
Uncoated fine paper
Service,
Kraft paper
Service,
Industrial bags
Production,
Uncoated fine paper
Adolf Stocletlaan 11,
2570 Duffel
Production,
Extrusion coatings
Mondi Poperinge N.V.
Nijverheidslaan 11,
8970 Poperinge
Production,
Industrial bags
Mondi Group
Integrated report and financial statements 2018
100.00
China
100.00
33.33
20.00
100.00
100.00
100.00
100.00
100.00
Mondi (China) Film
Technology Co. Ltd.
Mondi Trading (Beijing)
Co. Ltd.
Croatia
Mondi Valpovo d.o.o.
Czech Republic
EURO WASTE, a.s
Labe Wood s.r.o.
Lignocel s.r.o
Mondi Bags Štětí a.s.
No 29 Xinggang Road,
Taicang Port Development
Zone
0912, Air China Plaza,
Building 1, No.36 Xiaoyun
Road, Chaoyang, Beijing
Production,
Consumer packaging
100.00
In liquidation,
Consumer packaging
100.00
Oreškovićeva 6c,
10010 Zagreb (Grad Zagreb)
In liquidation,
Industrial bags
Litoměřická 272,
41108 Štětí
Litoměřická 272,
41108 Štětí
Poupětova 3,
17000 Prague 7
Litoměřická 272,
41108 Štětí
Service,
Containerboard,
Kraft paper
Service, Kraft paper
24.99
In liquidation,
Kraft paper
Production,
Industrial bags
Mondi Bupak s.r.o.
Papírenská 41, 37052
České Budějovice
Production,
Corrugated packaging
Mondi Coating Štětí a.s. Litoměřická 272,
Mondi Štětí a.s.
41108 Štětí
Litoměřická 272,
41108 Štětí
Production,
Extrusion coatings
Production,
Containerboard,
Kraft paper
Mondi Štětí White Paper
s.r.o
Litoměřická 272,
41108 Štětí
Production,
Kraft paper
Roto a.s.
Wood & Paper a.s.
Egypt
Litoměřická 272,
41108 Štětí
Hlina 57/18,
66491 Brno
Dormant, Kraft paper
100.00
Service, Kraft paper
46.50
National Company for
Paper Products and
Import & Export (S.A.E.)1
Plots No. 6 and No. 7 in the
Northern Expansion Area,
Industrial Zone,
6th of October, Giza
Production, Industrial
bags
100.00
Suez Bags Company
(S.A.E.)2
30 Maadi Road, Katameya,
Kilo 138, Cairo
Production, Industrial
bags
96.00
Finland
Harvestia Oy1
Mondi Finland
Services Oy
Mondi Powerflute Oy1
Powerflute Group
Holdings Oy1
Selluntie 142,
70420 Kuopio
Peltotie 20,
28400 Ulvila
Selluntie 142,
70420 Kuopio
Sorsasalo,
70100 Kuopio
Service,
Containerboard
97.40
Service, Kraft paper
100.00
Production,
Containerboard
Holding,
Containerboard
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
51.00
70.00
100.00
100.00
100.00
100.00
25.00
100.00
51.00
100.00
100.00
225
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shares
held by
Group
34.55
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Company
France
Registered office
Principal activities
% of
shares
held by
Group
Company
Iraq
Registered office
Principal activities
Mondi Gournay Sarl
5, rue Vernet,
75008, Paris
Production,
Extrusion coatings
100.00
Mondi Kaso Iraq
Industrial Bags Ltd.
Takya, Bazian,
Sulaimaniyah
Production,
Industrial bags
Mondi Lembacel SAS
11 Rue de Reims,
51490 Bétheniville
Production,
Industrial bags
Mondi Paper Sales
France Sarl
5, rue Vernet,
75008 Paris
Germany
Distribution,
Containerboard,
Kraft paper,
Uncoated fine paper
100.00
Italy
Mondi Gradisac S.r.l.
100.00
Mondi IPI S.r.l.
Mondi Italia S.r.l.
Via dell´Industria 11, 34072
Gradisca d´Isonzo, Gorizia
Production,
Industrial bags
Via Zanchetta 27, 35010
San Pietro in Gu, Padua
Production,
Industrial bags
Via Balilla 32, 24058
Romano di Lombardia,
Bergamo
Production,
Industrial bags
Mondi Ascania GmbH Daimlerstrasse 8,
06449 Aschersleben
Production,
Consumer packaging
Mondi Bad Rappenau
GmbH
Wilhelm-Hauff-Strasse 41,
74906 Bad Rappenau
Production,
Corrugated
packaging
100.00
100.00
Mondi Paper Sales
Italia S.R.L.
Via Fara Gustavo 35,
20124 Milano
Distribution,
Containerboard,
Kraft paper,
Uncoated fine paper
Holding,
Consumer packaging
100.00
Mondi S.r.l.
Via Zanchetta 27,
35010 San Pietro in Gu,
Padua
In liquidation,
Corrugated
packaging
100.00
Mondi San Pietro in
Gu S.r.l.
Via Mazzini 21, 35010 San
Pietro in Gu, Padua
Production,
Industrial bags
Mondi Consumer
Packaging International
GmbH
Jöbkesweg 11,
48599 Gronau
Mondi Eschenbach
GmbH
Am Stadtwald 14,
92676 Eschenbach
Mondi Gronau GmbH
Mondi Halle GmbH
Jöbkesweg 11,
48599 Gronau
Wielandstrasse 2,
33790 Halle
Production,
Corrugated
packaging
Production,
Consumer packaging
Production,
Consumer packaging
100.00
100.00
100.00
Mondi Hammelburg
GmbH
Thüringenstrasse 1–3,
97762 Hammelburg
Production,
Industrial bags
Mondi Silicart S.r.l.
Via Zanchetta 27, 35010,
San Pietro in Gu, Padua
Dormant,
Consumer packaging
Mondi Tolentino S.r.l.
Via Giovanni Falcone 1,
62029 Tolentino, Macerata
Production,
Industrial bags
NATRO-TECH S.r.l.
Via Balilla 32, 24058
Romano di Lombardia,
Bergamo
Service,
Industrial bags
Via Giacomo Matteotti 2,
21013 Gallarate
Distribution,
Containerboard
Mondi Holding
Deutschland GmbH
Jöbkesweg 11,
48599 Gronau
Mondi Inncoat GmbH
Mondi Jülich GmbH
Mondi Lindlar GmbH
Angererstrasse 25,
83064 Raubling
Rathausstrasse 29,
52428 Jülich
Wielandstrasse 2,
33790 Halle
Mondi Paper Sales
Deutschland GmbH
Oberbaumbrücke 1,
20457 Hamburg
Mondi Sendenhorst
GmbH
Herkulesweg 1,
48324 Sendenhorst
Mondi Trebsen GmbH Erich-Hausmann-Strasse 1,
04687 Trebsen
Mondi Wellpappe
Ansbach GmbH
Robert-Bosch-Strasse 3,
91522 Ansbach
wood2M GmbH
Hauptstrasse 66,
07366 Blankenstein
Greece
Holding, Corporate
100.00
Powerflute Italia S.r.l.1
Production,
Consumer packaging
100.00
Japan
Mondi Tokyo KK
Production,
Consumer packaging
100.00
7th floor 14–5, Akasaka
2-chrome, Minato-ku,
Tokyo
Service,
Consumer packaging
100.00
Dormant, Consumer
packaging
Distribution,
Containerboard,
Kraft paper,
Uncoated fine paper
Production,
Industrial bags
Production,
Industrial bags
Production,
Corrugated
packaging
Service,
Containerboard,
Kraft paper,
Uncoated fine paper
100.00
Jordan
100.00
Jordan Paper Sacks
Co. Ltd.
Al Salt, Industrial Area, P.O.
Box 119, 19374, Balqa
Production,
Industrial bags
67.74
Republic of Korea
Krauzen Co., Ltd.
Mondi KSP Co., Ltd.
100.00
100.00
100.00
Lebanon
50.00
Mondi Lebanon SAL
Luxembourg
1420, Keumkang-Penterium
IT tower, 282 Hakeui-ro,
Dongang-gu, Anyang-si,
Gyunggi-do
48–29, 439 Hongandaero,
Dongang-gu, Anyang-si,
Gyunggi-do
Distribution,
Consumer packaging
100.00
Production,
Consumer packaging
95.00
7th Floor, Bloc C, Kassis
Building, Antelias Highway,
Antelias
Production,
Industrial bags
66.00
Mondi Packaging S.à r.l. 1, rue Hildegard von
Holding, Corporate
100.00
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Mondi Thessaloniki A.E. Sindos Industrial Zone
– Block 18, 57022
Thessaloniki
Distribution,
Industrial bags
100.00
Hungary
Mondi Bags Hungária
Kft.
Tünde u. 2,
4400 Nyíregyháza
Production,
Industrial bags
Mondi Békéscsaba Kft. Tevan Andor u. 2,
5600 Békéscsaba
Mondi Szada Kft.
Vasút u. 13,
2111 Szada
Production,
Consumer packaging
Production,
Consumer packaging
100.00
100.00
100.00
Mondi S.à r.l.
Mondi Services S.à r.l.
Malaysia
Mondi Kuala Lumpur
Sdn. Bhd.
Bingen, 1282
1, rue Hildegard von
Bingen, 1282
1, rue Hildegard von
Bingen, 1282
Holding, Corporate
100.00
Service, Corporate
100.00
Lot Nos.PT 5034 & 5036,
Jalan Teluk Datuk 28/40,
40000 Shah Alam,
Selangor
Production,
Industrial bags
62.00
Mondi Group
Integrated report and financial statements 2018
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Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2018
11 List of subsidiaries and associated undertakings and other significant holdings as at 31 December 2018
Company
Mexico
Caja de Ahorro de
Personal de Mondi
Mexico Servicios A.C.
Mondi Mexico S. de
R.L. de C.V.
Mondi Mexico Servicios
S. de R.L. de C.V.
Morocco
Registered office
Principal activities
% of
shares
held by
Group
Company
Poland
Registered office
Principal activities
Av. San Nicolás No. 249,
Colonia Cuauhtémoc,
San Nicolás de los Garza,
Nuevo Léon, 66450
Av. San Nicolás No. 249,
Colonia Cuauhtémoc,
San Nicolás de los Garza,
Nuevo Léon, 66450
Av. San Nicolás No. 249,
Colonia Cuauhtémoc,
San Nicolás de los Garza,
Nuevo Léon, 66450
Service,
Industrial bags
100.00
Agromasa Sp. z o.o.
ul. Bydgoska 1,
86–100 Świecie
Fredonia Investments
Sp. z o.o.
ul. Bukowa 21,
87–148 Łysomice
Service,
Containerboard
Service,
Containerboard
Production,
Industrial bags
100.00
Service,
Industrial bags
100.00
Mondi Bags Mielec Sp.
z o.o.
ul. Wojska Polskiego 12,
39–300 Mielec
Production, Industrial
bags
Mondi Bags Świecie
Sp. z o.o.
ul. Bydgoska 12,
86–100 Świecie
Mondi BZWP Sp. z o.o. ul. Zamenhofa 36, 57–500
Bystrzyca Kłodzka
Mondi Corrugated
Świecie Sp. z o.o.
ul. Bydgoska 1,
86–100 Świecie
Production, Industrial
bags
Production,
Corrugated packaging
Production,
Corrugated packaging
% of
shares
held by
Group
100.00
100.00
100.00
100.00
100.00
100.00
Mondi Dorohusk Sp.
z o.o.
Brzezno 1, 22–174 Brzezno Production,
100.00
Mondi Kutno Sp. z o.o. ul. Żołnierska 1,
99–300 Kutno
Mondi Poznań Sp. z o.o. ul. Wyzwolenia 34/36,
62–070 Dopiewo
Corrugated packaging
In liquidation,
Consumer packaging
100.00
Production, Consumer
packaging
100.00
Mondi Recykling Polska
Sp. z o.o.
ul. Bydgoska 1,
86–100 Świecie
Service,
Containerboard
Mondi Simet Sp. z o.o. Grabonóg 77,
63–820 Piaski
Mondi Solec Sp. z o.o. Solec, 05–532 Baniocha
Production,
Corrugated packaging
Production,
Consumer packaging
Mondi Świecie S.A.
ul. Bydgoska 1,
86–100 Świecie
Production,
Containerboard
Mondi Szczecin Sp.
z o.o.
ul. Sloneczna 20,
72–123 Kliniska Wielkie
Production,
Corrugated packaging
Mondi Warszawa Sp.
z o.o.
ul. Tarczyńska 98,
96–320 Mszczonów
Production,
Corrugated packaging
Mondi Wierzbica Sp.
z o.o.
Kolonia Rzecków 76,
26–680 Wierzbica
Świecie Rail Sp. z o.o.
ul. Bydgoska 1,
86–100 Świecie
Świecie Recykling Sp.
z o.o.
ul. Bydgoska 1/417,
86–100 Świecie
Production,
Industrial bags
Service,
Containerboard
Service,
Containerboard
Romania
Mondi Bucharest S.R.L. Tudor Vladimirescu Street
1A, Ilfov, 75100 Otopeni
Distribution,
Industrial bags
LCC Mondi Aramil
25 Klubnaya Street, 62400
Aramil, Sverdlovskii Region
Production,
Consumer packaging
LLC Mondi Lebedyan
Sverdlova 67, 399610
Lebedyan, Lipetsk Region
Production,
Corrugated
packaging
LLC Mondi Pereslavl
Mendeleeva sq. 2, Building
55, 152025 Pereslavl-
Zalesski
Production,
Consumer packaging
100.00
LLC Mondi Syktyvkar
Energy Company1
pr. Bumazhnikov 2, 167026
Syktyvkar, Republic of Komi
Service,
Uncoated fine paper
OJSC Mondi Syktyvkar3 pr. Bumazhnikov 2, 167026
Syktyvkar, Republic of Komi
OOO Mondi Sales CIS 2nd Brestskaya str. 8 Floor
13, 123047, Moscow
Production,
Containerboard,
Uncoated fine paper
Distribution,
Uncoated fine paper
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Russia
100.00
70.00
100.00
100.00
100.00
49.00
L’Ensachage Moderne
Sarl
Rue Boukraa N1, Quartier
Industriel Dokkarat, Fes
Dormant,
Industrial bags
Pap-Sac Maghreb SA
Km 16, Route d´El Jadida,
Casablanca
Production,
Industrial bags
Netherlands
Mondi Coating B.V.
Fort Willemweg 1,
6219 PA Maastricht
Mondi Consumer Bags
& Films B.V.
Fort Willemweg 1,
6219 PA Maastricht
Mondi Consumer Bags
& Films Benelux B.V.
Fort Willemweg 1,
6219 PA Maastricht
Mondi Corrugated B.V. Fort Willemweg 1,
6219 PA Maastricht
Mondi Corrugated
Poland B.V.
Fort Willemweg 1,
6219 PA Maastricht
Holding,
Extrusion coatings
Holding, Consumer
packaging
Distribution,
Consumer packaging
Holding, Corrugated
packaging
Holding, Corrugated
packaging
Mondi Heerlen B.V.
Imstenraderweg 15, 6422
PM Heerlen
Production,
Consumer packaging
Mondi Industrial Bags
B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Holding,
Industrial bags
80.64
80.64
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Holding, Corporate
100.00
Mondi International
Holdings B.V.
Fort Willemweg 1,
6219 PA Maastricht
Mondi Maastricht N.V.
Mondi MENA B.V.
Fort Willemweg 1,
6219 PA Maastricht
Fort Willemweg 1,
6219 PA Maastricht
Mondi Packaging Paper
B.V.
Fort Willemweg 1,
6219 PA Maastricht
Mondi Paper Sales
Netherlands B.V.
Bruynvisweg 14,
1531 AZ Wormer
Mondi SCP Holdings
B.V.
Fort Willemweg 1,
6219 PA Maastricht
Production,
Industrial bags
Holding,
Industrial bags
Holding,
Kraft paper
Distribution,
Containerboard,
Kraft paper,
Uncoated fine paper
Holding,
Uncoated fine paper
Norway
Mondi Moss AS
Oman
Mondi Oman LLC
Rådmann Sirasvei 1,
1712 Grålum
Distribution,
Industrial bags
P.O. Box 20, 124, Muscat
Governorate, As Seeb, Al
Rusayl
Production,
Industrial bags
Mondi Group
Integrated report and financial statements 2018
Registered office
Principal activities
% of
shares
held by
Group
Company
Turkey
Nova 9, 15000 Šabac
Production,
Industrial bags
100.00
Mondi Istanbul Ambalaj
Limited Şti.
Company
Serbia
Mondi Šabac d.o.o.
Šabac
Singapore
Mondi Packaging Paper
Sales Asia Pte. Limited
3 Anson Road 27–01,
Springleaf Tower, 079909
Distribution,
Kraft paper
100.00
Slovakia
East Paper, spol. s.r.o.
KB Paper, s.r.o.
Mondi SCP a.s.
Obaly SOLO, s.r.o
RECOPAP, s.r.o.
Rastislavova 98,
04346 Kosice
L. Kassaka 10,
94001 Nove Zamky
Tatranská cesta 3,
03417 Ružomberok
Tatranská cesta 3,
03417 Ružomberok
Bratislavska 18,
90051 Zahor
Slovpaper Recycling
s.r.o.
L. Kassaka 10,
94001 Nove Zamky
SLOVWOOD
Ružomberok a.s.
Tatranská cesta 3,
03417 Ružomberok
STRÁŽNA SLUŽBA
VLA-STA s.r.o.
Tatranská cesta 3,
03417 Ružomberok
Spain
Mondi Bags Ibérica S.L. Autovía A-2, Km 582,
Mondi Ibersac S.L.
08630 Abrera
Calle La Perenal 4,
48840 Güeñes, Bizcaia
Mondi Sales Ibérica S.L. Calle Joaquin Costa 36 2a,
28002 Madrid
Service,
Containerboard
Service,
Containerboard
Production,
Kraft paper,
Uncoated fine paper
Production,
Uncoated fine paper
Service,
Containerboard
Service,
Containerboard
Distribution,
Uncoated fine paper
Distribution,
Uncoated fine paper
Production,
Industrial bags
Production,
Industrial bags
Distribution,
Containerboard,
Uncoated fine paper,
Consumer packaging
Powerflute International
S.L.1
Josep Irla I Bosch, 1–3 P.6
PTA.2, 08034 Barcelona
Distribution,
Containerboard
Sweden
Mondi Dynäs AB
87381 Väja
Production,
Kraft paper
Papersbruksallen 3A,
Box 926, 70130 Örebro
Production,
Extrusion coatings
Mondi Kale Nobel
Ambalaj Sanayi Ve
Ticaret A.Ş.4
Mondi Tire Kutsan Kagit
Ve Ambalaj Sanayi A.Ş.5
Ukraine
Mondi Packaging Bags
Ukraine LLC
26.01
25.50
51.00
51.00
25.50
UK
51.00
33.66
51.00
100.00
100.00
100.00
100.00
100.00
100.00
Frantschach Holdings
UK Limited
Hypac Limited
Medway Packaging
Pension Trustee Limited
Mondi Aberdeen
Limited
Mondi Consumer
Goods Packaging
UK Ltd
Mondi Finance plc
Mondi German
Investments Limited
Mondi Örebro AB
Switzerland
Dipeco AG
Thailand
Mondi Bangkok
Company, Limited1
Mondi Coating
(Thailand) Co. Ltd.
Mondi TSP Company
Limited
Bruehlstrasse 5,
4800 Zofingen
Production,
Industrial bags
100.00
Mondi Glossop Ltd
789/10 Moo 9 Bang Pla
Sub-District, Bang Phli
District, Bangkok, Samut
Prakan Province
Nr 888/100–101 Soi
Yingcharoen Moo 19,
Bangplee-Tamru Road,
Bangpleeyai, Bangplee,
Samutprakam 10540
110, Moo 3, Nong
Chumphon Nuea, Khao
Yoi District, Petchaburi
Province, 76140
Production,
Consumer packaging
100.00
Mondi Holcombe
Limited
Service,
Consumer packaging
100.00
Mondi Investments
Limited6
Production,
Consumer packaging
97.55
Mondi Packaging (Delta)
Limited
Trinidad and Tobago
TCL Packaging Limited Southern Main Road,
Claxton Bay
Production,
Industrial bags
20.00
Mondi Packaging
Limited
227
O
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a
t
e
g
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n
a
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c
e
i
F
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
% of
shares
held by
Group
100.00
Registered office
Principal activities
No. 12A Türkgücü OSB
Mah. Yilmaz Alpaslan
Caddesi Corlu, Tekirdag,
59870
Sevketiye Cobancesme
Kavsagi, A2 Blok, No.
229/230 Yeşilköy, Bakirköy/
Istanbul
Toki Mahallesi, Hasan
Tahsin Caddesi,
No. 28, Tire, Izmir 35900
Production,
Industrial bags
Production,
Consumer packaging
100.00
79.14
Production,
Containerboard,
Corrugated
packaging
Fabrychna Street 20,
Zhydachiv, Lviv Region,
81700
Production,
Industrial bags
100.00
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Parkway, Deeside Industrial
Park, Deeside, Clwyd,
Wales, CH5 2NS
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Holding,
Industrial bags
100.00
Dormant,
Corrugated packaging
100.00
Service,
Industrial bags
100.00
Distribution,
Industrial bags
100.00
Production,
Consumer packaging
100.00
Service, Corporate
100.00
Holding, Corporate
100.00
Dormant,
Consumer packaging
100.00
Dormant,
Corrugated
packaging
100.00
Holding, Corporate
100.00
Dormant,
Corrugated
packaging
Dormant,
Corrugated
packaging
100.00
100.00
Mondi Group
Integrated report and financial statements 2018
228
Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2018
11 List of subsidiaries and associated undertakings and other significant holdings as at 31 December 2018
Company
Registered office
Principal activities
% of
shares
held by
Group
Company
Registered office
Principal activities
% of
shares
held by
Group
100.00
100.00
100.00
100.00
100.00
100.00
Mondi Packaging UK
Holdings Limited
Mondi Pension Trustee
Limited6
Mondi Rochester
Limited
Mondi Scunthorpe
Limited3
Mondi Services (UK)
Limited
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Roxburgh House, Clayfield
Road, Foxhills Industrial
Estate, Scunthorpe, North
Lincolnshire, DN15 8QJ
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Holding,
Corrugated
packaging
100.00
USA
Mondi Akrosil, LLC
251 Little Falls Drive,
Wilmington DE 19808
Production,
Consumer packaging
Service, Corporate
100.00
Mondi Bags USA, LLC 251 Little Falls Drive,
Wilmington DE 19808
Production,
Industrial bags
In liquidation,
Extrusion coatings
Mondi Jackson, LLC
251 Little Falls Drive,
Wilmington DE 19808
100.00
Mondi Minneapolis, Inc. 220 South Sixth Street,
Suite 2200,
Minneapolis 55402
Production,
Consumer packaging
Service,
Consumer packaging
Dormant,
Consumer packaging
100.00
Mondi Romeoville LLC 251 Little Falls Drive,
Wilmington DE 19808
Production,
Industrial bags
Mondi Tekkote LLC
251 Little Falls Drive,
Wilmington DE 19808
Production,
Consumer packaging
Service, Corporate
100.00
Notes:
1 % of shares held by Group in 2017: nil
2 % of shares held by Group in 2017: 29.89
3 These companies have ordinary and preference shares
4 % of shares held by Group in 2017: 90.00
5 % of shares held by Group in 2017: 70.30
6 These companies are held directly
Mondi UK Consumer
Packaging Holding
1 Ltd
Parkway, Deeside Industrial
Park, Deeside, Clwyd,
Wales, CH5 2NS
Mondi UK Consumer
Packaging Holding
2 Ltd
Parkway, Deeside Industrial
Park, Deeside, Clwyd,
Wales, CH5 2NS
Holding,
Consumer packaging
100.00
Holding,
Consumer packaging
100.00
Powerflute Group
Holdings Limited1
Rochette Packaging
Limited
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey,
KT15 2PG
Holding,
Containerboard
100.00
Dormant,
Corrugated
packaging
100.00
Mondi Group
Integrated report and financial statements 2018
Production statistics
Fibre Packaging
Containerboard
Kraft paper
Softwood pulp
Internal consumption
Market pulp
Hardwood pulp
Internal consumption
Market pulp
Corrugated board and boxes
Industrial bags
Extrusion coatings
Consumer Packaging
Consumer packaging
Uncoated Fine Paper
Uncoated fine paper
Softwood pulp
Internal consumption
Market pulp
Hardwood pulp
Internal consumption
Market pulp
Newsprint
Exchange rates
versus euro
South African rand
Czech koruna
Polish zloty
Pound sterling
Russian rouble
Turkish lira
US dollar
2018
2017
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
million m²
million units
million m²
2,530
1,118
1,986
1,844
142
714
714
—
1,635
5,255
1,230
2,297
1,206
2,010
1,874
136
547
543
4
1,650
4,952
1,281
million m2
7,278
7,437
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
1,649
386
358
28
1,244
906
338
207
Average
Closing
2018
15.62
25.65
4.26
0.88
74.04
5.71
1.18
2017
15.04
26.33
4.26
0.88
65.88
4.12
1.13
2018
16.46
25.72
4.30
0.89
79.72
6.06
1.15
1,644
375
358
17
1,345
950
395
277
2017
14.81
25.54
4.18
0.89
69.39
4.55
1.20
229
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s
Mondi Group
Integrated report and financial statements 2018
230
Group financial record
Financial performance 2009–2018
Combined and consolidated income statement
Restated1
2017
2016
2015
2014
2013
2012
2011
2010
2009
7,096
1,482
6,662
1,366
6,819
1,325
6,402
1,126
6,476
1,068
5,790
5,739
5,610
5,257
€ million, unless otherwise stated
Group revenue
Underlying EBITDA
Fibre Packaging2
Consumer Packaging
Uncoated Fine Paper
Corporate
2018
7,481
1,764
1,086
194
516
(32)
833
222
464
(37)
Discontinued and disposed
operations
—
—
Underlying operating profit
1,318
1,029
Special items
(126)
(61)
(88)
916
824
(85)
721
668
721
198
481
(34)
—
981
(38)
(101)
667
638
734
177
448
(34)
—
957
(57)
(105)
647
600
651
158
349
(32)
—
767
(52)
(97)
519
471
596
143
359
(30)
—
699
(87)
(115)
460
386
927
519
57
383
(32)
—
574
(91)
(110)
334
242
964
560
52
394
(32)
(10)
622
(55)
(111)
340
330
798
392
56
379
(32)
3
458
(21)
(106)
206
224
40.6
37.8
645
261
40
298
(36)
82
294
(125)
(114)
95
(33)
18.7
(6.5)
189.1
170.1
148.9
137.9
137.8
131.8
133.7
124.0
107.3
97.4
95.0
79.8
69.2
50.1
68.1
57.5
76.0
62.0
57.0
52.0
42.0
36.0
28.0
26.0
20.0
9.5
1 Comparative information for 2017 has been restated to reflect the changes in IFRS as described in notes 32 and 33
2 Underlying EBITDA of Fibre Packaging for the years 2009 to 2016 has been restated for the reorganisation of the Group’s business units based on management
reporting (unaudited)
3 In addition to the 2017 ordinary dividend, a special dividend of 100 euro cents was paid in 2018
2018
19.0
23.6
17.6
23.6
1.3
2.5
9.6
Restated1
2017
8.5
20.9
14.5
19.3
1.0
2.4
14.6
2016
3.1
20.5
14.7
20.3
1.0
2.4
14.2
2015
17.7
19.4
14.0
20.5
1.1
2.6
13.5
2014
5.4
17.6
12.0
17.2
1.4
2.6
12.6
2013
15.2
16.5
10.8
15.3
1.5
2.6
13.2
2012
(3.8)
16.0
9.9
13.6
2.0
2.5
11.9
2011
20.8
16.8
10.8
15.0
0.9
2.6
8.0
2010
23.7
14.2
8.2
12.3
1.7
2.0
14.8
2009
(20.8)
12.3
5.6
7.6
2.4
2.0
20.2
1,634
1,931
1,666
1,334
1,050
1,046
670
455
514
335
92.16
4,001
57.30
2,655
51.42
3,097
40.14
1,969
309.57
319.27
279.99
307.27
188.74
179.70
Market capitalisation (€ million)
8,901
10,523
9,457
8,803
6,563
6,081
Note:
1 Comparative information for 2017 has been restated to reflect the changes in IFRS as described in notes 32 and 33
Mondi Group
Integrated report and financial statements 2018
Net finance costs (excluding
financing special item)
Underlying earnings
Basic earnings
Basic underlying EPS (euro
cents)
Basic EPS (euro cents)
Total ordinary dividend per
share paid and proposed
(euro cents)3
Notes:
Significant ratios
Underlying EBITDA growth (%)
Underlying EBITDA margin (%)
Underlying operating profit
margin (%)
ROCE (%)
Net debt to 12-month trailing
underlying EBITDA (times)
Ordinary dividend cover (times)
PE Ratio
Mondi plc – Share price at end
of year (GBP cents per share)
Mondi Limited – Share price
at end of year (ZAR per share)
231
Significant cash flows
€ million
Cash generated
from operations
Working capital cash flows
Income tax paid
Capital expenditure
cash outflows
Interest paid
Ordinary dividends paid
to shareholders2
Notes:
Restated1
2017
2018
2016
2015
2014
2013
2012
2011
2010
2009
1,654
1,363
1,401
1,279
1,033
1,036
(117)
(248)
(709)
(73)
(122)
(151)
(611)
(97)
68
(173)
9
(160)
(465)
(595)
(82)
(93)
(87)
(106)
(562)
(125)
(27)
(126)
(405)
(124)
849
(83)
(109)
917
(68)
(85)
778
(121)
(47)
(294)
(92)
(263)
(106)
(394)
(117)
867
248
(32)
(517)
(163)
O
v
e
r
v
e
w
i
(309)
(273)
(274)
(209)
(193)
(138)
(128)
(126)
(54)
(39)
1 Comparative information for 2017 has been restated to reflect the changes in IFRS as described in notes 32 and 33
2 A special dividend of €484 million was paid in 2018 in addition to the ordinary dividend
Combined and consolidated statement of financial position
€ million
Restated1
2017
2018
2016
2015
2014
2013
2012
2011
2010
2009
Property, plant and equipment
4,340
4,128
3,788
3,554
3,432
3,428
3,709
3,377
3,976
3,847
Goodwill
Working capital
Other assets
Other liabilities
Net assets excluding net debt
Equity
Non-controlling interests in equity
Net debt2
Capital employed
Notes:
942
972
540
698
899
530
681
799
532
590
794
422
545
811
434
550
711
429
561
764
503
202
575
408
274
660
466
269
527
419
(749)
(716)
(721)
(675)
(715)
(653)
(789)
(696)
(788)
(721)
6,045
3,485
340
2,220
6,045
5,539
3,683
324
1,532
5,539
5,079
3,392
304
1,383
5,079
4,685
2,905
282
1,498
4,685
4,507
2,628
266
1,613
4,507
4,465
2,591
255
1,619
4,465
4,748
2,572
301
1,875
4,748
3,866
2,586
449
831
3,866
4,588
2,763
461
1,364
4,588
4,341
2,399
425
1,517
4,341
1 Comparative information for 2017 has been restated to reflect the changes in IFRS as described in notes 32 and 33
2 Net debt prior to 2012 does not include the effect of net debt-related derivatives
S
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Additional information for Mondi plc shareholders
The disclosures below form part of the Directors’ report on pages 142 and 143 of this report.
Introduction
Set out below is a summary of certain provisions of Mondi plc’s articles of association (Articles) and applicable English law concerning
companies (the Companies Act). This is a summary only and the relevant provisions of the Articles or the Companies Act should be
consulted if further information is required.
Share capital
Mondi plc’s issued share capital as at 31 December 2018 comprised 367,240,805 ordinary shares of 20 euro cents each (the Ordinary
Shares) representing 71.4% of the total share capital, 118,312,975 PLC Special Converting Shares of 20 euro cents each representing
23.0% of the total share capital, 146,896,322 deferred shares of 4 euro cents each (the Deferred Shares) representing 5.5% of the total
share capital, the PLC Special Rights Share of €1, the PLC Special Voting Share of €1, the UK DAN Share of €1 and the UK DAS Share
of €1. Each of the PLC Special Rights Share, PLC Special Voting Share, UK DAN Share and UK DAS Share represent only a nominal
percentage of the total share capital.
The shares are in registered form.
Purchase of own shares
Subject to the provisions of the Articles and the Companies Act, Mondi plc may purchase, or may enter into a contract under which it will
or may purchase, any of its own shares of any class, including any redeemable shares.
Ordinary Shares
Dividends and distributions
Subject to the provisions of the Companies Act, Mondi plc may by ordinary resolution from time to time declare dividends not exceeding
the amount recommended by the board. The board may pay interim dividends whenever the financial position of Mondi plc, in the opinion
of the board, justifies such payment.
The board may withhold payment of all or any part of any dividends or other monies payable in respect of Mondi plc’s shares from a
person with a 0.25% or more interest in nominal value of the issued shares, if such a person has been served with a notice after failure to
provide Mondi plc with information concerning interest in those shares required to be provided under the Companies Act.
Voting rights
Subject to any special rights or restrictions attaching to any class of shares, at a general meeting, every member present in person has,
upon a show of hands, one vote. Every duly appointed proxy has, upon a show of hands, one vote unless the proxy is appointed by
more than one member, in which case the proxy has one vote for and one vote against if (i) the proxy has been instructed by one or more
members to vote for the resolution and by one or more members to vote against the resolution or (ii) the proxy has been instructed by one
or more members to vote either for or against the resolution and by one or more members to use his discretion as to how to vote. On a
poll every member who is present in person or by proxy has one vote for every fully paid share of which he is the holder. In the case of
joint holders of a share, the vote of the senior who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register
of members in respect of the shares. Under the Companies Act, members are entitled to appoint a proxy, who need not be a member
of Mondi plc, to exercise all or any of their rights to attend and to speak and vote on their behalf at a general meeting or class meeting.
A member may appoint more than one proxy in relation to a general meeting or class meeting provided that each proxy is appointed to
exercise the rights attached to a different share or shares held by that member. A proxy is not entitled to delegate the proxy’s authority to
act on behalf of a member to another person. A member that is a corporation may appoint one or more individuals to act on its behalf at a
general meeting or class meeting as a corporate representative.
Restrictions on voting
No member shall be entitled to vote either in person or by proxy at any general meeting or class meeting in respect of any shares held by
him if any call or other sum then payable by him in respect of that share remains unpaid. In addition no member shall be entitled to vote
if he has been served with a notice after failure to provide Mondi plc with information concerning interests in those shares required to be
provided under the Companies Act.
Deadlines for exercising voting rights
Votes are exercisable at a general meeting of Mondi plc in respect of which the business being voted upon is being heard. Votes may
be exercised in person, by proxy, or in relation to corporate members, by corporate representatives. The Articles provide a deadline for
submission of proxy forms of not less than 48 hours before the time appointed for the holding of the meeting or adjourned meeting.
Mondi Group
Integrated report and financial statements 2018
Variation of rights
Subject to the Companies Act, the Articles specify that rights attached to any class of shares may be varied with the written consent of
the holders of not less than three-quarters in nominal value of the issued shares of that class, or with the sanction of a special resolution
passed at a separate general meeting of the holders of those shares. At every such separate general meeting the quorum shall be two
persons holding or representing by proxy at least one-third in nominal value of the issued shares of the class (calculated excluding any
shares held as treasury shares). The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the
rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them.
Where, under an employee share plan operated by Mondi plc, participants are the beneficial owners of the shares but not the registered
owner, the voting rights are normally exercised by the registered owner at the direction of the participant.
Transfer of shares
All transfers of shares which are in certificated form may be effected by transfer in writing in any usual or common form or in any other
form acceptable to the directors. The instrument of transfer shall be signed by or on behalf of the transferor and (except in the case of
fully-paid shares) by or on behalf of the transferee and shall specify the name of the transferor, the name of the transferee and the number
of shares being transferred. Transfers of shares which are in uncertificated form are effected by means of the CREST system.
The directors may also refuse to register an allotment or transfer of shares (whether fully paid or not) in favour of more than four persons
jointly. If the directors refuse to register an allotment or transfer they shall, within 30 days after the date on which the letter of allotment or
transfer was lodged with Mondi plc, send to the allottee or transferee a notice of the refusal.
The directors may decline to register any instrument of transfer unless: (i) the instrument of transfer is in respect of only one class of
share, (ii) when submitted for registration is accompanied by the relevant share certificates and such other evidence as the directors may
reasonably require and (iii) it is fully paid.
Subject to the Companies Act and regulations and applicable CREST rules, the directors may determine that any class of shares may
be held in uncertificated form and that title to such shares may be transferred by means of the CREST system or that shares of any class
should cease to be so held and transferred.
A shareholder does not need to obtain the approval of Mondi plc, or of other shareholders of shares in Mondi plc, for a transfer of shares
to take place.
Some of the Mondi plc employee share plans include restrictions on transfer of shares while the shares are subject to such plan.
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Deferred Shares
The rights and privileges attached to the Deferred Shares are as follows: no entitlement to receive any dividend or distribution declared,
made or paid or any return of capital (save as described below) and does not entitle the holder to any further or other right of participation
in the assets of Mondi plc.
On a return of capital on winding up, but not on a return of capital on any other class of shares of Mondi plc, otherwise than on a winding
up of Mondi plc, the holders of the Deferred Shares shall be entitled to participate but such entitlement is limited to the repayment of the
amount paid up or credited as paid up on such share and shall be paid only after the holders of any and all Ordinary Shares then in issue
shall have received (i) payment in respect of such amount as is paid up or credited as paid up on those Ordinary Shares held by them at
that time plus (ii) the payment in cash or in specie of £10,000,000 on each such Ordinary Share.
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The holders of the Deferred Shares are not entitled to receive notice of, nor attend, speak or vote at, any general meeting of Mondi plc.
Shares required for the DLC structure
Mondi SCS (UK) Limited, a UK trust company, specially formed for the purpose of the DLC structure, holds the PLC Special Voting Share,
the PLC Special Converting Shares, the PLC Special Rights Share, the UK DAN Share and the UK DAS Share. These shares can only be
transferred to another UK trust company, in limited circumstances.
The PLC Special Voting Share is a specially created share so that shareholders of both Mondi plc and Mondi Limited effectively vote
together as a single decision-making body on matters affecting shareholders of both companies in similar ways, as set out in the Articles.
Prior to a change of control, approval of termination of the sharing agreement (which regulates the DLC), liquidation or insolvency of Mondi
plc, the PLC Special Converting Shares have no voting rights except in relation to a resolution proposing the (i) variation of the rights
attaching to the shares or (ii) winding up, and they have no rights to dividends. The PLC Special Converting Shares are held on trust for
the Mondi Limited ordinary shareholders.
The PLC Special Rights Share does not have any rights to vote or any right to receive any dividend or other distribution by Mondi plc, save
in respect to capitalisation of reserves.
Mondi Group
Integrated report and financial statements 2018
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Additional information for Mondi plc shareholders
Mondi plc and Mondi Limited have established dividend access trust arrangements as part of the DLC. Mondi plc has issued two
dividend access shares, the UK DAS Share and UK DAN Share, which enable Mondi plc to pay dividends to the shareholders of Mondi
Limited. This facility may be used by the board to address imbalances in the distributable reserves of Mondi plc and Mondi Limited and/or
to address the effects of South African exchange controls and/or if they otherwise consider it necessary or desirable.
Directors
Appointment and replacement of directors
Directors shall be no less than four and no more than 20 in number. A director is not required to hold any shares of Mondi plc by way of
qualification. Mondi plc may by special resolution increase or reduce the maximum or minimum number of directors.
At each Annual General Meeting held in each year at least one-third of the directors, including at least one-third of non-executive directors,
or if their number is not a multiple of three then the number nearest to, but not less than, one-third, shall retire from office. Any further
directors to retire shall be those of the other directors subject to retirement by rotation who have been longest in office since their last
election or re-election or, if later, deemed election or re-election and so that as between persons who became or were last re-elected
directors on the same day, those to retire shall, unless they otherwise agree among themselves, be determined by lot. In casting the lot,
the provision that a director must also be a director of Mondi Limited and the corresponding provision of the Mondi Limited memorandum
of incorporation shall be observed. A retiring director shall be eligible for re-election.
The board may appoint any person to be a director (so long as the total number of directors does not exceed the limit prescribed in the
Articles). Any such director shall hold office only until the next Annual General Meeting and shall then be eligible for re-election, but shall
not be taken into account in determining the number of directors who are to retire by rotation at such meeting.
Powers of the directors
Subject to the Articles, the Companies Act and any directions given by special resolution, the business of Mondi plc will be managed by
the board who may exercise all the powers of Mondi plc.
The board may exercise all the powers of Mondi plc to borrow money and to mortgage or charge any of its undertaking, property and
uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of
Mondi plc or of any third party.
Significant agreements: change of control
The Articles of Mondi plc and the memorandum of incorporation of Mondi Limited ensure that a person cannot make an offer for one
company without having made an equivalent offer to the shareholders of both companies on equivalent terms.
Pursuant to the terms of the agreements establishing the DLC structure, if either Mondi plc or Mondi Limited serves written notice on
the other at any time after either party becomes a subsidiary of the other party or after both Mondi plc and Mondi Limited become
subsidiaries of a third party, the agreements establishing the DLC structure will terminate.
All of Mondi plc’s share plans contain provisions relating to a change of control. Outstanding awards and options would normally vest and
become exercisable on a change of control, subject to the satisfaction of any performance conditions at that time.
Amendment of the Articles
Any amendments to the Articles of Mondi plc may be made in accordance with the provisions of the Companies Act by way of
special resolution.
Mondi Group
Integrated report and financial statements 2018
Shareholder information
Mondi has a dual listed company (DLC) structure comprising Mondi Limited, a company registered in South Africa and Mondi plc, a
company registered in the UK. Mondi Limited has a primary listing on the JSE Limited while Mondi plc has a premium listing on the
London Stock Exchange and a secondary listing on the JSE Limited.
Under the DLC structure any ordinary share held in either Mondi Limited or Mondi plc gives the holder an effective economic interest in
the whole Mondi Group. The relationship between Mondi Limited and Mondi plc is underpinned by the DLC structure principles, which
provide that:
e Mondi Limited and Mondi plc and their subsidiaries must operate as if they are a single corporate group; and
e the directors of Mondi Limited and Mondi plc will, in addition to their duties to the company concerned, have regard to the interests of
the Mondi Limited shareholders and the Mondi plc shareholders as if the two companies were a single unified economic enterprise and
for that purpose the directors of each company will take into account, in the exercise of their powers, the interests of the shareholders of
the other.
Financial calendar
9 May 2019
9 May 2019
16 May 2019
1 August 2019
September 2019
10 October 2019
2019 Annual General Meetings
Trading update
Payment date for 2018 final ordinary dividend
2019 half-yearly results announcement
2019 interim ordinary dividend payment
Trading update
Analysis of shareholders
As at 31 December 2018 Mondi Limited had 118,312,975 ordinary shares in issue and Mondi plc had 367,240,805 ordinary shares in
issue, of which 110,560,682 were held on the South African branch register.
By size of holding
Mondi Limited
Number of shareholders
% of shareholders
Size of shareholding
Number of shares
% of shares
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7,974
1,037
950
522
212
17
10,712
Mondi plc
74.44
9.68
8.87
4.87
1.98
0.16
100.00
1 – 500
501 – 1,000
1,001 – 5,000
5,001 – 50,000
50,001 – 1,000,000
1,000,001 – highest
1,247,973
754,776
2,061,440
8,687,023
44,982,449
60,579,314
118,312,975
1.06
0.64
1.74
7.34
38.02
51.20
100.00
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Number of shareholders
% of shareholders
Size of shareholding
Number of shares
% of shares
2,087
454
568
455
311
48
3,923
53.20
11.57
14.48
11.60
7.93
1.22
100.00
1 – 500
501 – 1,000
1,001 – 5,000
5,001 – 50,000
50,001 – 1,000,000
1,000,001 – highest
437,764
330,835
1,319,661
8,923,873
74,337,314
281,891,358
367,240,805
0.12
0.09
0.36
2.43
20.24
76.76
100.00
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Shareholder information
By type of holding
Mondi Limited
Public1
Non-public
Directors of Mondi Limited/Mondi plc
Mondi staff share schemes2
Total
Mondi plc
Public1
Non-public
Directors of Mondi Limited/Mondi plc
Mondi staff share schemes2
Total
1 As per the Listings Requirements of the JSE Limited
2 Shares held for the purposes of Mondi staff share schemes are held in trust
Managing your shares
Registrars
Number of holders
Number of shares
% of shares
10,710
117,957,296
2
1
1
355,679
208
355,471
10,712
118,312,975
99.70
0.30
0.00
0.30
100.00
Number of holders
Number of shares
% of shares
3,913
366,087,560
10
8
2
1,153,245
253,190
900,055
3,923
367,240,805
99.69
0.31
0.07
0.24
100.00
To manage your shares or if you have any queries, please contact the relevant Registrar:
Mondi Limited shares and Mondi plc shares
on the South African branch register
Mondi plc shares on the UK register
Link Market Services South Africa Proprietary Limited
(Link Market Services)
Link Asset Services
Registrar
Postal address
PO Box 4844
Johannesburg, 2000
South Africa
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK
0871 664 0300
(if calling from the UK; calls cost 12p per minute plus
your phone company’s access charge; lines are
open Monday to Friday between 9:00am to 5:30pm
excluding public holidays in England and Wales)
+44 371 664 0300 (if calling from outside the UK; calls
will be charged at the applicable international rate)
Helpline number
011 713 0800
(if calling from South Africa)
+27 11 713 0800
(if calling from outside South Africa)
Email
Online
meetfax@linkmarketservices.co.za
Not available
enquiries@linkgroup.co.uk
www.signalshares.com
Sign up to email communications
Many of our shareholders choose to receive shareholder information electronically rather than by post. Benefits include faster notification
of shareholder information, reduced costs and being more environmentally friendly.
Mondi plc shareholders on the UK register can sign up to email communications by contacting Link Asset Services or via their online
portal, Signal Shares.
Mondi Group
Integrated report and financial statements 2018
Mondi Limited shareholders and Mondi plc shareholders on the South African branch register holding their shares in certificated form can
sign up to email communications by contacting Link Market Services or by emailing corpactfax@linkmarketservices.co.za. Mondi Limited
shareholders and Mondi plc shareholders on the South African branch register with dematerialised shares should contact their Central
Securities Depository Participant (CSDP) or broker.
You will be notified by email each time new financial reports, notices of shareholder meetings and other shareholder communications are
published on our website at: www.mondigroup.com.
Manage your shares online
Mondi plc shareholders on the UK register can sign up to Signal Shares, a free secure online site provided by Link Asset Services, where
you can manage your shareholding quickly and easily. You can:
e View your holding and get an indicative valuation
e Change your address
e Arrange to have dividends paid into your bank account
e Request to receive shareholder communications by email rather
than post
e View your dividend payment history
e Make dividend payment choices
e Buy and sell shares and access stock market news
and information
e Register your proxy voting instruction
e Download a Stock Transfer form
To register for Signal Shares just visit www.signalshares.com. All you need is your investor code which can be found on your share
certificate, dividend confirmation or proxy form.
Dividends
A proposed final ordinary dividend for the year ended 31 December 2018 of 54.55 euro cents per ordinary share will be paid to Mondi plc
shareholders and an equivalent South African rand final ordinary dividend will be paid to Mondi Limited shareholders in accordance with
the below timetable.
Payment of the final ordinary dividend is subject to the approval of the shareholders of Mondi plc and Mondi Limited at the respective
Annual General Meetings scheduled for 9 May 2019.
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Last date to trade shares cum-dividend
JSE Limited
London Stock Exchange
Shares commence trading ex-dividend
JSE Limited
London Stock Exchange
Record date
JSE Limited
London Stock Exchange
Last date for receipt of Dividend Reinvestment Plan (DRIP) elections
by Central Securities Depository Participants
Last date for DRIP elections to UK Registrar and South African Transfer
Secretaries by shareholders of Mondi Limited and Mondi plc
Payment date
South African Register
UK Register
DRIP purchase settlement dates
(subject to the purchase of shares in the open market)
Currency conversion dates
ZAR/euro
Euro/sterling
1 Wednesday 22 May 2019 for Mondi plc South African branch register shareholders
Mondi Limited
Mondi plc
Tue 9 April 2019
Tue 9 April 2019
Not Applicable
Wed 10 April 2019
Wed 10 April 2019
Wed 10 April 2019
Not applicable
Thu 11 April 2019
Fri 12 April 2019
Not applicable
Fri 12 April 2019
Fri 12 April 2019
Thu 18 April 2019
Thu 18 April 2019
Tue 23 April 2019
Tue 23 April 2019
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Thu 16 May 2019
Thu 16 May 2019
Wed 22 May 2019
Mon 20 May 20191
Thu 28 February 2019
Thu 28 February 2019
Not applicable
Tue 30 April 2019
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Shareholder information
Share certificates on the South African registers of Mondi Limited and Mondi plc may not be dematerialised or rematerialised between
Wednesday 10 April 2019 and Sunday 14 April 2019, both dates inclusive, nor may transfers between the UK and South African registers
of Mondi plc take place between Saturday 6 April 2019 and Sunday 14 April 2019, both dates inclusive.
Dividend tax will be withheld from the amount of the gross final ordinary dividend paid to Mondi Limited shareholders and Mondi plc
shareholders on the South African branch register at the rate of 20%, unless a shareholder qualifies for an exemption.
Your dividend currency
All dividends are declared in euro but are paid in the following currencies:
Mondi Limited
Mondi plc
Mondi plc (UK residents)
Mondi plc (South African residents)
South African rand
euro
pound sterling
South African rand
e Mondi plc shareholders on the UK register resident in the UK may elect to receive their dividends in euro
e Mondi plc shareholders on the UK register resident outside the UK may elect to receive their dividends in pound sterling
Mondi plc shareholders on the UK register wishing to elect to receive their dividends in an alternative currency should contact Link Asset
Services in the UK using the details provided.
Payment of your dividends
Mondi encourages shareholders to have their dividends paid directly into their bank accounts. This means that the dividend will reach your
bank account more securely and on the payment date without the inconvenience of depositing a cheque.
Mondi Limited shareholders and Mondi plc shareholders on the South African branch register
e Shareholders with a South African bank account can elect to receive dividends directly into their bank account by contacting Link
Market Services.
e Shareholders without a South African bank account are encouraged to dematerialise their shares with a CSDP in South Africa as a
CSDP is often able to pay dividends into foreign bank accounts. Find out more by contacting Link Market Services or any CSDP.
Mondi plc shareholders on the UK register
e Shareholders with a UK bank account can elect to receive dividends directly into their bank account via Signal Shares or by contacting
Link Asset Services.
e Shareholders without a UK bank account may be able to take advantage of the International Payment Service offered by Link Asset
Services. Find out more via Signal Shares or by contacting Link Asset Services.
Reinvest your dividends
The dividend reinvestment plans (DRIPs) provide an opportunity for shareholders to have their Mondi Limited and Mondi plc cash
dividends reinvested in Mondi Limited and Mondi plc ordinary shares respectively.
The plans are available to all Mondi Limited and Mondi plc ordinary shareholders (excluding those in certain restricted jurisdictions).
Fees may apply.
If you wish to participate in the DRIPs you can sign up via Signal Shares or by contacting either Link Market Services in South Africa or
Link Asset Services in the UK as appropriate.
South African dematerialisation
Mondi encourages Mondi Limited shareholders and Mondi plc shareholders on the South African branch register to consider
dematerialising their shares. By surrendering your share certificate, you will hold your shares electronically with a CSDP in South Africa.
Holding shares electronically can help to prevent share fraud, theft and loss of share certificates. Once dematerialised, your dividends can
be paid directly into a bank account and your shares will be easier to sell.
Find out more by contacting Link Market Services or any CSDP.
Taxation
Mondi is unable to advise shareholders on taxation. Your tax obligations will vary depending on your jurisdiction and financial
circumstances. With regard to your Mondi shareholding, we recommend all shareholders maintain records of dividend payments,
share purchases and sales. A dividend confirmation will be sent with all dividend payments. For further assistance, please speak to an
independent professional tax or financial adviser.
Mondi Group
Integrated report and financial statements 2018
Donating shares to charity
If you have a small number of shares which would cost you more to sell than they are worth, there is the option to donate these unwanted
shares to charity free of charge. These shares are then aggregated, sold and the proceeds distributed to various charities. Donate your
shares or find out more using the relevant contact details below:
Mondi Limited shares or Mondi plc shares
on the South African branch register
Strate Charity Shares
PO Box 78608
Sandton, 2146
South Africa
0800 202 363
(if calling from South Africa)
+27 11 870 8207
(if calling from outside South Africa)
charityshares@computershare.co.za
http://www.strate.co.za/we-care/strate-charity-shares
Mondi plc shares
on the UK register
ShareGift
PO Box 72253
London
SW1P 9LQ
UK
+44 (0)20 7930 3737
help@sharegift.org
www.sharegift.org
Postal address
Helpline number
Email
Online
Fraud
Shareholders should be aware that they may be targeted by certain organisations offering unsolicited investment advice or the
opportunity to buy or sell worthless or non-existent shares. Should you receive any unsolicited calls or documents to this effect, you
are advised not to give out any personal details or to hand over any money without ensuring that the organisation is authorised by the
UK Financial Conduct Authority (FCA) and doing further research.
If you are unsure or think you may have been targeted you should report the organisation to the FCA. For further information, please
visit the FCA’s website at www.fca.org.uk, email consumer.queries@fca.org.uk or call the FCA consumer helpline on 0800 111 6768 if
calling from the UK or +44 20 7066 1000 if calling from outside the UK.
Shareholders can also contact Link Asset Services in the UK, Link Market Services in South Africa or Mondi’s company secretarial
department on +44 (0)1932 826300.
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Account amalgamations
If you receive more than one copy of any documents sent out by Mondi or for any other reason you believe you may have more than one
Mondi Limited or Mondi plc account, please contact the relevant Registrar who will be able to confirm and, if necessary, arrange for the
accounts to be amalgamated into one.
Alternative formats
If you would like to receive this report in an alternative format, such as in large print, Braille or in audio format, please contact Mondi’s
company secretarial department on +44 (0)1932 826300.
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Mondi Limited
Registered and head office
4th Floor
No. 3 Melrose Boulevard
Melrose Arch 2196
Gauteng
Republic of South Africa
Tel. +27 (0)11 994 5400
Fax. +27 (0)86 520 4688
Registered in South Africa
Registration No. 1967/013038/06
Mondi plc
Registered office
Building 1, 1st Floor
Aviator Park
Station Road
Addlestone
Surrey
KT15 2PG
UK
Tel. +44 (0)1932 826300
Fax. +44 (0)1932 826350
Registered in England and Wales
Registered No. 6209386
Website: www.mondigroup.com
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Glossary of terms
In addition to the terms explained below, the Group presents certain financial measures that are not defined or specified according to
IFRS. These measures, referred to as Alternative Performance Measures (APMs), are defined in note 32 in the notes to the combined and
consolidated financial statements. A full glossary of sustainability-related terms can be found in Mondi’s online Sustainable development
report 2018.
Circular economy
An industrial system that is restorative
or regenerative by intention and design.
It replaces the ‘end-of-life’ concept with
restoration, shifts towards the use of
renewable energy, eliminates the use of
toxic chemicals which impair reuse, and
aims for the elimination of waste through
the superior design of materials, products,
systems and business models.
Ellen MacArthur Foundation definition
CoC
Chain-of-Custody is a tracking system
that allows manufacturers and traders
to demonstrate that timber comes from
a forest that is responsibly managed in
accordance with credible standards.
COD
Chemical oxygen demand is a measure
of the oxygen consuming capacity of
inorganic and organic matter present in
the waste water. It is a metric for emissions
to water.
FSCTM
Forest Stewardship Council™ is an
international not-for-profit, multi-stakeholder
organisation established in 1993 to promote
socially and environmentally responsible
management of the world’s forests by way
of standard setting, third-party certification
and labelling of forest products.
PEFCTM
Programme for the Endorsement of Forest
Certification™ is an international not-
for-profit non-government organisation
dedicated to promoting sustainable forest
management through independent third-
party certification.
GHG and CO2e
Greenhouse gases (GHG) are gases
listed in the Kyoto Protocol of the United
Nations Framework Convention on Climate
Change (UN-FCCC) that contribute to the
greenhouse effect and are regulated by the
Kyoto Protocol. We convert non-CO2 GHGs
(such as CH4 or N2O) into an amount of
CO2 with an equivalent warming potential.
Total GHG emissions are the sum of the
equivalent amount of CO2 for each GHG,
abbreviated as CO2e.
Scope 1 emissions
Total GHG emissions from sources owned
or controlled by Mondi and its subsidiaries.
This includes CO2e from fossil fuels and
processes, company leased/owned
vehicles, waste and waste water treatment,
make-up chemicals, and other GHGs.
Scope 2 emissions
Total GHG emissions from sources that are
related to generation of purchased energy
outside the company boundaries.
Scope 3 emissions
Total GHG emissions from the production
of fuel and raw materials business travel;
raw materials; transport of products and
raw materials; and employee commuting.
GRI
The Global Reporting Initiative is a not-for-
profit organisation that produces one of
the world’s most prevalent frameworks for
sustainability reporting.
Specific
Figures reported in specific terms are
normalised to saleable production tonnes.
SDGs
The UN Sustainable Development
Goals were launched in 2015, involving
a comprehensive, far-reaching and
people-centred set of 17 universal and
transformative goals and 169 targets.
They are integrated and indivisible, and will
stimulate action over the next years until
2030 in areas of critical importance for
humanity and the planet: people, planet,
prosperity, peace and partnerships.
TRCR
Total recordable case rate is calculated as
the number of total recordable cases (the
sum of fatalities, lost-time injuries, restricted
work cases, medical treatment cases
and compensated occupational illnesses)
divided by the number of hours worked per
200,000 man hours.
TRS
Total reduced sulphur compounds,
generated in the pulping process, and a
source of odorous emissions to air.
UNGC
United Nations Global Compact is a
strategic policy initiative for businesses that
are committed to aligning their operations
and strategies with 10 universally accepted
principles in the areas of human rights,
labour, environment and anti-corruption.
Mondi Group
Integrated report and financial statements 2018
Forward-looking statements
This document includes forward-looking statements.
All statements other than statements of historical facts
included herein, including, without limitation, those
regarding Mondi’s financial position, business strategy,
market growth and developments, expectations of
growth and profitability and plans and objectives
of management for future operations, are forward-
looking statements. Forward-looking statements are
sometimes identified by the use of forward-looking
terminology such as ‘believe’, ‘expects’, ‘may’, ‘will’,
‘could’, ‘should’, ‘shall’, ‘risk’, ‘intends’, ‘estimates’,
‘aims’, ‘plans’, ‘predicts’, ‘continues’, ‘assumes’,
‘positioned’ or ‘anticipates’ or the negative thereof,
other variations thereon or comparable terminology.
Such forward-looking statements involve known
and unknown risks, uncertainties and other factors
which may cause the actual results, performance
or achievements of Mondi, or industry results, to be
materially different from any future results, performance
or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements
and other statements contained in this document
regarding matters that are not historical facts involve
predictions and are based on numerous assumptions
regarding Mondi’s present and future business
strategies and the environment in which Mondi will
operate in the future. These forward-looking statements
speak only as of the date on which they are made.
No assurance can be given that such future results will
be achieved; various factors could cause actual future
results, performance or events to differ materially from
those described in these statements. Such factors
include in particular but without any limitation: (1)
operating factors, such as continued success of
manufacturing activities and the achievement of
efficiencies therein, continued success of product
development plans and targets, changes in the
degree of protection created by Mondi’s patents and
other intellectual property rights and the availability of
capital on acceptable terms; (2) industry conditions,
such as strength of product demand, intensity of
competition, prevailing and future global market prices
for Mondi’s products and raw materials and the pricing
pressures thereto, financial condition of the customers,
suppliers and the competitors of Mondi and potential
introduction of competing products and technologies
by competitors; and (3) general economic conditions,
such as rates of economic growth in Mondi’s principal
geographical markets or fluctuations of exchange rates
and interest rates.
Mondi expressly disclaims a) any warranty or liability
as to accuracy or completeness of the information
provided herein; and b) any obligation or undertaking to
review or confirm analysts’ expectations or estimates
or to update any forward-looking statements to reflect
any change in Mondi’s expectations or any events
that occur or circumstances that arise after the date
of making any forward-looking statements, unless
required to do so by applicable law or any regulatory
body applicable to Mondi, including the JSE Limited
and the LSE.
This document includes market share estimates
prepared by the Group based on industry publications
and management estimates. Main industry publication
sources are:
Fastmarkets RISI, Pöyry, Henry Poole Consulting,
Eurosac, Freedonia, Alexander Watson Associates,
PCI Wood Mackenzie, EMGE, EURO-GRAPH
and eastconsult.
Mondi Group
Integrated report and financial statements 2018
Mondi investor relations team
Building 1, 1st floor, Aviator Park
Station Road, Addlestone
Surrey KT15 2PG, UK
+44 1932 826 300
www.mondigroup.com
Our 2018 suite of reports
Please visit our Group website where copies of our reports can be downloaded:
www.mondigroup.com/reports18
Integrated report and
financial statements 2018
A balanced overview of Mondi’s
performance in 2018 and insight into how
our approach to strategy, governance,
people and performance combine to
generate value in a sustainable way.
Also available online at
www.mondigroup.com/ir18
Sustainable Development
report 2018
A comprehensive view of our approach
to sustainable development and our
performance in 2018, prepared in
accordance with the GRI Standards: Core
option. Available online as an interactive
pdf at www.mondigroup.com/sd18
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