M
o
n
d
i
G
r
o
u
p
I
n
t
e
g
r
a
t
e
d
r
e
p
o
r
t
a
n
d
f
i
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
2
0
1
9
Mondi Group
Integrated report and
financial statements 2019
sustainable by design
make u
mondi
What make
mondi
sustainable by design ?
Mondi is a leading global
packaging and paper group
employing around 26,000 people
across more than 30 countries.
We are contributing to a better world by making innovative,
sustainable packaging and paper solutions, working with
thousands of local and global brands using paper where
possible, plastic when useful.
We want to create long-term value for the benefit of all
our stakeholders. That’s why we continuously engage
colleagues, customers, investors, communities, suppliers,
non-profit organisations and others to understand their
needs so that we can better inform our plans – our
continued success depends on it.
1
Sustainability is at the centre
of our strategy and intrinsic in the
way we do business. We focus
on driving performance along
the value chain, investing in assets
with cost advantage, inspiring
our people and partnering
with customers for innovation.
Our integrated business model
provides us with distinct
competitive advantages which
can sustain performance through
the economic cycle.
See what this means for stakeholders
Page 12-13
Being passionate about
performance entails efficient
processes, rigorous quality control
and a culture of continuous
improvement. This helps us to grow
and operate sustainably across
the value chain – securing wood
responsibly, running our operations
safely and effectively, minimising
our environmental impact and
contributing to our communities.
See what this means for stakeholders
Page 84-85
Consumers are looking for
products that maximise
functionality, are competitively
priced and designed to support
a circular economy. We’re leading
the industry with our customer-
centric EcoSolutions approach,
asking the right questions to find
the most sustainable solutions in a
complex landscape – from strong
yet lightweight paper bags to right-
sized e-commerce boxes to fully
recyclable flexible plastic pouches,
and a whole lot more!
See what this means for stakeholders
Page 146-147
Clear strategy and
business model
Manufacturing
excellence
Customer-centric
approach to
sustainable solutions
Mondi Group Integrated report and financial statements 2019 2
2019 at a glance
A robust performance
€1,658m
Underlying EBITDA
t6%
171.1 euro
cents
Basic underlying earnings per share
t10%
167.6 euro
cents
Basic earnings per share
t1%
€1,221m
Operating profit
q2%
83.0 euro
cents
Ordinary dividend per share
q9%
19.8%
Return on capital employed
15.5%
Reduction in total specific CO2e
emissions against 2014 baseline
100%
Sustainably sourced fibre
(certified or controlled wood)
22%
Safety: total recordable case rate
reduction against 2015 baseline
102%
Electricity self-sufficiency
e Robust financial performance with strong margins, returns
and cash generation
e Strong cost control across the Group
e Good contribution from capital investments and acquisitions
completed in 2018
e Capital investment pipeline to deliver further growth
e Simplification of corporate structure completed
e Delivering against our 2020 Growing Responsibly commitments
and updated science-based climate commitment
Mondi Group Integrated report and financial statements 2019 Contents
In this year’s report
3
Scope
Mondi’s Integrated report and financial statements
2019 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 2019.
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 the Disclosure Guidance
and Transparency and Listing Rules of the United
Kingdom Listing Authority and the Listings
Requirements of the JSE Limited. We also prepare
a detailed Sustainable Development report, in
accordance with the GRI Standards: Core option
and is externally assured and available to read:
www.mondigroup.com/sd19
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 31 and where relevant reconciled to IFRS in
the notes to the consolidated financial statements,
and are prepared on a consistent basis for all
periods presented.
Non-financial information statement,
Section 172 statement and
stakeholder engagement
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 36.
An overview of our engagement with employees,
customers, suppliers and other stakeholders can be
found on pages 18 to 21 and 100 to 103, including
our Section 172 statement in compliance with the
Companies Act 2006.
Materiality
Mondi’s Integrated report and financial statements
2019 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
Business unit reorganisation
Throughout this report, prior year figures have been
restated to reflect the change in organisational
structure effective from October 2019. The
reorganisation has no impact on the Group’s
overall result.
Basis of restatement: Note 2 in the
consolidated financial statements
Page 165-169
Overview
2-11
2019 at a glance
Our businesses
Where we operate
The Mondi Way
Letter from the Chair
Strategic
report
12-83
Governance
84-145
External context
Our business model
Engaging with our stakeholders
(including Section 172 statement)
Key performance indicators
Our strategy and strategic performance
Sustainability performance
Principal risks
Financial performance
Business reviews
Corrugated Packaging
Flexible Packaging
Engineered Materials
Uncoated Fine Paper
Introduction from the Chair
How we comply with the UK Corporate
Governance Code
Board of directors
Executive Committee and company secretary
Corporate governance report
Nominations committee
Audit committee
Sustainable development committee
Remuneration report
Other statutory information
Financial
statements
146-232
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
16
18
22
24
34
52
62
66
68
72
76
80
86
88
90
92
94
106
110
117
119
144
149
150
160
223
224
226
228
232
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
4
Our businesses
Packaging and paper
that is sustainable by design
Corrugated
packaging
We are a leading containerboard producer with an integrated,
well-invested, cost-advantaged asset base. We use our
containerboard to make a range of regular and bespoke
corrugated solutions designed to keep our customers’
products safe, and differentiate their brands in-store and
online. Our cost-effective fibre-based solutions are made
from a renewable resource, and are lightweight, recyclable
and biodegradable.
Segment revenue
Underlying EBITDA
Leading market positions
Industry end-use includes
Business review: Corrugated Packaging
Page 68-71
€2,014m
€583m
Flexible
Packaging
producer in Europe
#1 virgin containerboard
#1 containerboard producer
#3 corrugated solutions producer
in emerging Europe
in emerging Europe
e FMCG and consumer products
e E-commerce and retail
e Automotive, heavy-duty and other
specialised applications
As a global leader, we offer our customers a unique range
of flexible packaging solutions using paper where possible,
plastic when useful. Our world-class integrated mills produce
kraft paper that we, or our customers, convert into strong
yet lightweight paper bags and other paper-based solutions.
We also make a variety of flexible plastic-based consumer
packaging which gives our customers additional functionality
when required. Wherever possible our range of flexible
packaging is designed to minimise material usage, prioritise
recyclability and use recycled content.
Business review: Flexible Packaging
Page 72-75
Segment revenue
Underlying EBITDA
Leading market positions
Industry end-use includes
€2,708m
€543m
producer globally
#1 kraft paper
#1 paper bag producer in Europe
#3 consumer flexible packaging
producer in Europe
and a global leader
e FMCG products
e Food service and retail
e Cement and building materials
e Chemicals, agricultural
and other industrial
Our award winning products
Mondi won five awards at the WorldStar Packaging Awards 2020.
The annual competition rewards the greatest achievements in
packaging innovation and technologies worldwide, with a focus
on both sustainability and end-user convenience.
UpliftBox
DashV1Box
Stabilising System
An ingenious lifting platform
that raises a product as the
packaging is opened, making it
ideal for promotions.
Universal packaging for vehicle
dashboards that reduces supply
chain complexity and cost.
A packaging solution that
secures goods during transport,
increases capacity and is
fully recyclable.
The WorldStar awards are run by the World
Packaging Organisation (WPO) and are
considered to be the pre-eminent international
awards in packaging. 2020 winners were
announced in December 2019.
Mondi Group Integrated report and financial statements 2019 5
Engineered Materials brings together Mondi’s leading
positions and expertise across a range of specialised
products. Personal care components include soft nonwovens,
unique stretchy elastic films and laminates, and mechanical
fastening components. Our high-performance extrusion
solutions provide advanced barrier properties and our paper
and film-based release liners protect various adhesive
surfaces. We focus on prioritising the responsible use of
resources and, wherever possible, designing for recycling
or biodegradability.
Business review: Engineered Materials
Page 76-79
Underlying EBITDA
Leading market positions
Industry end-use includes
producer in Europe
#1 commercial release liner
#2 extrusion solutions producer
in Europe
e Baby care, feminine care,
adult incontinence, and wipes
e Tapes, labels and graphic arts
e Food, building and
industrial applications
€122m
Our vertically integrated, well-invested, cost-advantaged
paper mills make a wide range of environmentally sound
office and professional printing papers, tailored to the latest
digital and offset print technologies. We also manage forests
in Russia and South Africa providing sustainable wood fibre
for our operations. Our focus is on transforming credibly
sourced raw materials into innovative paper solutions to meet
customer needs in a cost-effective and sustainable way.
Engineered
materials
Segment revenue
€979m
Uncoated
Fine Paper
Business review: Uncoated Fine Paper
Page 80-83
Segment revenue
Underlying EBITDA
Leading market positions
Industry end-use includes
€1,758m
€444m
#1 uncoated fine paper
supplier in Europe
(including Russia)
#1 uncoated fine paper
producer in South Africa
e Paper for home and office printers
e Paper for professional digital and
analogue printing presses
Protector Bag
StripPouch
Other awards won by StripPouch
An easily sealable lightweight
‘envelope-like’ bag replacing
plastic packaging used for
shipping door consoles.
An innovative 100% recyclable
mono-material pouch that uses
70% less material than rigid plastic
bottles holding the same volume.
In addition to WorldStar, StripPouch also won various industry awards this year including: Kompack
Green Packaging Star Award, Sustainability category winner – German Packaging Award, and is a
Diamond Finalist in the 2019 Dow Packaging Innovation Awards.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 6
Where we operate
Global leader in
packaging and paper
Mondi employs around 26,000 people at 100
production sites across more than 30 countries,
with key operations located in Europe,
North America and Africa.
Western Europe
Employees
Production sites
7,300
Revenue by location of:
35
Production
Customer
38%
38%
Africa
Employees
1,800
Production sites
7
Revenue by location of:
Production
Customer
8%
9%
Revenue from customers in South America
represented 2% in 2019
Mondi Group Integrated report and financial statements 2019North AmericaEmployeesProduction sites1,70013Revenue by location of:ProductionCustomer7%10% Emerging Europe
Employees
Production sites
9,100
Revenue by location of:
32
Production
Customer
34%
22%
7
Russia
Employees
5,300
Production sites
4
Revenue by location of:
Production
Customer
12%
10%
Key
Corrugated Packaging
Mill
Converting plant
Flexible Packaging
Mill
Converting plant
Asia & Australia
Employees
700
Production sites
10
Revenue by location of:
Production
Customer
1%
9%
Group offices
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
United Kingdom
Oman
Poland
USA
Engineered Materials
Converting plant
Uncoated Fine Paper
Mill
Russia
Serbia
Slovakia
South Africa
South Korea
Spain
Sweden
Thailand
Turkey
Ukraine
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
8
About us
The Mondi Way
The Mondi Way shows how we link purpose, strategy
and culture to drive our business forward so that we
can create sustainable value today and into the future
for the benefit of our stakeholders.
When our people believe in what we are doing
and know how best to contribute, we can maximise
our potential and contribute to a better world.
p urpose
sustainable by design
We contribute to a better world
by making innovative, sustainable
packaging and paper solutions
The
Mondi
Way
grow, create,
Inspire. together
drive value accretive
growth, sustainably
Performance – Care – Integrity
We are passionate, entrepreneurial and empowered
We are respectful and look out for each other
We are honest, transparent and inclusive
We drive performance along the value chain
We invest in assets with cost advantage
We inspire our people
We partner with customers for innovation
c
u
lt
ure
strategy
Mondi Group Integrated report and financial statements 2019
9
Purpose
Strategy
Culture
This year we updated our purpose to reflect
our long-term focus on being sustainable by
design. There has never been a better time
for us to lead the industry in demonstrating
the value of responsibly managed forests in
tackling climate change, the role sustainable
fit-for-purpose packaging plays in reducing
waste, and the exciting opportunities
manufacturing can offer to the best young
talent. Together we really can contribute to
a better world.
Mondi’s strategy has a strong track record
of delivering value accretive growth through
the economic cycle. Sustainability has
always been central to how we operate, and
we have updated our strategic framework
to reflect this. Our four strategic value
drivers build on the competitive advantages
we enjoy today and set a clear roadmap
for investment and operational decisions
that create sustainable value today and in
the future.
Our business model
Page 16-17
Our strategy
Page 24-25
We celebrate our differences, while
understanding the important role culture
plays in connecting, guiding and inspiring
our people to achieve Mondi’s purpose.
Three values ‘Performance – Care –
Integrity’ underpin our culture, empowering
our people to be passionate and
entrepreneurial in a respectful and inclusive
way. A recent example is our new brand
look, which we co-created with colleagues
from around the world to convey the
passion, colour and creativity we experience
every day at Mondi.
Corporate governance report
Page 99
maximising
the potential
of our business
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 10
Letter from the Chair
Creating sustainable value
for our stakeholders
Safety remains our top priority and is a
focus area at every Board meeting. It is a
moral and a business imperative that we do
all we can to avoid harm to people working
for Mondi.
We are therefore deeply saddened that in
addition to the fatal injury at Ružomberok
(Slovakia) in January 2019, we experienced
a fatality in the second half of 2019 at our
Russian logging operation. We are also
deeply saddened that another fatality
occurred as a result of an incident during
demolition activities at our Syktyvkar
(Russia) mill in January 2020.
Our thoughts are with their families and
colleagues. Robust investigations have
been carried out to understand the events
involved and identify ways to prevent future
occurrences. We continue to 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 helps Mondi to build constructive
partnerships with stakeholders.
Our business model
Page 16-17
Sustainability performance
(including Non-financial
information statement)
Page 34-51
Engaging with our stakeholders
(including Section 172 statement)
Page 18-21
There is no generic template for long-term
success. Businesses that flourish when
times are good and show resilience in more
challenging markets know how to foster an
authentic culture that links to purpose and
strategy. At Mondi, we set out our approach
in a framework called The Mondi Way.
It shows how purpose, strategy and culture
can connect to drive our business forward in
a way that creates sustainable value into the
future for the benefit of our stakeholders.
The Mondi Way
Page 8-9
Considering our stakeholders
Mondi’s business model is built on
constructive relationships with stakeholders
and using resources responsibly. As a
Board we regularly discuss the impact our
business has on our stakeholders and the
wider environment. There has never been
a better time for us to lead the industry
in demonstrating the value of responsibly
managed forests in tackling climate change,
the role sustainable fit-for-purpose paper
and plastic packaging can play in reducing
waste, and the exciting opportunities
manufacturing can offer to the best
young talent.
We interact with a broad range of people
to better understand the requirements
of our stakeholders and the risks we
need to manage when making strategic
decisions. Acting with integrity and showing
consideration for others is fundamental to
how we think about Mondi’s future as a
leader in the packaging and paper industry.
We appreciate the trust our shareholders
place in us to generate industry-leading
returns while contributing to a better world.
This includes supporting local communities;
providing a safe, fair, diverse and inclusive
working environment; and helping
employees, customers and suppliers to
realise their full potential. Mondi’s success
relies on engaging with key stakeholders
in a meaningful way by finding the most
effective channels of communication,
focusing on the issues that are important
to people, and taking action to make
visible progress.
A culture of strong governance
Mondi’s Board commits to 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 and ensure an open-minded
approach to discussions, while keeping our
culture and values at the forefront when we
consider how best to achieve our strategy.
This allows us to balance our commitment to
achieving long-term shareholder value with
the diverse needs of all our stakeholders.
In 2019, we completed the Simplification of
Mondi’s dual listed company structure into
a single holding company structure under
Mondi plc. Since listing, Mondi has continued
to grow as a successful global player and the
Simplification was a natural step forward to
simplify cash and dividend flows, enhance
the Group’s strategic flexibility, increase
transparency and remove the complexity
associated with the dual listed structure.
We consider the composition of the
Board and length of service of individual
board members to ensure an appropriate
balance of capabilities, business experience,
independence and diversity. Fred Phaswana
retired as Joint Chair on 31 August having
seen through the Simplification of Mondi’s
corporate structure. I would like to reiterate our
thanks to Fred for his significant contribution to
the Mondi Group since his appointment in
2013 and wish him all the best for the future.
We were pleased to welcome Enoch
Godongwana to the Board as a non-
executive director, he brings significant
leadership experience and invaluable
knowledge of the South African
business environment.
“ There has never
been a better
time for us to lead
the industry in
demonstrating the
value of sustainable
fit-for-purpose
packaging.”
David Williams
Chair
Mondi Group Integrated report and financial statements 2019 11
As a Board we aim to amplify Mondi’s
ability to grow sustainably by building on
the Group’s inherent strengths to take
advantage of opportunities while mitigating
the impact of risks.
We are proud of the strong performance
we have delivered over an extended period.
Since listing in 2007, Mondi has achieved a
compound annual growth in basic underlying
earnings per share of 11%, and our current
return on capital employed is industry-leading.
We remain confident in the Group’s ability to
deliver long-term value to shareholders.
2019 was another successful year for Mondi,
particularly given the challenging macro
economic backdrop. Underlying EBITDA
was €1,658 million, with an underlying
EBITDA margin of 22.8%, operating profit
was up 2% to €1,221 million, and return on
capital employed was 19.8%. The Board
has recommended a final ordinary dividend
of 55.72 euro cents per share (2018: 54.55
euro cents per share). Together with the
interim ordinary dividend of 27.28 euro cents
per share, this amounts to a total ordinary
dividend for the year of 83.0 euro cents per
share, an increase of 9% from 2018.
We have a focused capital expenditure
project pipeline securing our future
growth, including major investments in
our Ružomberok, Štětí (Czech Republic),
Syktyvkar and Richards Bay (South Africa)
pulp and paper mills, which are
all progressing well.
We continue to use the Growing
Responsibly model to shape our long-term
response to sustainability. It covers 10 Action
Areas and includes 16 public commitments
running to the end of 2020, along with a
carbon emissions commitment that runs
to 2050. As a Board we are pleased with
the progress we made during 2019, and we
are committed to continue our efforts to
achieve our 2020 and longer-term targets.
There is however always more we can do
to play our part in securing the future of
our world. Work to refine our approach
beyond 2020 has already commenced,
including stakeholder consultation to ensure
that we build on our well-respected model
to demonstrate, monitor and improve our
sustainability performance across the
value chain.
Looking forward, we do not expect the
current political and market-related
uncertainties to abate in the near term.
However, with our strong balance sheet
and industry-leading margins, the Board
remains confident that Mondi will continue
to prosper and is well placed to take
advantage of any opportunities that
may arise.
With my intention to retire later this year,
it’s a good opportunity to reflect on my
time as Chair. I am certainly proud of what
we have achieved together at Mondi, and
more importantly, I have every confidence in
Mondi’s relevance and ability to prosper into
the future.
On behalf of the Board we thank everyone
who has given their time, energy and
expertise to contribute to Mondi’s
performance in 2019. We have every reason
to believe that together we will continue
delivering value to our stakeholders
alongside industry-leading returns into
the future.
David Williams
Chair
Strategic performance
Page 26-33
Sustainability performance
Page 34-51
Financial performance
Page 62-65
Total ordinary dividend per share
euro cents
83.0
euro
cents
832
76
62
57
52
2015
2016
20171
2018
2019
1
In addition to the 2017 ordinary dividend, a special dividend of
100 euro cents was paid in 2018
Based on proposed final ordinary dividend of 55.72 euro cents
2
per share
In January 2020, we announced the Board’s
agreement with Group CEO Peter Oswald
that he would step down as CEO and leave
the Group on 31 March 2020. Our sincere
thanks go to Peter for the immense
contribution he has made to the growth and
development of Mondi since joining in 1992.
We are extremely pleased that Andrew King,
Group CFO, has agreed to take over as
Group CEO from 1 April. Andrew has been
with the Group for more than 17 years,
playing a leading role in strategy formulation
and capital allocation decisions. We are
delighted to have someone of Andrew’s
calibre leading the Group and wish him all
the best in his new role.
Corporate governance report
Page 94-105
An industry-leading performance
Mondi’s strong track record of delivering
value accretive growth sustainably is thanks
to our diverse teams who have a real passion
for performance. This includes working with
customers to leverage our unique expertise
in developing packaging and paper products
that are sustainable by design.
Five-year total shareholder return (TSR) of 88%
(euro returns: indexed to 1 January 2015)
Mondi plc
Median of peer group
Peer performance range
x
e
d
n
I
n
r
u
t
e
R
350
300
250
200
150
100
50
0
Basic underlying earnings per share
euro cents
171.1
euro
cents
5-year CAG R1: 6%
189.1
171.1
133.7
137.8
148.9
1 Jan
2015
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
2015
2016
2017
2018
2019
1 Compound annual growth rate
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
12
A clear
Strategy
and business
model
Mondi Group Integrated report and financial statements 2019 What this means for employees…
A consistent strategy that prioritises
sustainability and investing in the
business gives our people the confidence
that Mondi is fit for the future and instils
a sense of pride that the work we each
do contributes to a better world.
13
strategic
Report
External context
Our business model
Engaging with our stakeholders
(including Section 172 statement)
Key performance indicators
14
16
18
22
Our strategy and strategic performance 24
Sustainability performance
Principal risks
Financial performance
Business reviews
Corrugated Packaging
Flexible Packaging
Engineered Materials
Uncoated Fine Paper
34
52
62
66
68
72
76
80
The Strategic report was approved by the Board
on 26 February 2020 and is signed on its behalf by:
David Williams
Chair
Andrew King
Group CFO
What this means for customers…
The depth and breadth of our business
model gives customers the confidence
to partner with us for innovation in
order to differentiate their products
in a competitive marketplace.
What this means for investors…
Mondi’s discipline in value-accretive
growth and focus on being sustainable
by design gives confidence to investors
that we are equipped to deliver industry-
leading returns to our shareholders.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
14
External context
Key themes shaping the packaging
industry and opportunities
We operate in a fast-paced world with diverse
and complex issues impacting our 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 in the packaging markets where
we operate, and partnering with others to find
long-term solutions for our stakeholders.
To learn more about our wider context,
take a look at our Sustainable Development
report 2019 website:
www.mondigroup.com/sd19
Anticipating and
responding in a
fast-paced
world
“ Mondi is well positioned
to succeed in a world
that is looking for
innovative, efficient and
sustainable packaging.”
Clara Valera
Group Head of Strategy and Investor Relations
Sustainability
Context and challenges
e Our society continues to face significant environmental
challenges. Climate change, degraded ecosystems, resource
scarcity, access to sustainable fibre, increasing waste and
pollution and the impact of plastic leakage on the environment
are key issues our industry needs to be addressing with urgency
e Consumer awareness around these challenges continues
to rise, requiring corporates to take decisive action and
fostering sustainability pledges by major FMCGs, retailers and
packaging players
e Sustainability-related legislation is increasing at a different scale
and pace across geographies, creating an increasingly complex
landscape to operate in
Opportunities
e Grow with our paper-based packaging solutions, which
are renewable and widely recyclable, offering a sustainable
packaging alternative
e Develop circular flexible plastic packaging, which is the most
resource efficient plastic-based packaging, with a focus on
increasing the use of recycled content and designing for recycling
e Collaborate with stakeholders along the value chain to find
innovative solutions and educate end-consumers about
sustainable choices
How we are responding
e Keeping sustainability core to our business, with sustainable
growth at the centre of our strategic framework and clear
sustainability performance targets across our Growing
Responsibly Action Areas
e Working with our customers to achieve their sustainability
goals, using our EcoSolutions approach to replace less
sustainable packaging; reduce raw material usage; and design
packaging ready to recycle
e Further lightweighting and right-sizing our packaging solutions
without compromising strength and functionality
e Working with partners such as Ellen MacArthur Foundation,
CEFLEX, CISL, CEPI’s 4evergreen and WWF to play a leading
role in finding tangible solutions and shape our approach
to sustainability
Context and challenges
Context and challenges
e Digitalisation continues to shape the world we live in, connecting
e Competition between brands and private labels, together with
billions of people every day, with information generated and
the convergence of offline and online retail channels, make it
distributed at unprecedented speed and scale
important for products to stand out on shelves and screens
e Traditional retail channels are being disrupted and new platforms
e Urbanisation, migration and an ageing population continue to
are emerging
reshape consumer lifestyles and purchasing decisions
e More frequent purchases and faster deliveries are adding
e Busy consumers are looking for convenience, more personalised
complexity to supply chains, requiring increased efficiency
products and services, and sustainable packaging pre- and
and transparency
post-consumption
e Consumers are ever more informed, price-savvy and time-
e Younger consumers want to buy brands whose purpose aligns
pressured – expecting value, convenience and experience from
with their own values
their online purchases
e Packaging needs to protect products through a ‘frustration free’
journey from manufacturing to consumption
Opportunities
Opportunities
e Serve the growing e-commerce sector with fit-for-purpose
e Help our customers stand out from the crowd, convey their
sustainable packaging solutions
e Benefit from automation and digitalisation with improvements in
our manufacturing processes and cost structures and increasing
printing capabilities
brand purpose and meet their sustainability commitments
with our sustainable materials and innovative converting and
efficiencies along the value chain
e Leverage data analytics to gain in-depth customer and end-
consumer understanding, enabling us to help our customers offer
more tailored shopping experiences
e Promote the value of greater traceability in our supply chain with
a focus on raw material sourcing, especially fibre
e Work with our customers to stay competitive, simplifying
their processes and reducing costs while enhancing shelf-
attractiveness and product performance with our range of
packaging solutions and services
e Grow with our customers and create fit-for-purpose packaging
that prioritises functionality and creates a seamless consumer
experience across channels
How we are responding
How we are responding
e Investing in digital technologies as an accelerator, with
e Creating innovative packaging solutions that portray
advanced analytics, automation and robotics driving efficiency
our customers’ brand values and differentiate them
and quality, and digital platforms helping us to connect with
across channels
customers and employees in an agile way
e Fostering transparency along the value chain through active
e Using our EcoSolutions approach to support our customers so
they achieve their sustainability goals by transitioning to more
engagement with key stakeholders
sustainable packaging solutions
e Continuing to develop the right packaging solutions for our
e Leveraging our six R&D centres, unique cross-functional packaging
e-commerce customers, offering a multi-channel customer
development expertise, and strong customer relationships
experience, reducing costs and optimising the amount
to become the go-to supplier for sustainable packaging
of packaging
e Investing in enhancing the capacity and capabilities of our
Corrugated Packaging and Flexible Packaging businesses
to broaden our capabilities and grow with our customers
Strategic
performance
Page 26-33
Sustainability
performance
Page 34-51
EcoSolutions
case study
Page 32
Sustainable
Development report
www.mondigroup.com/sd19
Strategic
performance
Page 26-33
Business reviews
Page 66-83
Strategic
performance
Page 26-33
Business reviews
Page 66-83
Sustainability
performance
Page 34-51
Mondi Group Integrated report and financial statements 2019 15
Context and challenges
e Our society continues to face significant environmental
challenges. Climate change, degraded ecosystems, resource
scarcity, access to sustainable fibre, increasing waste and
pollution and the impact of plastic leakage on the environment
are key issues our industry needs to be addressing with urgency
e Consumer awareness around these challenges continues
to rise, requiring corporates to take decisive action and
fostering sustainability pledges by major FMCGs, retailers and
packaging players
e Sustainability-related legislation is increasing at a different scale
and pace across geographies, creating an increasingly complex
landscape to operate in
Opportunities
e Grow with our paper-based packaging solutions, which
are renewable and widely recyclable, offering a sustainable
packaging alternative
e Develop circular flexible plastic packaging, which is the most
resource efficient plastic-based packaging, with a focus on
increasing the use of recycled content and designing for recycling
e Collaborate with stakeholders along the value chain to find
innovative solutions and educate end-consumers about
sustainable choices
How we are responding
e Keeping sustainability core to our business, with sustainable
growth at the centre of our strategic framework and clear
sustainability performance targets across our Growing
Responsibly Action Areas
e Working with our customers to achieve their sustainability
goals, using our EcoSolutions approach to replace less
sustainable packaging; reduce raw material usage; and design
packaging ready to recycle
e Further lightweighting and right-sizing our packaging solutions
without compromising strength and functionality
e Working with partners such as Ellen MacArthur Foundation,
CEFLEX, CISL, CEPI’s 4evergreen and WWF to play a leading
role in finding tangible solutions and shape our approach
to sustainability
Digitalisation and interconnectivity
Enhancing our customers’ brand value
Context and challenges
e Digitalisation continues to shape the world we live in, connecting
billions of people every day, with information generated and
distributed at unprecedented speed and scale
e Traditional retail channels are being disrupted and new platforms
are emerging
Context and challenges
e Competition between brands and private labels, together with
the convergence of offline and online retail channels, make it
important for products to stand out on shelves and screens
e Urbanisation, migration and an ageing population continue to
reshape consumer lifestyles and purchasing decisions
e More frequent purchases and faster deliveries are adding
complexity to supply chains, requiring increased efficiency
and transparency
e Busy consumers are looking for convenience, more personalised
products and services, and sustainable packaging pre- and
post-consumption
e Consumers are ever more informed, price-savvy and time-
e Younger consumers want to buy brands whose purpose aligns
pressured – expecting value, convenience and experience from
their online purchases
Opportunities
e Serve the growing e-commerce sector with fit-for-purpose
sustainable packaging solutions
e Benefit from automation and digitalisation with improvements in
our manufacturing processes and cost structures and increasing
efficiencies along the value chain
e Leverage data analytics to gain in-depth customer and end-
consumer understanding, enabling us to help our customers offer
more tailored shopping experiences
e Promote the value of greater traceability in our supply chain with
a focus on raw material sourcing, especially fibre
How we are responding
e Investing in digital technologies as an accelerator, with
advanced analytics, automation and robotics driving efficiency
and quality, and digital platforms helping us to connect with
customers and employees in an agile way
e Fostering transparency along the value chain through active
engagement with key stakeholders
e Continuing to develop the right packaging solutions for our
e-commerce customers, offering a multi-channel customer
experience, reducing costs and optimising the amount
of packaging
with their own values
e Packaging needs to protect products through a ‘frustration free’
journey from manufacturing to consumption
Opportunities
e Help our customers stand out from the crowd, convey their
brand purpose and meet their sustainability commitments
with our sustainable materials and innovative converting and
printing capabilities
e Work with our customers to stay competitive, simplifying
their processes and reducing costs while enhancing shelf-
attractiveness and product performance with our range of
packaging solutions and services
e Grow with our customers and create fit-for-purpose packaging
that prioritises functionality and creates a seamless consumer
experience across channels
How we are responding
e Creating innovative packaging solutions that portray
our customers’ brand values and differentiate them
across channels
e Using our EcoSolutions approach to support our customers so
they achieve their sustainability goals by transitioning to more
sustainable packaging solutions
e Leveraging our six R&D centres, unique cross-functional packaging
development expertise, and strong customer relationships
to become the go-to supplier for sustainable packaging
e Investing in enhancing the capacity and capabilities of our
Corrugated Packaging and Flexible Packaging businesses
to broaden our capabilities and grow with our customers
Strategic
performance
Page 26-33
Sustainability
performance
Page 34-51
EcoSolutions
Sustainable
case study
Page 32
Development report
www.mondigroup.com/sd19
Strategic
performance
Page 26-33
Business reviews
Page 66-83
Strategic
performance
Page 26-33
Business reviews
Page 66-83
Sustainability
performance
Page 34-51
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 16
Our business model
How we create
and protect value
Our integrated business model provides us distinct
competitive advantages, using our key resources and
relationships to convert raw materials into innovative
and sustainable packaging and paper solutions for
our customers.
Our strategy
Page 24-25
Our business model is grounded by our culture and
values and driven by our purpose and strategy to
create sustainable value today and into the future for
the benefit of our stakeholders. See how it all connects
in the Mondi Way.
The Mondi Way
Page 8-9
The
Mondi
Way
Competitive advantages of our integrated business model:
e Leading producer of paper and plastic solutions and uniquely positioned to meet sustainable packaging requirements
e Leading market positions providing scale and ability to innovate with our customers and service key accounts
e Well-located operations with access to competitive fibre and a high-quality, well-invested, cost-advantaged asset base
Our key resources
and relationships
Our integrated
value chain
High-quality, well-invested,
cost-advantaged integrated assets
80%
pulp & paper capacity in
two lowest cost quartiles
€6.6bn
capital employed
Collaboration with customers
and suppliers
9,000
customers
2,000
key suppliers
Responsible procurement
of raw materials
100%
sustainably sourced
fibre (certified or
controlled wood)
64%
mill fuel consumption
from biomass-based
renewable sources
Diverse and talented people
25,900
employees
21%
women employed across
our operations
Strong financial position
and cash flow generation
€1,215m
cash flow generated
BBB+/Baa1
S&P/Moody’s
credit ratings
Community and non-profit engagement
Numerous
86%
strategic partnerships
and memberships
of mills & forestry
operations completed
a SEAT assessment
to date
Forests and raw materials
Pulp and paper mills
Our manufacturing processes require
access to natural resources, most notably
water and energy, and raw materials, such
as wood, paper for recycling, chemicals
and polymers. Fibre is a key input in our
pulp and paper production, which we
source in a sustainable way from our 100%
certified managed forests or externally
from either certified sources (72%) or
forests that meet minimum Controlled
Wood requirements (28%), in line with
industry best practice.
We operate vertically integrated pulp and
paper mills producing pulp, packaging
papers and uncoated fine paper. We have
a high degree of electricity self-sufficiency
in our operations and a high share of our
mill fuel consumption comes from biomass-
based renewable sources.
Our operations produce more pulp than
we need which we sell externally. Our broad
range of containerboard and kraft paper
packaging grades are used by our
converting operations, with the remainder
sold to other customers. Our range of
uncoated fine paper includes office and
professional printing paper.
Resins, films and
other raw materials
Wood
(internal and external)
Paper for recycling
Pulp and paper mills
Mondi Group Integrated report and financial statements 2019
17
Managing our risks
Successfully managing our risks and appropriately
setting our risk appetite is critical to ensuring we
continue to generate long-term value.
Principal risks
Page 52-61
e Vertical integration reducing exposure to price volatility, providing security of supply and production and logistics optimisation
e Focus on excellence and driving performance along the whole value chain
e Disciplined capital allocation and robust financial position providing strategic flexibility
Our integrated value chain
Page 66-67
Our key
outputs
Converting operations
Supporting a circular economy
We convert packaging paper (sourced
internally and externally), together with
other raw materials into corrugated solutions,
flexible packaging products (both paper
and plastic-based), and speciality products
for a wide range of consumer and industrial
end-uses.
We collaborate and jointly create high-quality,
innovative, sustainable packaging and paper
solutions, by leveraging our R&D centres and
innovation capabilities across the value chain.
Fibre is a renewable, recyclable and
biodegradable resource. In addition to
virgin fibre, we also use paper for recycling
to produce containerboard which reduces
waste and supports the circular economy.
Our consumer flexible packaging operations
and Engineered Materials business use resins,
films and other raw materials as part of the
production process. Mondi is collaborating
with stakeholders across the value chain to
innovate and develop sustainable solutions
that are designed for recycling and include
an increased proportion of recycled content.
Converting operations
Packaging
and paper solutions
Recycling
High-performing operations
19.8%
ROCE
7
production records on
pulp/paper machines
Innovative products and solutions
€25m
spent on research
and development
5
WorldStar Packaging
awards (2020)
Sustainably managed natural
resources and outputs
100%
mills certified to Chain-
of-Custody standards
15.5%
reduction in specific
CO2e emissions
since 2014
Inspired and skilled people
31
average annual training
hours per employee
22%
reduction in total
recordable case rate
since 2015
Capital appreciation
and dividends to shareholders
9%
increase in ordinary
dividend per share
88%
five-year total
shareholder return
Support to regional economies
and local communities
€248m
direct taxes paid
€13m
community investments
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 18
Engaging with our stakeholders
Maintaining and nurturing
our key relationships
Our business does not operate in isolation. Our success relies on our ability
to understand and engage constructively with our key stakeholders.
Our employees
Our customers
Why we engage
Evolving consumer preferences and
increasing demands on our products
require close cooperation with
our customers to understand their
needs and anticipate market trends.
Our engagement helps us to prioritise
long-term success for our business
and our customers by providing an
opportunity to develop innovative
sustainable solutions, improve our
customer service and enhance
product quality.
How we engage
e Key account manager relationships
e Digital customer interfaces
e Collaboration on product innovation
e Customer and industry events
and exhibitions
e Questionnaires
e Regular customer satisfaction surveys
e Ongoing conversations
Our suppliers
and contractors
Why we engage
We partner with our suppliers to find
sustainable ways of using resources as
efficiently as possible. We work together
to find solutions to the social and
environmental challenges we collectively
face across the value chain, encouraging
supply chain transparency and promoting
fair working conditions. We work closely
with our contractors to mitigate risks and
improve practices ensuring they follow
Mondi policies in areas such as safety,
transparency and business ethics.
How we engage
e Regular compliance and risk
assessments of key suppliers
e Strategic supplier partnerships
e Discussions on credible certification
systems to secure sustainable fibre
e Meetings and workshops to develop
common approaches based on
shared values
Why we engage
Our people make Mondi. By engaging
with our employees and creating positive
experiences for them, we shape our
culture and live our values. We foster open
dialogue to provide an opportunity to
identify and resolve challenges together, as
well as identify and support development
initiatives so that our employees are
prepared to drive our business forward.
How we engage
e Regular group-wide employee surveys
e Group-wide intranet (planetmondi)
and other electronic communication
e Performance and development
reviews at regular intervals
e Internal conferences such as European
Communication Forum, Leadership
Forums, Virtual Employee Meetings
e Employee training programmes
and workshops
e Day-to-day team interaction and
recognition schemes like You Make Mondi
e Mondi Diamond Awards to recognise
outstanding projects
e Annual Make a Difference Day
Key issues discussed
e Strategic direction and performance
e Diversity and Inclusion
e Employee experience
e Development and training opportunities
e Effective grievance mechanisms
e Safety, health and fair working conditions
Key issues discussed
e Sustainable packaging and
paper solutions
e Product innovation
e Quality and service
e Responsible sourcing along
the supply chain
Key issues discussed
e Local procurement and
resource support
e Safety, health and fair
working conditions
e Responsible sourcing along
the supply chain
Key issues discussed
Key issues discussed
e Employment and enterprise support
e Strategy and financial performance
e Community health and impacts
on the environment
and market dynamics
e Local infrastructure investment
e Capital allocation
e Sustainability priorities and actions
e Governance and remuneration
e Fibre sourcing, water stewardship
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Employee and contractor safety and health
Page 37-38
A skilled and committed workforce
Page 39-40
Fairness and diversity in the workplace
Page 40-41
Supplier conduct and responsible
procurement
Page 48
Solutions that create value for our customers
Page 51
Employee and contractor safety and health
Page 37-38
Fairness and diversity in the workplace
Page 40-41
Sustainable fibre
Page 42-43
Supplier conduct and responsible procurement
Page 48
Climate change
Page 43-44
Constrained resources
and environmental impacts
Page 45-46
Biodiversity and ecosystems
Page 46-47
Relationships with communities
Page 49-50
Sustainability performance
Page 34-51
Strategic performance
Page 26-33
Financial performance
Page 62-65
Corporate governance report
Page 100-103
Sustainable fibre
Page 42-43
Climate change
Page 43-44
Constrained resources
and environmental impacts
Page 45-46
Biodiversity and ecosystems
Page 46-47
Our communities
Our investors
Why we engage
Our businesses are more likely to
succeed when they are part of healthy,
prosperous and dynamic communities.
Ongoing and transparent dialogue
with local communities enables us to
collaboratively address challenges,
Why we engage
We actively and regularly engage with
our investors and analysts and use the
feedback to inform our management
and reporting practices. Our relationship
with debt investors and banks as key
providers of capital to the Group,
understand and manage risks, generate
together with credit rating agencies,
employment and business opportunities,
ensures we have access to funding for
improve performance and build trust.
We invest directly in the communities
where we operate, supporting
health, education, local enterprise
and infrastructure.
How we engage
(SEAT) process
e Socio-economic Assessment Toolbox
e Community Engagement Plans (CEPs)
e Open days and visits to our sites
e Partnering with communities
and other stakeholders on
development initiatives
investment opportunities through the
business cycle.
How we engage
e Annual General Meetings
e Events including results presentations,
trading update calls, site visits and
capital markets days
e Roadshows, telephone calls and
other meetings
e Integrated and Sustainable
Development reports
e Questionnaires and ad hoc questions
and requests
investors such as CDP
e Investor perception studies
e Independent disclosure platforms for
Paper Industries
Partners, governments
and regulators
Why we engage
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.
Among others, we engage with:
e WWF
e Ellen MacArthur Foundation
e The Cambridge Institute for
Sustainability Leadership
e The United Nations Global Compact
e World Business Council for
Sustainable Development
e Confederation of European
e Circular Economy for Flexible Packaging
e CEPI 4evergreen
e TCFD Preparer Forum
Key issues discussed
e Climate change and
circular economy
and biodiversity
e Regulatory compliance
e Support for research programmes
Mondi Group Integrated report and financial statements 2019
Our employees
Our customers
Our communities
Our investors
Our suppliers
and contractors
Why we engage
Our businesses are more likely to
succeed when they are part of healthy,
prosperous and dynamic communities.
Ongoing and transparent dialogue
with local communities enables us to
collaboratively address challenges,
understand and manage risks, generate
employment and business opportunities,
improve performance and build trust.
We invest directly in the communities
where we operate, supporting
health, education, local enterprise
and infrastructure.
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
Why we engage
We actively and regularly engage with
our investors and analysts and use the
feedback to inform 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.
How we engage
e Annual General Meetings
e Events including results presentations,
trading update calls, site visits and
capital markets days
e Roadshows, telephone calls and
other meetings
e Integrated and Sustainable
Development reports
e Questionnaires and ad hoc questions
and requests
19
Partners, governments
and regulators
Why we engage
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.
Among others, we engage with:
e WWF
e Ellen MacArthur Foundation
e The Cambridge Institute for
Sustainability Leadership
e The United Nations Global Compact
e World Business Council for
Sustainable Development
e Confederation of European
e Independent disclosure platforms for
Paper Industries
investors such as CDP
e Investor perception studies
Key issues discussed
e Employment and enterprise support
e Community health and impacts
on the environment
e Local infrastructure investment
Key issues discussed
e Strategy and financial performance
and market dynamics
e Governance and remuneration
e Capital allocation
e Sustainability priorities and actions
e Circular Economy for Flexible Packaging
e CEPI 4evergreen
e TCFD Preparer Forum
Key issues discussed
e Climate change and
circular economy
e Fibre sourcing, water stewardship
and biodiversity
e Regulatory compliance
e Support for research programmes
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Read more about how we engaged in 2019
Employee and contractor safety and health
Supplier conduct and responsible
Employee and contractor safety and health
Page 37-38
Page 39-40
Page 40-41
A skilled and committed workforce
Fairness and diversity in the workplace
procurement
Page 48
Page 51
Solutions that create value for our customers
Page 40-41
Page 37-38
Fairness and diversity in the workplace
Sustainable fibre
Page 42-43
Supplier conduct and responsible procurement
Page 48
Climate change
Page 43-44
Constrained resources
and environmental impacts
Page 45-46
Biodiversity and ecosystems
Page 46-47
Relationships with communities
Page 49-50
Sustainability performance
Page 34-51
Strategic performance
Page 26-33
Financial performance
Page 62-65
Corporate governance report
Page 100-103
Sustainable fibre
Page 42-43
Climate change
Page 43-44
Constrained resources
and environmental impacts
Page 45-46
Biodiversity and ecosystems
Page 46-47
Why we engage
Our people make Mondi. By engaging
with our employees and creating positive
experiences for them, we shape our
Why we engage
Evolving consumer preferences and
increasing demands on our products
require close cooperation with
Why we engage
We partner with our suppliers to find
sustainable ways of using resources as
efficiently as possible. We work together
culture and live our values. We foster open
our customers to understand their
to find solutions to the social and
dialogue to provide an opportunity to
needs and anticipate market trends.
identify and resolve challenges together, as
Our engagement helps us to prioritise
long-term success for our business
and our customers by providing an
opportunity to develop innovative
sustainable solutions, improve our
customer service and enhance
product quality.
How we engage
e Key account manager relationships
e Digital customer interfaces
e Collaboration on product innovation
e Customer and industry events
and exhibitions
e Questionnaires
e Regular customer satisfaction surveys
e Ongoing conversations
environmental challenges we collectively
face across the value chain, encouraging
supply chain transparency and promoting
fair working conditions. We work closely
with our contractors to mitigate risks and
improve practices ensuring they follow
Mondi policies in areas such as safety,
transparency and business ethics.
How we engage
e Regular compliance and risk
assessments of key suppliers
e Strategic supplier partnerships
e Discussions on credible certification
systems to secure sustainable fibre
e Meetings and workshops to develop
common approaches based on
shared values
well as identify and support development
initiatives so that our employees are
prepared to drive our business forward.
How we engage
e Regular group-wide employee surveys
e Group-wide intranet (planetmondi)
and other electronic communication
e Performance and development
reviews at regular intervals
e Internal conferences such as European
Communication Forum, Leadership
Forums, Virtual Employee Meetings
e Employee training programmes
and workshops
e Day-to-day team interaction and
recognition schemes like You Make Mondi
e Mondi Diamond Awards to recognise
outstanding projects
e Annual Make a Difference Day
Key issues discussed
e Strategic direction and performance
Key issues discussed
e Sustainable packaging and
e Diversity and Inclusion
e Employee experience
e Development and training opportunities
e Effective grievance mechanisms
e Safety, health and fair working conditions
paper solutions
e Product innovation
e Quality and service
e Responsible sourcing along
the supply chain
Key issues discussed
e Local procurement and
resource support
e Safety, health and fair
working conditions
e Responsible sourcing along
the supply chain
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
How stakeholder views have shaped
our capital expenditure decisions
Štětí machine conversion (Czech Republic)
Growing consumer preferences for a more sustainable
carrier bag solution, and increasing single use plastic bag
legislation to reduce or eliminate waste have driven increased
demand for our speciality kraft paper. We are therefore
converting a containerboard machine at our cost-advantaged
flagship kraft paper site 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.
Board consideration of stakeholder input
When evaluating this investment, the Board considered a
number of our key stakeholders including our customers,
regulators and local government. Customer insights are
important so that we can collaboratively address the fast
growing needs for sustainable paper-based shopping bag
solutions and how Mondi can fulfil these requirements.
We talked to customers to understand their needs and
end-consumer demands at numerous meetings and at our
‘Let’s paper the world’ event, the first European shopping
bag summit bringing together leading converters, suppliers
and customers.
The decision to proceed was also influenced by anticipated
changes in environmental legislation designed to reduce
the use of plastic bags and the views of key retailers around
their commitments towards eliminating plastic bags.
20
Engaging with our stakeholders
Making informed decisions
This section serves as our Section 172
statement in compliance with the Companies
Act 2006. Section 172 of the Companies
Act requires the directors to have regard
to the interests of our wider stakeholders
when making key decisions across a range
of areas. The interests of our stakeholders
and our desire to ensure we act fairly, with
a reputation for high standards of business
conduct, and the long-term consequences
of the decisions we take, underpin the
way in which we operate. This statement,
together with the sections of the Integrated
report referred to, explains how our
Board meets this requirement and also
how stakeholder engagement influences
decision making across the Group.
While we have a significant number of stakeholders,
the Board determines those it believes are most
relevant to Mondi as set out in this section. This includes
an overview of how we engage, and the issues that
stakeholders consider to be important. There is also
a more comprehensive Stakeholder engagement
matrix in our 2019 Sustainable Development report.
The list of key stakeholders is reviewed by the Board
at least annually.
Sustainable Development report
www.mondigroup.com/sd19
The Board ensures that strategic and operational
decisions consider the needs of our key stakeholders
and align with Mondi’s culture and values. It’s important
that the Board remains, on an ongoing basis and in
relation to specific matters, mindful of the views of our
key stakeholders and that it has the right information
to understand the impact of potential decisions. This is
done via a range of formal and informal processes,
ensuring that discussions on the impact of decisions on
key stakeholders form part of decision documentation.
Going forward the Board will continue to build on
this approach, particularly bringing more structure
to how stakeholder feedback is communicated.
You can find more detailed information about how the
Board engages with and establishes the views of our
stakeholders in the governance report (page 100-103).
The Board’s approach to considering stakeholder
feedback is illustrated in the way it evaluates major
capital expenditure projects, which is one of the key
strategic areas of consideration for the Board during
the year. Stakeholder input and feedback is therefore
critical in the review and decision-making process.
The following examples show practical ways in which
the interests of our stakeholders are raised and how
their needs inform our plans.
Mondi Group Integrated report and financial statements 2019 How stakeholder views have shaped
our capital expenditure decisions
21
Świecie standby power boilers (Poland)
We are investing in our Świecie mill to replace two coal
boilers with new standby power boilers. The mill is a major
regional employer, providing employment to more than 1,200
people and indirectly supporting the livelihoods of many
more local suppliers and contractors. Once commissioned,
we have the potential to eliminate coal as a fuel source at this
site thereby reducing greenhouse gas emissions.
Board consideration of stakeholder input
A broad range of stakeholder views were taken into
consideration when evaluating this investment, including
regulatory requirements and government interests, along
with local community impacts. As part of the 2019 Socio-
economic Assessment Toolbox (SEAT) process at Świecie,
all key stakeholder groups were consulted on how they see
Mondi. The results of focus group meetings, which included
employees; suppliers and contractors; trade unions; local
authorities; communities; and NGOs, enable the Board
to better understand where our impacts lie and what our
stakeholders expect now and in the long term.
Read more about SEAT assessments
Sustainable Development report
www.mondigroup.com/sd19
The Board’s decision to approve the project supports
Mondi’s aim of contributing to a better world as the new
boilers will further reduce greenhouse gas emissions and
increase overall resource efficiency by minimising mill
downtime in the event of a shutdown of the primary boilers.
Enabling the mill to meet new local emissions requirements
was also a key factor in the Board’s decision-making.
Richards Bay mill modernisation (South Africa)
We are modernising our Richards Bay mill to improve
reliability and avoid unplanned shutdowns. Our aim is to
sustain the mill into the future, while securing employment
in the region and improving its environmental performance,
including reducing emissions and related impact on the
local community.
Board consideration of stakeholder input
The interests of almost all of our key stakeholder groups
were relevant to the Board, with the most significant being
our employees and the local community. The decision to
proceed was influenced by the positive impact the project
is expected to have on the local community, increasing
employment during the period and permanently lowering
emissions. The Board also looked at how the investment
would benefit our 1,400 employees in South Africa by
enhancing safety and efficiency, and extending the life of
the mill.
In the lead up to the decision, the Board had detailed
discussions around the reliability of the mill and its ability
to meet environmental requirements into the future.
All significant modernisation projects involve environmental
impact assessments ensuring that the views of local
associations are heard. Mondi South Africa’s CEO also
presented the wider South African business, providing
useful context for the Board’s deliberations.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
22
Key performance indicators
Tracking our performance
Our KPIs provide a broad measure
of Mondi’s strategic performance.
Using KPIs to measure the success of our strategy
Aligning KPIs to remuneration
Our strategy is to deliver value accretive growth, sustainably. This is
underpinned by four strategic value drivers which build on the
competitive advantages we enjoy today and set a clear roadmap for
investment and operational decisions into the future. We use KPIs
to provide a measure of Mondi’s strategic performance and value
creation. We set individual targets for each of our business units in
support of these Group KPIs.
Our strategy
Page 24-25
Return on capital employed (ROCE)
% (12-month trailing)
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 119-143
ROCE
Current estimated pre-tax weighted average cost of capital
Why this is a KPI
23.6
20.5
20.3
19.3
19.8
ROCE provides a measure of the
efficient and effective use of capital
in our operations.
2019 performance
ROCE of 19.8% reflects an industry-
leading performance.
We compare ROCE to our current
estimated Group pre-tax weighted average
cost of capital to measure the value
we create.
10.5
2015
2016
2017
2018
2019
Total shareholder return (TSR)1
%
Mondi plc
Median of peer group
1-year
20%
3-year
23%
5-year
88%
1 Based on 31 December value
Underlying EBITDA
€ million
Underlying EBITDA margin
Why this is a KPI
2019 performance
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.
Mondi realised a five-year TSR of 88% and
recommended a total ordinary dividend of
83.0 euro cents per share.
Why this is a KPI
2019 performance
5-year CAGR1: 6%
1,764
1,658
1,325
1,366
1,482
Underlying EBITDA provides a measure of
the cash generating ability of the Group that
is comparable from year to year.
%
4
9
1
.
%
5
0
2
.
%
9
0
2
.
%
6
3
2
.
%
8
2
2
.
Tracking our cash generation is one of the
components we measure when we assess
our value creation through the cycle.
Underlying EBITDA of €1,658 million
represents a 6% year-on-year decrease,
with a five-year CAGR of 6%. In 2019, we
delivered an industry-leading underlying
EBITDA margin of 22.8%.
2015
2016
2017
2018
2019
1 Compound annual growth rate
Mondi Group Integrated report and financial statements 2019 23
Total recordable case rate (TRCR)
per 200,000 hours worked
0.76
0.69
0.68
0.68
0.59
2015
(baseline)
2016
2017
20181
20191
1 The recent acquisitions completed in 2018 (Powerflute and Egyptian
paper bag plants) are excluded
Total specific CO2e emissions1
tonnes per tonne of saleable production
0.83
0.76
0.72
0.72
0.71
2015
2016
2017
2018
2019
1 From our pulp and paper mills
Sustainable fibre supply
% FSC- or PEFC-certified wood procured
Wood (Internal and external)
66
67
71
71
72
2015
2016
2017
2018
2019
Investment grade credit rating
Why this is a KPI
2019 performance
The safety and health of all our employees
and contractors is of paramount
importance. We are embedding a 24-hour
safety mindset to help us reach our goal of
sending everybody home safely in support
of our strategy to grow in a sustainable way.
Our overall TRCR has improved by 22%
against the 2015 baseline (and 13% against
2018) but we were deeply saddened by the
two fatalities and two life-altering injuries
during the year.
Why this is a KPI
2019 performance
We continually focus on making our
business less carbon intensive to address
climate change-related impacts and secure
the long-term success of our business.
We have committed to reducing our
specific CO2e emissions by 2050 against
our 2014 baseline through our science-
based target.
To date, we have reduced our specific
CO2e emissions by 15.5% against our
2014 baseline. In 2019, our science-based
greenhouse gas reduction targets were
approved by the Science Based Targets
initiative in which we committed to reduce
our specific emissions 34% by 2025 and
72% by 2050, against our 2014 baseline.
Why this is a KPI
2019 performance
Securing sustainable fibre for our products
is critical for our long-term success. We only
source our wood from responsible sources,
and are committed to maintaining our 100%
FSC-certified forests and procuring at least
70% of our wood from FSC- or PEFC-
certified sources by 2020.
100% of our managed forests remained
FSC-certified, and 72% of the wood we
procured was FSC- or PEFC-certified
(with the remainder meeting minimum
Controlled Wood standards), exceeding
our 2020 commitment.
Standard & Poor’s
Non-investment grade
Moody’s Investors Service
Investment grade
Why this is a KPI
2019 performance
We aim to maintain investment grade credit
ratings to ensure we have access to funding
for value accretive investment opportunities
through the business cycle.
Our investment grade credit ratings were
reaffirmed during the year – Standard &
Poor’s BBB+ (stable outlook) and Moody’s
Investors Service Baa1 (stable outlook).
BBB+
BBB
BBB-
BB+
BB
BB-
Dec
2014
May
2015
Sep
2017
Apr
2018
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3
Dec
2019
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 24
Our strategy
Strategic framework
Mondi’s strategy is to deliver value accretive growth sustainably through
our four strategic value drivers. Sustainability has always been central to
how we operate, and we have updated our framework to emphasise this.
Our strategic approach allows us to build on the competitive advantages
we enjoy today, and sets a clear roadmap for our investment and
operational decisions so that we can continue creating value in a
sustainable way into the future. All strategic value drivers are important,
while priority levels differ across the value chain. We also incorporate
digital initiatives across our four drivers to accelerate our value creation.
“Sustainability is at the centre of
our strategy, and we see digitalisation
accelerating our value creation.”
Andrew King
Group CFO and Group CEO designate
Our disciplined strategic approach, while retaining flexibility around how we execute on 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 a focus on assets and markets that
offer us inherent advantages, and products that are core to our portfolio or bring related
development opportunities.
Prioritising growth in our packaging businesses
We are actively working with our customers and other stakeholders to develop innovative
and sustainable packaging solutions that are fit for purpose with our customer-centric,
EcoSolutions, approach. To further support this ongoing growth in packaging, we plan to
continue to pursue value-enhancing capital investments and acquisitions that build on our
competitive advantages and enable us to better serve our customers.
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.
Delivering value accretive
growth sustainably
Sustainability lies at the centre of
our strategy to drive value accretive
growth. We believe that being part
of the solution to global sustainability
challenges will secure the long-term
success of our business and benefit our
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 and tackle the
complex global challenges that no one
organisation can solve in isolation.
Our Growing Responsibly model is the
framework through which we respond
to opportunities to address sustainability
and societal challenges, especially by
contributing to the UN Sustainable
Development Goals and other global
initiatives. It enables us to demonstrate,
monitor and improve our sustainability
performance across the value chain.
The model comprises 10 Action Areas
which reflect the aspects of sustainability
that are most relevant for us and our
stakeholders. Within these Action Areas
we have made 16 public commitments
running to the end of 2020. In addition,
we have updated our science-based
climate commitment in line with the Paris
agreement to keep global temperature
rise below 2°C. As we come to the
end of our current sustainability
commitment period, we are working on
our post-2020 commitments to build
on our achievements and enable our
future success.
Collaborative relationships and partnerships
are key. It is only by working together that
we will achieve the impact, innovation and
scale necessary to bring about positive
change beyond our own boundaries.
Priorities in the medium term
e Deliver on our 2020 commitments as set out
in our Growing Responsibly model and focus
on developing plans to achieve our science-
based targets
e Develop our post-2020 commitments to
build on our achievements and enable our
future success
Related risks and mitigation
5 9 10 11 12 13 14 15
Principal risks
Page 52-61
Mondi Group Integrated report and financial statements 2019 25
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. 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.
Invest in assets
with cost advantage
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, 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.
Priorities in the medium term
e Continuous improvement
initiatives to enhance
productivity, efficiency and
reduce costs
Related risks and mitigation
e Focus on procurement savings,
commercial excellence
programmes, quality
management systems and
digitalisation initiatives
Priorities in the medium term
e Continue to evaluate value
enhancing organic and inorganic
investment opportunities
e On time and on budget
execution of capital
investment programme
Related risks and mitigation
1
3 5 9 10 11 16
Principal risks
Page 52-61
1
2 3 4 5 10 11
Principal risks
Page 52-61
Inspire our people
Ensuring the safety of our people always comes first. Our employees and
contractors work in potentially hazardous environments. We embed clearly
defined methodologies, procedures and robust controls to ensure they, and
other people who have reason to be on Mondi sites, stay safe. Above all we
look to develop a safety mindset across the Group.
We engage with our people to nurture their commitment to a business which
they feel has purpose, acts responsibly, and offers a range of development
opportunities to help them grow. The Mondi Way sets out our culture and
values and helps to connect them with our purpose and strategy. Creating an
inclusive environment that fosters and respects diversity is vital to our success,
and improves our competitive advantage in becoming an employer of choice.
Enhancing the skills of our employees is a key part of developing an agile and
motivated workforce that is capable of delivering our strategy and driving
success in a sustainable way. Personal development and training supports
employees to be accountable to our standards, principles and policies.
Partner with customers
for innovation
Working with our customers to create high-quality, innovative and sustainable
solutions is key to our long-term success. As a leading producer of paper
and plastic-based packaging, we are uniquely positioned to leverage our
relationships and product know-how to offer our customers the most
sustainable solutions, combining the best of our paper and flexible plastic
packaging. Our backward integration into paper production provides us
security of supply and enables us to carry developments in our upstream
paper operations over to our converting plants.
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 in the medium term
e Continued focus on improving
our safety performance and
embedding a behaviour-based
safety mindset
Related risks and mitigation
13 14 15
e Continued initiatives to engage
our people with special attention
to diversity and inclusion
Priorities in the medium term
e Strong focus on product
innovation especially around
sustainable packaging solutions
Related risks and mitigation
e Further implementation
and enhancement of digital
Customer Relationship
Management systems across
our businesses
Principal risks
Page 52-61
2 3 5 15
Principal risks
Page 52-61
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 26
Strategic performance
A robust performance against a backdrop
of challenging trading conditions
A solid operational performance, strong cost control and a good contribution
from acquisitions and capital investment projects, partially offset the effects
of market pressures seen in a number of key pulp and paper grades in
2019. We also completed the Simplification of our corporate structure and
continued to build our portfolio of sustainable packaging solutions.
Our financial performance in 2019
Underlying EBITDA of €1,658 million was
down 6% on the prior year. Strong
performances from Flexible Packaging and
Engineered Materials helped to mitigate
the margin pressures seen in Corrugated
Packaging and Uncoated Fine Paper in the
face of market driven price decreases.
Group revenue was down 3% as a result of a
combination of lower average selling prices
and lower sales volumes, in turn primarily
due to longer planned maintenance shuts
and restructuring initiatives.
Our return on capital employed (ROCE)
was 19.8%.
After taking into consideration the impact
of depreciation and operating special items,
operating profit of €1,221 million was up 2%
(2018: €1,192 million).
Our capital investment programme
to deliver value accretive growth and
enhance the ongoing cost competitiveness
of our operations remains on track.
Having commissioned the pulp mill rebuild
at our Ružomberok mill (Slovakia) in the
second half of the year, we are making
good progress on the related investment
in a new 300,000 tonne kraft top white
machine at the same site and previously
announced major capital investment
projects at our Syktyvkar (Russia) and Štĕtí
(Czech Republic) mills. Smaller expansionary
projects underway at a number of our
converting packaging operations will further
enhance our production capabilities and
product offering to customers.
Basic underlying earnings of 171.1 euro
cents per share were down 10% compared
to 2018.
After taking the effect of special items into
account, basic earnings of 167.6 euro cents
per share were down 1% compared to 2018.
The Group remains strongly cash generative
with cash generated from operations
of €1,635 million (2018: €1,654 million).
The impact of lower underlying EBITDA
generation was mitigated by a net working
capital inflow. Net debt at 31 December
2019 was down to €2,207 million
(2018: €2,220 million) or 1.3 times
(2018: 1.3 times) net debt to 12-month
trailing underlying EBITDA, despite capital
investments in the amount of €757 million
or around 187% of depreciation, as we
pursue our investment programme to
continue to deliver value accretive growth.
Financial performance
Page 62-65
Group revenue
€ million
€7,268m
Group underlying EBITDA
€ million
€1,658m
t6%
on
2018
7,481
7,268
7,096
1,764
1,658
1,325
1,366
1,482
6,819
6,662
Corrugated Packaging
583
Flexible Packaging
Engineered Materials
543
122
Uncoated Fine Paper
444
Breakdown excludes corporate
costs of €34 million
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Underlying EBITDA margin
%
Underlying EBITDA development by Business Unit
€ million
23.6
22.8
1,764
(124)
82
10
(72)
(2)
1,658
(435)
20.5
20.9
19.4
(2)
1,221
2015
2016
2017
2018
2019
Underlying
EBITDA
Corrugated
Packaging
Flexible
Packaging
Engineered
Materials
Uncoated
Fine Paper
Corporate
2018
Underlying
EBITDA
Depreciation,
amortisation
& impairment
Operating
special
items
Operating
profit
2019
2019
Mondi Group Integrated report and financial statements 2019 27
Delivering value accretive
growth sustainably
We made good progress across our
strategic drivers in 2019, continuing to
deliver value accretive growth sustainably
while optimising our cost base. Our strong
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.
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.
The attention to sustainable packaging
continues to gain momentum. We have
been making sustainable packaging
products for our customers for over 50
years and we are pleased to see recent
heightened awareness.
As a leading producer of paper and
plastic-based packaging we are uniquely
positioned to help our customers’ transition
to more sustainable packaging through our
customer-centric EcoSolutions approach,
using paper where possible, plastic when
useful. Read more later in this section.
A number of our ongoing and recently
completed major capital projects are
expected to contribute to our sustainability
commitments, in particular reducing
greenhouse gas emissions and waste.
As we continue to make progress in making
our business less carbon intensive, we are
pleased our total greenhouse gas emissions
(per tonne of saleable production) have
declined to 0.71, a 15.5% reduction against
the 2014 baseline. The contribution of
biomass-based renewable energy to the
total fuel consumption of our mills has
increased from 59% in 2014 to 64% in 2019.
As part of our global partnership, we joined
WWF’s Climate Savers programme in
2018. This leadership programme for
businesses supports our commitment
to further reducing our greenhouse gas
emissions using science-based target
setting methodology.
In 2019, Mondi’s science-based reduction
targets were approved, covering more than
95% of our total Scope 1 and 2 greenhouse
gas emissions, including our energy sales.
We have committed to reduce Scope 1 and
2 emissions 34% by 2025, and 72% by 2050
(per tonne of saleable production) against a
2014 baseline.
In addition to climate change, we continue
working closely with WWF in the sixth
year of our global partnership on key
focus areas such as responsible fibre
sourcing and water security. Our initiatives
include water stewardship in South Africa,
protection of intact forest landscapes in
Russia, sustainable forest management
and biodiversity.
The social, economic and environmental
health of local communities is important to
our long-term success. During the year, we
supported local livelihoods and businesses
to build strong, proactive and transparent
relationships with local stakeholders.
As part of our stakeholder engagement
initiatives and to deepen the understanding
of our relationship and impact on local
communities, we conducted in-depth
socio-economic assessments in two of our
mills during the year.
Return on capital employed (ROCE)
% (12-month trailing)
19.8%
20.5
20.3
19.3
19.8
23.6
2015
2016
2017
2018
2019
Net operating assets by location
%
Emerging Europe
Western Europe
Russia
South Africa
North America
Other
37
30
13
12
4
4
“ Our robust
business model
and sustainable
packaging
portfolio secure
a solid platform
for growth.”
Andrew King
Group CFO and Group CEO designate
Mondi Group
Integrated report and financial statements 2019
OverviewStrategic reportGovernanceFinancial statements 28
Strategic performance
We are helping to lead the transformation
towards circular thinking through our
collaboration with customers and multi-
stakeholder initiatives such as CEPI’s
4evergreen, CEFLEX and the Ellen
MacArthur Foundation’s New Plastics
Economy initiative. We signed up to the
New Plastics Economy Global Commitment
made by leading brand owners, retailers and
packaging companies in 2018, pledging to
ensure 100% of plastic-based packaging
is reusable, recyclable or compostable
and a minimum of 25% of post-consumer
waste is incorporated across all our flexible
packaging where food contact regulations
allow by 2025. Our focus is on developing
innovative plastic packaging solutions that
are in line with circular design principles, and
working with stakeholders across the value
chain to address the current challenges we
face in securing high-quality recycled plastic
input required to transition to a circular
plastic economy.
Sustainable Development report
www.mondigroup.com/sd19
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.
Digital solutions are helping us to
further enhance our competitive edge.
After successful pilots in 2019, we are
applying digital technologies and advanced
analytics across a number of our pulp and
paper production lines, which will enable
us to increase equipment efficiency and
reduce variable costs. We are implementing
other digital projects to improve quality and
pricing, gain efficiencies, optimise the value
chain and introduce new ways to share best
practice across our machines and plants.
To continue to optimise our production
footprint and leverage our cost-advantaged
locations, we undertook a number of
restructuring initiatives during the year.
Accelerated by weaker domestic market
conditions, we shut a 65,000 tonne per
annum recycled containerboard machine
at our mill in Tire Kutsan (Turkey) in the
second quarter, while continuing to operate
the 75,000 tonne per annum machine on
site. We sold a specialised extrusion coated
products plant in Duffel (Belgium). In our
paper bags business we reorganised our
US and Egyptian paper bag operations and
streamlined production across our European
network and in Engineered Materials
we initiated steps to right-size our major
operations in Europe and the US in order
to improve our competitiveness. We will
continue to evaluate the actions required to
ensure the long-term competitiveness of
the business.
Value distribution1
%
€2,729m
Employees
Providers
of equity capital
Direct taxes paid
Providers
of loan capital
Reinvested
in the Group
38
15
9
3
35
Investing in
digital as
an accelerator
1 Value distribution defined as operating profit before taking into
account personnel costs and depreciation, amortisation
and impairments
Total specific CO2e emissions1
tonnes per tonne of saleable production
0.83
0.76
0.72
0.72
0.71
2015
2016
2017
2018
2019
1 From our pulp and paper mills
Mondi’s digital transformation journey is about people
using technology and data to make our strategic
value drivers even more effective. In 2019, we set-up a
specialised team of data scientists and digital project
managers to work with our people across the world
to identify digitalisation opportunities focusing on
three areas:
Digital operations and production
This is the area with the most impact for Mondi as
there are significant opportunities to drive efficiency,
productivity and quality through advanced analytics,
automation and robotics. For example, in our pulp and
paper mills, we’ve installed machine learning models
and soft sensors to continually measure a range of
parameters in our production processes, enabling
continuous prediction and helping us to stabilise and
enhance performance and improve efficiency.
Digital customer experience
To connect better with our customers and drive
process efficiency improvements, we have developed
myMondi, a digital platform that allows customers
to track orders online, access additional order and
product information, file claims and, if applicable,
place orders electronically. The tool is adapted for
the requirements in each of our businesses. After its
success with our Uncoated Fine Paper customers in
2018, we rolled out the platform to our paper bags
business in 2019 and will be implementing it in our
Corrugated Packaging business in 2020.
New ways of agile working
We are embedding agile methodologies including
communities of practice and design thinking
approaches in all areas of our work to improve
processes and promote innovation. We see these
changes as important for the vitality of our business,
as well as for attracting and retaining the best
talent, encouraging an entrepreneurial spirit among
our people.
Mondi Group Integrated report and financial statements 2019
29
Invest in assets
with cost advantage
During the year, we benefited from the
contribution of our Štětí mill modernisation
project completed in late 2018, to replace
the recovery boiler, rebuild the fibre lines
and debottleneck the existing packaging
paper machines. This project provides
cost and energy efficiencies, an improved
environmental footprint, and additional
annual production of 90,000 tonnes of
softwood market pulp and 55,000 tonnes
of packaging paper once fully ramped up.
We have a focused capital expenditure
project pipeline securing future
organic growth:
e The investment in a new 300,000 tonne
per annum kraft top white machine and
related pulp mill upgrade at Ružomberok
is making good progress. The pulp mill
rebuild was successfully commissioned
in the second half of 2019, while the kraft
top white machine is expected to start up
at the end of 2020.
e The 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 is
on track. The investment is supported by
the drive to replace plastic carrier bags
with paper-based alternatives and allows
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.
e Our investment programme to
debottleneck production and avoid
unplanned shuts at our Syktyvkar mill
is progressing well, including various
upgrades of the mill infrastructure,
fibre lines and pulp dryer, and a new
evaporation plant.
e We are investing in the modernisation
of our Richards Bay mill (South Africa),
including upgrading the energy and
chemical plants to improve reliability and
avoid unplanned shutdowns.
e We continue to invest in our packaging
and Engineered Materials’ converting
plants to grow with our customers,
enhance our product and service offering
and reduce conversion costs.
Our recently completed and planned major
capital expenditure projects in the Czech
Republic, Slovakia and Russia are expected
to increase our current saleable pulp and
paper production by around 8% when in
full operation.
Over the past three years, our major
capital expenditure projects have
cumulatively contributed an estimated
€75 million of annual incremental operating
profit. The incremental operating profit
contribution from capital investment
projects in 2019 was around €30 million and
we expect to generate a further €40 million
in 2020.
Given the approved project pipeline, our
capital expenditure is expected to be in
the range of €700-800 million in 2020 and
€450-550 million in 2021 in the absence of
any other major investment.
Vertical integration
production in million tonnes
We use
Net market exposure
0.2
4.2
3.8
1.7
0.3
0.6
(0.1)
1.51
0.4
0.8
Pulp
Virgin
container-
board
Recycled
container-
board
Kraft
paper
Uncoated
fine
paper
1 In addition to the 1.5mt of uncoated fine paper, the Group also
produced 0.2mt of newsprint in 2019
Capital expenditure
€ million
€757m
Capex as a percentage of depreciation
757
187%
709
173%
595
174%
611
147%
465
132%
2015
2016
2017
2018
2019
Five-year net investment1
%
Corrugated Packaging
Flexible Packaging
48
50
Engineered Materials
and Uncoated Fine Paper
2
1 Net investment calculated as capex less depreciation and
amortisation, plus acquisitions, less disposals
As part of our Štětí
mill modernisation
completed in 2018,
we used 40,000m3
of concrete and laid
520km of cables
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
30
Strategic performance
Contributing
to a better
world
Hope Mwanake,
co-founder Eco Blocks
and Tiles and Lead2030
SDG12 challenge winner
Acting sustainably, inspiring our people
While there has been unprecedented attention to
sustainability and the climate crisis recently, Mondi
has had sustainable business principles embedded
for more than 25 years. For many, our very focus on
sustainability offers a sense of purpose, to contribute
to a better world, which inspires and drives our
people. As we move forward, we aim to support
sustainable business practices that can make a direct
contribution to our stakeholders, our bottom-line and
ultimately the health of the planet.
From words to action
The response from society and the private sector to
global sustainability challenges has been passionate,
and at Mondi we can show tangible results across the
10 Action Areas of our Growing Responsibly model,
such as:
1) Climate change – we have reduced CO2e
emissions by 15.5% since our 2014 baseline and in
2019, we have set a new long-term science-based
target to further reduce our emissions.
2) Forestry – our managed forests are 100% certified
and 72% of our procured wood is derived from
certified sources, with the remaining volume
meeting Controlled Wood standards to ensure
responsible sourcing.
3) Communities – we have invested €46 million
in local community initiatives over the past five
years and our industry leading Socio-economic
Assessment toolbox (SEAT) stakeholder
engagement process has been completed across
86% of our mills.
Fine-tuning our impacts – introducing SDG 6
While the focus of our communication has been on
the six United Nations Sustainable Development
Goals (SDGs) where we believe we have the greatest
impact and opportunity to make a real and lasting
difference – SDGs 7, 8, 9, 12, 13, and 15, this year we
have added SDG 6 (Clean Water and Sanitation).
Water scarcity is becoming a key issue of concern
in the regions where we operate. Beyond historically
sensitive regions such as South Africa, the impacts of
our pulp and paper mills on water is a relevant area of
focus in all the countries in which we work.
Scaling great ideas
As part of our commitment to support Lead2030,
we formulated a challenge related to SDG 12
‘Responsible Consumption and Production’ to
address the issue of waste. The Lead2030 initiative,
funded by some of the world’s leading businesses,
aims to find, fund and accelerate youth-led solutions
that contribute to achieving the SDGs. In May, we
selected Eco Blocks and Tiles as the challenge
winner, providing them with $50,000 to invest in the
business, alongside 12 months’ business coaching to
help scale the business. Following the success of this
year’s initiative we have committed a further $50,000
investment in 2020 to fund a new project by a young
innovator contributing to SDG 12.
Inspire
our people
We want to develop and inspire a diverse
and inclusive workforce where opportunities
for employment, engagement, promotion,
training and any other benefits are based
on skills and ability. We believe in lifelong
learning which is why we run The Mondi
Academy and focus on creating tailored
development plans.
Over the past decade, our open and honest
discussions have transformed the way we
engage in and take responsibility for safety.
We are among the safety leaders in our
industry yet unsafe behaviour continues to
be a common factor in incidents.
We sincerely regret two fatalities during
2019. In January, a contractor lost his life
conducting pile drilling activities at the
construction site of our new paper machine
in Ružomberok, and in August, a contractor
was fatally injured during towing activities
at our Russian forestry operations. We are
also deeply saddened that a contractor
died as a result of an incident during
demolition activities at our Syktyvkar mill
in January 2020. Thorough investigations
are conducted after all incidents and action
plans implemented to address root causes
and prevent repeat incidents.
We continue to focus on the top fatal risks
at each site, implementing clearly defined
methodologies, procedures and robust
controls to drive continuous improvement in
safety across the business.
Total recordable case rate (TRCR)
per 200,000 hours worked
0.76
0.69
0.68
0.68
0.59
2015
(baseline)
2016
2017
20181
20191
1 The recent acquisitions completed in 2018 (Powerflute and Egyptian
paper bag plants) are excluded
Mondi Group Integrated report and financial statements 2019 31
In 2019, we had 222 recordable cases
(2018: 262), which equates to a Total
Recordable Case Rate (TRCR) of 0.59
(2018: 0.68) representing a 13% reduction
compared to 2018 and a 22% improvement
against our 2015 baseline, well ahead of our
2020 commitment to reduce TRCR by 5%.
Examples of initiatives to develop and
inspire our people include a female
leadership initiative at our Świecie mill,
knowledge-sharing opportunities at our
Richards Bay mill, and a talent programme
in our corrugated solutions plant
network. Our aim is to provide leadership
opportunities that encourage gender, age
and cultural diversity. We believe that this
will ensure we have the right talent and
succession plans across our operations to
deliver on our long-term strategic targets.
In 2019, we joined the growing community
of businesses publicly demonstrating their
commitment to gender equality in the
workplace by signing the UN Women’s
Empowerment Principles.
We plan to carry out our next biennial
group-wide employee survey in March 2020
to understand our employees’ concerns
and key areas for engagement. In between
surveys, we implement a range of initiatives
at a Group level and in individual locations
to respond to employee feedback and make
Mondi a better and more inspiring place
to work. Progress is communicated locally
and via our group-wide intranet platform.
We will report on the outcomes of the
survey in our 2020 report.
Employee and contractor safety and health
Page 37-38
A skilled and committed workforce
Page 39-40
Fairness and diversity in the workplace
Page 40-41
Partner with customers
for innovation
As a business we have increased our focus
on innovating with our customers and
are pleased with the external recognition
we have received. We won a number of
awards and are particularly proud of our
five WorldStar Packaging Awards, three for
Corrugated Solutions and two for Flexible
Packaging innovations.
Delivering innovative, sustainable packaging
solutions for our customers was again a key
focus in 2019. 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.
During the year, we centred our efforts
on developing paper-based packaging
solutions to replace unnecessary plastic
packaging, helping our customers to
achieve their own sustainability targets and
reduce their environmental footprint.
Paper-based packaging is renewable
and recyclable which means it is an
optimal solution for many of today’s
applications. When certain functionality
barriers are required, plastic-based
flexible packaging can deliver many
benefits when manufactured, used and
disposed appropriately, from reducing
food waste through shelf-life extension
to resource efficiency (by reducing raw
material usage, being lightweight and less
transport intensive).
We have focused on designing consumer
plastic-based flexible packaging for
recycling to improve its circularity and we
have also looked for ways to increase, where
possible, the proportion of recycled plastic
content in our solutions.
EcoSolutions case study
Page 32
Our businesses
Page 4-5
During the year, we spent €25 million on
R&D across our businesses to develop
innovative products for our customers.
We continue to evolve our customer
interaction and partnership using
digital solutions.
In Uncoated Fine Paper we have leveraged
our digital customer platform to interact
directly and promote Mondi’s brands
to decision makers in the paper-buying
process and end-users. We continue
to explore digital platforms that further
connect to our customers.
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
e Climate change related risk
These risks are long term in nature as
they are directly related to the Group’s
strategy and operating footprint. The Board
continues 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 52-61
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 32
Strategic performance
EcoSolutions - paper where
possible, plastic when useful
In a race to protect our planet, sustainable
packaging can contribute to a better world.
However, the decision on what is the most
sustainable solution might not always be straight
forward. As a leader in packaging and paper, there
are numerous trade-offs to consider when defining
a sustainable packaging solution. For example, we
know that for many applications paper packaging
is the best choice as it’s made from a renewable
resource and is fully recyclable. It is also a lot
stronger than most people expect.
Alternatively, there are applications where plastic
solutions provide functionality that is difficult to
replicate with any other packaging material – for
example barrier properties for food or product
preservation. Additionally, within plastic solutions,
flexible plastic packaging typically uses 70% less
plastic than rigid-based alternatives thereby
reducing raw material input requirements. We need
to ask the right questions to find the best solution
for protecting products across the value chain using
paper where possible, plastic when useful.
Our approach to sustainable packaging solutions
...less sustainable products with
solutions following our principle
“paper where possible, plastic
when useful”
...the volume of raw material
used through design,
operational efficiency and raw
material choices
...packaging by developing
solutions that are designed
for recycling
Supporting customers achieve their goals
e Challenge needs and define the route towards sustainability
e Analyse supply and value chains
e Identify the right solution for relevant impact areas
e Demonstrate the solution is sustainable by design
e Review product evolution to meet future requirements
Advantage Smooth White Strong
The challenge
Most pasta packaging in Europe
is made from plastic
Our solution
A paper-based solution, with the option
for a large paper window
Key benefits
e Excellent strength and product preservation
e Outstanding printability
e Suitable for paper recycling streams
PerFORMing
The challenge
Conventional trays are made
of non-recyclable PET/PE
Our solution
A natural, brown or white, formable
coated paper solution for food applications
such as portion packs and trays
Key benefits
e Reduces plastic use by up to 80%
e Reduces CO2 emissions by 70%
e Recyclability in certain paper streams
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,
€660 million of our €2.5 billion committed
debt facilities were undrawn and the
weighted average maturity of committed
debt facilities was 3.2 years. In February
2020, the Group entered into an additional
debt facility with a maturity of 18 months,
increasing the undrawn, committed
debt facilities available to the Group by
€250 million, further strengthening the
Group’s liquidity position.
Our free cash flow priorities remain
unchanged. We are focused on maintaining
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.
Given our strong financial position and
confidence in the future of the business, the
Board has recommended payment of a final
ordinary dividend of 55.72 euro cents per
share, bringing the total ordinary dividend
for the year to 83.0 euro cents per share, an
increase of 9% on 2018.
Mondi Group Integrated report and financial statements 2019 33
Farewell from Peter Oswald
“It has been a great honour to have worked for
the Mondi Group over the past 28 years, and I
am extremely proud of what we have achieved
together. I leave knowing that the Group is in the
hands of a strong Board and an experienced senior
management team led by Andrew King, who will
ensure its continued success.”
Peter Oswald
Outgoing Group CEO
Message from Andrew King
“I am excited to accept the role as CEO of Mondi.
We have a clear strategic focus, robust business
model and many talented and dedicated people.
I look forward to working with the Board and
wider leadership team to continue the successful
development of the Group.”
Andrew King
Group CFO and Group CEO designate
Simplification of
corporate structure
At the end of July 2019, we completed the
simplification of our corporate structure
from a dual listed company structure into
a single holding company under Mondi
plc (the “Simplification”). We believe this
has simplified cash and dividend flows,
increased transparency, removed the
complexity associated with the previous
structure and enhanced strategic flexibility.
As a result of the Simplification, each
Mondi plc shareholder has the same
voting and capital interests in the Group as
each Mondi plc ordinary shareholder and
Mondi Limited ordinary shareholder had
under the dual listed company structure.
The Simplification did not result in any
changes to management, operations,
locations, activities or staffing levels of the
Group. Nor did it, save for one-off expenses
to effect the Simplification, have any
significant impact on the reported profits or
net assets of the Group.
Near-term outlook
Looking ahead, we remain confident
in the structural growth drivers in the
packaging sectors in which we operate.
Heightened macro-economic uncertainties
are likely to continue to affect markets
in the short term and, while we are
seeing indications of stability in pricing
in certain segments, we start the year
with lower prices across our key paper
grades. Input cost relief, our ongoing
profit improvement programmes and
customer-centric innovation initiatives, and
the benefits from our capital expenditure
pipeline will continue to support
our performance.
With our robust business model, centred
around our high-quality, cost-advantaged
asset base, our culture of continuously
driving performance, and the strategic
flexibility our strong cash generation and
financial position bring, we continue to look
to the future with confidence.
David Williams
Chair
Andrew King
Group CFO
Total ordinary dividend per share
euro cents
83.0
euro
cents
Interim ordinary dividend
Ordinary dividend cover (times)
Final ordinary dividend
.
2
6
7
3
2.6
8
3
4
1
.
9
1
.
8
3
2.4
.
1
8
8
1
0
9
2
4
.
2.4
0
1
.
9
1
.
5
5
4
5
2.5
5
4
.
1
2
2
2
7
5
5
.
2.1
8
2
7
2
.
2015
2016
20171
2018
2019
1 In addition to the 2017 ordinary dividend, a special dividend of
100 euro cents was paid in 2018
2 Proposed
Five-year cumulative cash flow
€ billion
5.5
(3.1)
(1.9)
(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
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
34
Sustainability performance
Growing responsibly
Our Growing Responsibly model remains the
framework through which we respond to our
sustainability challenges and opportunities,
providing a solid structure for our future success.
It also enables us to implement our strategy
to drive value accretive growth, sustainably,
as well as 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 running to the end of 2020,
along with long-term science-based carbon
emissions commitments.
Contributing to the UN Sustainable
Development Goals (SDGs)
In 2019, we reviewed our contribution to the SDGs
to identify those areas where we believe we have
the greatest impact and opportunity to make a
real and lasting difference. As a result, we added
SDG 6 (Clean water and sanitation) to the six
SDGs which were highlighted as most relevant in
last year’s report. Water scarcity is a key concern
that extends beyond historically sensitive regions
such as South Africa; the impacts of our pulp
and paper mills on water quality and quantity is a
pertinent topic in all countries where we operate.
6 Clean water & sanitation
7 Affordable & clean energy
8 Decent work & economic growth
Industry, innovation & infrastructure
9
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. This is
crucial to identify and manage our risks and
opportunities and to respond effectively to our
stakeholders. We carried out an assessment
of our material sustainability issues in 2018 to
understand their relative importance and identify
new and emerging issues. It combined qualitative
and quantitative inputs from internal and external
stakeholders, meeting GRI guidance and best-
practice standards. Identifying and understanding
our material issues supports the development of
our commitments beyond 2020.
Sustainable Development report –
Materiality section
www.mondigroup.com/sd19
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 51
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 49-50
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 48
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 46-47
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 45-46
UN SDGs
UN SDGs
UN SDGs
Mondi Group Integrated report and financial statements 2019
35
Employee and contractor
safety and health
UN SDGs
Our goal is zero harm
to employees and
contractors, and a safe
and healthy workplace.
Read more
Page 37-38
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 39-40
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 40-41
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 42-43
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 43-44
Sustainable Development report
www.mondigroup.com/sd19
9
8
10
7
1
Our
10 Action
Areas
6
2
5
3
4
“ We are committed
to enhancing our
positive contribution
and addressing our
negative impacts.”
Dominique Reiniche
Chair of the sustainable
development committee
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
36
Sustainability performance
Growing responsibly: Our approach
Strong governance is fundamental to building a resilient and successful
organisation in which sustainability is embedded at all levels. We engage
openly and transparently with stakeholders across the value chain through
our governance processes to create an inclusive and fair business.
Sustainability governance
The Board and committees provide the
leadership necessary to implement the
principles of good corporate governance
across the Mondi Group, ensuring all
decisions and actions are based on integrity,
responsibility, accountability, fairness
and transparency. The Board reviews
the sustainability performance approach
and outcomes.
Policies and standards
Linked to our material issues and aligned
with our Growing Responsibly model,
comprehensive policies, standards and
management systems help us meet
our commitments, guide our practice
and enable us to address the risks and
opportunities we face.
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
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.
We review our operating standards
and practice notes to ensure that they
remain relevant and up to date. We seek
appropriate expert input into the standards
the Group should adopt to be in line with
industry good practice and to assess our
operations’ readiness to meet the upcoming
requirements contained in the standards.
Sustainable Development report
www.mondigroup.com/sd19
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 16-17
Page 42 to 47
Page 37 to 41
Page 49-50
Page 41
Page 36
Page 52 to 61
Non-financial key performance indicators
Page 23, 34 to 51, and 68 to 83
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 CEO, Group CFO 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 2019, we received 162 Speakout
messages (2018: 104) relating to 104
cases (2018: 65). These covered a range
of topics, in particular the reporting of
employee-related concerns, potential
business irregularities and perceived
fraudulent activities.
External assurance
Our Sustainable Development (SD) report provides a
comprehensive view of our approach to sustainable
development and our performance in 2019 across
our 10 Growing Responsibly Action Areas. ERM CVS
has provided assurance on selected information
and key performance indicators as well as checked
that the SD report is in accordance with the Global
Reporting Initiative (GRI) Standards: Core option and
that information included in our Integrated Report is
consistent and comparable.
Mondi Group Integrated report and financial statements 2019 Growing responsibly: Our approach
37
Growing responsibly: Our progress in 2019
Performance worse than
or the same as the base year
Achievement of the
commitment behind target
Achievement of the
commitment on track
Employee and
contractor safety
and health
External recognition
Our sustainability performance has been
disclosed in or received recognition by a
number of external corporate ratings and
indices, including:
e Advanced Reporter
e The CEO Water Mandate – joined 2015
e Leadership level A for water and A-
for climate change and forests
e ESG Rating AAA
e Ranked #2 in sector
e Sustainability Yearbook 2020,
Ranked #2 in sector
1
e UK 20; Europe 120
e GOLD recognition level
e Top 1% of all suppliers
e Member of the ESI Excellence Europe
e Member of the FTSE4Good
Index Series
e FTSE/JSE Responsible Investment
Index: Top 30
e Ranked sixth FTSE 100 company
Our commitments to 2020
2019 performance in brief
Status1
Avoid work-related employee
and contractor fatalities
Prevent life-altering employee
and contractor injuries
There were two fatal injuries
There were two life-altering injuries
Reduce TRCR by 5% compared
to 2015 baseline, including new acquisitions
TRCR was down 22% on 2015
Over the past decade, we’ve seen open
and honest discussions transform the way
we engage in and take responsibility for
safety. But while we’re among the safety
leaders in our industry, unsafe behaviour
continues to be a common factor in
incidents. To achieve our ambition of
sending everybody home safely every day,
we need to create a safety culture where
people act safely in everything they do.
With deepest regret, we report two
fatalities in 2019. In January 2019, a
contractor conducting pile drilling works
at the construction site of a new paper
machine at our Ružomberok mill (Slovakia)
was fatally injured.
1 For fatalities and life-altering injuries we compare our performance
to our goal of zero harm
In August, a contractor log delivery driver
was fatally injured in our Russian logging
operations during towing activities.
We are also deeply saddened to report that
a contractor died in January 2020 as a result
of an incident during demolition activities at
our Syktyvkar mill (Russia).
Robust investigations have been carried
out to understand the events involved
and identify ways to prevent future
occurrences of such incidents and the
findings communicated.
We had 222 recordable cases in our
operations in 2019 (2018: 262). This equates
to a total recordable case rate (TRCR) of
0.59 (2018: 0.68) and represents a 22%
decrease compared to our 2015 baseline
of 0.76.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 38
Sustainability performance
Growing responsibly: Our progress in 2019
Embedding a 24-hour
safety mindset
Our ‘24-hour safety mindset’ approach
positions safety as something we do for
ourselves, for our families, for our colleagues
and for their families. We developed the
concept to tap into people’s awareness on
an emotional, conscious and unconscious
level by applying safety to all aspects of
their lives, not just to work. It is based on
the premise that there is no difference
between being safe at work or at home
– the outcome is the same – and if we
develop our habits so that safety becomes a
conscious and unconscious behaviour, we’ll
ensure our own safety and that of those
around us.
We are developing programmes and
tools to develop both the conscious and
unconscious mindset of our employees,
as well as improving safety engagement
between first line managers and their teams.
In 2019, we launched new safety videos
to promote the 24-hour safety mindset
and new e-learning tools for selected
safety topics.
Read more about how we promoted a
24-hour safety mindset in 2019
www.mondigroup.com/sd19
All Mondi safety and health colleagues
are required to complete our safety
for professionals programme by 2021.
This programme addresses leadership
and training skills, as well as selected
methodologies, such as task risk
assessment and permit to work. At the end
of 2019, 1,524 people had also attended
the three-day first-line managers
training programme.
Measuring progress:
lead, current and lag indicators
Conventional safety performance metrics
focus on incidents and total recordable
case rate (TRCR), known as ‘lag’ indicators.
We also use ‘current’ and ‘lead’ indicators,
enabling 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 2019, we carried out 100,620 safety
audits against a target of 68,458, including
management risk-focused audits, first-line
manager task audits, SHE professional
focus audits and peer observations.
More than 96% of resulting actions
were completed.
Health and wellbeing
We raise awareness of diseases such as
HIV/AIDS, diabetes and tuberculosis among
the people who work for us. We also
offer health and wellbeing facilities and
wellness programmes at many locations.
In 2019, 3,269 employees and contractors
participated in the HIV/AIDS voluntary
programme in our South African operations
(2018: 3,465), with 1,827 opting for testing.
In addition, 13 employees and 1,099
contractors benefited from the anti-
retroviral treatment (ART) programme.
In January 2019, we extended our Employee
Assistance Programme (EAP) to 14
countries. It is a 100% confidential telephone
hotline, provided by an external company
of qualified counsellors and advisers, which
can be used by Mondi colleagues and their
families free of charge and around the clock,
24/7/365.
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.
We provide training on our methodologies
to ensure teams understand and align with
the requirements.
In 2019, we continued with our top fatal
risks approach. Each operation identified
the next set of top risks and developed
management plans to engineer them out of
the business. Where this was not feasible or
possible, we introduced robust controls and
procedures to reduce the risks.
Our ‘Nine Safety Rules to Live By’
cover hazards that pose a risk of high-
consequence injuries. They include: work at
heights; mobile plant; chemicals; confined
spaces; work in forests; permit to work
activities; lifting activities; and moving and
rotating equipment.
They are supported by our Task Risk
Management Methodology, which provides
a practical, easy-to-understand approach
to conducting pre-task risk assessments.
It enables us to assess probability and
severity of a potential incident and shape
action plans based on a hierarchy of
controls to firstly prevent incidents and then,
if they do occur, reduce their severity.
In 2019, we introduced working groups,
chaired by the business unit Safety,
Health and Environment (SHE) managers,
to develop safe practice notes for all
operations for the following high-risk topics:
e Manual intervention with moving and
rotating parts in converting operations
e Safe bleaching chemical handling
e Safe lime handling
e Social psychology of risk
engagement tool
e Visitors induction programmes
e Safety requirements for doctor
blade handling
e Prevention of noise induced hearing loss
The safe practice notes were distributed
during the second quarter of 2019 and an
engagement board tool was developed and
rolled out at selected sites.
Mondi Group Integrated report and financial statements 2019 Growing responsibly: Our progress in 2019
39
We share the detailed results of our group-
wide employee survey for each business and
location to allow for targeted action planning.
We also support local operations to develop
their response by sharing best practice and
through a new guide to “Employee survey
action planning and workshop design”.
Transparency, assessment
and feedback
Annual and mid-year PDRs are an
opportunity for employees and their
managers to reflect on individual
performance and set personal development
goals. The PDR process includes all office
employees and production employees with
a leadership role including team leaders,
plant supervisors and shift leaders. We also
use a variety of 360˚ feedback tools to
enable people to better understand their
behaviours and areas for improvement.
In 2019, we adjusted the 360˚ feedback’s
questions and evaluation criteria to support
our Diversity and Inclusion (D&I) journey.
The questions explore respect for diversity
in the organisation, communication with
diverse audiences and adaptation to
cultural norms.
Training and development
By enhancing the skills of our people, we
support them to realise their potential and
develop an agile workforce that is capable
of meeting our changing business needs.
Our employee induction includes training
related to the business, its strategic
value drivers, products and our approach
to sustainable development. We have
designed specific training to empower
employees and support diversity, particularly
gender diversity. In 2019, we introduced
‘Conscious Inclusion’ to enable employees
and management to become more
mindful of their unconscious perspectives
and biases.
Employees in sales and marketing roles,
and others that may come into contact with
competitors, annually complete competition
compliance training which also covers
Group Organisational Policies and Business
Integrity. We extended this training in
2019 to include sustainability policies, with
special emphasis on our Labour and Human
Rights Policy.
A skilled
and committed
workforce
2
Our commitment to 2020
2019 performance in brief
Status
Engage with our people to create
a better workplace
With approximately 26,000 employees
across more than 30 countries, our vision
is to provide an employee experience
that inspires and empowers a global
workforce to deliver our Group strategy.
Engaging and motivating our people to
reach their full potential and providing
opportunities for their personal and
professional development ensures our
business continues to grow and succeed.
Employee engagement is integral to our
culture and to creating an inspiring workplace
where people feel valued and included.
Providing a strong employee experience,
supported by open, two-way communication,
positions Mondi as an attractive employer to
current and future employees.
Employee engagement
Page 102
Our cultural development programme
‘Inspire’ drives our people to live by Mondi’s
three core values – performance, care and
integrity and is the lens through which we
consider all our HR processes, engagement
and development mechanisms.
Action was taken across the Group in
response to the 2018 employee survey
A new employee survey conducted
in March 2020
We use both formal and informal processes
to communicate and engage with employees,
together with Performance and Development
Reviews (PDRs). In addition to our global
intranet platform, regular local sessions focus
on safety, operational objectives, performance
and the Group’s purpose, strategy, values and
culture. There are a number of performance-
related pay schemes that reward employees
for the pursuit and achievement of business
objectives, in which the majority of our
employees participate. We also have long
service and recognition awards across
the organisation.
Our group-wide employee survey enables us
to better understand employee views so we
can consider them in strategy and decision-
making. Following our most recent employee
survey in March 2020, we will report in more
detail on the outcomes and actions in our
2020 report. Our previous employee survey
was carried out in 2018. Detailed outcomes
can be found on page 48 of our 2018
Sustainable Development Report.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 40
Sustainability performance
Growing responsibly: Our progress in 2019
In 2019, we devoted around 801,900 hours
of employee and contractor time to training
and development (2018: 819,200 hours).
This does not include informal and on-the-
job training, where much of our employee
learning happens. Some 46% of this training
was dedicated to safety and health issues
(2018: 40%).
In addition to 302,032 hours of general safety
training (2018: 267,028), we conducted 68,625
hours of critical safety training (2018: 59,995).
We launched a Reverse Mentoring
programme in 2019 to enable our leadership
teams to benefit from learning from
early-career employees outside of their
usual circles, developing awareness of
the challenges they may face, the unique
value they bring, and what they expect
from leaders.
Digital transformation
We have begun our digital transformation
journey to use data to improve our
processes and support our people.
This includes simplifying tasks, providing
expertise and instructions that may be
lacking in some areas, and developing the
skills that will help people secure quality
jobs. For us, digital transformation is not
about cutting jobs – it’s about freeing up
people’s time to enable human creativity
and innovation, and reduce stress.
Ultimately, our employees will be better
equipped for the job market of tomorrow
with digital skills that will be necessary
across all industries and markets.
The Mondi Academy
The Mondi Academy is our global learning
hub. It provides business-related training
programmes for leaders, line managers and
employees through group-wide training
networks and local academies (currently in
Poland, Russia, Slovakia, Czech Republic
and South Africa). It develops customised
programmes – with an emphasis on
global topics and leadership. The Mondi
Academy International (based in Vienna)
conducted 135 seminars and programmes
in 2019 (2018:126). which were attended by
1,420 employees, 33% female (2018: 1,196,
26% female). We also launched Digital
Bootcamps in 2019 to support employees in
developing their digital skills.
Fairness and
diversity in
the workplace
3
Our commitment to 2020
2019 performance in brief
Status
Promote fair working conditions
and diversity in the workplace
The group-wide D&I taskforce made
good progress in 2019
Mondi joined the UN Women’s Empowerment
Principles – We Mean Business initiative
Diversity & Inclusion (D&I)
Our policy is to treat everyone – including
our employees and contractors, whether
part-time, full-time or temporary – fairly
and with respect. Our approach is designed
to promote diversity, eliminate bias, and
support equal opportunity across our
operations.
We monitor gender diversity across
the business, and among our senior
management. We provide equal
opportunities for all regardless of gender,
race, age, sexual orientation, ethnicity or
any other difference and we are working to
increase the representation of women at
all levels.
The diversity of our workforce drives
innovation and better decision-making,
enabling us to meet the needs of our
employees, customers, communities and
shareholders. To maintain a fair, diverse
and inclusive workplace, we promote
good working conditions and uphold
high standards of employment and
human rights.
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 wages1) apply throughout the
business. They are managed locally, guided
by Group policies and standards.
Mondi Group Integrated report and financial statements 2019 Growing responsibly: Our progress in 2019
41
At our Group office in Vienna, we have
partnered with myAbility, a social business
which brings together companies and
people with disabilities to foster a more
inclusive workplace.
In the event of an employee suffering a
life-altering injury at work, we facilitate
appropriate medical treatment and ongoing
rehabilitation, and support their continued
employment by finding alternative
equivalent jobs for them.
Our D&I taskforce – a cross-business,
cross-functional team launched in 2018 – is
helping to shape and embed our approach
to managing D&I across the Group.
In 2019, it focused on communication and
good practice sharing, piloting ‘Conscious
Inclusion’ training with the Group Executive
and Operational Committees and several
senior leadership teams, and a review of
‘Inspire’, our cultural framework, to foster an
inclusive environment.
Human rights
We are strengthening the monitoring and
reporting of potential human rights risks
across our operations and areas of our
supply chain. We have added labour and
human rights criteria to our procurement
processes – including fibre procurement
due diligence and audit processes,
purchasing policies, Code of Conduct for
Suppliers, and supplier audit protocols.
Respecting and protecting human rights
is embedded in many of our practices,
including: safety and health; fair treatment
of employees; respect for the law; engaging
and investing in communities; minimising
environmental footprint; producing products
to the highest safety, health and hygiene
standards; and working with suppliers and
contractors to meet high standards of
business conduct.
In 2019, we started to develop a new
human rights due diligence process with
the support of the Danish Institute for
Human Rights (DIHR)3 and will report on
the outcomes and actions arising from
this process.
We are investigating the need for formal
human rights training based on risk, and
developing tools and guidance.
As a first step, we have extended
competition compliance training to include
our sustainability policies, with emphasis
on our Labour and Human Rights Policy.
We are also working on the implementation
of comprehensive mechanisms to identify
and address human rights incidents in our
supply chain.
There were no reports of human rights
incidents in our operations or supply chain
through our Speakout tool or any other
reporting mechanisms in 2019.
We support the UK Modern Slavery Act
and its requirement for organisations to
prepare an annual slavery and human
trafficking statement. The latest statement
was published on our website in June 2019
for the financial year 2018, with the next
update due in June 2020.
Restructuring, divestitures
and closures
When employees are affected by
organisational restructuring, we follow
our own human resources policies and
local labour rules as a minimum, including
consultation, notice periods, regular
briefings and trade union involvement where
available. If roles are at risk, we support
affected employees through retraining,
re-employment and relocation, supporting
entrepreneurship and providing severance
payments, depending on local regulations
and available legal schemes. In 2019, we
divested a plant in Duffel (Belgium) and in
Turkey we ceased production on a recycled
containerboard machine at our Tire Kutsan
operation, affecting 60 employees (out
of the operation’s total of 300). We have
offered compensation packages in mutual
agreements to those affected. In the US,
our paper bags operation in Pine Bluff
went through restructuring (affecting 55
employees), and the relocation of our head
office in North America as well as sales and
regional restructuring affected a further
10 people. We provided all employees
impacted with severance packages as
well as outplacement services with an
external service provider, offering support
to find jobs through online courses and
personal coaching.
Our Diversity & Inclusion Policy reflects
the Hampton-Alexander Review2
recommendation that boards and executive
committees and their direct reports
combined should be 33% women by 2020.
It also includes a focus on ethnic and racial
diversity across our board and executive
committee members and supports our
Labour and Human Rights Policy. In 2019,
we joined the growing community of
businesses publicly demonstrating their
commitment to advancing gender equality
in the workplace by signing the UN
Women’s Empowerment Principles.
At the end of 2019, 21% of employees
were female (2018: 21%), with two female
directors (25%) on the Board and one
director of colour. In June 2019, we reported
to the Hampton-Alexander Review that
we had 22% female representation on our
executive committee and 27% in the direct
reports to the executive committee, giving
a combined total of 27% (2018: 27%). As at
31 December 2019, this had increased to
33% female representation on our executive
committee and 29% in the direct reports to
the executive committee, giving a combined
total of 30%. We also reported in June that
22% of the executive committee members
were between 30 and 50 years old, with the
remaining 78% being over 50. 64% of Mondi
South Africa’s management team (seven
out of 11 operational committee members)
were previously disadvantaged individuals
(2018: 60%, six out of 10).
Gender diversity 2019*
Male
% Female
%
Directors
6 75
2 25
Senior managers
186 87
29 13
Employees
20,267 79 5,379 21
* As at 31 December 2019
Senior managers including subsidiary directors as per the
definition set out in Section 414C of the UK Companies Act 2006
We consider all applications for
employment in a fair and balanced way,
based on capabilities, skills and experience.
Our Labour and Human Rights Policy
commits us to consistent and fair training,
career development and promotion,
including for people with disabilities.
1 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
2 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
3 An independent state-funded institution with a mandate to
promote and protect human rights in Denmark and abroad
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 42
Sustainability performance
Growing responsibly: Our progress in 2019
l
B
u
g
a
r
i
a
f
o
r
e
s
t
l
a
n
d
s
c
a
p
e
(
@
T
z
v
e
t
a
n
Z
a
t
a
n
o
v
)
l
4
sustainable
FIBRE
Our commitments to 2020
2019 performance in brief
Status
72% of wood and 99% of pulp sourced from
certified sources
All Chain-of-Custody (CoC) certifications
with Controlled Wood (CW) requirements
were maintained
100% of owned and leased forest lands
maintained as certified
Our risk-based approach
We recognise that there are significant
global challenges related to deforestation,
which affect biodiversity and ecosystems,
our climate and livelihoods. We are
committed to zero deforestation, no illegal
logging, and no use of illegal wood or
species listed by the Convention of
International Trade on Endangered Species
(CITES) or the Red List of International
Union for Conservation of Nature (IUCN).
We do not use wood from genetically
modified (GM) trees.
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 (CW)
Maintain FSC certification for 100% of our owned
and leased forest lands in South Africa and Russia
and promote sustainable forest management
Mondi uses wood fibre from responsibly
managed forests to make its packaging
and paper products. Responsibly sourced
wood is a sustainable, renewable resource
and we work hard to provide the best
assurance that our wood fibre is sourced
responsibly and transparently.
The majority of our wood fibre is sourced
in the form of roundwood and wood chips.
Around one quarter of this originates in
our managed forests in Russia and South
Africa and the remainder we buy from
external suppliers, mainly in central Europe.
We also buy a small proportion of our wood
fibre in the form of market pulp. We have
maintained 100% compliance with FSCTM,
PEFCTM or Controlled Wood sourcing of
all wood and pulp in 2019, ensuring full
transparency in our supply chain.
Our primary wood sourcing regions are in
South Africa, north-west Russia and Europe.
By sourcing wood from these regions, in
line with our Due Diligence Management
System (DDMS), we minimise the risk of
controversial wood entering our supply
chain. We support multi-stakeholder
platforms globally to address root causes
of deforestation.
Our DDMS applies a risk-based approach
to ensure legal compliance and also to
address broader economic, social and
environmental issues across our entire wood
supply chain. It focuses on two key areas:
Legal compliance: We classify our wood
sourcing countries into three categories
of risk – high, medium and low. Risk levels
are based on the strength of national
governance systems and the prevalence of
legal risks within each country. Within each
risk category we have defined the level of
assurance or certification grade of materials
sufficient to comply with legal requirements
for each country.
Sustainability issues: We go beyond
the requirements of current assurance
mechanisms by screening economic,
social and environmental issues, using
publicly available information and insights
from partners to ensure timely detection
and targeted response to critical issues
in our wood supply chains on a case-by-
case basis.
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.
In 2019, 72% of our total procured wood
was certified to FSC or PEFC (2018: 71%)
and 99% of our externally procured pulp
was from FSC- or PEFC-certified sources
(2018: 94%). All our mills are certified to FSC
and/or PEFC Chain-of-Custody standards.
Mondi Group Integrated report and financial statements 2019
Growing responsibly: Our progress in 2019
43
We have established a Certification
Managers Network which brings Mondi’s
wood supply teams from across Europe
together with external experts to facilitate
collaboration and alignment of local
Due Diligence Systems and practical
implementation of control measures.
Effective use of wood fibre
in the forest products value chain
The world is facing growing demand for
sustainable forests and sustainable wood
fibre. The current focus on substitution
of materials – paper packaging instead
of plastic, wood biomass energy instead
of fossil fuels – will continue to drive this
trend. We believe there are a number
of approaches that are fundamental to
meeting the demand for sustainable wood
fibre in the long term:
Sustainable Working Forests model:
Securing resilient forest landscapes is
key to producing sustainable virgin fibre.
The Sustainable Working Forest model1
integrates productive renewable forest
sites with effective ecological networks,
and is the basis of how we practice forestry
at Mondi.
Integrated wood fibre system: Virgin
and recycled fibres are complementary
across the forest products value chain.
A proportion of virgin wood fibre will
always be needed in the fibre supply chain
to ensure recycled paper production and
supply are sustainable in the long term.
Cascading use of wood approach: In order
to reduce the pressure on the world’s
forests, wood should first be used to make
high-value products like furniture, packaging
and fine papers before it is reused, recycled
and finally burnt for energy generation.
We are not in favour of direct use of wood
as an energy source.
Over the last 25 years the forests area in
Europe has been growing. Forest area
has expanded by 17.5 million hectares and
wood stock grew by 10.1 billion m3 with
total biomass carbon stocks increasing by
42%2. We consider not only the positive
impact of forests on climate change, but
also the obvious impact of climate change
on forests.
1 https://www.mondigroup.com/en/sustainability/working-forest/
2 Forest Europe, State of Europe’s forests 2015, https://foresteurope.
org/state-europes-forests-2015-report/
climate
change
5
Our commitments to 2025 and 2050
2019 performance in brief
Status
Reduce Scope 1 and 2 GHG emissions 34% per tonne
of saleable production by 2025 and 72% per tonne of
saleable production by 2050, from a 2014 baseline
15.5% reduction of specific Scope 1 and 2
CO2e emissions against the 2014 baseline
Reduce Scope 2 GHG emissions 39% per MWh by 2025
and 86% per MWh by 2050 from a 2014 baseline
6.1% reduction of specific Scope 2 CO2e
emissions per MWh against the 2014 baseline
Our customers are increasingly concerned
about the consequences of climate change
and are looking to us for more sustainable
solutions. We are taking action and
managing our impacts by transitioning to
low carbon energy technologies, reducing
the carbon footprint of our products
and refining our approach to sustainable
fibre and forest management. In 2019 our
science-based greenhouse gas reduction
targets to address the climate crisis
were approved by the Science Based
Targets initiative and we updated our
commitments accordingly.
Producing pulp, paper and packaging is
energy-intensive and energy generation is
the major source of our greenhouse gas
(GHG) emissions. In addition, fibre is the
main raw material for our products and
forests are an important carbon store,
with sustainably managed forests having
the opportunity to support a circular
bioeconomy. We combine strategic
energy-related investments across our pulp
and paper mills with good management
and best-practice sharing. We invest in
optimising energy and process efficiencies
and replacing fossil fuel-based energy with
renewable biomass sources.
Sustainable Development report
www.mondigroup.com/sd19
Managing climate-related risks
and opportunities
We identify and assess climate-related risks
using our group-wide risk management
framework. It includes pre-determined risk
tolerance limits, established by the Board,
based on the likelihood and severity of
risk factors.
Climate change has the potential to
affect our business in various ways.
While these may not be severe in the
short term, we believe climate-related risks
are likely to have a medium and long-
term impact on our business. We have
identified both transition and physical risks.
Governments and regulators are likely
to take action to curb carbon emissions
that may impact our business, such as the
introduction of carbon taxes. Changes in
precipitation patterns and extreme weather
conditions such as floods, storms, droughts
and fires may impact our plantations and
the forests we source wood from and could
result in fibre supply chain interruptions and
higher fibre costs. Higher temperatures may
also increase the vulnerability of forests
to pests and disease. Increased severity
of extreme weather events may also
interrupt our operations. In water-scarce
countries, we may see an impact on our
production process as a result of limited
water availability.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 44
Sustainability performance
Growing responsibly: Our progress in 2019
We assess the financial implications of
climate-related risks according to the
Financial Stability Board’s Task Force on
Climate-related Financial Disclosures
(TCFD) recommendations, considering
a 2°C scenario and a business as usual
scenario. Three key climate-related risks and
three opportunities have been identified to
calculate our first estimate of the financial
implications. We have evaluated the impact
the reduction of CO2 allowances during the
next EU Emissions Trading System (ETS)
period would have on our manufacturing
operations in the European Union. We have
also identified how extreme weather
conditions may result in reduced tree growth
yields at our South African forests and how
water scarcity may impact our operations in
the country. Our climate-related opportunities
include reduced operating costs through
greater energy and water efficiency and
generating income by selling low-carbon,
biomass based chemical by-products from
our pulp process (such as turpentines) as well
secondary raw materials.
Working with WWF’s Climate
Savers programme to set science-
based targets
In 2018, we joined Climate Savers1, WWF’s
climate leadership programme for businesses.
In 2019, the Science Based Targets initiative
(SBTi)2 assessed and approved our Scope
1 and Scope 2 science-based target
submissions against the Call to Action’s
eligibility criteria. These science-based targets
will help Mondi support the global transition
to a low-carbon economy.
Our science-based targets together cover
more than 95% of Mondi´s total Scope 1 and
2 emissions3. They are:
1) Reduce Scope 1 and 2 GHG emissions
by 34% per tonne of saleable production
by 2025 and 72% per tonne of saleable
production by 2050 from a 2014 base year.
2) Reduce Scope 2 GHG emissions by 39%
per MWh by 2025 and 86% per MWh by
2050 from a 2014 base year.
“By setting science-based
GHG reduction targets,
Mondi has taken an important
step in supporting the
achievement of SDG13.”
Manuel Pulgar-Vidal,
WWF’s global climate and energy practice lead
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, Mondi has invested around
€700 million in energy efficiency measures
and generating biomass-based energy
in our mills. We identify potential energy
efficiency projects through our ongoing
internal energy efficiency programme
(DIANA). Projects are assessed against the
level of investment, potential financial and
energy savings, CO2 reduction and their
contribution to energy security.
GHG emissions:4, 5
Our mills‘ absolute scope 1
emissions
Our mills‘ absolute scope 2
emissions
Our mills‘ specific GHG emissions
(per tonne of saleable production)6
Our mills‘ specific scope 1 emissions
(per tonne of saleable production)6
Our mills‘ specific scope 2
emissions
(per tonne of saleable production)6
Our GHG methodology
Sustainable Development report
www.mondigroup.com/sd19
2014 baseline
CO2e
2018
CO2e
2019
CO2e
4.3 million
tonnes
3.8 million
tonnes
3.9 million
tonnes
1.0 million
tonnes
0.58 million
tonnes
0.46 million
tonnes
0.84 tonnes 0.72 tonnes
0.71 tonnes
0.69 tonnes 0.63 tonnes 0.64 tonnes
0.15 tonnes
0.10 tonnes 0.07 tonnes
Energy consumption and energy intensity (mill operations):5
Energy consumed by pulp and
paper core processes in the form
of heat and electricity at our
operations
Electricity purchased by our mills
from external sources
Total electricity requirements for
producing pulp and paper
Total heat requirements for
producing pulp and paper
2014 baseline
GJ
2018
GJ
2019
GJ
90.7 million
91.6 million
91.1 million
7.6 million
4.3 million
3.6 million
20.0 million
19.3 million
19.8 million
70.7 million
72.2 million
71.3 million
Energy sold to the local grids
10.8 million
8.5 million
8.3 million
Total energy sales including green
fuel sales
Our mill’s electricity self-sufficiency
(including energy sales)
Our mill’s electricity self-sufficiency
(excluding energy sales)
12.8 million
10.2 million
9.8 million
95%
77%
100%
102%
85%
87%
% change
2018-2019
2.7%
increase
21.7%
decrease
1.8%
decrease
1.4%
increase
22.7%
decrease
% change
2018-2019
0.5%
decrease
14.7%
decrease
2.6%
increase
1.4%
decrease
3.2%
decrease
3.6%
decrease
1 https://climatesavers.org
2 https://sciencebasedtargets.org/
3 Scope 1 emissions of our converting operations are excluded from our science-based GHG reduction target as there is currently no sector
based calculation approach available.
4 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/sd19
5 Figures have been rounded for ease of reading, however % change 2018-2019 has been calculated using full performance figures as disclosed
in our Sustainable Development report www.mondigroup.com/sd19
6 2014 baseline excludes divested mills
Mondi Group Integrated report and financial statements 2019 Growing responsibly: Our progress in 2019
Constrained
resources and
environmental
impacts
6
Our commitments to 2020
2019 performance in brief
Status
Reduce specific contact water consumption
from our pulp and paper mills by 5% compared to a
2015 baseline
1.9% reduction of specific contact water
consumption against the 2015 baseline
Reduce specific waste to landfill by 7.5% compared to
a 2015 baseline
3.0% decrease 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
12.6% reduction of specific NOx emissions
against the 2015 baseline
Reduce specific effluent load to the environment
(measure COD) by 5% compared to a 2015 baseline
7.9% increase of specific effluent load against
the 2015 baseline.
The linear use and discard of materials
has led to resource scarcity, pollution,
biodiversity loss, degradation of
land and water, and climate change.
Using raw materials and energy efficiently
is fundamental to being a sustainable
business, ensuring we manage our adverse
impacts and maximise our opportunities.
Resource efficiency is relevant to many of
our material issues – from product design
to minimising our environmental impacts
and sourcing responsibly. We consider
waste disposed at landfills and emissions
to air and water as wasted resources and
we take action to minimise them across
our operations. Our investments in Best
Available Techniques (BAT)1 have enabled
us to achieve significant improvements in
resource efficiency.
1
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/
45
Water reduction and recycling
The paper and pulp industry is water-
intensive; our mills and converting
operations impact on water resources and
communities through their withdrawal and
use. We are committed to managing our
water impacts by reducing our water use
and increasing water recycling.
In 2019, we worked with WWF to develop
a new water stewardship assessment
methodology to help us identify basin- and
production-related water risks, understand
shared challenges facing the catchment and
identify measures to manage future risks.
Total Group water input was around
306 million m3 in 2019 (2018: 303 million m3),
with specific contact water consumption at
our mills at 33.0 m3 per tonne of saleable
production (2018: 33.2 m3). In water scarce
areas in South Africa, we used 27 million m3
of water (2018: 25 million m3), a 5.5% increase
on the previous year. This increase was mainly
due to process instabilities at our Richards
Bay (South Africa) mill during 2019 negatively
impacting our water use efficiency.
Effluent and wastewater quality
We have invested €75 million in
modernising our wastewater treatment
plants, including at our mills in Świecie
(Poland) and Syktyvkar, since 2013.
Our commitment is to reduce the specific
effluent load (COD) of waste water by 5%
by 2020 (against a 2015 baseline). As of
the end of 2019, the Group´s COD had
increased by 7.9%. As above, this is mainly
due to process instabilities at our Richards
Bay mill, which caused increasing COD
loads to be treated by the mill’s wastewater
treatment plant. Improvements to the
production site and in the wastewater
treatment plant are planned for 2020.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 46
Sustainability performance
Growing responsibly: Our progress in 2019
Managing waste
We work closely with partners such as the
World Business Council for Sustainable
Development (WBCSD), WWF, New
Plastics Economy initiative and CEPI to
support the transition to a circular economy.
Our goal is zero waste to landfill and we
focus on developing initiatives to enable
our business and the packaging and
paper sector as a whole to achieve greater
resource efficiency.
We have committed to reduce the waste
we send to landfill by 7.5% by 2020, against
a 2015 baseline. In 2019, we sent 37.1 kg
of waste to landfill per tonne of saleable
production (2018: 38.2 kg). This is a
3.0% decrease against 2015 and a 2.8%2
decrease since the previous year. It was
achieved through recycling programmes
for effluent fibre and boiler ash, and aided
by the shutdown of a paper machine at our
Merebank mill (South Africa).
Air emissions
We are committed to minimising
environmental impacts resulting from air
emissions from our sites. We carefully
manage our air emissions and use ISO
standards to monitor, analyse and calculate
absolute emissions of pollutants.
In 2019, we emitted 44 tonnes of TRS
(2018: 55 tonnes). This 19.7%2 decrease
compared with 2018 has been achieved
mainly by modernisation projects at
our mills.
In 2019, our SO2 emissions were 1,276
tonnes (2018: 1,567 tonnes). This represents
an 77.2% reduction against 2015 levels and
a 18.6% decrease on 2018, mainly due to
our boiler investments at our mill in Štětí
(Czech Republic).
Our specific NOx emissions amounted to
1.8 kg per tonne of saleable production
(2018: 1.7 kg), down 12.6% against 2015
levels. We emitted 928 tonnes of fine dust
emissions (particulates) (2018: 1,023), a 38.1%
decrease since 2015.
2 Figures have been rounded for ease of reading, however %
change 2018-2019 has been calculated using full performance
figures as disclosed in our Sustainable Development report
www.mondigroup.com/sd19
Biodiversity
and ecosystems
Mondi supports the WWF’s efforts to develop
a population recovery programme for reindeer
in the Komi Republic and Kamchatka.
Mondi Group Integrated report and financial statements 2019 Growing responsibly: Our progress in 2019
47
Our commitment to 2020
2019 performance in brief
Status
7
Promote ecosystem stewardship in the landscapes
where we operate through continued multi-
stakeholder collaboration
Biodiversity is a crucial component
of healthy functioning forests and
other important ecosystems.1 We
focus on implementing best available
practices for managing conservation
areas and maintaining natural capital in
our operations.
We aim to go beyond our forestry
operations to promote and catalyse
ecosystems stewardship by working in
partnership across broad landscapes and
product value chains.
Our most significant biodiversity impacts
and dependencies occur in our forestry
operations due to their large scale and
landscape-wide impacts. Biodiversity is also
relevant to our manufacturing operations
through the local impacts of our mills.
We have forestry operations in Russia
and South Africa. We manage 2.1 million
hectares of slow-growing natural boreal
forests in Russia and 254,000 hectares
of fast-growing forestry plantation
landholdings in South Africa, with around
a quarter set aside for conservation
and protection of biodiversity and
ecosystem services.
The measures we apply to manage our
impacts on natural ecosystems vary
depending on the region. In Russia, we
work with others to protect Intact Forest
Landscapes (IFLs) and Intact Forest Areas
(IFAs). We protect High Conservation
Values (HCV) areas, preserving them in
the natural state, imitating natural dynamics
in forestry and protecting watercourses
and soils. In 2019, a new national park was
established in Komi, Koigorodsky National
Park, which we achieved together with
Silver Taiga Foundation after more than
a decade of collaboration. In our South
African forestry landholdings, we recognise
the value of well-designed and managed
ecological networks to protect or enhance
biodiversity, and to increase the resilience
to adverse effects of severe weather events
and the climate crisis.
1 https://www.worldwildlife.org/publications/below-the-canopy
We continued active support and
collaboration with a number of organisations
We took steps to extend management of the
biodiversity impacts of our operations.
We have been exploring potential impacts
and dependencies of our pulp and paper
mills since 2015. Next steps will be to
develop site-specific Biodiversity Action
Plans (BAPs) for any relevant sites following
biodiversity impact assessment outcomes.
Sustainable Working Forest
and landscape approach
Our Sustainable Working Forest model
concept represents a resilient production
landscape, which maximises timber
production while seeking to maintain
biodiversity and ecosystem services.
A Sustainable Working Forest promotes
effective integration of productive forest
areas within a robust nature conservation
network. We aim to go beyond the
boundaries of our forestry operations and
proactively promote landscape stewardship
practices by engaging land tenants and
other stakeholders via our landscape
level initiatives.
Measuring our biodiversity impacts
We continue to improve existing metrics
and are developing new metrics to aid
measurement across our value chain.
For forests, we focus on locally relevant
and specific metrics which enable an
effective, targeted management response
to biodiversity conservation within forest
management plans.
Scaling up our impact
through collaboration
To have a meaningful positive impact, we
contribute to international dialogues and
processes, and actively engage with multi-
stakeholder platforms and organisations.
We work closely with WWF through our
global partnership, and regionally through
the WWF Russian Boreal Forest Platform
(BFP) and New Generation Plantations
Platform (NGP). Other key partnerships
include the WBCSD Forest Solutions
Group (FSG), the Natural Capital Impact
Group (NCIG) at the Cambridge Institute
for Sustainability Leadership (CISL), the
HCV Resource Network (HCVRN) and
International Union of Forest Research
Organisations (IUFRO).
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 48
Sustainability performance
Growing responsibly: Our progress in 2019
In 2019, we continued the rollout of our
responsible procurement process to our
key suppliers across specific procurement
categories. This included training procurement
teams and engaging with our suppliers on our
approach, principles and goals.
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
issues. We updated the Code in 2018 and
rolled it out in 2019 through our responsible
procurement process.
Human rights in the supply chain
Understanding and managing our human
rights impacts enables us to reduce risks,
meet shareholder needs, secure access to
resources, and strengthen our supply chains.
We continue to work on strengthening the
monitoring and reporting of potential issues
in our operations and supply chain, including
integration of labour and human rights risks
into our responsible procurement process.
Through our responsible procurement
approach, we are taking steps to identify
and address suppliers with high labour risk
exposure or non-compliance with our Code
of Conduct on labour issues. We have
started working with the Danish Institute
for Human Rights to strengthen our human
rights due diligence, impact assessment,
and governance.
“Our responsible
procurement process
ensures continuity in the
way we communicate our
values of environmental and
social responsibility to our
key suppliers worldwide.”
Beatrix Praeceptor
Chief Procurement Officer
1 Direct suppliers that were active in 2019 with at least one
purchase order
2 Our key suppliers are categorised as high spend suppliers
delivering their goods and services to more than one Mondi site
and classified within our supplier relationship management (SRM)
with the biggest share of strategic and captive suppliers
3 Wood and fibre are not part of the responsible procurement
process, but risk-assessed through our Due Diligence
Management System
Supplier Conduct
and responsible
procurement
8
Our commitment to 2020
2019 performance in brief
Status
Encourage supply chain transparency
and promote fair and sustainable working
conditions with our key suppliers
In today’s globally connected economy,
supply chain transparency is a priority for
stakeholders worldwide. It is a complex
challenge that requires cooperation
across the value chain. We are improving
transparency and managing our impacts
by partnering with suppliers to build a
responsible and inclusive supply chain.
Our global supply chain spans more than
14,000 tier one suppliers1 in 66 countries
around the world, of which 2,000 are
key suppliers2. Our focus on responsible
sourcing helps to ensure there are no
human rights violations and improves our
understanding of climate change and water-
related risks in our supply chain.
Further rolled out the responsible procurement
process and screened 1,000 suppliers
Improved our latest Modern Slavery statement
by using best-practice reporting guidance
Risk-based approach
We take a targeted, risk-based approach to
focus on relevant parts of our supply chain
and 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.
We have defined four key risk areas:
labour rights, climate change, water and
biodiversity. Our responsible procurement
process3 addresses these risks by
identifying high-risk suppliers with whom
we will work to resolve or effectively
mitigate risks. Wood fibre procurement is
covered by our Due Diligence Management
System (DDMS).
We conduct regular assessments of key
suppliers of wood, fibre and other raw
materials to evaluate the reliability of supply,
quality of service and environmental and
social practices of suppliers.
Mondi Group Integrated report and financial statements 2019 Growing responsibly: Our progress in 2019
Relationships
with communities
9
Mondi SCP (Slovakia) – Project Regiochem, visit to the Science Centre in Brno
Our commitment to 2020
2019 performance in brief
Status
Enhance social value in our communities through
effective stakeholder engagement and meaningful
social investments
SEATs were carried out at two further sites
and new investments were made in health
and education
As a global company employing around
26,000 people, we play an important role in
local communities – creating employment
and business opportunities and investing
in local infrastructure. We’re developing
our approach to measure the social value
we create through our investments in
communities around the world.
We work hard to support local livelihoods
and businesses and to build strong,
proactive and transparent relationships with
local stakeholders. We are continuously
improving our understanding of our social,
environmental and economic impacts
on local communities – be they positive
or negative, actual or potential, short- or
long-term, direct or indirect, and intended
or unintended.
We revised and improved investment
guidelines, to be rolled out in 2020
We do this through various forms of
impact assessment, monitoring and
reporting, including our tailored Socio-
economic Assessment Toolbox (SEAT)
and additional formal and informal
stakeholder engagement.
Outputs include SEAT reports, action plans
and community/stakeholder engagement
plans. We use these to inform and target
our community development programmes,
investments and initiatives, community
forums, and training of our community
and human resource professionals.
Committees and functions such as works
councils, health and safety committees
and others help shape our response to the
findings of local impact assessments.
49
Our SEAT at Frantschach mill (Austria) was
conducted in 2018 and the report published
in 2019. We conducted two SEATs in 2019,
at our Dynäs mill (Sweden) and Świecie mill.
Other local engagement processes include
targeted stakeholder surveys, impact
assessments, legally-required social and
environmental due diligence processes for
acquisitions and investments, and regular
direct engagement with local stakeholders.
Investing in communities
We base our community investment
decisions on the principles of sustainable
development, the needs of the community,
our business objectives and the potential
effectiveness of projects. The majority of
our initiatives promote education, health,
employment and enterprise support,
or support local infrastructure and
community development.
We’ve invested some €46 million in local
community initiatives over the past five
years, including employee time and gifts
in kind. Our investments in 2019 totalled
€13.1 million (2018: €7.9 million) and
supported a wide range of outcomes
including: building healthier communities
and improving their future prospects;
securing our supply chain; strengthening
local relationships; engaging employees;
and building trust in the Mondi brand.
The increase this year is largely due to more
accurate categorisation and reporting of our
infrastructure investments in Russia.
Our voluntary investments go beyond
monetary contributions; we create social
value through Mondi employees giving their
time and expertise and by sharing our core
skills, networks and influence.
Education
We support educational programmes with
a focus on science, technology, engineering
and maths (STEM) education. This helps
to secure talent and skills for our future
business by addressing the need for
technical knowledge in the areas where we
operate. Our mill in Ružomberok launched
‘Project Regiochem’ in 2019. It promotes
science and chemistry education with a link
to paper making for primary school pupils
aged 6 to 15.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 50
Sustainability performance
Growing responsibly: Our progress in 2019
Infrastructure and
community development
We invest in improving infrastructure and
development in the communities where
we operate. High-quality infrastructure
promotes access to important services,
empowers enterprise, facilitates improved
levels of health and education, and supports
our efficient business operations.
In some cases, impact assessments (for
example through SEAT) highlight the
need to support improvement of local
infrastructure. Examples include in Russia,
where we build or maintain more than
100 kilometres of forest roads annually, and
some of our mills, such as at Syktyvkar and
Ružomberok, which treat community waste
water in their wastewater treatment facilities
at no cost to the municipality.
Employment and
enterprise support
Our support for local enterprise creates
wealth and employment, strengthens
the local supply chain and builds more
independent, resilient communities. In South
Africa, our main channel for supporting
enterprise is Mondi Zimele1, which
supported 21 businesses and provided
discounted loan funding of €1.4 million in
2019. This brings the total to €12 million
since 2012, supporting over 230 local
businesses, and contributing to creating
over 3,500 jobs.
The small-scale timber grower programme
has benefited over 3,200 growers through
Mondi Zimele supporting and sourcing
timber from 1-2 hectare households in rural
communities. It has helped generate direct
revenues of €6.75 million to date. As part
of the programme, Mondi Zimele has
distributed 2.1 million seedlings to eligible
small growers, and provided training, mill
visits and knowledge-sharing field days.
Sibuyile Investments,
a community owned
silviculture supported
by Mondi Zimele
Health
Public health provision can be a challenge
in some remote communities where we
operate and improving the health of our
workforce and local communities is an
important element of our community
strategy. We actively promote the health
and wellbeing of our people.
Examples include:
e An on-site medical facility at our
Stambolijski mill (Bulgaria) which is
accessible to both employees and the
local community
e ‘Mondi for Life’ project at Štětí mill which
now supports 432 members from the
workforce and the community to promote
a healthy work-life balance and a healthy
and active lifestyle
e Health programmes at our Syktyvkar mill,
including a medical treatment facility and
family care programmes
e Our Austria-wide health management
programme which focuses on safe
and healthy working conditions and
sustainable health management
for employees
e In South Africa, we operate nine mobile
clinics in partnership with local NGOs
and the Department of Health.
They provide comprehensive health
care for our forestry contractor
employees and remote communities
that do not have access to health
care services
1 http://www.mondizimele.co.za/
Mondi Group Integrated report and financial statements 2019 Growing responsibly: Our progress in 2019
51
Solutions that create
value for our customers
10
Our commitments to 2020
2019 performance in brief
Status
Encourage sustainable responsibly procured products
Additional commitment added in 2018
Ensure 100% of plastic packaging is reusable,
recycable, or compostable by 2025
Introduced EcoSolutions, our customer-
centric approach
Joined CEPI´s ‘4evergreen’ platform
The first Progress Report on the Global
Commitment was published
Completed Project Proof, a pre-competitive
project to design a prototype plastic-based
flexible packaging solution that can be
recycable at scale
Innovative, responsibly produced
packaging and paper products play a
crucial role in tackling issues such as food
waste, resource scarcity, plastic leakage
into the environment and the climate crisis.
Rising demand for responsibly produced
products is an opportunity to grow our
business by engaging partners to unlock
fit-for-purpose plastic and paper-based
solutions supporting a circular economy.
Packaging and paper
that is sustainable by design
Mondi is uniquely positioned to offer a
range of high-performance paper-based,
flexible plastic and hybrid packaging
products. To ensure packaging is fit-
for-purpose and supports customers to
achieve their sustainability goals, we have
rolled out our customer-centric approach,
EcoSolutions. We aim to enable our
customers to make a conscious decision to
use packaging that is sustainable by design.
Our sustainable solutions are created to
offer functionality, maximise recyclability
and minimise waste. Our benchmark for
sustainable products is that they must
meet at least two of our Sustainable
Products criteria, with responsible
sourcing mandatory.
In 2019, our businesses finalised business-
specific criteria and now track progress in
developing sustainable products. This will
increase the transparency of our sustainable
products portfolio for our business,
customers and partners.
Developing the circular economy
We are committed to supporting
the transition to a circular economy.
Our approach is characterised by
collaboration with customers and partners
who share our commitments. We are
helping to lead the change through multi-
stakeholder initiatives such as CEPI’s
4evergreen, CEFLEX1, and the Ellen
MacArthur Foundation’s New Plastics
Economy initiative2. We signed up to the
New Plastics Economy Global Commitment
made by leading brand owners in 2018,
retailers and packaging companies to
achieve 100% reusable, recyclable or
compostable plastic packaging by 2025.
As part of our involvement in the New
Plastics Economy Commitment initiative, we
led a pre-competitive partnership project to
design and prototype a plastic-based flexible
packaging solution that is scalable and
commercially viable and can be processed in
sorting and recycling facilities at scale.
Innovation – our R&D approach
In 2019, we invested €25 million in R&D
(2018: €22 million). We aim to increase
investment in research and development
to drive deeper collaboration throughout
our supply chain as we move away from
non-renewable and non-recyclable plastic.
Mondi’s research centres drive innovation
and collaboration across all Mondi
businesses, including the UFP Product
and Process Development Centre at
Hausmening (Austria), the R&D Innovation
Centre and Bag Application Centre at
Frantschach and the Consumer Flexibles
R&D Centre at Gronau (Germany).
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 social, environmental, legal and
ethical criteria
Renewable materials: Products made
with renewable material or feedstock
Recycled materials: Products made with
recycled content without compromising
on quality or safety
Resource optimisation: Products
designed, engineered and manufactured
to best utilise available resources and
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 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
For Uncoated Fine Paper (UFP), our
Green Range labelling system has been
in place since 2006. It is designed to
communicate three sustainability criteria
specific to our uncoated fine paper
products: FSC- or PEFC-certified; or
100% recycled fibre; or totally chlorine
free (TCF).
1 https://ceflex.eu
2 https://www.ellenmacarthurfoundation.org/our-work/activities/
new-plastics-economy
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 52
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
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
e Overall responsibility for the Group’s strategy and risk management
e Determines risk appetite in line with Group strategy, and approves the Group’s risk management framework
e Approves the annual budget and three-year plan
Board
Sustainable
development committee
Audit
committee
e Monitors and reviews material safety, health, environment
e Reviews and monitors the adequacy and effectiveness
and other sustainable development risks
of the 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
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
Business units
Group functions
e Responsible for identification of emerging risks and for
implementation of risk management policies and procedures
e Responsible for providing oversight, and management of certain
specialised risk areas that benefit from central coordination
(e.g. tax, treasury, information technology, sustainable
development, safety and health)
e Work closely with the business units to manage and monitor
these risk areas
The three levels of assurance in our internal control environment
Operational
management
e Key policies and procedures covering all main areas
of business conduct are approved by the Board 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.
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 Board and audit committee.
e The Group is subject to independent audits against
internationally accepted standards 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.
Mondi Group Integrated report and financial statements 2019 Our risk management framework and internal control environment
53
The Group’s organisational structure
is regularly reviewed and where
circumstances dictate, changes to the
organisational structure are recommended
to the executive committee or Board to
ensure it remains relevant.
The Board and its 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
internal control environment is in place to
anticipate and respond to risks. The Group’s
financial reporting process 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. In-depth reviews of business
units and market developments are
carried out by the Board. These regular
reviews are designed to ensure ongoing
monitoring of financial performance and
early identification of potential issues
and/or emerging risks. In addition, the
Board reviews the Integrated report and
financial statements to ensure these are
fair, balanced and understandable and the
audit committee reviews and approves the
accounting policies for each financial 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 2020 the
audit 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 Board 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
internal control systems have been in
place for the year under review and up
to the date of approval of the Integrated
report and financial statements 2019 and
are in accordance with the Guidance on
Risk Management, Internal Control and
Related Financial and Business Reporting
issued by the Financial Reporting Council.
No significant failings or weaknesses were
identified in the internal control systems for
the year under review.
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 Board has conducted a robust
assessment of the Group’s emerging and
principal risks to which Mondi is exposed
and it is 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 Board has overall responsibility for
setting the Group’s strategy and it is
responsible for monitoring and maintaining
the effectiveness of the Group’s risk
management activities and internal control
processes. The Board has put in place
procedures for identifying, evaluating, and
managing the risks faced by the Group.
The Board has determined the Group’s
risk appetite, using a risk rating matrix
which takes into consideration both the
likelihood of the risk event occurring 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 Board has also
established specific risk tolerance levels for
each category of risk. The Board considers
changes in current principal risks and
reviews emerging risks during the year.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 54
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
audit 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 assessment of principal risks is updated annually to
reflect the developments in our strategic priorities and Board
discussions on emerging risks. During the year, we enhanced
our understanding of the risks and implications related to
climate change, demand for sustainable packaging solutions
including substitution of plastic packaging and the UK’s exit
from the European Union.
We recognise investors and other stakeholders are seeking
a better understanding of how companies are evaluating and
responding to climate change related risks. We have been
evaluating the impact and reporting on these risks for a number
of years and this year have included climate change related risk
as a separate principal risk to provide further clarity on the key
impacts on our business and our associated response.
We have considered and will continue to closely monitor the
potential impact of COVID-19 on our business. We have not
seen any impact on the Group to date. The Group’s direct
exposure to China is limited, with revenues in the country
accounting for less than 1% of the total. We continue to monitor
its impact on global trade and the macro-economic outlook.
13
15
12
12
9
11
14
16
2
10
3
4
8
1
7
5
6
t
c
a
p
m
I
Likelihood
Key
Strategic
Financial
Operational
Compliance
1.
Industry productive capacity
2.
Product substitution
3.
Fluctuations and variability in
selling prices or gross margins
4. Country risk
5. Climate change related risk
6. Capital structure
7. Currency risk
8. Tax risk
9. Cost and availability of
raw materials
10. Energy security and related
input costs
11. Technical integrity of our
operating assets
12. Environmental impact
13. Employee and contractor safety
14. Attraction and retention of key
skills and talent
15. Reputational risk
16. Information technology risk
Strategic risks
Risk tolerance:
Low
Medium to low
High
Key person responsible:
Group CEO
The industries and geographies in which we operate expose us to specific long-term risks
which are accepted by the Board as a consequence of the Group’s chosen strategy and
operating footprint.
We continue to monitor recent capacity announcements and demand developments, how
consumers are demanding more sustainable packaging, the developments in the transition period
after the UK ended its membership of the European Union, the stability of the Eurozone, the
increasing prevalence of trade tariffs and economic sanctions and the potential impacts of the
coronavirus outbreak. Furthermore, while we continue to increase our understanding of climate
change related risks and the impacts become clearer, we will continue to improve our disclosures
and develop our responses.
The executive committee and Board 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 influence market prices through their
impact on the supply/demand balance. Unless market growth exceeds capacity
additions, excess capacity may lead to lower selling prices. In the markets where our
converting plants operate, 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, sustainable and responsibly produced
products. This is combined with our focus on growing markets and consistent
investment in our existing asset base securing 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 2019 55
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 marine and terrestrial ecosystems has led to
heightened environmental considerations, changes in legislation and a shift in consumer
attitudes towards packaging. While this could create opportunities for the Group, there
could also be a risk of substitution, which may be to different solutions not produced by
Mondi meeting the same customer requirements.
Factors that may positively or negatively impact the demand for our products
include reduced weight of packaging materials, electronic substitution of paper
products, increased use of recycled raw materials, substitution of plastic packaging,
substitution of rigid plastic by flexible packaging, increased demand for high-quality
printed material, increased demand for paper-based packaging, certified and
responsibly produced goods, and changes in demand for specific material qualities
such as recyclable/biodegradable packaging.
EcoSolutions case study
Page 32
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. Our sustainability task force on EcoSolutions collaborates across the
organisation to identify and respond to sustainability requirements from suppliers,
customers and consumers. It also monitors the current market trends and legislative
developments around sustainability of our plastic-based packaging. As a member
of the Ellen MacArthur Foundation’s New Plastics Economy initiative, 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. 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.
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 a number of uncertainties,
including the effects of increased protectionism, use of trade tariffs, economic
sanctions, the stability of the Eurozone, the uncertainty over the outcome of
agreements between the UK and the European Union after the UK ended its
membership of the European Union and more recently the potential effects of the
coronavirus outbreak in China (COVID-19).
In South Africa, the Group is subject to land claims and could face adverse land
claims rulings. 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 amended to allow government to expropriate land without compensation.
A process to have the South African Constitution amended accordingly has started
and is expected to be finalised in 2020. There could be other changes in legislation
governing land ownership in South Africa.
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.
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.
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, reduce 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 Board has 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. However, the Group’s exposure
to the UK is limited. The Group operates two Flexible Packaging plants in the UK, which
are expected to be closed in 2020 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. We are continuously assessing the risks, analysing the supply chain
and developing backup plans to manage any short-term disruptions. Given 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. Although the Group operates
one Engineered Materials plant in China and its overall direct exposure is limited, with
revenues in the country accounting for less than 1% of the Group’s revenue, we continue
to closely monitor the potential impact of the coronavirus outbreak.
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 2019OverviewStrategic reportGovernanceFinancial statements
56
Principal risks
Strategic risks
5 Climate change related risk
Potential impact
Climate change has the potential to affect our business in various ways. While these
may not be severe in the short term, we believe climate change related risks are likely to
have a medium and long-term impact on our business. Our manufacturing operations
are energy-intensive, resulting in both Scope 1 and Scope 2 GHG emissions.
In addition, fibre is the main raw material for our products and forests are an important
carbon store, with sustainably managed forests having the opportunity to support a
circular bioeconomy. Customers and consumers are increasingly concerned about
the consequences of climate change and are looking for solutions produced from
renewable materials and reduced carbon footprints. Our climate change related risks
relate to transition and physical risks and are described below.
Governments and regulators are likely to take action to curb carbon emissions that may
impact our business, such as the introduction of carbon taxes. For example, the EU
Parliament recently declared a climate emergency and called on all EU countries to phase
out all direct and indirect fossil fuel subsidies by 2020, in addition to encouraging an EU
policy to reach climate neutrality as soon as possible, and latest by 2050. In Europe, all
of our pulp and paper mills fall under the EU Emissions Trading Scheme (EU ETS) and
in South Africa, the government has committed to introduce a carbon tax. In Russia, the
strategy for the development of a low-carbon economy is currently under development.
Changes in precipitation patterns and extreme weather conditions such as floods,
storms, droughts and fires may impact our plantations and the forests we source
wood from and could result in fibre supply chain interruptions and higher fibre costs.
Higher temperatures may also increase the vulnerability of forests to pests and disease.
Increased severity of extreme weather events may also interrupt our operations.
In water-scarce countries, we may see an impact on our production process as a result
of limited water availability.
Monitoring, mitigation, and where relevant, independent assurance activities
We focus on measures to reduce our GHG emissions by improving our energy
efficiency, 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. We do this with a combination of capital investments and ongoing
efficiency programmes.
We look to source our wood from diverse regions and forest types to mitigate the
potential impacts of climate change on our wood supplies, in particular in Europe.
In South Africa, we continue to investigate and develop wood species which require
less rainfall and are more resistant to pests and disease.
We monitor and measure our impact on climate change. Our reporting on GHG
emissions and energy is independently assured and we have set science-based targets
for our Scope 1 and Scope 2 emissions. We support WWF Climate Savers programme
and the We Mean Business Coalition which aims to catalyse business action and drive
policy ambition to accelerate the zero-carbon transition.
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. We will continue to investigate the financial implication of our mid- and
long-term climate-related risks and opportunities using the International Energy
Agency’s 2°C scenario and a business as usual scenario (RCP8.5).
Climate change
Pages 43-44
Sustainable Development report
www.mondigroup.com/sd19
Financial risks
Risk tolerance:
Low
Medium to low
High
Key person responsible:
Group CFO
6 Capital structure
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.
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.
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 Board 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.
7 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.
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.
Mondi Group Integrated report and financial statements 2019 57
8 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 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 Board has approved the Group tax strategy and performs 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.
Operational risks
Risk tolerance:
Low
Medium to low
High
Key people responsible:
Group CEO,
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.
9 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, polymers 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, 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.
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.
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 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 unforeseen
events on our wood supplies.
We have developed a responsible procurement process 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.
Wood and pulp suppliers are assessed as part of our Due Diligence Management
System which addresses the main legal and sustainability risks.
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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 58
Principal risks
Operational risks
10 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.
11 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 Engineered Materials 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.
We have established a central digital transformation function to drive operational
efficiency through advanced analytics, automation and robotics.
12 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.
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.
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. Our Asset Management and Technical Integrity Management systems
have contributed to a continuous improvement of our risk profile.
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 at our
major sites and enhance our engineering and loss prevention competencies
and capabilities.
Our Fire Protection programme is supported by external experts and independent
loss prevention audits and we take out property insurance cover for key risks.
Monitoring, mitigation, and where relevant, independent assurance activities
We ensure that we are complying with all applicable environmental and 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 impact of plastics in the environment, and to work
together on scaleable, meaningful solutions to address this. Our product design
and innovation efforts focus 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.
Mondi Group Integrated report and financial statements 2019 59
13 Employee and contractor safety
Potential impact
We operate large facilities, often in remote locations. 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 mindset and safety culture of sending everybody
home safely.
14 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 or highly competitive markets 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.
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. We have a Permit to Work methodology across the
Group to improve our 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.
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 diversity and inclusion, labour
and human rights policies in place. 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.
Our mentoring programme
boosts professional networks
by connecting
leaders and employees
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 60
Principal risks
Compliance risks
Risk tolerance:
Low
Medium to low
High
Key person responsible:
Group CFO
15 Reputational risk
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,
underpin our approach.
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.
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. We perform sustainable
development risk assessments for our suppliers and have updated the Code of
Conduct for Suppliers.
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.
Our legal and governance compliance is supported by a centralised legal
compliance team and is subject to regular internal audit review.
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.
16 Information technology risk
We have a confidential reporting hotline, Speakout, enabling employees, customers,
suppliers, managers and other stakeholders to raise concerns about misconduct.
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 have a comprehensive IT Security Policy approved by the Board 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 2019 61
Viability statement
As part of the approval of this Integrated
report, the Board has 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 16 to 25. Our strategy is to deliver
value accretive growth sustainably by
focusing on our four strategic value drivers.
Our industry-leading asset portfolio
and our focus on performance and
sustainability 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 strategy and strategic
performance section.
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 Board believes that the three-years to
December 2022 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 Board
has 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 above, the Board believes that
the ability to assess the Group’s longer-
term viability beyond this period becomes
increasingly reduced. The Board has
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 principal risks identified
on pages 54 to 60 have been assessed
for potential impact as part of the
risk assessment.
The Group’s budget and three-year plan
has been tested for the most severe but
plausible downside scenarios. 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 risks associated with industry
productive capacity and fluctuations
and variability in selling prices and gross
margins were tested with scenarios of lower
packaging paper and uncoated fine paper
prices, weaker demand for products in
both upstream and downstream operations
and lower gross margins in downstream
operations. Testing was performed for
individual scenarios and their combinations
for a duration of three years. Furthermore,
the currency risk was tested as the wide
geographic spread exposes the Group
to the potential impact of exchange rate
fluctuations. We have evaluated the impact
of weaker US dollar, Russian rouble and
Turkish lira exchange rates, and stronger
other emerging market currencies including
South African rand, relative to the euro.
Based on the results of these scenarios,
the Board is 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 continues 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 Board is 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.
The Board believes that the strong and
stable financial position of the Group,
supported by a continued strong investment
grade credit rating, ensures the Group
has access to funding throughout the
business cycle.
In the scenarios evaluated, the Group
remains within its key financial covenant
ratio in terms of which its net debt to
12-month trailing underlying EBITDA ratio
must not exceed 3.5 times. The ratio net
debt to 12-month trailing underlying EBITDA
at the end of 2019 was 1.3 times, which
remains substantially below the maximum
covenant level of 3.5 times, providing
significant headroom. Underlying EBITDA
would need to fall 62% before triggering
the covenant.
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
will be able to continue in operation and
meet its liabilities as they fall due 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 and assessed
the significant risks as stated in the Integrated
report which may impact the Group’s
performance in the near term. This includes
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.
The Group´s net debt at 31 December 2019
was €2,207 million (2018: €2,220 million)
representing a gearing level of 33.5%
(2018: 36.7%). The Group´s net debt to
12-month trailing underlying EBITDA at
31 December 2019 was 1.3 times, well within
the key financial covenant requirement of
3.5 times.
At 31 December 2019, the Group had
€660 million of undrawn, committed debt
facilities. The Group’s debt facilities have
maturity dates of between less than 1 year
and 7 years, with a weighted average maturity
of 3.2 years. In February 2020, the Group
entered into an additional debt facility with
a maturity of 18 months, increasing the
undrawn, committed debt facilities available
to the Group by €250 million.
Based on our evaluation the Board 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 2019.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 62
Financial performance
Strong financial position
Our strong cash flow generation and financial position
make us resilient and provide us with strategic flexibility
to take advantage of opportunities.
Our financial performance
€ million
Group revenue
Underlying EBITDA
% margin
Depreciation, amortisation and impairments
Underlying operating profit
% margin
Underlying net finance costs
Net profit from equity accounted investees
Underlying profit before tax
Underlying tax charge
Underlying non-controlling interests
Underlying earnings
Special items (before tax)
Profit for the year attributable to shareholders
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
2019
7,268
1,658
22.8%
(435)
1,223
16.8%
(104)
—
1,119
(257)
(33)
829
(16)
812
167.6
171.1
19.8%
2019
4,800
948
952
620
(728)
6,592
4,015
370
2,207
6,592
2018
7,481
1,764
23.6%
(446)
1,318
17.6%
(88)
1
1,231
(273)
(42)
916
(126)
824
170.1
189.1
23.6%
2018
4,340
942
972
540
(749)
6,045
3,485
340
2,220
6,045
Mondi delivered a robust performance in
2019 against a backdrop of challenging
trading conditions, with Group revenue of
€7,268 million, down 3% on the prior year
and underlying EBITDA of €1,658 million,
down 6%. A solid operational performance,
strong cost control and a good contribution
from acquisitions and capital investment
projects, partially offset the effects of
market pressures seen in a number of key
pulp and paper grades.
Strategic performance
Page 26-33
Input costs were generally higher year-on-
year, although we did see some cost relief in
the second half of the year, measured both
on a sequential and year-on-year basis.
On average, wood costs were higher in local
currency terms. We saw higher wood costs
in Russia, South Africa and northern Europe,
while costs in some countries in central
and eastern Europe were lower due to
favourable regional wood supply dynamics.
Driven by Chinese import policies, average
benchmark paper for recycling costs were
down 21% on the prior year, with the rate
of decline accelerating in the second half
of the year. Chemical costs were higher on
average versus the prior year, albeit we did
see them coming down over the course
of the year, while energy costs were lower.
Cash fixed costs were higher on average
as a result of inflationary cost pressures
and mill maintenance shut effects, although
again we saw a positive trend over the
course of the year.
% change
(3)%
(6)%
(7)%
(9)%
(9)%
(1)%
(1)%
(10)%
Mondi Group Integrated report and financial statements 2019 63
Uncoated Fine Paper
e Impairment of the Neusiedler operation
in Austria. Impairment of assets of
€39 million was recognised.
e On 13 December 2018, a change in
the Austrian Social Security Law was
enacted. Effective 1 January 2020, the
law states that the plan liabilities of
the Group’s Austrian health insurance
fund are assumed by the Republic of
Austria. The effect of the change in law
is classified as a third party taking on
the obligation for future contributions
which is a one-off non-cash benefit to
the Group of €41 million. Further detail is
provided in note 23 of the consolidated
financial statements.
Corporate
e To effect the Simplification of the
corporate structure from a dual listed
company structure into a single holding
company structure under Mondi plc, the
Group incurred one-off transaction costs
of €20 million, of which €14 million were
charged as a financing special item to
the consolidated income statement and
€6 million were attributed to equity in
accordance with IAS 32. Further detail is
provided in note 21 of the consolidated
financial statements.
The impact of planned maintenance shuts
on underlying EBITDA in 2019 was around
€150 million (2018: €110 million). Based on
prevailing market prices, we estimate
that the impact of planned maintenance
shuts on underlying EBITDA in 2020 will
be around €100 million, of which the first
half year effect is estimated at around
€55 million (2019: €80 million).
Depreciation and amortisation charges
were marginally lower during the period as
the effects of acquisitions and our capital
investment programme were more than
offset by the impact of a revision in the
estimated useful lives on certain fixed
assets (refer to note 31 of the consolidated
financial statements).
Underlying operating profit of
€1,223 million was down 7% on the prior
year. After taking into consideration the
impact of operating special items of
€2 million (2018: €126 million), operating
profit of €1,221 million was up 2%
(2018: €1,192 million).
The net special item charge before tax of
€16 million (2018: €126 million) comprised
the following:
Flexible Packaging
e Announced closure of two
consumer flexibles plants in the UK.
Restructuring and closure costs of
€1 million and related impairment of
assets of €3 million were recognised.
Additional restructuring costs will be
incurred in 2020 with total costs expected
to exceed €10 million.
e Release of restructuring and closure
provisions of €5 million, partly offset
by additional restructuring costs of
€1 million, and reversal of impairment
of assets of €1 million were recognised.
All credits/(charges) related to special
items from prior years.
e Additional provision of €5 million relating
to the 2012 Nordenia acquisition was
recognised. The provision relates to a
special item from prior years.
Underlying EBITDA development
€ million
1,764
(87)
(103)
(14)
(18)
25
45
28
18
1,658
(435)
(2)
1,221
Underlying
EBITDA
Sales
volumes
Sales
prices
Variable
costs
Cash
fixed
costs
Currency
effects
Acquisitions
& disposals
Forestry
fair value
gain
Other
Underlying
EBITDA
Depreciation,
amortisation
& impairment
Operating
special
items
2018
2019
Operating
profit
2019
Movement in net debt
€ million
2,220
(1,635)
399
2,207
418
757
48
Cash generated
from operations
Capital
expenditure
Investment
in forestry
assets
Tax,
interest
and other
Ordinary
dividends
paid1
Net debt
Dec
2018
Net debt
Dec
2019
1 Ordinary dividends paid to shareholders and non-controlling interests
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 64
Financial performance
Net debt and interest
€ million
Net debt
Average net debt
Net interest expense
Effective interest rate
Committed facilities
Of which undrawn
2019
2,207
2,243
95
4.2%
2,476
660
2018
% change
(1)%
13%
14%
2,220
1,979
83
4.2%
2,487
616
Net debt to 12-month trailing underlying EBITDA
(times)
1.3
1.3
Strong cash flow generation
Cash generated from operations of
€1,635 million (2018: €1,654 million), reflects
the continued strong cash generating
capability of the Group, with the impact
of lower underlying EBITDA generation
mitigated by a net working capital inflow.
Working capital as a percentage of revenue
was 13.1%, in line with the prior year (13.0%)
and within our expected range of 12% to
14%. The net cash inflow from movements
in working capital during the year was
€35 million (2018: €117 million outflow).
In 2019, capital expenditure amounted
to €757 million (2018: €709 million),
driven by our major capital expenditure
programme. Tax paid of €248 million
(2018: €248 million) was in line with the
prior year.
Further outflows from financing
activities included the payment of
ordinary dividends of €396 million
(2018: €309 million) and interest paid of
€96 million (2018: €73 million).
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. The sources of
funding set out below provide us with a
diversity of funding sources with various
debt maturities.
Our short-term liquidity needs are met
through our €750 million Syndicated
Revolving Credit Facility. We aim to maintain
sufficient headroom under this facility for
the potential needs of the Group.
The Group’s liquidity position remains
robust. At the end of the year, €660 million
of our €2.5 billion committed debt facilities
were undrawn and the weighted average
maturity of committed debt facilities was
3.2 years.
Cash generated from operations
€ million
€1,635m
Maturity profile of net debt
€ million
€2,207m
Gearing at the same date was 33.5% 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. In February 2020, the Group
entered into an additional debt facility with
a maturity of 18 months, increasing the
undrawn, committed debt facilities available
to the Group by €250 million and further
strengthening the Group’s liquidity position.
The Group’s investment grade credit
metrics were reaffirmed during the
course of the year, at BBB+ and Baa1 for
Standard & Poor’s and Moody’s Investors
Service, respectively.
Net debt at 31 December 2019 was
€2,207 million, down from €2,220 million
at 31 December 2018, reflecting the strong
cash-generating capacity of our business,
while we continue to deliver on our capital
investment programme.
Underlying net finance costs of €104 million
were €16 million higher than the previous
year. While the effective interest rate was
stable at 4.2% (2018: 4.2%), trailing 12-month
average net debt of €2,243 million was
higher (2018: €1,979 million) as a result of
the special dividend paid to shareholders
(€484 million) and acquisitions totalling
€424 million completed during 2018.
Composition of debt
€ million
1,654
1,635
1,401
1,363
1,279
2015
2016
2017
2018
2019
Within 1 year
1–2 years
2–5 years
>5 years
711
188
568
740
Bonds
1,594
Bank loans
and overdrafts
Lease liabilities
Other loans
454
218
10
Mondi Group Integrated report and financial statements 2019
65
Currencies
Our global 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, converted
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 with derivative contracts.
Currency movements had a net positive
impact on underlying EBITDA versus the
comparable prior year period. The negative
impact of a weaker Turkish lira on translation
of our domestically focused Turkish
businesses was more than offset by the
benefits to certain of our export orientated
businesses of a stronger US dollar and
weaker South African rand.
.
Tax
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 Board,
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
€257 million (2018: €273 million) giving an
effective tax rate of 23%, in line with our
expectations. Tax relief on special items was
nil (2018: €34 million).
Assuming a similar geographic profit mix
and stable statutory tax rates, we expect
our effective tax rate in 2020 to remain
around 23%.
Net debt and finance costs
€ million
Currency split of net debt
%
Average net debt
Effective interest
Net finance cost (underlying)
1,650
%
3
6
.
1,476
%
2
6
.
1,572
%
8
4
.
105
101
85
2,243
1,979
%
2
4
.
88
%
2
4
.
104
2015
2016
2017
2018
2019
Euro
Czech koruna
Polish zloty
South African rand
Russian rouble
US dollar
Turkish lira
Pound sterling
Other
41
17
16
4
4
3
3
3
9
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
66
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.
Our business however does not operate in
isolation. Our success relies on our ability to
understand and engage constructively with
our key stakeholders along the value chain
most notably our employees, customers,
investors, communities, suppliers and non-
profit organisations.
We believe that the integrated nature of our
business places us in an ideal position to develop
sustainable packaging and paper solutions for
our customers. We engage with our suppliers at
each step along the value chain aiming to build
a responsible and inclusive supply chain where
we can be seen as a reliable and reputable
business partner.
Engaging with our stakeholders
Page 18-21
Forests and raw materials1
Mondi managed forests
Annual allowable cut:
8 million m3
Internally procured wood2
4 million m3
Externally procured wood
14 million m3
Paper for recycling
1.3 million tonnes (mt)
Resins
Films and
other raw
materials
1 Based on 2019 statistics
2 Due to commercial, logistic and sustainability considerations, the
actual wood procured from our managed forests was lower than
the annual allowable cut
3 In addition to the 1.5 mt of uncoated fine paper, the Group also
produced 0.2 mt of newsprint in 2019
4 Pulp and packaging paper net exposure
Recycling
Mondi Group Integrated report and financial statements 2019 67
Production processes1
Packaging and paper solutions1,4
Pulp and paper mills
Converting operations
Pulp
4.4 mt
Containerboard
2.5 mt
Box plant
Kraft paper
1.2 mt
Converting plants
Uncoated fine paper3
1.5 mt
Pulp
0.2 mt
Containerboard
1.6 mt
Corrugated
solutions
1.7 bn m2
Kraft
paper
0.4 mt
Paper bags
5.2 bn bags
Consumer flexibles
2.5 bn m2
Engineered
materials
5.5 bn m2
Uncoated
fine paper
1.5 mt
s
w
e
v
e
r
i
s
s
e
n
i
s
u
B
1
7
-
8
6
e
g
a
P
s
w
e
v
e
r
i
s
s
e
n
i
s
u
B
5
7
-
2
7
e
g
a
P
s
w
e
v
e
r
i
s
s
e
n
i
s
u
B
9
7
-
6
7
e
g
a
P
s
w
e
v
e
r
i
s
s
e
n
i
s
u
B
3
8
-
0
8
e
g
a
P
d
e
t
a
g
u
r
r
o
C
i
g
n
g
a
k
c
a
P
l
i
e
b
x
e
F
l
i
g
n
g
a
k
c
a
P
d
e
r
e
e
n
g
n
E
i
s
l
a
i
r
e
t
a
M
d
e
t
a
o
c
n
U
r
e
p
a
P
e
n
F
i
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
68
Business reviews
corrugated
packaging
Our Corrugated Packaging business
produces and sells a wide range
of containerboard and converted
corrugated solutions.
We are a leading containerboard producer
with an integrated, well-invested, cost-
advantaged asset base. We use our
containerboard to make a range of regular
and bespoke corrugated solutions designed
to keep our customers’ products safe, and
differentiate their brands in-store and online.
Our cost-effective fibre-based solutions are
made from a renewable resource, and are
lightweight, recyclable and biodegradable.
Industry end-use includes:
e FMCG and consumer products
e E-commerce and retail
e Automotive, heavy-duty and other
specialised applications
Leading market positions:
e #1 virgin containerboard producer
in Europe
e #1 containerboard producer
in emerging Europe
e #3 corrugated solutions producer
in emerging Europe
EnvelopeMailer
In response to growing e-retail sales
and the need to reduce product loss
experienced with commonly used
mailers while keeping transport volumes
at a minimum, we created a corrugated
EnvelopeMailer. The design allows
packing from flat to box shape, offering
utmost flexibility with a single packaging
item. This instantly ready, self-adjusting
package ensures products are well
protected and tightly packed. To develop
the solution our experts worked with
key stakeholders from across the value
chain to determine the sustainability
attributes needed for e-commerce
packaging lifecycles, including recycling
infrastructure and CO2 reduction
associated with light-weighting and
transportation optimisation. The result
is a high-strength paper-based
solution that leverages our knowledge
of corrugated manufacturing and
experience from creating our patented
sack kraft paper MailerBag to offer
another fully recyclable alternative to
plastic e-commerce bags.
Operating sites
21 in 8 countries
Paper mills: 5
Converting plants: 16
Employees
6,700
Production capacity
2,535 ktpa
Containerboard1
1
In addition, the Štětí mill (Czech Republic) has 120 ktpa of
containerboard capacity
ecosolutions
highlights
BucketBox
Working closely with global chemical
company Wacker, we created
BucketBox a new easy to handle, leak-
proof, one-piece corrugated solution
for chewing gum premix production,
designed to hold 110°C hot molasses
which turns solid after three days.
Using our EcoSolutions approach,
we assembled a team of experts
to work with Wacker to determine
their packaging and sustainability
requirements. Our engineers
applied their extensive experience
in extrusion coatings to develop a
food-safe corrugated solution that is
fully recyclable and replaces difficult
to recycle barrier boxes and rigid
plastic drums.
Mondi Group Integrated report and financial statements 2019 69
Financial performance
€ million
Segment revenue
Underlying EBITDA
Underlying EBITDA margin
Underlying operating profit
Capital expenditure cash payments
Operating segment net assets
ROCE
Sustainable development
% change
(5)%
(18)%
(21)%
TRCR
Gender diversity
Training hours
per 200,000 hours worked
% women employed
thousand hours
Energy consumption
million GJ
Scope 1 and 2 GHG emissions million tonnes CO2e
FSC- or PEFC-certified wood
procured
%
Environmental management
certification
% of operations certified to
ISO 14001 standards
CoC Certification
Hygiene certification
% operations certified to FSC
or PEFC CoC standards
% food contact operations
certified to recognised food
hygiene standards
1 Refer to note 2 in the notes to the consolidated financial statements for basis of restatement
2019
2,014
583
Restated1
2018
2,115
707
28.9%
33.4%
459
257
2,166
24.9%
2019
0.73
21
111
28.16
0.51
94
79
100
79
582
157
2,001
34.7%
Restated1
2018
0.77
21
96
23.52
0.39
91
79
95
58
Segment revenue
€ million
€2,014m
Underlying EBITDA margin
1,631
1,569
1,798
%
2
6
2
.
%
0
6
2
.
%
5
6
2
.
2,115
2,014
%
4
3
3
.
%
9
8
2
.
Underlying EBITDA
€ million
€583m
ROCE
707
%
7
4
3
.
583
%
9
4
2
.
427
408
%
9
7
2
.
%
8
3
2
.
477
%
0
4
2
.
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Financial review
While margins and returns remain strong,
underlying EBITDA was down 18% on
the prior year to €583 million, with
lower average containerboard selling
prices and the effects of longer planned
maintenance shuts more than offsetting the
full year contribution from the acquisition
of Powerflute (Finland) completed
in 2018 and a strong performance in
the downstream corrugated solutions
business. Performance in the year was
further supported by enhanced value
chain alignment and our ongoing profit
improvement programme.
Following sharp declines in the first half,
containerboard prices stabilised in the
third quarter before some further price
erosion towards the end of the year.
The magnitude of the decreases varied
by grade. Average benchmark European
prices for unbleached kraftliner were
down 11% year-on-year while benchmark
recycled containerboard prices were down
around 18% year-on-year. Prices in the
specialty grades of white top kraftliner
and semi-chemical fluting were down
around 3% year-on-year. Encouragingly,
we saw a deceleration of customer de-
stocking and improvement in order books
as we progressed through the second
half and into the new year. In response to
these improved market conditions we are
currently in discussions with customers
around price increases for unbleached
kraftliner and recycled containerboard.
Corrugated Solutions achieved 3% overall
box volume growth, with strong growth in
central and eastern Europe, underpinned
by good demand in fast moving consumer
goods, retail, e-commerce and specialised
applications. This was partly offset by
weaker volumes in Turkey. The business
benefited from lower input paper prices
while it remained focused on further
enhancing its product offering, quality and
service to customers and implementing
continuous improvement initiatives to
reduce conversion costs.
Input costs were on average stable year-on-
year. Cash fixed costs were modestly higher,
driven by maintenance costs and inflationary
cost pressures.
Planned maintenance shuts were completed
during the first half of the year at Syktyvkar
(Russia), Powerflute and Richards Bay
(South Africa) and during the second half
at Świecie (Poland). A similar maintenance
shut plan is scheduled for 2020.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 70
Business reviews
Corrugated Packaging
Operational review –
delivering on our strategy
We want to grow our business responsibly,
addressing sustainability challenges and
opportunities along the value chain.
Climate change is one of our Growing
Responsibly model Action Areas and we
focus on energy optimisation programmes
and increasing the use of renewable energy
as we transition to a low carbon economy.
We are investing in new standby power
boilers at our Świecie mill to replace two
coal boilers. The new boilers can eliminate
coal as a fuel source and will reduce the
mill’s greenhouse gas emissions. The
€27 million investment is planned to be
completed in the second half of 2021.
This year we hosted several open door
day events at Świecie to proactively
engage with the local community. We also
conducted a socio-economic assessment
and will publish the report findings in 2020
to provide an overview of the feedback
received from stakeholders on issues that
are important to them.
Engaging with our stakeholders
Page 21
We continue to focus on enhancing
performance across our business. In 2019,
we pre-selected a number of paper
machines across our network and set
improvement targets on a quarterly basis
to further drive operational excellence.
We successfully improved efficiency and
productivity through our targeted action
plans and detailed monitoring, as well as
collaboration and best-practice sharing
between our people. In our corrugated
solutions plant network, we commenced a
similar programme during the year to drive
performance and reduce converting costs.
Continuous improvement initiatives will
remain a focus area in 2020.
Strategic performance
Page 26-33
Our commercial excellence initiatives this
year focused on broadening our geographic
reach in our containerboard sales and
optimising corrugated solutions pricing.
We increased our containerboard export
sales volumes in existing markets and in
new geographies, benefiting from our
enlarged product portfolio following the
integration of Powerflute, acquired last year.
In our converting network, we focused on
strengthening our international key account
relationships and tailored solutions for our
customers. To further support this, we also
implemented dynamic digital pricing tools
based on advanced analytics.
As part of our ongoing portfolio review,
accelerated by weaker domestic market
conditions, we shut a 65,000 tonne per
annum recycled containerboard machine at
our mill in Tire Kutsan (Turkey) in the second
quarter, while continuing to operate the
75,000 tonne per annum machine on-site.
The investment in a new 300,000 tonne per
annum kraft top white machine and related
pulp mill upgrade at Ružomberok (Slovakia)
is making good progress. The pulp mill
rebuild was successfully commissioned in
the second half of 2019 while the kraft top
white machine is expected to start up at the
end of 2020.
Our ongoing investments at our corrugated
solutions’ plants are progressing well.
At our Bupak (Czech Republic) plant,
we are investing to broaden capabilities,
reduce conversion costs and focus on
growing e-commerce applications, and in
Ansbach (Germany), we are investing to
grow with our customers, reduce conversion
costs and secure the plant’s long-term
competitiveness as a leading heavy-duty
corrugated packaging supplier.
We were encouraged that during our annual
maintenance shuts, we had no major safety
incidents. We engaged with our employees
and contractors in detail ahead of time
and through practical advice and shared
responsibility, everyone felt a greater sense
of ownership, resulting in an improved safety
awareness and performance.
During the year, and as part of promoting
a diverse and inclusive workplace, our
Świecie mill started a female leadership
initiative aimed at attracting and retaining
women in leadership roles. We also
piloted a recognition programme across
the business called ‘You make Mondi’ to
encourage our people to provide feedback
and actively recognise good work identified
by colleagues which has now been rolled
out across the Group. Our corrugated
solutions business continued to attract and
retain people through a talent programme,
creating a pipeline of future leaders within
the business. The programme provided
employees with an opportunity to develop
their leadership skills and has already
yielded several managerial placements
across this plant network, while promoting
gender, age and cultural diversity.
To connect better with our customers and
drive process efficiency improvements, we
developed our myMondi digital customer
platform for both our corrugated solutions
and containerboard customers, to be
implemented in 2020. These tools will allow
our customers to track their orders online,
file claims, access additional order and
product information and, if applicable place
their orders electronically.
Pleasingly, Corrugated Solutions won three
2020 WorldStar1 awards, building on its
success in winning 12 such awards in the
prior two years, proof of our ambition to
continue delivering innovative solutions
that best meet our customers’ needs.
Our WorldStar awarding winning Stabilising
System is one such example of our
innovative capabilities where we developed
a stabilising component for transporting
dairy products that secures the goods
during transport, increases capacity by more
than 40%, and is fully recyclable.
1 The WorldStar awards are open to packaging organisations
from across the world, the competition acknowledges the best
ideas, innovations and technologies in the market. Judges look
for sustainable solutions to packaging challenges, demonstration
of enhanced user convenience and reduced material waste.
2020 winners were announced in December 2019.
Mondi Group Integrated report and financial statements 2019 71
Delivering on our strategy
Progress in 2019
Medium term priorities
Delivering value
accretive growth
sustainably
e Commenced investment in new standby power
boilers at our Świecie mill to reduce the mill’s
environmental footprint
e Hosted several community open days
e Progress with energy optimisation programmes
e Ongoing engagement with our communities
to address challenges, understand and
manage risks, generate opportunities and
improve performance
Sustainability performance
Page 34-51
Strategic value drivers
Progress in 2019
Medium term priorities
Drive performance
along the value chain
e Implemented and realised initial benefits from
e Continuous improvement initiatives to drive
operational and commercial excellence initiatives
e Closure of a paper machine at our Tire
Kutsan mill
performance, benefiting from vertically integrated
and more closely aligned business unit
e Continue to roll out digital projects to improve
performance from operations to pricing
Invest in assets
with cost advantage
e Progress made with new paper machine
investment at Ružomberok and converting plant
investments at Bupak and Ansbach
Inspire our people
e Improved safety record and no major
safety incidents recorded during annual
maintenance shuts
e Initiatives to inspire and promote a diverse and
inclusive workforce
Partner with customers
for innovation
e Development of myMondi digital customer
platforms for both corrugated solutions and
containerboard customers
e Commission new paper machine investment
at Ružomberok, complete investments at
Bupak and Ansbach and evaluate further
investment opportunities
e Continued focus on growing our safety maturity
e Focus on talent attraction, retention and diversity
and inclusion initiatives
e Launch myMondi digital customer platforms and
realise process efficiency gains
e Continue to partner with customers to develop
e Continuous innovation and product development
innovative sustainable packaging solutions
with customers, with a number of external
awards being received
e Prepare the ramp-up of the new kraft top white
machine in Ružomberok
Did you know?
Our paper machine 7
at Świecie can produce
1,700 metres of
containerboard per minute!
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 72
Business reviews
FLEXIBLE
packaging
Operating sites
63 in 30 countries
Paper mills: 5
Converting plants:
e Paper bags: 39
e Consumer flexibles: 19
Employees
10,400
Production capacity
1,216 ktpa
Kraft paper
Our Flexible Packaging business produces
and sells a broad range of kraft papers,
converted paper bags and consumer
flexible packaging, offering our customers
a unique range of products for a variety of
consumer and industrial applications.
As a global leader, we offer our customers
a unique range of flexible packaging
solutions using paper where possible,
plastic when useful. Our world-class
integrated mills produce kraft paper that
we, or our customers, convert into strong
yet lightweight paper bags and other
paper-based solutions, and we make a
variety of flexible plastic-based consumer
packaging which gives our customers
additional functionality when required.
Wherever possible our range of flexible
packaging is designed to minimise material
usage, prioritise recyclability and use
recycled content.
ecosolutions
highlights
Industry end-use includes:
e FMCG products
e Food service and retail
e Cement and building materials
e Chemicals, agricultural and
other industrial
Leading market positions:
e #1 kraft paper producer globally
e #1 paper bag producer in Europe
and a global leader
e #3 consumer flexible packaging producer
in Europe
StripPouch
Together with German cleaning products
maker Werner & Mertz GmbH, we
have developed an award winning, fully
recyclable, flexible, mono-material stand-
up pouch called StripPouch. The solution
follows our EcoSolutions approach of
replacing existing packaging with more
sustainable alternatives. This innovative
solution is the result of a four-year
development process which applied
Cradle-to-Cradle® principles to assess
every aspect of the product, from design
to optimal end-of-life options, to close
the packaging loop. StripPouch has
removable side panels to balance
branding and recycling requirements. It is
100% recyclable, uses 70% less plastic
and reduces CO2 emissions by up to
70% compared to rigid plastic bottles
that hold equivalent volumes.
MailerBag
Reducing packaging waste has
become a key issue for the rapidly
growing e-commerce industry
as consumers actively seek more
sustainable packaging alternatives.
We therefore developed MailerBag,
a patented, high-strength paper
bag made of high-performance
sack kraft paper. The bag features
an easy opening strip, a double
adhesive strip with a release liner on
the flap for easy returns and provides
excellent printability for attractive
branding opportunities. Similar to our
corrugated EnvelopeMailer, MailerBag
provides a sustainable solution for the
e-commerce industry, while reducing
transportation costs, and is suitable
for waste paper recycling streams
even in countries with the most
stringent standards.
Mondi Group Integrated report and financial statements 2019 73
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
% change
–%
18%
29%
TRCR
Gender diversity
Training hours
per 200,000 hours worked
% women employed
thousand hours
Energy consumption
million GJ
Scope 1 and 2 GHG emissions million tonnes CO2e
FSC- or PEFC-certified wood
procured
%
Environmental management
certification
% of operations certified to
ISO 14001 standards
CoC Certification
Hygiene certification
% operations certified to FSC
or PEFC CoC standards
% food contact operations
certified to recognised food
hygiene standards
1 Refer to note 2 in the notes to the consolidated financial statements for basis of restatement
2019
2,708
543
20.1%
389
(4)
248
2,603
15.7%
2019
1.00
21
263
38.74
0.81
51
55
41
83
Restated1
2018
2,708
461
17.0%
301
(102)
360
2,442
14.3%
Restated1
2018
0.98
21
261
36.46
0.89
49
50
40
88
Segment revenue
€ million
€2,708m
Underlying EBITDA margin
Underlying EBITDA
€ million
€543m
ROCE
2,500
2,492
2,634
2,708
2,708
%
6
4
1
.
%
2
5
1
.
%
8
6
1
.
%
0
7
1
.
%
1
.
0
2
442
461
365
380
%
9
3
1
.
%
0
3
1
.
%
6
3
1
.
%
3
4
1
.
543
%
7
5
1
.
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Financial review
Underlying EBITDA was up 18% on the prior
year to €543 million, with higher average
selling prices, positive currency effects and
good cost containment more than offsetting
lower paper bags volumes.
Kraft paper prices were, on average, up
around 6%, compared to the prior year
as strong demand growth supported
meaningful price increases during the
second half of 2018 and into early 2019.
Like-for-like sales volumes were higher
versus the prior year period with an
improved product mix, benefiting from
the contribution of recently completed
capital investment projects and our product
development initiatives. The drive to replace
plastic carrier bags with paper-based
alternatives and consumer preferences for
fibre based primary packaging continues
to support good demand across our
range of speciality kraft papers. However,
slowing economic activity, particularly in
the construction related sectors in various
export markets, coupled with increased
competition, resulted in kraft paper price
reductions in the second half and into
early 2020.
Paper bags sales volumes were down on
a like-for-like basis, due to a combination
of pricing discipline and weaker markets, in
particular in the Middle East. Price increases
were achieved in the early part of 2019
to compensate for higher paper input
costs. Strong cost management and the
benefit of rationalisation activities resulted
in significant fixed cost savings during
the period.
Consumer flexibles made progress during
the year, benefiting from an improved
product mix, previously implemented
restructuring initiatives, and good cost
control. The business has been focused
on innovating with customers and other
stakeholders along the value chain to
develop recyclable plastic flexible packaging
solutions and increase recycled plastic
content in new packaging. Further product
development and commercialisation will be
a focus in 2020 and beyond.
Input costs were stable year-on-year.
While cash fixed costs were higher due to
inflationary cost pressures and the impact
of maintenance shuts, this was mitigated by
our cost reduction programmes.
All planned maintenance shuts at the kraft
paper mills were completed in the second
half of the year. In 2020, the majority of
planned maintenance shuts are again
scheduled for the second half.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 74
Business reviews
Flexible Packaging
Operational review –
delivering on our strategy
Our people, the communities where we
operate and the impacts of our operations
on society and the environment are of
utmost importance to us. We continually
monitor emissions from our sites and
invest to improve our performance.
In 2019 we completed the investment in
our Frantschach mill (Austria) to reduce
malodorous gas emissions. During the year
we hosted a number of events including
visits by local students, family days and
community open days.
The 70th anniversary celebration of
our Štětí mill (Czech Republic) was a
particular highlight, as we are one of
the largest employers in the Ústí region
and the country’s leading paper mill
in terms of size, production rates and
environmental responsibility. We see clear
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.
In 2019 we published the report from our
Socio-economic Assessment Toolbox
(SEAT) assessment that we conducted at
our Frantschach mill in 2018, highlighting
the key findings from the stakeholder
engagement. We also completed a SEAT
assessment at our Dynäs (Sweden) mill and
look forward to reporting on the findings
during 2020.
We continue to drive operational excellence
initiatives to increase productivity and
efficiency and reduce conversion costs.
During the year we reorganised our US
and Egyptian paper bag operations and
streamlined production across our European
network. In early 2020, we announced the
proposed closure of our two consumer
flexibles plants in the UK due to the change
in demand for the niche products produced
at these sites leading to a special item
charge estimated at over €10 million, of
which €4 million was recognised in 2019.
Stronger quality management systems
in our consumer flexibles business and
implemented quality improvement initiatives
have delivered a reduction in incidents and
customer claim costs, improving overall
customer experience.
We are now looking at how our other
businesses could benefit from a similar
programme to reduce costs and further
enhance our product, service and process
quality standards for customers. In our
paper bags business we are also testing
digital quality sensors.
In continuing to accelerate our performance
through digitalisation, we implemented
a speed optimisation pilot at one of our
paper bag operations applying advanced
analytics to monitor and report speed
losses. The project has been successful in
increasing productivity, employee motivation
and competitiveness while maintaining
safety, quality, downtime and set-up time
standards. We are implementing similar
projects across our paper bag network
in 2020 to continue to improve our
operational performance.
The aim is to change personal behaviour
through emotional identification with
possible impacts on one’s personal life.
Subsequent improvements have been
observed across our key indicators.
We are investing in our paper bag
converting plant network to enable us
to better serve our customers with an
innovative and broader product portfolio.
We will install a new state-of-the-art line
at our Hammelburg (Germany) plant and
digital printing equipment at our Abrera
(Spain) plant. To grow with our customers
and expand our geographical footprint we
successfully expanded our plant in Abidjan
(Côte d’Ivoire) with a second line which is
already running at full capacity. We also
approved a greenfield investment in a new
paper bag plant in Cartagena (Colombia)
with start-up planned for late 2020.
In addition to our operational and
continuous improvement initiatives, we look
to invest in our cost-advantaged asset base
to grow and deliver value in a sustainable
way. Our Štětí mill modernisation project
completed in late 2018 has reduced our
GHG emissions and generated a strong
profit contribution in 2019.
To capture further growth opportunities
and innovate with more value added paper
bag solutions, we organised a number
of our paper bag plants in a specialised
cluster, fully dedicated to the production of
more technically demanding solutions for
chemical, food, pet food, e-commerce and
specialised applications.
In addition to expanding our footprint and
increasing our customer offering, we are
also leveraging digital platforms to improve
customer engagement. During 2019 we
successfully installed myMondi in our paper
bag plant network providing an online
system for our customers to place and track
their orders. We expect to realise benefits
from these initiatives from 2020.
Delivering innovative, sustainable packaging
solutions for our customers was again a
key focus in 2019. We are pleased Flexible
Packaging won two 2020 WorldStar
awards for our StripPouch and Protector
Bag innovations.
EcoSolutions case study
Page 32
Our businesses –
Award winning innovations
Page 4-5
The 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 is
on track. The investment is supported by
the drive to replace plastic carrier bags
with paper-based alternatives and allows
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.
Engaging with our stakeholders
Page 20
We continue to minimise the top safety
risks in our operations to improve our
year-on-year performance and are pleased
to report that there were no major safety
incidents at our mills during planned annual
maintenance shuts in 2019. We however
had one life-altering injury in May 2019 at
our Dynäs mill when an employee severely
injured one of his fingers. We have rolled
out behaviour-based safety training using
social psychology across our network to
encourage our people to promote a safe
working culture across the organisation.
Mondi Group Integrated report and financial statements 2019 75
Delivering on our strategy
Progress in 2019
Medium term priorities
Delivering value
accretive growth
sustainably
e Ongoing development of sustainable
e Continue to work with stakeholders to develop
packaging solutions
sustainable packaging solutions
e Investment at Frantschach to reduce
e Reduce the impact on the environment from
malodorous gas emissions
our operations
e Community engagement through hosting
e Continue to engage with our communities to
events, open days and site visits
build trust and develop relationships
Sustainability performance
Page 34-51
Strategic value drivers
Progress in 2019
Medium term priorities
Drive performance
along the value chain
e Reorganised and streamlined paper bag
production to optimise performance and drive
productivity improvements
e Continued focus on performance initiatives
across the value chain and reduction of our
cost base
e Tested digital pilots to enhance
operational performance
e Investment in quality assurance
improvement technologies
e Roll-out of speed improvement project to paper
bag network to drive productivity gains and
evaluate further digitalisation initiatives
Invest in assets
with cost advantage
e Ramp-up of production and environmental
e Complete machine conversion investment
improvements from the Štětí mill modernisation
project completed in late 2018
e Progress with machine conversion investment at
Štětí and investments in our converting plants
at Štětí
e Realise benefits from recently completed
investments and evaluate further
investment opportunities
Inspire our people
e Improved safety performance during annual
mill shuts
e Ongoing focus on growing our safety maturity
e Continued attention on promoting and
e Employee-supportive initiatives and programmes
developing a diverse workforce
to engage with and develop our workforce
Partner with customers
for innovation
e Ongoing product innovation in particular around
e Continue to partner with our customers to
sustainable packaging
e Approved a number of investments to enhance
our product offering and expand geographical
paper bag footprint
e Launched myMondi in our paper bag network to
enhance customer engagement
develop sustainable packaging solutions – paper
where possible, plastic when useful
e Complete approved investments in paper bags
e Leverage recently implemented digital
customer platforms
Did you know?
Our Steinfeld plant (Germany)
produces FlexiBags for more
than 12 million kg of pet food
annually – that’s more than the
weight of the Eiffel Tower!
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 76
Business reviews
ENGINEERED
MATERIALS
Industry end-use includes:
e Baby care, feminine care, adult
incontinence and wipes
e Tapes, labels and graphic arts
e Food, building and industrial applications
Leading market positions:
e #1 commercial release liner producer
in Europe
e #2 extrusion solutions producer
in Europe
Our Engineered Materials business
develops, manufactures and sells innovative
components for personal care products,
extrusion solutions and release liners.
Engineered Materials brings together
Mondi’s leading positions and expertise
across a range of specialised products.
Personal care components include soft
nonwovens, unique stretchy elastic films
and laminates, and mechanical fastening
components. Our high-performance
extrusion solutions provide advanced
barrier properties and our paper and
film-based release liners protect various
adhesive surfaces. We focus on prioritising
the responsible use of resources and,
wherever possible, designing for recycling
or biodegradability.
Operating sites
15 in 8 countries
Employees
2,400
ecosolutions
highlights
Biodegradable wipes
With our new Carded Airlaid Carded
(CAC) technology, we can create
innovative 3-layer wipes for hygienic
and cleaning end-uses. This new line will
use 100% cellulose content, including
viscose and pulp from renewable
resources, resulting in a wipe that is
fully biodegradable and compostable.
The three layers combined deliver a
highly functional and stable composite
material for wipes, and have absorption
and cleaning functionality that matches
currently available non-woven products.
The technology will be able to produce
the entire sustainable material in-line,
while also providing embossing that
creates a structured outer layer for
increased cleaning functionality.
increasing the end-consumer’s comfort.
Biodegradable coating
Our Sustainex® portfolio represents
a unique family of innovative
biodegradable and industrially
compostable packaging materials.
Extrusion coated on various paper-
based substrates, the DIN EN 13432
certified biopolymer provides excellent
sealability as well as gas, grease,
aroma and moisture barriers. End-uses
include kitchen waste bags, single-use
paper cups and hygiene products.
Mondi Group Integrated report and financial statements 2019 77
Financial review
Underlying EBITDA of €122 million was up
9% on the prior year.
Engineered Materials business benefited
from an improved product mix, its continued
focus on innovation with customers,
previously implemented restructuring
initiatives, good cost control and a one-off
gain on disposal of a plant in Belgium of
€9 million.
Performance in personal care components
improved year-on-year, although we
expect this area will continue to face
pressure going forward as a key product
matures. Release liner made progress as it
benefited from an improved product mix,
pricing discipline and good cost control.
Extrusion solutions was impacted by lower
like-for-like volumes in certain segments,
which were partly offset by the benefits of
cost reduction programmes. We continue
to see strong demand for sustainable
coating solutions for a range of packaging
applications, an area of innovation and
product development that offers further
growth potential.
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
% change
(1)%
9%
18%
TRCR
Gender diversity
Training hours
per 200,000 hours worked
% women employed
thousand hours
Energy consumption
million GJ
Scope 1 and 2 GHG emissions million tonnes CO2e
Environmental management
certification
% of operations certified to
ISO 14001 standards
Hygiene certification
% food contact operations
certified to recognised food
hygiene standards
1 Refer to note 2 in the notes to the consolidated financial statements for basis of restatement
2019
979
122
12.5%
86
—
32
612
13.8%
2019
0.73
15
62
1.42
0.12
86
100
Restated1
2018
984
112
11.4%
73
(3)
31
672
11.4%
Restated1
2018
0.80
14
68
1.41
0.14
87
100
Segment revenue
€ million
€979m
Underlying EBITDA margin
Underlying EBITDA
€ million
€122m
ROCE
1,107
1,054
1,028
984
979
%
4
2
1
.
%
2
3
1
.
%
5
2
1
.
%
4
.
1
1
%
7
0
1
.
131
%
5
4
1
.
136
%
4
4
1
.
119
%
2
3
1
.
122
%
8
3
1
.
112
%
4
.
1
1
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 78
Business reviews
Engineered Materials
Operational review –
delivering on our strategy
We constantly drive performance along the
value chain through operational excellence
initiatives, lean processes, rigorous quality
management and commercial excellence
programmes that enhance productivity
and efficiency. Towards the end of the year,
we initiated steps to right-size our major
operations in Europe and the US in order to
improve our competitiveness.
In 2019, we focused on further improving
our product mix by increasing our sales
in value-added segments primarily in our
extrusion solutions product offering. In order
to streamline our portfolio, we sold a
specialised extrusion coated products plant
in Duffel (Belgium) serving customers across
protective clothing, imaging, automotive and
other speciality products markets. Mondi’s
remaining extrusion coatings plants in
Europe are primarily focused on consumer
and other selected applications.
Stronger quality management systems and
implemented quality improvement initiatives
have delivered a reduction in incidents and
customer claim costs.
We remain focused on promoting an
environment where all our employees can
go home safely every day. We are pleased
with our significantly improved safety record.
One of the key safety initiatives in 2019 was
a tailor-made approach where plants with
a more mature safety culture could focus
on advanced safety developments, while
plants that do not yet meet requirements
receive more specific assistance to improve
safety performance. We also took action to
further optimise our equipment so that we
can minimise human interaction with moving
and rotating parts, which was previously
identified as a top safety risk. In 2020, we
have set more demanding safety targets
for our plants in order to drive an ongoing
safety improvement culture.
Developing our people is a key focus and
we made good progress in 2019 with a
number of internal promotions to senior
leadership positions within our business
unit. To support our goal of having a
diverse and inclusive workforce we have
also reviewed the composition of our
operational leadership team across our
network and taken steps to improve the
representation of women in management
positions. To support the development of
an inclusive culture we have committed to
conduct diversity and inclusion training for
our business unit’s operational management
committee in 2020.
We are working with our customers
to create more sustainable solutions.
During the year we continued developing
films and paper-based laminates to replace
aluminium and plastic-based packaging.
In our commitment to support the circular
economy, we further developed films
with increased recycled plastic content
that can be used in various applications
including labels.
An investment in a new line at our Ascania
plant (Germany) was approved during
the year, which will enable us to produce
sustainable wipes using renewable and
biodegradable raw materials. Start-up is
planned for early 2021.
Partnering with our customers for
innovation is key to our success. We are
developing the next generation of elastic
laminates for personal care products
components with the application of glue-
free technologies and enhanced breathe-
ability. This is expected to deliver efficiency
improvements and raw material savings
while retaining softness and elasticity
properties and reducing the product’s
environmental footprint.
Mondi Group Integrated report and financial statements 2019 79
Delivering on our strategy
Progress in 2019
Medium term priorities
Delivering value
accretive growth
sustainably
e Partnerships with key stakeholders to develop
and promote cutting-edge, sustainable solutions
e Continue to collaborate along the value chain to
improve the sustainability of our product offering
e Ongoing initiatives to reduce our
environmental footprint
e Ongoing initiatives to reduce our
environmental footprint
Sustainability performance
Page 34-51
Strategic value drivers
Progress in 2019
Medium term priorities
Drive performance
along the value chain
e Sale of a specialised extrusion coated products
e Ongoing continuous improvement initiatives
plant and initial steps to right-size business
e Improved our product mix and quality systems
focusing on quality and efficiency to reduce cost
and waste supported by digital technologies
Invest in assets
with cost advantage
e Stay-in business investments to maintain
e Evaluate investments to enhance our
cost competitiveness
cost competitiveness
Inspire our people
e Significantly improved safety record
e Initiatives to increase diversity and foster an
inclusive workforce
e Ongoing and more demanding safety targets set
to drive a continuous safety improvement culture
e Continuous efforts to develop an inclusive
workforce and promote diversity
e Continue to focus on talent development and
internal promotions
Partner with customers
for innovation
e Developed next generation of elastic laminates
for personal care components
e Ramp-up production of next generation elastic
laminates and sustainable wipes production
e Approved investment in sustainable wipes line
e Ongoing product innovation with customers
e Continue to partner with customers to
research and develop innovative and more
sustainable solutions
Did you know?
Our blown film extruders
are 25 metres high – that’s
equivalent to a seven-
storey building!
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 80
Business reviews
UNCOATED
FINE PAPER
Industry end-use includes:
e Paper for home and office printers
e Paper for professional digital and
analogue printing presses
Leading market positions:
e #1 uncoated fine paper supplier in
Europe (including Russia)
e #1 uncoated fine paper producer in
South Africa
Our Uncoated Fine Paper (UFP) business
manufactures and sells an extensive range
of quality papers for use in offices and
professional printing houses.
Our vertically integrated, well-invested,
cost-advantaged paper mills make a wide
range of environmentally sound office and
professional printing papers, tailored to the
latest digital and offset print technologies.
We also manage forests in Russia and
South Africa providing sustainable wood
fibre for our operations. Our focus is on
transforming credibly sourced raw materials
into innovative paper solutions to meet
customer needs in a cost-effective and
sustainable way.
Color Copy
Our flagship office and professional
printing paper is by far the most well-
known brand of office paper in Europe
for digital colour printing applications.
In 2019, we introduced Color Copy Jet
which has a special surface pigmentation
allowing for quick drying and offers
a silk appearance. Color Copy is part
of our Green Range and CO2 neutral.
We measure the carbon footprint of
all our paper mills as well as for each
individual paper product that we
produce using our Product Carbon
Footprint tool.
Green range
highlights
NAUTILUS®
We further expanded our NAUTILUS®
range of recycled papers in 2019.
The product now offers a diverse
portfolio of high-white recycled papers
in various grammages and covers a
wide range of customer requirements
from flyers to posters and brochures.
The NAUTILUS® product family
helps our customers look after the
environment and reinforces their
sustainability profile with certifications
that include: FSC recycled, PEFC, the
European Eco-label or the Blue Angel.
Operating sites
6 in 4 countries
Employees
6,300
Production capacity
1,890 ktpa
Uncoated fine paper1
1
Includes 205 ktpa of newsprint
Mondi Group Integrated report and financial statements 2019 81
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
% change
(6)%
(14)%
(18)%
TRCR
Gender diversity
Training hours
per 200,000 hours worked
% women employed
thousand hours
Energy consumption
million GJ
Scope 1 and 2 GHG emissions million tonnes CO2e
Forest certification
% managed land certified to
FSC standards1
FSC- or PEFC-certified wood
procured
%
Environmental management
certification
% of operations certified to
ISO 14001 standards
CoC Certification
Hygiene certification
% operations certified to FSC
or PEFC CoC standards
% food contact operations
certified to recognised food
hygiene standards
1 Our forestry operations in Russia are also 100% PEFC certified
2019
1,758
444
25.3%
324
2
220
1,758
25.1%
2019
0.29
23
366
87.52
3.31
100
77
100
100
60
2018
1,877
516
27.5%
395
(21)
161
1,494
31.9%
2018
0.40
23
394
91.76
3.38
100
78
100
100
60
Financial review
Underlying EBITDA was down 14% to
€444 million as the business was impacted
by lower average selling prices, longer
planned maintenance shuts and higher
costs. This was partially compensated for
by ongoing profit improvement initiatives,
positive currency effects and a higher
forestry fair value gain. ROCE remains
strong at 25.1% and margins robust at
25.3%.
Uncoated fine paper sales volumes were
lower, mainly due to planned extended
maintenance shuts and the closure of a
small machine in Merebank (South Africa) in
2018. We continue to see ongoing structural
decline in demand for uncoated fine paper
in mature markets, with demand in Europe
estimated to have declined around 5% in
2019. Demand in Russia and South Africa
was also softer during the year, although
we expect broadly flat demand in the
medium term in these markets. Our superior
cost position and emerging market
exposures continue to provide us with
competitive advantage.
Average uncoated fine paper selling prices
achieved by our European operations
were flat year-on-year but down in the
second half as a result of price pressures in
European markets and a higher proportion
of exports. Uncoated fine paper selling
prices in Russia and South Africa were
higher year-on-year, offsetting domestic
cost inflation.
Average benchmark European bleached
hardwood pulp prices were 13% lower
than the prior year and 21% down in the
second half compared to the first half.
Encouragingly, prices have stabilised in
early 2020, notably in the key Asian markets.
On an annualised basis, and including the
pulp sales in our packaging businesses, we
estimate the Group’s net long pulp position
in 2020 will be around 400,000 tonnes.
We saw overall higher input costs, most
notably for wood 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.
Segment revenue
€ million
€1,758m
Underlying EBITDA margin
Underlying EBITDA
€ million
€444m
ROCE
1,764
1,720
1,832
1,877
1,758
%
0
8
2
.
%
4
5
2
.
%
3
5
2
.
%
5
7
2
.
%
3
5
2
.
481
%
3
2
3
.
448
%
0
7
2
.
464
%
6
6
2
.
516
%
9
.
1
3
444
%
1
.
5
2
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 82
Business reviews
Uncoated Fine Paper
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.
Higher export prices and net volume
increases during the year resulted in a
forestry fair value gain of €71 million, up
€28 million on the prior year, but with the
second half gain €33 million below that
recognised in the first half of 2019. Based on
current market conditions, we would expect
a significantly lower forestry fair value gain in
2020 compared with 2019.
Planned maintenance shuts at our Syktyvkar
(Russia) and Richards Bay (South Africa)
mills were completed during the first half of
the year. In the second half, we completed
a project related shut at Ružomberok
(Slovakia) and smaller planned maintenance
shuts at our remaining operations. In 2020,
our Syktyvkar and Richards Bay shuts are
planned for the first half of the year while
the remaining shuts are scheduled for the
second half.
Operational review –
delivering on our strategy
We continually strive to improve the
environmental performance of our
operations. We undertake investments,
collaborate with key partners and
associations, and monitor the impact from
our processes across the value chain to
ensure that our actions sustain ecosystems
and minimise the impact on the surrounding
communities and environment.
Regrettably, we experienced odour
incidents at our Ružomberok and Richards
Bay mills early in 2019. The improvements
made over the course of the year at
our Ružomberok mill had good results,
and at our Richards Bay mill we are
planning to invest to further reduce our
odour emissions.
During the year we celebrated the 50th
anniversary of our Syktyvkar mill along
with our employees, the local community,
customers, and other key partners.
In addition to the celebratory event, we
invested in renovating community facilities
and local infrastructure around the mill such
as upgrading sports facilities and roads.
By working with, and investing in our
communities, we are able to build trust,
collaboratively address challenges,
understand and manage risks, generate
opportunities and improve performance.
We continue to focus on operational
improvements across our sites. In particular
at our South African mills, we implemented
initiatives to drive productivity and lean
processes which have already delivered
improvements in performance and
maintenance practices. We continue to
invest in modernising our South African
forestry operations to mitigate rising
operational costs and increasingly variable
climate conditions. Our investment in digital
tools, such as advanced direct sensing
technologies for harvesting, transport and
silviculture equipment, or remote sensing in
plantations, has enhanced the information
we gather, enabling value chain optimisation,
efficiency and productivity. Our ongoing
journey to modernise, mechanise and
digitalise our forestry operations is
delivering results in line with our relentless
drive for continuous improvement.
We are investing in the modernisation of
our Richards Bay mill, including upgrading
the energy and chemical plants to improve
reliability and avoid unplanned shutdowns.
Our investment programme to debottleneck
production and avoid unplanned shuts
at our Syktyvkar mill is progressing well,
including various upgrades of the mill
infrastructure, fibre lines and pulp dryer,
and a new evaporation plant. We modified
the scope of the power plant rebuild at the
same site to replace three existing bark
boilers and four turbines with a single new
bark boiler and turbine. This will simplify
processes while reducing our environmental
footprint. This project is expected to
complete in the first half of 2020 with
total capital expenditure expected around
€135 million.
With respect to safety at work, we have
achieved an improvement in reducing
the overall safety recordable case rate.
The Merebank mill in particular recorded
an incident free year, which is a world-class
achievement. However, we have not made
progress regarding the severity of incidents
and we sincerely regret two fatalities
during 2019.
In January, a contractor lost his life during
drilling works at the construction site of our
new paper machine in Ružomberok and
in August, a contractor was fatally injured
during towing activities at our Russian
forestry operations. We unfortunately
also had one life-altering injury at our
Ružomberok mill. We are deeply saddened
that a contractor died as a result of an
incident during demolition activities
at our Syktyvkar mill in January 2020.
Thorough investigations are conducted after
all incidents and action plans implemented
to address root causes and prevent
repeat incidents.
Towards the end of the year we started a
structured knowledge sharing programme
called ‘Knowledge Circle’ as colleagues
across our European mill network were
seconded to our Richards Bay mill to share
best-practice techniques with their South
African colleagues and transfer know-how.
It also provided these employees with the
opportunity to gain invaluable experience by
working in a new location and encouraging
cultural diversity among our people.
Following the successful roll out of myMondi
in 2018 providing our customers with 24/7
access to detailed product information,
order placement, tracking and enquiries,
we have further leveraged our digital
customer platform during the year to create
awareness and promote Mondi’s brands
to decision makers in the paper-buying
process and end-users through digital
channels. This has enabled us to optimise
the value chain, interact directly with end-
users and improve our customers’ buying
experience. The successful implementation
and ongoing enhancements of myMondi
have resulted in productivity and efficiency
gains and increased focus on improving
sales and marketing functions which will
continue to be a priority during 2020.
Mondi Group Integrated report and financial statements 2019 83
Progress in 2019
Medium term priorities
e Improved odour abatement at Ružomberok and
Richards Bay over the course of the year
e Further improve odour abatement in our mills
e Support biodiversity and sustain ecosystems
e Further optimisation of the wastewater treatment
around our operations
Delivering on our strategy
Delivering value
accretive growth
sustainably
plant at Syktyvkar
e Community investment and engagement
initiatives and events
e Complete investments and develop new
initiatives to reduce the environmental footprint
of our mills and increase energy efficiency
Sustainability performance
Page 34-51
Strategic value drivers
Progress in 2019
Medium term priorities
Drive performance
along the value chain
e Improved performance and maintenance
e Continue to focus on operational improvements
practices, most notably at our South African mills,
through operational improvement initiatives
e Investment in digital tools across our site network
to drive productivity and efficiency gains
across our business
e Realise efficiency and material use benefits from
installed digital technologies in our fibre lines and
paper machines and evaluate further projects
Invest in assets
with cost advantage
e Progressed with investment to debottleneck
e Continue with investment programme to
production at Syktyvkar
debottleneck Syktyvkar
e Continued with power plant modernisation
e Continue with the modernisation of our Richards
project at Syktyvkar
Bay mill
e Initiated investment programme in the Richards
Bay facility to improve reliability and avoid
unplanned shutdowns
Inspire our people
e Improved overall safety performance in terms of
e Continued focus on improving our safety mindset
frequency but not in severity
to eliminate fatal and severe injuries
e Promoted knowledge sharing and cultural
e Leverage benefits from employee knowledge
diverse learning opportunities
sharing initiatives
Partner with customers
for innovation
e Further enhancements to our myMondi digital
platform to connect directly with decision
makers along the paper-buying value chain
and the end-users of our products
e Leveraging digital platforms, primarily through
myMondi, to attract and grow with our customers
Did you know?
In Russia we manage
2.1 million hectares of
forest, an area half the size
of Switzerland!
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 84
manufacturing
excellence
Mondi Group
Integrated report and financial statements 2019
What this means for employees…
Manufacturing to the highest standards
enables our people to operate in a safe
and progressive environment, providing
inspiring possibilities for their personal
development. Technology makes us
efficient, but it’s our people who make
us smart.
manufacturing
excellence
What this means for communities…
Operational excellence means generating
employment and business opportunities in
the areas in which we operate, as well as
minimising our environmental impact and
supporting health, education and infrastructure
to provide sustainable benefit.
85
governance
Introduction from the Chair
How we comply with the UK
Corporate Governance Code
Board of directors
Executive committee
and company secretary
Corporate governance report
Nominations committee
Audit committee
Sustainable development
committee
Remuneration report
Other statutory information
86
88
90
92
94
106
110
117
119
144
What this means for suppliers
and contractors…
We provide a wide range of
opportunities to work with us across the
value chain, encouraging supply chain
transparency and promoting fair and
safe working conditions. As a reliable
and reputable business partner, we work
together to find solutions to operational,
social and environmental challenges.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 86
Introduction from the Chair
A culture of strong governance
Dear fellow shareholder
I would like to provide you with a more
detailed look at how our governance
framework operates in practice and the
Board’s key focus areas during the year.
Having a robust and effective governance
framework is key to delivering on our
strategy and ensuring the long-term
sustainable success of our business, not
only in the interests of our shareholders but
also to the benefit of those stakeholders
most impacted by what we do. It guides
how the Board operates and provides a
basis for its decision-making, ensuring
that our culture and values are considered
and that we act ethically and in line with
our duties as directors. New governance
and regulatory requirements provided an
opportunity during 2019 to take a closer
look at the impact our business has on our
stakeholders and to ensure that we fully
understand the issues they face. This report
aims to provide clarity around how we
did this.
In July 2019 we completed the simplification
of our dual listed company structure
into a single holding company structure
under Mondi plc. This process was aimed
at simplifying cash and dividend flows,
increasing transparency, removing the
complexity associated with the previous
structure and enhancing strategic flexibility.
The UK Corporate Governance Code is
now our primary governance framework.
Pages 88 and 89 provide an overview of our
compliance with the 2018 Code.
Board composition
Following the announcement in March 2019
that Fred Phaswana would retire from the
Board following completion of the corporate
simplification, Fred duly retired as Joint
Chair on 31 August 2019 after more than six
years on the Board. Fred made a significant
contribution to Mondi during his time on
the Board, providing invaluable insight and
leadership. On behalf of the Board, I wish
him all the best for the future.
At the same time, we welcomed Enoch
Godongwana to the Board as an
independent non-executive director.
Enoch brings a wealth of knowledge to the
Board, particularly in relation to the South
African business environment, and we look
forward to continuing to work with him in
2020. Further information relating to Enoch’s
appointment and his induction can be found
on pages 98 and 108.
In January 2020, we announced that
Peter Oswald would step down as Group
CEO and from the Board of Mondi plc on
31 March 2020. Peter has made an immense
contribution to the growth and development
of Mondi during his 28 years with the
Group, most notably during his tenure as
CEO of the former Europe & International
Division and subsequently as Group CEO.
Peter leaves with our best wishes for the
future. We subsequently announced, in
February 2020, that Andrew King, Group
CFO, will be appointed as Group CEO with
effect from 1 April 2020. I am delighted that
someone of Andrew’s calibre has agreed to
succeed Peter as CEO. The formal review
process undertaken by the nominations
committee convinced the Board that he is
the right person to lead the Group and we
wish him all the best in his new role.
“ Having a robust and
effective governance
framework is key
to delivering on our
strategy and ensuring
the long-term
sustainable success
of our business.”
David Williams
Chair
Mondi Group Integrated report and financial statements 2019 87
Safety
We were deeply saddened by the fatalities
of two contractors during the year, one
at our Ružomberok mill (Slovakia) and
another at our Russian logging operations.
Sadly, a contractor also died as a result of
an incident during demolition activities at
our Syktyvkar mill (Russia) in January 2020.
We continue to strive to send everybody
home safely, every day and this goal remains
fundamental to the way we do business, so
thorough investigations were undertaken
in all instances and the findings reported to
the Board. Actions being taken to prevent
future similar incidents are always discussed
by the Board in detail, with additional follow
up actions agreed. We are very conscious
of the need to avoid complacency and to
ensure that lessons are learnt from every
incident. Safe behaviour is a key part of
Mondi’s culture and we will continue to
do everything we can to ensure that it is
embedded across all sites, including at
those operations that are new to Mondi
and where additional work may be required
to instil our culture. In 2019 we focused
in particular on the social psychology of
risk, aimed at addressing the conscious
and unconscious aspects of individual
behaviour that can often lead to incidents.
Further details around the actions taken
during the year to improve safety can be
found on page 38.
Stakeholder engagement
Towards the end of 2018, the Board
reviewed and agreed Mondi’s key
stakeholder groups, being those groups that
our business has the greatest impact on and
that are most influenced by the decisions
we take.
While we have a duty to act in the interests
of our shareholders, we also understand the
importance of our wider stakeholders and
want to ensure that, to the extent we can,
we also act in their interests, considering the
long-term consequences of our decisions
and our desire to drive the business forward
in a sustainable manner.
The Board has always considered the
interests of our wider stakeholders,
particularly through the work of our
sustainable development committee and
its long standing focus on our impact on
the environment and local communities
as well as our relationships with NGOs
and other relevant bodies. However, the
requirements of the new UK Corporate
Governance Code introduced in 2018, as
well as the requirement for a statement
in accordance with Section 172 of the
Companies Act 2006, encouraged us to
re-assess whether we were doing enough
in this area. As a result, we have introduced
among other things regular updates to
the Board on employee engagement
matters and a requirement for all decision
papers to include details of the potential
impact on stakeholders. These changes
have also strengthened our understanding
of the extent to which Mondi’s culture is
embedded across the organisation.
More details of the ways in which we
engage with and consider the views of our
stakeholders are set out in this report on
pages 100 to 103 and in the Strategic report
on pages 18 to 21.
Board effectiveness
In line with best practice, we undertook
an externally-facilitated board
evaluation process in 2019. In light of the
announcement that I will be stepping down
in 2020, the process was led by Stephen
Harris as Senior Independent Director on
behalf of the nominations committee.
I am pleased to report that as a result of
the process, the Board concluded that it
continues to operate effectively, with strong
levels of engagement and a boardroom
atmosphere that allows for open and
constructive challenge. More details can
be found on page 105.
Looking ahead
Our focus during 2020 continues to be
on leading the Group in line with our
established culture and values while moving
our strategy forward. Maintaining a safe
working environment for our employees
remains paramount while also taking
account of the interests of our stakeholders
and taking every opportunity to enhance
the long-term sustainability of our business.
Our strong governance processes will
continue to provide the framework within
which we do this.
While I intend to step down during 2020,
I know that this will remain the Board’s
priority. I am extremely proud of everything
the business has achieved since I joined the
Board in 2007, the way it has grown and its
strong sense of purpose and desire to act
sustainably. This is thanks to the dedication
of the people that work for Mondi and I
am confident that it is in good hands for
the future.
David Williams
Chair
“ Having a robust and
effective governance
framework is key
to delivering on our
strategy and ensuring
the long-term
sustainable success
of our business.”
David Williams
Chair
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 88
How we comply with the UK Corporate Governance Code
Mondi aims to comply with the principles and provisions of the July 2018 edition of the UK Corporate Governance Code issued
by the Financial Reporting Council (available at www.frc.org.uk).
It is the view of the Board that Mondi has applied the principles of the UK Corporate Governance Code throughout the year.
As set out below, there are examples throughout this report of the way in which we do this.
Section 1
Board Leadership and Company Purpose
A A successful company is led by an effective and
entrepreneurial board, whose role is to promote
the long-term sustainable success of the
company, generating value for shareholders and
contributing to wider society.
B The board should establish the company’s
purpose, values and strategy and satisfy itself
that these and its culture are aligned. All directors
must act with integrity, lead by example and
promote the desired culture.
Section 2
Division of Responsibilities
F The chair leads the board and is responsible for
its overall effectiveness in directing the company.
The chair should demonstrate objective
judgement throughout their tenure and promote
a culture of openness and debate. In addition, the
chair facilitates constructive board relations and
the effective contribution of all non-executive
directors, and ensures that directors receive
accurate, timely and clear information.
G The board should include an appropriate
combination of executive and non-executive
(and, in particular, independent non-executive)
directors, such that no one individual or small
group of individuals dominates the board’s
decision-making. There should be a clear division
of responsibilities between the leadership of
the board and the executive leadership of the
company’s business.
Pages
90-91,
96
Pages
8-9,
16-17,
99
C The board should ensure that the necessary
resources are in place for the company to
meet its objectives and measure performance
against them. The board should also establish
a framework of prudent and effective controls,
which enable risk to be assessed and managed.
D In order for the company to meet its
responsibilities to shareholders and stakeholders,
the board should ensure effective engagement
with, and encourage participation from,
these parties.
E The board should ensure that workforce policies
and practices are consistent with the company’s
values and support its long-term sustainable
success. The workforce should be able to raise
any matters of concern.
Pages
52-53,
96
Pages
18 to 21,
100 to 103
Pages
36 to 41,
99, 116
Pages
95-96
H Non-executive directors should have sufficient
time to meet their board responsibilities.
They should provide constructive challenge,
strategic guidance, offer specialist advice and
hold management to account.
I
The board, supported by the company secretary,
should ensure that it has the policies, processes,
information, time and resources it needs in order
to function effectively and efficiently.
Pages
95,
107-108
Pages
94 to 96
Pages
90-91,
95
Mondi Group Integrated report and financial statements 2019 89
Section 3
Composition, Succession and Evaluation
J Appointments to the board should be subject
to a formal, rigorous and transparent procedure,
and an effective succession plan should be
maintained for board and senior management.
Both appointments and succession plans should
be based on merit and objective criteria and,
within this context, should promote diversity of
gender, social and ethnic backgrounds, cognitive
and personal strengths.
Section 4
Audit, Risk and Internal Control
M The board should establish formal and
transparent policies and procedures to ensure
the independence and effectiveness of internal
and external audit functions and satisfy itself on
the integrity of financial and narrative statements.
Section 5
Remuneration
P Remuneration policies and practices should
be designed to support strategy and
promote long-term sustainable success.
Executive remuneration should be aligned to
company purpose and values, and be clearly
linked to the successful delivery of the company’s
long-term strategy.
Pages
108-109
K The board and its committees should have a
combination of skills, experience and knowledge.
Consideration should be given to the length of
service of the board as a whole and membership
regularly refreshed.
L Annual evaluation of the board should consider
its composition, diversity and how effectively
members work together to achieve objectives.
Individual evaluation should demonstrate whether
each director continues to contribute effectively.
Pages
90-91,
94, 107
Page
105
Pages
114-115
N The board should present a fair, balanced and
understandable assessment of the company’s
position and prospects.
O The board should establish procedures to
manage risk, oversee the internal control
framework, and determine the nature and
extent of the principal risks the company is
willing to take in order to achieve its long-term
strategic objectives.
Page
114
Pages
52 to 60,
112
Pages
123 to 128,
134 to 137
Q A formal and transparent procedure for
developing policy on executive remuneration and
determining director and senior management
remuneration should be established. No director
should be involved in deciding their own
remuneration outcome.
R Directors should exercise independent
judgement and discretion when authorising
remuneration outcomes, taking account of
company and individual performance, and
wider circumstances.
Page
140
Page
130
There were a number of provisions that were introduced in the 2018 version of the Code that Mondi is still working towards implementing. These are as follows:
e Provision 19 – David Williams remained as Chair throughout 2019, and continues to hold the role, despite having exceeded a nine-year term. We announced in March 2019
that David would step down in 2020, allowing time for us to undertake a search for a new Chair and to ensure an orderly succession. The search is progressing well but until a
successor is appointed, David continues to contribute significant financial and business knowledge to the Group.
e Provision 36 – Mondi did not have a formal policy for post-employment shareholding requirements during 2019 but is proposing to introduce such requirements alongside a
number of other changes to its directors’ remuneration policy. Further details can be found on page 122.
e Provision 38 – we have reviewed the pension contribution rates for executive directors as part of our wider directors’ remuneration policy review and changes are proposed to
better align such contributions with those of the majority of the workforce in the relevant location. Further details can be found on page 122.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 90
Board of directors
David Williams
Chair
Appointed to the Board
May 2007 and as Chair
in August 2009
Independent
Yes (on appointment)
Committee memberships
Nominations (chair),
remuneration
Qualifications
Graduated in economics from
Manchester University, chartered
accountant (UK)
Skills and experience
David has extensive board-level experience as both an executive and non-executive director and has held
senior financial roles across a range of multinational companies. He continues to contribute significant financial
and business knowledge to the Board and has an extensive understanding of Mondi and its history since listing.
David was appointed Joint Chair of Mondi in August 2009 and became sole Chair following the corporate
simplification in July 2019.
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.
Current external appointments
None.
Peter Oswald
Group CEO
Appointed to the Board
January 2008 and as
Group CEO in May 2017
Independent
No
Committee memberships
Executive (chair),
sustainable development,
Qualifications
Graduated in law from the
University of Vienna and in
business administration from
WU-Vienna Business School
Skills and experience
Peter brings significant manufacturing industry experience to the Board, including 28 years in the packaging
and paper sector. The business benefits from his track record of developing and growing Mondi’s packaging
businesses, overseeing and integrating over 50 acquisitions and his focus on inspiring diverse 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 CEO of the former Europe & International
Division in January 2008 and CEO 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.
It was announced on 10 January 2020 that Peter will step down as CEO, and leave the Group, on 31 March 2020.
Current external appointments
None.
Andrew King
Group CFO and
Group CEO Designate
Appointed to the Board
October 2008
Independent
No
Committee membership
Executive
Qualifications
Graduated in commerce
from the University of Cape
Town, chartered accountant
(South Africa)
Skills and experience
Andrew has more than 17 years’ experience with Mondi in various strategy, business development and finance
leadership 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 CFO of Mondi from June 2005 to May 2006. He was then appointed as Group Strategy and
Business Development Director before becoming the CFO of the Mondi Group in 2008.
It was announced on 18 February 2020 that Andrew will be appointed CEO of the Mondi Group with effect from
1 April 2020.
Current external appointments
None.
Stephen Harris
Senior Independent
Director
Appointed to the Board
March 2011
Independent
Yes
Committee memberships
Audit, nominations,
remuneration,
sustainable development
Qualifications
Chartered engineer, graduated
in engineering from Cambridge
University, master’s degree in
business administration from
the University of Chicago, Booth
School of Business
Skills and experience
Stephen brings to the 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.
In 2009 Stephen was appointed as CEO of Bodycote plc, a global provider of thermal processing services.
His CEO background provides a unique insight to the Board and his leadership experience is vital to his role as
Mondi’s Senior Independent Director.
Current external appointments
CEO of Bodycote plc.
Mondi Group Integrated report and financial statements 2019 91
Tanya Fratto
Non-Executive Director
Appointed to the Board
January 2017
Independent
Yes
Committee memberships
Audit, nominations, remuneration
(chair)
Qualifications
BSc in electrical engineering
Skills and 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 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.
Current external appointments
Non-executive director of Advanced Drainage Systems, Inc., Smiths Group plc and Ashtead Group plc.
Enoch
Godongwana
Non-Executive Director
Appointed to the Board
September 2019
Independent
Yes
Committee memberships
Nominations,
sustainable development
Qualifications
MSc in Financial Economics
from the University of London
Skills and experience
Enoch brings to the Board significant leadership experience and invaluable knowledge of the South African
business environment.
Enoch spent the early part of his career working for the National Union of Metal Workers of South Africa,
holding a number of key roles until becoming General Secretary. He went on to hold a number of South African
governmental roles, including Deputy Minister of Public Enterprises from 2009 to 2010 and Deputy Minister
of Economic Development from 2010 to 2012, before being appointed head of the African National Congress’
economic transformation committee.
Current external appointments
Non-executive director and chair of the Development Bank of South Africa and a non-executive director of New
Development Bank.
Dominique
Reiniche
Non-Executive Director
Appointed to the Board
October 2015
Independent
Yes
Committee memberships
Nominations, remuneration,
sustainable development (chair)
Qualifications
MBA from ESSEC Business
School in Paris
Skills and 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 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.
Current external appointments
Non-executive director and chair of Chr. Hansen Holding A/S and Eurostar International Limited and a non-
executive director of Paypal (Europe) and Severn Trent Plc.
Stephen Young
Non-Executive Director
Appointed to the Board
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)
Skills and experience
Stephen brings a strong financial and general management background to the Board with experience gained
internationally across a variety of sectors, including industrial and engineering. He 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 CEO in 2013.
Stephen stepped down from the board of Meggitt plc on 31 December 2017. He was also a non-executive director
of Derwent London plc from 2010 until May 2019.
Current external appointments
Non-executive director and audit committee chair at Weir Group plc
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 92
Executive committee and company secretary
Peter Oswald
Group CEO
See full biography
Page 90
Andrew King
Group CFO and
Group CEO Designate
See full biography
Page 90
Markus Gärtner
CEO, Corrugated
Packaging
Appointed to the
executive committee
October 2018
Qualifications
Doctorate of Technical Sciences
from ETH Zürich and a Master of
Science in Electrical Engineering
from Stanford University
Skills and experience
Markus has significant industrial and international business experience. He started his career at McKinsey &
Company, working on numerous operational and strategic projects across a variety of industries.
Markus went on to join Novelis AG, a leading producer of rolled aluminium products, where he held various roles
in strategy and sales with growing responsibility until he eventually became the head of 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 as CEO, Fibre Packaging/Paper and was appointed to the Executive
Committee in October that year. He subsequently became CEO, Corrugated Packaging in October 2019.
Current external appointments
None.
Michael Hakes
Group HR Director
Appointed to the
executive committee
April 2018
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
Skills and 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.
Current external appointments
None.
Vivien McMenamin
CEO,
South Africa
Appointed to the
executive committee
October 2017
Qualifications
MSc in Economics from the
University of London and
certificate in Advanced High
Performance Leadership from
IMD Switzerland
Skills and 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 CEO 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.
Current external appointments
Non-executive director of KAP Industrial Holdings Limited.
Mondi Group Integrated report and financial statements 2019 93
Peter Orisich
CEO, Flexible
Packaging and
Engineered Materials
Appointed to the
executive committee
May 2017
Qualifications
Graduated in business
administration from the WU-
Vienna business school
Skills and 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 CFO, later going on to become CEO 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 CEO of Mondi Industrial Bags, taking responsibility for
the strategy and operations of Mondi’s industrial bags business. He went on to be appointed as CEO of Mondi’s
Uncoated Fine Paper business in 2012. In February 2020, he was appointed CEO of Mondi’s Flexible Packaging
and Engineered Materials businesses.
Peter is also responsible for overseeing Mondi’s Group procurement function.
Current external appointments
None.
Gunilla Saltin
CEO, Uncoated
Fine Paper and
Group Technical &
Sustainability Director
Appointed to the
executive committee
December 2019
Qualifications
MSc in chemical engineering
from the Royal Institute of
Technology in Stockholm, a PhD
in chemical engineering from
the University of Idaho in the
US and an executive MBA in
general management from the
Stockholm School of Economics
Skills and experience
Gunilla has more than 19 years’ experience in the pulp industry, having worked for Södra Cell, one of the largest
pulp producers, from 2000 until joining Mondi in August 2019.
Gunilla started her career in R&D engineering, holding a number of roles in this field before joining Södra Cell as a
process development manager. She went on to manage Södra’s kraft paper mill in Värö in Sweden for three years
before being appointed Södra Cell’s Executive Vice President in 2008, with responsibility for production, sales
and marketing and leading the business through several investments including a significant mill extension project.
During this period Gunilla was also Acting CEO of Södra Skogsägarna Ekonomisk Förening, a forestry cooperative
with 52,000 forest owners.
Gunilla was appointed Group Technical & Sustainability Director on 1 December 2019 and CEO, Uncoated Fine
Paper in February 2020.
Current external appointments
Member of the Board of Luossavaara-Kiirunavaara Aktiebolag (LKAB).
Sara Sizer
Group Communication
& Marketing Director
Appointed to the
executive committee
September 2017
Qualifications
Degree in Business
Administration from
Loughborough University
Skills and 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.
Current external appointments
None.
Jenny Hampshire
Company Secretary
Skills and 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.
Diversity of the executive committee
%
Nationalities represented
on the executive committee
Female
Male
37.5
62.5
South African
Austrian
British
German
Swedish
Swiss
2
2
1
1
1
1
As at the date of this report
As at the date of this report
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
94
Corporate governance report
Composition of the Board
The directors holding office during the year ended 31 December 2019 are listed below,
together with their attendance at board meetings. Biographical details for those in office at
the date of this report can be found on pages 90 and 91.
Composition
of the Board
The size and composition of the Board and its 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 Board to meet the
Group’s current business needs. The directors have experience gained from a range of
international organisations.
Chair
Executive directors
Non-executive directors
1
2
5
Board attendance1
Directors
Fred Phaswana2
David Williams
Tanya Fratto
Enoch Godongwana3
Stephen Harris
Andrew King
Peter Oswald
Dominique Reiniche
Stephen Young
Diversity of the Board
%
Female
Male
25%
75%
5/5
7/7
7/7
2/2
7/7
7/7
7/7
7/7
7/7
1 The maximum number of scheduled meetings held during the year that each director could attend is shown next to the number attended.
Additional meetings were held as required. Until 26 July 2019, Mondi plc’s board meetings were held as joint meetings with Mondi Limited in
accordance with its dual listed company structure. Board meetings held following completion of the corporate simplification on 26 July 2019
were meetings of Mondi plc only.
2 Fred Phaswana retired from the Board on 31 August 2019. Fred attended all meetings up to the time of his retirement
3 Enoch Godongwana joined the Board on 1 September 2019. Enoch attended all meetings following his appointment
Non-executive director meetings
The Chair 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 Group CEO in order to provide input to the discussions on
executive performance and succession.
Non-executive
director tenure
0–3 years
3–6 years
6–9 years
9+ years
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 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.
Directors’ & Officers’ liability insurance
Throughout the year to 31 December 2019, in line with
market practice, Mondi maintained directors’ and
officers’ liability insurance.
Procedure for conflicts of interest
Company law 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 Board with support from the Company Secretary,
with authorisations reviewed on an annual basis.
Nationalities represented
on the Board
South African
British
Austrian
French
American
2
2
1
0
2
3
1
1
1
Mondi Group Integrated report and financial statements 2019
95
Division of responsibilities
The division of responsibilities between the Chair and the Group CEO has been clearly defined and approved by the Board.
The functions and duties of the Senior Independent Director are also set out in a separate statement.
Role
Chair
David Williams
Biography
Page 90
Role
Group CEO
Peter Oswald
Biography
Page 90
e leads and manages the Board, setting
the agenda, providing direction and
focus, ensuring effectiveness and open
and transparent debate
e undertakes regular engagement with the
Group CEO in between meetings
e ensures there is a constructive
relationship between the executive and
non-executive directors
e ensures high standards of corporate
governance and ethical behaviour and
oversees the culture of the Group
e oversees the induction, training and
development of directors and the
consideration of succession
e ensures effective communication with
shareholders and other stakeholders
e ensures the Board receives accurate,
timely and clear information to support
discussion and decision-making
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 Board
e ensures the communication of Mondi’s
values and goals throughout the
organisation, leading by example
e chairs the 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 Group CFO,
leads the relationship with
institutional shareholders
Role
Executive
Director
Andrew King
Biography
Page 90
Role
Senior
Independent
Director (SID)
Stephen Harris
Biography
Page 90
Role
Independent
Non-Executive
Directors
Tanya Fratto
Enoch
Godongwana
Dominique
Reiniche
Stephen Young
Biographies
Page 91
Role
Company
Secretary
Jenny Hampshire
Biography
Page 93
e manages the day-to-day operations of
the Group, in this case within his remit as
Group CFO, in accordance with authority
delegated by the Board
e together with the Group CEO,
leads the relationship with
institutional shareholders
e provides support to, and acts as a
sounding board for, the Chair 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 manages chair succession
e provide independent oversight of the
Group’s activities
e offer an external perspective to, and
constructively challenge, management
e provide to the Board a diversity of
knowledge and experience
e monitor management performance
and the development of the
organisational culture
e review and agree strategic priorities
and monitor the delivery of 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
e supports the Chair in the delivery of
accurate and timely information ahead of
each meeting
e ensures compliance with board and
committee procedures
e acts as a key point of contact for Chair
and Non-Executive Directors
e provides support to the Board and
committees, and advises on governance,
statutory and regulatory requirements
e provides advice on legal, governance and
listing requirements, in particular relating to
continuing obligations and directors’ duties
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 96
Corporate governance report
Board leadership and governance
The Board
Nominations
committee
Oversees the composition of
the Board and committees
and considers succession
planning and diversity, making
recommendations to the Board
Audit
committee
Oversees the Group’s
corporate financial reporting,
the internal control system,
risk management and
the relationship with the
external auditor
Remuneration
committee
Responsibility for
recommending overall
remuneration policy and the
setting of executive and senior
management remuneration
Sustainable
development
committee
Oversees the Group’s strategy,
commitments, targets and
performance relating to
safety, the environment
and other sustainable
development matters
Read more
Page 106
Read more
Page 110
Read more
Page 119
Read more
Page 117
CEO
Executive
committee
Day-to-day management
of the Group
Disclosure
committee
Responsibility for classifying
and overseeing the prompt
disclosure of inside information
and overseeing the creation
of insider lists
The primary role of the Board is to lead
the Group and to ensure its long-term
success, taking into consideration the views
and interests of not only our investors, but
our other key stakeholders. The Board,
led by the Chair, has responsibility for
setting, and overseeing the implementation
of, the Group’s strategy, ensuring the
implementation of an appropriate risk
management framework and overseeing
financial performance. Underpinning this
are the values and culture defined by the
Board and a strong corporate governance
framework, designed to ensure ethical and
sustainable performance.
There is a clearly defined Schedule of
Matters Reserved for the Board, setting
out those key matters that require Board
approval and cannot be delegated. The
Board meets at least seven times a year
and an annual rolling agenda is agreed with
the Board to ensure that all key matters
reserved for the consideration of the Board
are covered in the annual cycle of meetings.
In relation to other matters, the Board is
supported by a number of committees,
each of which has its own Terms of
Reference and annual work programme.
The Matters Reserved for the Board and
the Terms of Reference are reviewed at
least annually and are available on the
Mondi Group website. The committees
meet prior to meetings of the Board to
enable the committee chairs to report to
the Board. This facilitates communication
between directors. It also ensures that all
aspects of the Board’s mandate have been
addressed and enables any necessary
recommendations or advice relevant for
deliberations to be provided.
The agenda for each meeting is agreed
with the Chair 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.
Responding appropriately to the changing
environment in which the Group operates is
vital for Mondi’s long-term success.
The Chair, with support from the Company
Secretary, ensures 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 boardroom.
Ensuring there is sufficient debate and
consultation with management and advisers
as well as between the directors themselves
during meetings is key to 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 and assisting
the Board with monitoring performance and
achieving its objectives.
Mondi Group Integrated report and financial statements 2019 97
Board activity
The key matters considered by the Board during the year are set out below. In addition, each meeting includes a report from the
Group CEO providing an operational update; a report from the Group CFO on the Group’s financial performance; an update on safety
performance; country risk assessments for key geographic locations where the Group operates; and a report from the Company
Secretary on recent governance and regulatory matters.
Financial performance
Operational performance
Risk management
e Reviewed and approved the full and half-yearly
results and trading updates.
e Reviewed and approved the Mondi Group
Integrated report and financial statements, ensuring
they are fair, balanced and understandable (see
page 114 for more information).
e Considered dividend recommendations and
declarations in light of the Group’s stated dividend
policy (see page 32 for more information).
e Reviewed and approved the Group business plan
for 2020–2022 and the budget for 2020, 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 and confidence that Mondi’s strategy is
sustainable in the long-term (see pages 24 and 25
for more information).
e Discussed and implemented the simplification of
Mondi’s corporate structure.
e Considered and approved a number of capital
expenditure projects, taking into consideration
the interests of Mondi’s key stakeholders (see
pages 20 and 21).
e Regular review of competitor and market analyses.
e Regular review of shareholder analysis reports.
e Detailed reports in relation to the fatalities
and life-altering injuries and oversight of
management’s response.
e Reports from the CEOs of the business units.
e Monitored the implementation of a number of large
capital projects, including the investment in a new
kraft top white machine and pulp mill upgrade at
Ružomberok (see page 29 for more information).
Governance and stakeholders
e Regular reports from the chair of each committee.
e Reviewed the Group’s corporate governance
framework in light of governance and
regulatory developments.
e Reviewed investor feedback (see pages 100 and 101
for more information).
e Reviewed employee engagement and customer
satisfaction survey results (see pages 102 and 103).
e Reviewed key stakeholders (see pages 18 and 19).
e Reviewed reports received via Mondi’s confidential
reporting hotline, Speakout (see pages 36 and 116).
e Approved the renewal of terms of office for Tanya
Fratto and Stephen Harris.
e Reviewed and approved the Group’s Modern Slavery
Act statement.
e Reviewed the output from the external board
evaluation process and agreed an action plan (see
page 105 for more information).
e Reviewed principal Group policies.
e Reviewed arrangements for the Annual General
Meeting, in particular feedback received from
shareholders and voting indications.
e Reviewed 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.
Emerging risks were also considered. This process
resulted in the inclusion of climate change-related
risk as a separate principal strategic risk (see pages
52 to 60 for more information).
e Half-yearly presentations on IT risks and cyber
security (see page 114 for more information).
e Reviewed the Group insurances, ensuring an
appropriate balance of risk between the Group and
our insurers.
Leadership
e Considered and agreed to the recommendation
of the nominations committee that Enoch
Godongwana be appointed as a non-
executive director.
e Agreed that Peter Oswald would step down as
Group CEO and considered and agreed to the
recommendation of the nominations committee that
Andrew King be appointed as Group CEO.
e Considered recommended changes to the
membership of the executive committee.
e Considered succession and talent management
plans, including initiatives to improve diversity levels
across the Group.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 98
Corporate governance report
Induction, training
and development
When new directors join the Board 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 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, the
key duties of the director, including in relation
to section 172 and stakeholder interests,
and the culture and values of the Group.
Following his appointment to the Board on
1 September 2019, an induction programme
was undertaken by Enoch Godongwana, the
details of which can be found below.
We also aim to ensure that existing directors
receive ongoing training and development
opportunities. We offer the directors the
opportunity to keep up to date with regulatory,
governance and economic changes as
well as developments in the markets and
environments in which we operate.
We do this through board presentations,
both from internal and external presenters,
site visits, updates aimed at providing wider
context to the Group’s activities and position
in the market and regular reports from the
Company Secretary highlighting developing
trends and future changes in governance
and regulation.
We recognise that valuable experience can
also be gained from executive directors
accepting appointments as non-executive
directors on other boards. 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.
Neither of Mondi’s executive directors
currently holds a directorship external to
Mondi. The policy also covers non-executive
directors who are required to notify the
Chair of any proposed appointments,
including the time commitment and any
potential conflicts of interest, so that the
nominations committee can consider and,
if appropriate, agree to the appointment.
Each director can discuss any development
needs with the Chair 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.
Enoch Godongwana – Induction Programme
In the lead up to and following Enoch’s appointment
as a non-executive director on 1 September 2019, a
number of meetings and briefings were organised in
order to provide Enoch with a detailed overview of the
Group and to allow him to make as full and effective
a contribution as possible to the Board’s deliberations
and decision-making during the first few months
following his appointment.
Company Secretary
Enoch’s induction started with a briefing from the
Company Secretary to explain Mondi’s structure and
the governance and regulatory environment in which
it operates, as well as more practical matters including
board meeting arrangements. He was given access
to an online director handbook containing a number
of key documents, including guidance on the duties
and obligations of listed company directors, covering,
among other things, the Section 172 duty to consider
the interests of our key stakeholders, key policies and
the terms of reference for each of Mondi’s committees.
Chair and Non-Executive Directors
While Enoch met with members of the Board during
the recruitment and interview process, further meetings
were arranged as appropriate around the time of his
appointment and the board programme.
Senior management
Meetings with key members of senior management
were held in order to give Enoch an understanding
of the Group’s business, risk areas and key focus
areas, giving him context for the matters discussed
at Board and committee meetings and to give him
the opportunity to hear first hand about the Group’s
culture and operational style. Meetings were held
with 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. Given Enoch’s membership of the sustainable
development committee, Enoch also met with the
Group Technical & Sustainability Director.
Site visits
Enoch’s first board programme included visits to
Mondi’s plants in Gronau (Germany) and Korneuburg
(Austria), allowing him early on in his tenure to see
our operations, to meet with local management and
to see our culture and approach to safety in practice.
Further details can be found on page 102.
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 Enoch a broader perspective of
the business.
Mondi Group Integrated report and financial statements 2019 99
Board presentations
Safety reports and statistics
The Board reviews safety statistics and
key safety focus areas at every meeting.
Caring for our employees is a significant
part of Mondi’s culture and this includes
ensuring safe behaviour. Reviewing the
safety reports highlights to the Board any
concerns around the approach to safety.
Review of key policies
The Board undertakes an annual review
of Mondi’s key policies, including the
Business Integrity Policy. This gives the
Board the opportunity to assess whether
policies remain suitable for Mondi, reflect
the appropriate values and approach to
the way the business is run and support its
long-term sustainable success.
The Board has 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 and hear their views and
opinions. 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.
Employee survey results
The Board receives regular reports from
the Group HR Director on the results of
our biennial employee survey, the issues
raised and the follow up actions being
taken, giving the Board an insight into
how employees feel about the culture of
the Group and particular areas that may
need addressing. Results are classified into
categories including acting with integrity,
caring, empowered and transparent,
allowing comparison of the results in
each category against previous surveys.
More information about the way in which
the views of employees are gathered and
assessed can be found on page 18.
Speakout statistics and themes
The Board regularly receives details of the
messages received via our confidential
reporting hotline, Speakout. The Board
reviews the types of messages received
and the actions being taken in response.
These details allow the Board to identify
any particular trends and common issues.
Messages are classified into categories
including HR and culture, business
integrity and safety and the environment.
Further details on Speakout can be found
on page 36.
How do we monitor culture?
It is critical to the strategy and long-term
success of the Group that we have a
culture and set of values that are widely
understood and that guide everything
we do. These are clearly defined in The
Mondi Way, our framework for creating
sustainable value, and are set out on
pages 8 and 9. They are reinforced by our
Code of Business Ethics which sets out
key principles under five headings that
guide the way we do business – legal
compliance, honesty and integrity, human
rights, stakeholders and sustainability.
The Board has responsibility for assessing
and monitoring the culture of the Group
and ensuring that the Group’s policies
and practices are aligned with this.
This responsibility is embedded in the
Matters Reserved for the Board.
There are a number of ways in which the
Board monitors and assesses culture,
including:
Site visits
The directors are encouraged wherever
possible to visit Mondi’s key assets and
operations so that they can get a more
in-depth understanding of the business.
Such visits offer directors the opportunity
to see for themselves how our safety
and sustainability culture is working in
practice, to talk to local management
and employees and to see how Mondi’s
values are communicated at a local
level. During 2019 the Board visited our
Engineered Materials plant in Gronau
(Germany) and our Flexible Packaging
plant in Korneuburg (Austria) (see page
102 for further details). The Board also
visited our Merebank mill (South Africa)
in January 2020.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 100
Corporate governance report
Stakeholder engagement
Understanding the views of our
stakeholders, including our shareholders,
and the issues that are of most relevance
to them is key to the achievement of our
vision and strategy and securing long-
term sustainable value. The views of our
stakeholders inform all Board discussions
and decision making and having regard to
their interests is one of the key principles
of our Code of Business Ethics. The Board
cannot effectively judge the long-term
consequences of the decisions it takes
without understanding the impact on
our stakeholders. The Engaging with
our stakeholders section (including the
Section 172 statement), which identifies
who our key stakeholders are, engagement
activities undertaken during the year and
the matters that are of most importance
to them, is set out on pages 18 to 21.
The information provided over the next few
pages aims to explain how the feedback
from this engagement is fed back to the
Board and how it influences the Board’s
decision making.
Investor engagement
While the Chair maintains responsibility for
ensuring there is effective communication
with shareholders, it is the Group CEO
and Group CFO 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.
Details of the key investor events that have
taken place during 2019, including meetings,
investor roadshows and participation
in investor conferences, can be found
opposite. In November 2019, we held an
investor site visit at our Štětí operation in
the Czech Republic.
More than 40 analysts, investors and
relationship bankers attended the day
which included presentations from
senior executives focusing on the role
of sustainability and digitalisation in our
strategy and our approach to sustainable
packaging. In addition, the presentations
were well followed via webcast. The day
was completed with a tour of the pulp
and paper mill and the paper bag
plant. Video recordings and copies of
the presentations are available on the
Group’s website.
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.
We also maintain ongoing contact with our
debt providers and the Group CFO 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
changes to the Group’s remuneration policy
which will be proposed to shareholders for
approval at the Annual General Meeting
in 2020.
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 Board and consideration given to any
views both positive and negative regarding
the Group’s performance, future direction
and the perceptions of the management
team. These views provide context for,
and feed into, the Board’s discussions
around strategy, capital allocation and
succession planning.
During 2019, an overview of the actions
taken in response to the study carried
out by Investor Perceptions in 2018 was
provided. The study was intended to help us
understand how a broad cross-section of
stakeholders and sell-side analysts perceive
Mondi and the findings of the study helped
inform our debates on strategy and refine
the key messages we wanted to convey
to investors.
Mondi’s Annual General Meeting also
presents 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.
At the 2019 Annual General Meeting
all resolutions were passed. Overall in
excess of 72% of the total Group shares
were voted.
The next Annual General Meeting is
scheduled to be held on 7 May 2020.
Separate resolutions will be proposed for
each item of business to be considered at
the meeting with the voting conducted by
poll. The notice, which includes explanations
of each resolution, is contained in a separate
circular which will be made available to all
shareholders in advance of the meeting.
The voting results will be announced and
published on the Mondi Group website as
soon as practicable following the close of
the meeting.
Mondi Group Integrated report and financial statements 2019 101
Event
e Preliminary results announcement
e Investor roadshow in Europe (London, Edinburgh & Frankfurt), including Jefferies
packaging conference
e Investor roadshow in South Africa (Johannesburg & Cape Town)
e Sun City BoAML conference (South Africa)
e Exane basic materials conference (London)
e Discussions with investors and advisory bodies prior to Annual General Meeting
e Investor roadshow day (London)
e Trading update
e Annual General Meeting
e Investor roadshow in the US (Boston, Chicago & New York)
e Investor roadshow day (Paris)
e Investor roadshow day (London)
e Half-yearly results
e Investor roadshow in South Africa (Johannesburg & Cape Town)
e Consultation with major shareholders and advisory bodies regarding proposed changes
to remuneration policy
e Investor roadshow in Europe (London and Edinburgh)
e Trading update
e Investor site visit (Štětí, Czech Republic)
e London UBS European conference
e London BoAML Paper conference
Investor events
Month
February
March
April
May
June
August
September
October
November
December
2019 Investor
site visit to our
world-class
Štětí mill in the
Czech Republic
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 102
Corporate governance report
Employee engagement
The effect our decisions will have on our
employees is one of the Board’s primary
considerations when determining our future
strategy, reviewing transaction and capital
expenditure proposals and considering
our approach to safety and sustainability.
Rather than use only one method to
establish the views of our employees, we
use a combination of different methods,
consisting of a formal workforce panel in line
with the UK Corporate Governance Code
as well as a number of other arrangements.
Mondi employs around 26,000 people
across more than 30 countries. Some of
our people are office-based but many
work in our plants and forests. There is
therefore no one method that is suitable for
all employees. By using a range of methods,
we aim to reach as many people as we can.
While we have always had engagement
mechanisms in place, we have looked to
strengthen these over recent years and to
improve the provision of information in this
regard to the Board given the importance of
our workforce to the business.
In 2019, we introduced regular presentations
on employee engagement to the Board’s
rolling agenda. At least twice a year, the
Group HR Director provides a detailed
update to the Board on engagement
activities undertaken, the views expressed
by employees, their key concerns and
issues and the actions being taken to
address them.
One of the most significant forms
of engagement is Mondi’s European
Communication Forum, a formally
constituted body designed to facilitate
communication between Mondi and
its employees. At least once a year,
employee representatives from plants
across Europe attend the Forum, at which
a number of presentations are given by
senior management, including in relation
to operational and financial performance,
HR activities and safety and health.
The meetings also allow for open discussion
and questions and are usually attended
by the Group CEO, the Group CFO and
the Group HR Director, together with
other executive committee members as
appropriate. Discussion topics raised by
employees at the last meeting of the Forum
included contractor safety compliance,
incident reporting, the employee survey and
the future strategy for specific plants.
In addition, the Group HR Director holds
a number of meetings every year with
employees at a range of levels across
plants worldwide to obtain their views and
feedback and to understand their concerns.
Feedback from these meetings provides an
insight for the Board into the issues of most
concern to employees, highlighting that they
are most interested in local issues directly
affecting their day-to-day working lives.
The board visits Gronau
to See our people and
processes in action
In addition to the Forum and the
presentations from the Group HR
Director, the Board also uses the following
mechanisms to ensure it has a broad view
of the issues affecting our employees and
their views on key matters:
e The latest global employee survey – the
last survey, undertaken in January 2018,
had a participation rate of 89% and the
results and follow up actions, as well as
the results of interim pulse surveys, have
been reviewed by the Board at regular
intervals since. The next survey will take
place in March 2020.
e Site visits, giving the Board the
opportunity to engage with local
employees, as well as dinners involving
members of local management (see
below for more information).
e Senior leadership forums, usually
attended by several members of the
Board and held at least every three years.
e Speakout reports – the Board regularly
receives details of the messages
received via our confidential reporting
hotline, Speakout, providing insight into
specific issues affecting our employees.
Further details on Speakout can be found
on page 36.
e Review of usage rates for Mondi’s
Employee Assistance Programme which
offers an anonymous counselling service
for employees.
Further information in relation
to the engagement activities
undertaken across the Group
Page 18 to 21
The October 2019 board programme was held
at our Engineered Materials plant in Gronau
(Germany). The two-day visit incorporated the
scheduled Board and committee meetings
but also provided the opportunity for the
Board to listen to presentations from the
local management team and to have a tour
of the plant. A dinner with representatives
from the plant was also held. Safety, financial
performance and key challenges in particular
were discussed and the Board was able to see
first hand the drive to innovate and create new,
sustainable products.
Members of the Board went on to visit Mondi’s
Group office in Vienna (Austria), meeting the
Chief Information Officer and key members
of his team and receiving presentations
on EcoSolutions, our customer centric
approach to sustainable packaging solutions,
and the Consumer Flexibles packaging
business. This was followed by a tour of the
Korneuburg plant.
Mondi Group Integrated report and financial statements 2019 103
Wider stakeholder engagement
The Board also takes a number of actions to
ensure it understands the views of our other
key stakeholders, beyond investors and
employees. During 2019 these included:
e Review of the results of the latest
customer satisfaction survey, including
the primary areas of concern for our
customers and the actions we need to
take to improve
e Presentations from the CEO of each
business unit, highlighting those
stakeholder issues that are of specific
relevance to their businesses
e Updates on the global initiatives Mondi
participates in, primarily related to climate
change and sustainability matters, and
collaboration with external bodies
e Reports on the outcomes of the Socio-
economic Assessment Toolbox (SEAT)
processes undertaken at our Dynäs
(Sweden) and Świecie (Poland) sites
during the year, including positive feedback
and areas for improvement (see pages
49 and 50 and our 2019 sustainability
report for more information), as well as
detailed overviews of the education, health,
employment and community initiatives in
place at each of our key sites
e Regular environmental performance
reviews given at meetings of the
sustainable development committee,
which all board members attend
How does the Board consider our
stakeholders when taking decisions?
The views and issues raised by our
stakeholders through the engagement
methods referred to above and on pages 18
and 19 and the information provided to the
Board in this regard form a key part of the
Board’s decision making process.
They provide context to the Board, so that
the directors always have them in mind
when considering the Group’s strategy and
taking decisions.
To assist the Board, all papers requiring
material decisions include clear explanation
as to the expected impact on those
stakeholders relevant to the decision,
whether positive or negative. Having this
discipline not only acts as a reminder for the
Board of the need to specifically consider
our stakeholders but also reiterates this to
those in senior management and at lower
levels. For capital expenditure decisions
in particular, a thorough review of the
impact on our stakeholders is part of the
established process we have for developing
the necessary business case.
Examples of the ways in which stakeholder
interests and views have influenced the
Board’s decision making during the year can
be found on pages 20 and 21.
engaging
stakeholders
on Mondi’s sustainable
packaging offering
to reduce waste
Context
Packaging has an important role to play in addressing
some of the world’s greatest challenges. Our ability
to contribute to a better world is closely linked to
how we engage with stakeholders to find sustainable,
fit-for-purpose, packaging solutions using paper
where possible, plastic when useful. Well-designed
packaging contributes to a circular economy and
can reduce food waste, alleviate plastic waste, and
ensure that we do not over-package products.
Working with stakeholders enables us to better
understand their needs so that we can make informed
strategic decisions around how we set up our
business to develop our sustainable product offering
going forward.
In 2019 we engaged with stakeholders in a variety
of ways, such as:
e Bespoke workshops with customers such as Henkel,
Intersnack, Mars, Nestlé, Reckitt Benckiser and
Rewe to discuss how we can co-create innovative
packaging solutions that help them meet their
sustainability commitments
e Worked with NGOs and industry associations such
as the Ellen McArthur Foundation and CEFLEX on
projects that challenge the status quo across the
packaging spectrum
e Researched the trade-offs of various packaging
options with partners including Cambridge Institute
for Sustainability Leadership, and Quantis who have
done a series of product life-cycle assessments for us
e Discussed design parameters and material selection
with leading recyclers such as Suez and Veolia to
ensure we are designing packaging for recycling
e Participated in global events, including Future of
Sustainable Packaging, MIT Solve, Responsible
Business Summit, Sustainability in Packaging,
The Klosters Forum, and The Telegraph Plastic
Sustainability Summit, to share our views and
further understand how stakeholders perceive
different packaging alternatives and the role Mondi
can play in addressing global challenges
e Connected cross-functional teams around the
business to innovate more effectively to meet our
customers’ sustainability goals
e Shared our views on sustainable packaging
options with investors and analysts and listened to
their feedback
Outcomes
Our engagement with stakeholders has informed the
debate across our organisation around the trade-offs
to consider when making sustainable packaging
decisions. In turn this has guided our discussions both
at Board and committee level, influencing Mondi’s
strategic direction. Actions taken in response to
this engagement, in addition to capital investment
decisions as outlined in the Strategic report, include:
e Update to our strategic framework to reflect
sustainability as central to how we operate
e Reorganisation of the Group to further strengthen
our value chain integration, enhance our offering in
sustainable packaging solutions and improve the
way we partner with our customers
e Ramp-up of our customer-centric EcoSolutions
approach, asking the right questions to help our
customers meet their sustainable packaging
requirements using paper where possible, plastic
when useful
e Agreement to continue building on our stakeholder
engagement and collaboration, and ensure that the
Board is given appropriate opportunities to discuss
the outcomes as input into their decision-making
Read more in Strategic report
Page 24 to 32
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 104
Corporate governance report
2018 internal performance evaluation
Below are the key actions reported last year following the internal evaluation undertaken
in 2018 and details of the progress we have made against those actions:
Action agreed from 2018 evaluation
Progress achieved
Subject to shareholder and necessary regulatory
approval, to ensure the smooth implementation
of the corporate simplification announced in
November 2018.
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.
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.
To continue to actively consider a variety of
strategic growth options for the Group, giving due
consideration to evolving industry trends.
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 corporate simplification was implemented in July
2019 after receiving shareholder approval at the Annual
General Meeting in May 2019.
This continued to be a key area of discussion for the
Board and the nominations committee during the year.
Enoch Godongwana was appointed as a new non-
executive director in September 2019 and the search
for a new chair is progressing well. There were changes
to the Executive Committee during the year, with the
percentage of women on the committee increasing.
A number of new initiatives were implemented or
progressed during 2019, including the use of social
psychology of risk tools and the video and poster safety
campaign initiated at the end of 2018. The Engagement
Board tool has also been developed and trialled with
positive feedback.
The Board has had regular discussions during the year
around growth options for the Group and updates
on industry developments, including during its annual
in-depth review of the Group’s strategy. A number of
capital expenditure proposals have been considered by
the Board during the year (see pages 20 and 21 for more
details). This remains a key focus.
Adjustments to the Board’s Matters Reserved,
each of the committee terms of reference and the
rolling agendas have been made to reflect the new
requirements. The required disclosures and evidence
of the ways in which we have implemented the
new requirements can be found throughout this
governance report.
Mondi Group Integrated report and financial statements 2019 105
As a result of the process, the Board
concluded that it continues to operate
in an effective manner, benefiting from
positive dynamics, strong engagement and
relationships with senior management and
a boardroom culture that allows for open
and constructive challenge. Each director
continues to contribute effectively to
the Board.
There was consensus around the priorities
for the forthcoming year and the key
actions agreed by the Board as a result of
the evaluation include:
e To increase the focus at Board level on
customer requirements and perspectives
e Following the appointment of a new
chair, to give renewed consideration
to the composition of the Board
and whether the balance of skills
is appropriate
e To expand the provision of information to
the audit committee and Board around
emerging risks, increasing the level of
discussion in this regard
e To consider the introduction of further
deep dives into specific elements of
the Group’s strategy
The Board considers that it continues to
benefit from the annual review process, the
results from which help guide the future
focus of meeting agendas and behaviours.
2019 external board evaluation process
In line with best practice, in 2019 we conducted an external board evaluation, the last one
having been in 2016. The evaluation was undertaken by Lintstock, which has no other
connection to Mondi. Anonymity was ensured throughout the process to allow for the
provision of candid and open feedback by participants. In light of David Williams’ planned
departure from the Board during 2020, the evaluation process was led by the Senior
Independent Director, in conjunction with the nominations committee.
The process is illustrated below:
Decision to engage Lintstock
to conduct the evaluation
Questionnaires relating to the Board,
committees and individual performance
completed by directors, the Company
Secretary and other regular attendees at
Board and committee meetings
One-on-one interviews conducted by
Lintstock with each director and the
Company Secretary
Report presented by Lintstock at a
meeting of the nominations committee
Review of board and
committee papers issued for
the latest meeting to provide
context for interviews
Detailed report
issued and reviewed
with the Senior
Independent Director
Action plan recommended by the
nominations committee and agreed by
the Board
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 106
Corporate governance report
Nominations
committee
The search for a new chair
was a priority during 2019,
with much of the committee’s
time spent discussing and
agreeing the process and the
attributes that the committee
would be seeking, taking
into consideration the future
strategy of the Group.
David Williams
Chair of the nominations committee
Composition and attendance1
Members
throughout
the year
Committee
member
since
Tanya Fratto
January 2017
Enoch
Godongwana2
September 2019
Stephen Harris
March 2011
Fred Phaswana3
June 2013
Dominique
Reiniche
October 2015
David Williams,
chair
May 2007
Stephen Young4 May 2018
Meeting
attendance
7/7
2/2
7/7
5/5
7/7
7/7
6/7
1 The maximum number of scheduled meetings held during
the year that each director could attend is shown next to the
number attended. Additional meetings were held as required.
2 Enoch Godongwana joined the committee on 1 September 2019.
3 Fred Phaswana stepped down from the committee on
31 August 2019.
4 Stephen Young missed one scheduled meeting of the
committee during the year due to a commitment made prior to
his appointment to the Board.
Other regular attendees
e Group CEO
Dear Shareholder
This report provides an overview of the
committee’s key activities and focus areas
during the year and the framework within
which it operates.
Composition
We welcomed Enoch Godongwana to the
committee in September 2019 upon his
appointment to the Board. This is in line with
our practice of appointing all non-executive
directors to the committee, ensuring that
the committee has as wide a range of skills
and experience as possible.
Areas of focus
The key focus of the committee is to
ensure that the composition of the
Board is appropriate and relevant to the
Group and that the Board is in the best
position to drive the agreed strategy.
This includes consideration of diversity and
succession matters.
Following the announcement in March 2019
that I would step down as chair in 2020,
succession and in particular the search for a
new chair became a high priority, with much
of the committee’s time spent discussing
and agreeing the process and the attributes
that the committee would be seeking,
taking into consideration the future strategy
of the Group. Stephen Harris is leading this
process in his role as Senior Independent
Director. The search is progressing well.
In light of my intention to step down, the
Board has accepted the committee’s
recommendation that Stephen Harris
remain on the Board for a further year
following the completion of nine years in
office in March 2020 to ensure a smooth
transition to the new Chair. The committee
considered in detail Stephen’s performance,
independence and ability to commit the
required time to Mondi.
Mondi Group Integrated report and financial statements 2019 107
Nominations Committee activity
Set out below are some of the key matters addressed by the committee.
Board and committee composition
Succession planning
e Considered succession planning for the Chair,
resulting in a recruitment process which is
progressing well.
e Discussed and agreed the recruitment process for
the CEO role, including the key attributes required,
resulting in the decision to appoint Andrew King.
e Reviewed the composition of the Board to ensure
maintenance of an appropriate balance of skills and
diversity of experience to support the future growth
strategy, resulting in the appointment of Enoch
Godongwana (see page 108 for more information).
e Reviewed the composition of each of the
committees and committee chairs.
e Considered the composition of the executive
committee, including the skills, experience and
qualifications required, diversity and succession
planning, and proposals from management and
recommended new appointments to the Board
for approval.
e Reviewed Tanya Fratto’s performance and
contribution to the Board as she completed her
three-year term in office, with the committee
concluding that Tanya 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 the
remuneration committee.
e Reviewed Stephen Harris’ performance and
contribution to the Board in advance of his
completion of nine years in office, focusing
particularly on his ability to remain independent.
Further details are provided opposite.
e Reviewed the continued independence of each
non-executive director, including consideration
of their term in office and any potential conflicts
of interest.
e Reviewed 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.
e Considered the Board’s succession plans, including
in relation to existing directors and the requirements
of the Board 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 page 109 for more
information on our approach to diversity).
e Reviewed 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
104 for more information).
e Considered and agreed the process for the 2019
external evaluation of the Board, committees
and individual directors (see page 105 for
more information).
Corporate governance and other matters
e Considered the proposed appointment of
Dominique Reiniche as a director and chair of
EIL Limited. After reviewing the expected time
commitment and any potential conflicts of interest,
the committee agreed that the role would not
interfere with Dominique’s duties to Mondi and she
was permitted to accept.
e Considered requests from members of the
executive committee to take on directorships
at other companies, confirming that the time
commitment would not interfere with their duties
to Mondi.
e Considered, and recommended to the Board,
the re-election of all directors at the Annual
General Meeting.
e Reviewed 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.
It was agreed that Stephen continues to
take an active interest in Mondi, dedicating
sufficient time to his duties, and regularly
demonstrates a willingness to challenge
management when required. It was
therefore concluded that he remains
independent and able to effectively
contribute and that it is in the best interests
of shareholders for him to remain on the
Board during the transition period.
Following the announcement that Peter
Oswald will step down as Group CEO and
as a director of Mondi plc on 31 March
2020, the committee, following a formal
review process assessing both internal and
external candidates, recommended to the
Board the appointment of Andrew King as
Peter’s successor. The Board accepted the
committee’s recommendation. Andrew has
consistently demonstrated considered and
effective leadership during his time with
Mondi and I am confident he will bring
significant insight and leadership to the role.
The other key focus area remained diversity,
both at Board level and on the executive
committee and among senior management.
The committee received a detailed
presentation from the Group HR Director
providing an update on progress towards
improving diversity across the Group at
all levels. More information regarding our
approach to diversity can be found on
page 109.
A more detailed overview of the key matters
considered by the committee during the
year can be found opposite.
Committee effectiveness
The committee’s performance and
effectiveness was reviewed as part of the
external board evaluation undertaken during
the year, more details of which can be
found on page 105. In light of my intended
retirement, Stephen Harris led this process
on behalf of the committee. I am pleased
to confirm that the committee is seen to be
operating effectively and fulfilling the duties
delegated to it by the Board.
David Williams
Chair, nominations committee
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements Russell Reynolds Associates, an external
search agency, was engaged to assist with
the selection processes leading to the
appointments of Enoch and Andrew King
as CEO. Russell Reynolds is a signatory
to the Voluntary Code of Conduct for
Executive Search Firms and does not
provide any services to the Mondi Group
other than board-level recruitment.
On appointment each non-executive
director receives a letter 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.
108
Corporate governance report
Board appointments
Mondi has an agreed process in place for the recruitment and appointment of new
directors to the Board. This process was followed in relation to the appointment of Enoch
Godongwana and is set out below:
Agreement of key business experience
and skills required, taking into account
succession and diversity requirements,
and candidate specification drawn up
Search conducted and long list of
potential candidates provided 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
Board considers 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 the Chair and SID
Nominations committee considers the
preferred candidates including ability
to commit time to the role and any
potential conflicts of interest, and makes
a recommendation to the Board
Mondi Group Integrated report and financial statements 2019 109
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 and we know
that having a diverse Board and workforce
and the broad range of perspectives this
brings strongly supports the achievement of
our strategy. 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 Board, 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 Board, 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 Board’s
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 and the Parker
Review’s recommended target of one
person of colour on boards, a target that we
currently meet.
However, while gender, ethnicity, race
and other forms of D&I 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 Board, 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 108.
At the end of 2019, we had two female
directors representing 25% of the
composition of the Board and one director
of colour. During 2019, we also reported
to the Hampton-Alexander Review that
as at 30 June 2019 we had 22% female
representation on our executive committee
and 27% in the direct reports to the
executive committee, giving a combined
total of 27%. As at 31 December 2019, this
had increased to 33% female representation
on our executive committee and 29% in the
direct reports to the executive committee,
giving a combined total of 30%.
Regular discussions are also held at both
executive committee and operational
committee level.
Our D&I taskforce – a cross-business,
cross-functional team launched in
2018 – is helping to shape and embed
our approach. In 2019, it focused on
communication and good practice sharing,
piloting ‘Conscious Inclusion’ training
with the executive committee and several
senior leadership teams, and a review
of our cultural framework to foster an
inclusive environment.
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.
D&I is also an essential part of Mondi’s
leadership development programme.
We offer 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.
However, we still have a long way to go,
particularly in developing the pipeline up
to the executive committee and ultimately
up to the Board, a process that will take
time. This remains a priority at all levels of
the organisation.
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.
As part of the Board’s oversight of Mondi’s
D&I policy, a presentation was provided to
the nominations committee during the year
in relation to D&I and succession planning,
covering new and ongoing initiatives.
More details can be found on pages
40 and 41.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 110
Corporate governance report
Audit
committee
Oversight of Mondi’s principal
risks remained high on the
agenda during the year, with
a number of the key risks
falling within the committee’s
remit reviewed at each
meeting, Cyber security risk
was a particular focus for
the committee.
Stephen Young
Chair of the audit committee
Composition1
Members
throughout
the year
Committee
member
since
Tanya Fratto
May 2017
Stephen Harris
March 2011
Stephen Young,
chair2
May 2018
Meeting
attendance
4/4
4/4
4/4
1 The maximum number of scheduled meetings held during
the year that each director could attend is shown next to the
number attended.
2 Stephen Young satisfies the requirement for the committee to
have a member with recent and relevant financial experience
given his previous role as Group Finance Director at Meggitt plc
and the other commercial accounting and finance roles he has
held during his career. Stephen is a member of the Chartered
Institute of Management Accountants.
Other regular attendees
e Group CEO
e Group CFO
e Chair and Non-Executive Directors
who are not members of the committee
e Group Controller
e Group Head of Internal Audit
e Representatives from PwC as
external auditor
Dear Shareholder
This report provides an overview of the
committee’s key activities and focus areas
during the year and the framework within
which it operates.
Composition
The membership of the committee
remained unchanged during the year, with
the Board remaining comfortable that the
committee members have the appropriate
knowledge, skills and experience to fulfil
the duties delegated to the committee.
The members of the committee 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, giving the committee as a whole
competence relevant to the sector in which
the Group operates.
Areas of focus
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 Board with any judgements
and decision-making required in this
regard. This remained the key focus of the
committee during the year, with its activities
being consistent with prior years and in line
with its terms of reference.
The committee spent time during the year
assessing the accounting impact of the
Group’s corporate simplification, which
was completed in July 2019, as well as
the required assessment of the impact of
the transaction on the working capital of
the Group to support the working capital
statement made by the directors in the
prospectus. After detailed consideration,
the committee confirmed that it was
comfortable with the proposed accounting
treatment and reported as such to
the Board.
Oversight of Mondi’s principal risks
remained high on the agenda during the
year, with a number of the key risks falling
within the committee’s remit reviewed at
each meeting. Cyber security risk was a
particular focus for the committee (see
page 114 for more information) and the
decision was taken to recommend to the
Board the inclusion of climate change-
related risk as a separate strategic risk.
For the first time in 2019, the Group HR
Director presented to the committee on
Mondi Group Integrated report and financial statements 2019 111
Audit Committee activity
Set out below are some of the key matters addressed by the committee.
Financial reporting
Risk management and internal controls
e Reviewed the integrity of all financial
announcements with input provided by the Group
CFO, Group Controller and PwC.
e Reviewed the Mondi Group Integrated report and
financial statements for tone and consistency and
considered whether the report as a whole was fair,
balanced and understandable (see page 114 for
more information).
e Considered and agreed the accounting treatment
applicable to the simplification of the Group’s
corporate structure.
e Reviewed and discussed PwC’s reports to
the committee.
e Reviewed accounting policies to be applied for the
year ending 31 December 2019.
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
61 for more information).
e Reviewed and considered the outcome of the
FRC’s review of Mondi’s 2018 Integrated report and
financial statements and the response provided
(see opposite for more details).
External audit matters
e Recommended to the Board that the appointment
of PwC for the 2019 audit be put to shareholders at
the Annual General Meeting.
e Reviewed the independence, objectivity
and effectiveness of PwC (see page 115 for
more information).
e Reviewed and approved the external audit plan,
taking account of the scope, materiality and audit
risks and agreeing the audit fees.
e Received a report at each meeting of any non-audit
services performed by PwC in order to monitor
auditor independence.
e Reviewed and agreed the engagement and
representation letters.
e Held two meetings with PwC without management
present; the committee chair also engaged
regularly with the lead audit partner.
e Undertook a detailed review of the Group’s
risk management policy, plan and tolerance
levels and of the process to assess the risks.
Emerging risks were also considered. This resulted
in a recommendation to the Board that climate
change-related risk be included as a separate
principal strategic risk (see pages 52 to 60 for
more information).
e Reviewed the effectiveness of the risk management
and internal control systems (see pages 52 to 60 for
more information).
e At each committee meeting undertook a more
in-depth review of a number of the most significant
Group risks.
e Received half-yearly presentations on IT risk
management and cyber security (see page 114 for
more information).
Internal audit matters
e Reviewed and agreed the internal audit plan,
confirming the focus on key risk areas and
adequate cover of all material operations.
e Received reports from the Group Head of
Internal Audit at each meeting (see page 116 for
more information).
e Reviewed the effectiveness of the internal
audit team.
e Held a meeting with the Group Head of Internal
Audit without management present.
Governance and other
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.
the risks associated with the attraction and
retention of key skills and talent, giving the
committee a deeper understanding of the
challenges faced in this area.
A more detailed overview of the key matters
considered by the committee during the
year can be found opposite.
Approach to regular financial reporting
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. During the year, the practice of
publishing a quarterly update on trading
conditions was reviewed. Given the cyclical
nature of our business, our competitor
reporting cycles and our desire to keep
the market informed, it was agreed 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.
FRC review of Integrated report
During the year the Conduct Committee
of the Financial Reporting Council (FRC)
reviewed the Mondi Group’s Integrated
report and financial statements 2018 as part
of its review of compliance with relevant
reporting requirements. While the review
was based solely on the Integrated report
and not on detailed knowledge of the
business and the FRC does not provide
any sort of assurance, after responding
to a number of queries, the review was
satisfactorily concluded with no further
queries raised. As a result of the review,
we have enhanced our disclosures around
critical accounting judgements and
significant accounting estimates.
Committee effectiveness
The committee’s performance and
effectiveness was reviewed as part of the
external board evaluation undertaken during
the year, more details of which can be found
on page 105. I am pleased to confirm that
the committee is seen to be operating
effectively and fulfilling the duties delegated
to it by the Board.
Stephen Young
Chair, audit committee
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 112
Corporate governance report
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 Board. 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 52 to 60.
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 2018.
The key considerations in relation to the 2019 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 €16 million before
tax. It included impairment of assets of €39 million of the Neusiedler
operation (Austria) and other net asset impairments of €2 million;
a third party contribution relating to the Group’s Austrian health
insurance fund of €41 million (income); a financing special item of
€14 million related to the Simplification of the corporate structure;
restructuring and closure costs more than offset by release of
restructuring and closure provisions from prior years totalling
€3 million (income); and an additional provision of €5 million relating
to the 2012 Nordenia acquisition.
Details of the special items are included in the Strategic report on
page 63 and in note 3 of the financial statements.
The basis of preparation has changed for the year ended
31 December 2019 due to the Simplification of the corporate
structure. Prior to the Simplification, Mondi Limited and Mondi plc
operated under a dual listed company structure as a single economic
entity, and as such, together with their respective subsidiaries, were
reported on a combined and consolidated basis as a single reporting
entity. Post Simplification, the Group is reported on a consolidated
basis. The details of the Simplification are further described in notes
21 and 31 of the consolidated financial statements and notes 1 and 5
of the notes to the Mondi plc parent company financial statements.
The Group has revised the estimated useful economic lives
of property, plant and equipment. In accordance with IAS 8,
‘Accounting Policies, Changes in Accounting Estimates and
Error’, the effect of the change in accounting estimate has been
recognised prospectively in the consolidated income statement
and is not considered material.
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.
The committee has considered a report from management
in relation to the Simplification of the corporate structure and
satisfied itself that the treatment is according to the Group’s
accounting policy.
The committee has considered a report from management
in relation to the revised estimated useful economic lives and
satisfied itself that the review process and recognition of the
results were appropriate.
Mondi Group Integrated report and financial statements 2019 113
Matter considered
Action
In addition to property, plant and equipment of €4,800 million,
intangible assets of €81 million and goodwill of €948 million are
included as assets in the statement of financial position.
The committee considered a report from management describing
potential impairment indicators for 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 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.
During 2019, the Group reorganised its business units to
strengthen value chain integration and improve customer focus.
The prior year figures have been restated to reflect the new
organisational structure. The reorganisation has no impact on the
overall Group result.
The Group is organised across four business units (previously
three business units): Corrugated Packaging, comprising the
operations of containerboard and corrugated solutions; Flexible
Packaging, comprising kraft paper, paper bags and consumer
flexibles operations; Engineered Materials, comprising personal
care components, extrusion solutions and release liner operations;
and Uncoated Fine Paper.
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 to property, plant
and equipment and other intangible assets were appropriate.
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 2019.
The committee satisfied itself that the assumptions, and the
changes to those assumptions when compared with the year
ended 31 December 2018, were appropriate.
The committee has considered a report from management in
relation to the restated segmental information.
The process of restatement was discussed with management
and the committee satisfied itself that the restated segmental
information was appropriate.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 114
Corporate governance report
Fair, balanced and understandable
In line with the committee’s responsibility
for ensuring there are robust financial
reporting procedures and internal
controls in place and the UK Corporate
Governance Code requirement for the
committee to advise the Board in relation
to the annual report and accounts, the
committee undertook an assessment
of the Integrated report and financial
statements 2019. This incorporated the
work undertaken by the committee
throughout the year to monitor financial
reporting. The process and outcome are
set out below.
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 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 Board
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 or significant
accounting estimates had been made
e Consideration of going concern and
longer-term viability
e Separate meetings with PwC without
management present
e Sufficient opportunity to review drafts
Conclusion
After completion of the detailed review,
the committee was satisfied that:
e taken as a whole, the Group’s
Integrated report and financial
statements 2019, were fair, balanced
and understandable;
e the report accurately reflected the
information shareholders would require
in order to assess the Group’s position
and performance, business model and
strategy; and
e the use of alternative performance
measures contained in the report
assists in presenting a fair review of
the Group’s business
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.
Lessons learnt from attempted security
breaches and cyber security training for
employees were key areas of focus for the
committee during the year.
In addition, the committee continued to
monitor implementation of a number
of measures designed to give greater
protection to Mondi’s key operational
assets following the detailed audit by
KPMG in 2018 and looked to understand
in greater detail the ways in which Mondi’s
data is stored and the associated risks.
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 60 for more information).
Mondi Group Integrated report and financial statements 2019 115
External audit
PricewaterhouseCoopers LLP (PwC)
was first appointed as auditor, with Andrew
Kemp as audit partner, by shareholders at
the Annual General Meeting in May 2017,
replacing Deloitte LLP following a tender
process. The 2019 audit was PwC’s third
for Mondi.
The committee confirms its compliance
for the financial year ended 31 December
2019 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.
Non-audit services
A policy is in place that governs the
provision of non-audit services provided
by PwC to Mondi, differentiating between
those services that are permissible and
prohibited and including the requirements
for the approval of permissible services.
For all non-audit services, 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, as well as sufficient information to
allow an assessment of materiality.
The committee monitors compliance with
the policy, receiving reports at each meeting
detailing all approved non-audit services.
The breakdown of the fees paid to PwC
during the year, including the split between
audit and non-audit fees, is included in note
4 to the financial statements on page 171.
Total fees for non-audit services amounted
to €0.5 million, representing 10.9% of the
audit fee paid, with the majority of the
non-audit fees incurred relating to the half
year review, comfort related to statutory
reporting on the corporate simplification
and other audit-related assurance services.
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 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 partner
e Reviewed feedback from committee
members including views on how
PwC has supported the work of the
committee and 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
Group CFO, 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) 2018/19 report on Audit Quality
Inspections included a review of audits
carried out by PwC
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 financial reporting 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
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 116
Corporate governance report
Reports are given at each committee
meeting providing an update on activities,
resourcing levels, 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.
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.
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. An internal
review was undertaken in 2019, confirming
that the internal audit function remains
effective. A further external review is
scheduled to take place during 2020.
Internal audit
Mondi’s internal audit function 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 help the Board
and executive management to protect the
assets, reputation and sustainability of the
organisation and to manage and mitigate
its risks effectively. This includes assessing
whether all significant risks are identified
and appropriately reported by management
to the Board and executive management
and whether they are adequately controlled.
The audit committee has primary
responsibility for monitoring and reviewing
the scope and effectiveness of the
Group’s internal audit function. The Group
Head of Internal Audit has direct access
to, and responsibility to, the committee
as well as regular access to Mondi’s
executive management.
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.
Code of Business Ethics
and Speakout
Mondi continues to have a stated policy of
zero tolerance of bribery and corruption.
The Board has 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.
The Group has a confidential reporting
hotline called ‘Speakout’ operated by
an independent third party. Speakout,
monitored by the Board and audit
committee, is a simple, accessible and
confidential channel through which our
employees, customers, suppliers, and other
stakeholders can raise concerns about
unethical practices and conduct contrary
to Mondi’s values. Any type of concern
can be raised via Speakout. The Board
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. The effectiveness
of the Speakout facility is kept under
regular review. More information about
Mondi’s approach to anti-bribery and
anti-corruption as well as Speakout can be
found on page 36.
Mondi Group Integrated report and financial statements 2019 sustainable
development
committee
The committee assisted
the Board with a review
of Mondi’s key stakeholders,
the engagement activities
undertaken during the year
and the issues that matter
most to our stakeholders.
This insight will ultimately
provide context for
future decision-making
by the Board.
Dominique Reiniche
Chair of the sustainable
development committee
Composition1
Members throughout
the year
Committee
member since
Meeting
attendance
Enoch
Godongwana2
September 2019
Stephen Harris
March 2011
Peter Oswald
May 2017
Dominique
Reiniche, chair
May 2017
Stephen Young
May 2018
2/2
6/6
6/6
6/6
6/6
1 The maximum number of scheduled meetings held during
the year that each director could attend is shown next to the
number attended.
2 Enoch Godongwana joined the committee on 1 September 2019.
Other regular attendees
e Group CFO
e Chair 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
117
Dear Shareholder
This report provides an overview of the
committee’s key activities and focus areas
during the year and the framework within
which it operates.
Composition
In September 2019 Enoch Godongwana
joined the committee following his
appointment to the Board. Enoch’s
knowledge and previous experience
mean he will be able to make a valuable
contribution to the committee and
bring a new perspective and I look
forward to working alongside him on
sustainability matters.
Membership of the committee otherwise
remains consistent with the previous year.
Areas of focus
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, 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 34 to 51.
The safety of our employees and contractors
was our primary focus during the year with
safety performance reviewed in detail at
each meeting. Despite this, we were deeply
saddened by the two fatalities we experienced
during 2019. In January, a contractor lost
his life conducting pile drilling works at the
construction site of our new paper machine
in Ružomberok (Slovakia) and in August, a
contractor was fatally injured during towing
activities in our Russian logging operations.
Sadly, a contractor also died as a result of an
incident during demolition activities at our
Syktyvkar mill (Russia) in January 2020.
It was extremely important for the
committee to understand the reasons
for each incident. To assist with this, the
managing director of the affected plant in
respect of each fatality attended a meeting
of the committee to provide more context
and to explain the detailed outcome of the
investigations. We fully acknowledge the
impact such incidents have on the families,
friends and colleagues of those involved
and we continue to work hard to further
embed our safety culture across the Group.
Further details of the actions being taken
can be found on page 38.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 118
Corporate governance report
Sustainable development committee activity
Set out below are some of the key matters addressed by the committee.
Safety performance and serious incidents
Policies and commitments
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 a presentation in relation to social
e Reviewed the achievements against the
2020 commitments (see pages 36 to 51 for
more information).
e Reviewed an initial proposal for the approach to
setting post-2020 commitments.
e Considered and agreed the revised science-based
GHG targets (see page 44 for more information).
e Reviewed Group SD policies and approved
amendments to reflect best practice.
psychology of risk, how it applies to safety and how
it can improve our safety performance.
Forestry
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.
Sustainable development 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, including in relation to climate
change which is now mapped separately.
e Reviewed and approved the Group’s human
trafficking and modern slavery statement.
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.
Environmental performance
e Received regular reviews on performance against
each of the environmental key performance
indicators and commitments.
e Received information on any material environmental
incidents and considered management’s response.
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, their key issues
and the actions being taken to address them.
e Reviewed our social and community engagement,
including community investments and initiatives
at our pulp and paper mills, and the outcome of
the SEATs undertaken at our Dynäs (Sweden) and
Świecie (Poland) mills during 2019 (see pages 49
and 50 for more information).
Product stewardship
e Received a report on the Group’s product
stewardship practices, including updates to the Due
Diligence Management System.
e Considered in detail work being undertaken
in relation to sustainable products, including
the criteria used to define sustainable
products, prototypes being developed and the
key challenges.
One of the other key topics of discussion
during the year was Mondi’s science-based
greenhouse gas (GHG) emissions targets.
Having set a long-term reduction goal for
production-related GHG emissions in 2018,
the goal was reviewed to comply with the
criteria set by the Science Based Targets
initiative. This resulted in revised targets, more
details of which can be found on page 44.
Our impact on the environment and the risks
to Mondi’s performance associated with
climate change are high on the committee’s
agenda, both in respect of our long-term
prospects and financial performance, and
work is being undertaken by the Group
to ensure we are in a position to make the
disclosures recommended by the Task Force
on Climate-related Financial Disclosures.
Information relating to Mondi’s climate-related
risks can be found on page 56 and additional
details can be found in Mondi’s online
sustainability report.
We also increased our focus on stakeholder
engagement. This has always been one of
the committee’s primary responsibilities but it
was important to reiterate this during the year
in light of new regulatory and governance
requirements in this regard. The committee
assisted the Board with a review of Mondi’s
key stakeholders, the engagement activities
undertaken during the year and the issues
that matter most to our stakeholders.
This insight will ultimately provide context
for future decision-making by the Board.
There was a particular focus on the outcomes
of the two Socio-economic Assessments
undertaken during the year using Mondi’s
‘SEAT’ approach1, more details of which can
be found on pages 49 and 50 and in our
2019 sustainability report. Further information
on the way in which Mondi engages with its
key stakeholders, including the section 172
statement, can be found on pages 18 to 21.
A more detailed overview of the key matters
considered by the committee during the year
can be found opposite.
Committee effectiveness
The committee’s performance and
effectiveness was reviewed as part of the
external board evaluation undertaken during
the year, more details of which can be found
on page 105. I am pleased to confirm that
the committee is seen to be operating
effectively and fulfilling the duties delegated
to it by the Board.
Dominique Reiniche
Chair, sustainable development committee
1 Socio-economic Assessment Toolbox
Mondi Group Integrated report and financial statements 2019 Remuneration report
Statement from the Remuneration Committee Chair
119
Remuneration
committee
Our remuneration policy
is simple and aligned to
our shareholders’ interests.
Tanya Fratto
Chair of the remuneration committee
1 The full policy can be found on pages 123 to 131 of this report
Fellow shareholder, it is with pleasure
that I present the committee’s report on
directors’ remuneration.
At the 2020 AGM we are submitting the
Directors’ Remuneration Policy (DRP)1
for triennial approval, in accordance with
statutory requirements. The current DRP
was strongly supported at the AGM in
2017, with a vote of over 95% in favour.
The operation of the policy has also
been supported by our shareholders in
subsequent financial years, with votes of
99%, 95% and 99% in favour in 2017, 2018
and 2019 respectively. The new DRP, which
is set out in full in this Remuneration Report
has been updated to take account of the
latest developments in the UK Corporate
Governance Code and market practice.
The remainder of this Directors’
Remuneration Report, which describes how
the policy was implemented in 2019, will be
put to the usual advisory vote at the AGM.
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, three-
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. Vested LTIP shares
are required to be retained (net of sales to
settle tax on vesting) for two further years.
Executive directors are also required to build
a personal shareholding in Mondi, and, in the
new DRP, to retain a shareholding post-
employment.
Board changes
As we announced on 10 January 2020,
on 31 March 2020 Peter Oswald will
step down as CEO and leave the Group.
Details of the remuneration arrangements
applying to him on departure are included
in this Remuneration Report. Peter’s
12-month notice period under his contract
commenced on 10 January 2020, the date
of the announcement. He will however
cease employment on 31 March 2020, with
no payment in lieu of notice (PILON) for the
remainder of the 12-month notice period.
In accordance with the relevant plan rules,
he will retain deferred bonuses earned
for prior years, and LTIP awards which
will be subject to time pro-ration and
assessment of performance at the normal
vesting dates. He will be required to retain
shares from LTIP awards vesting in 2020,
2021 and 2022, net of tax, for a further two
years after vesting, which implies a post-
employment shareholding requirement of
up to four years.
As announced on 18 February 2020,
Andrew King will be appointed as Group
CEO with effect from 1 April 2020.
Full details of his remuneration are included
in this Remuneration Report.
Review of Directors’ Remuneration
Policy and shareholder consultation
In advance of the triennial vote on the DRP,
we have undertaken a thorough review of
the remuneration structures in place for
our executive directors. We have aimed to
ensure that the policy continues to support
Mondi’s success for the next three-year
cycle, incentivising the management team
to deliver outstanding shareholder value
and reflecting the updated UK Corporate
Governance Code requirements.
The remuneration philosophy, which has
been strongly supported by shareholders,
remains unchanged.
The key changes are:
e an increase in the minimum shareholding
requirement for executive directors
e a new post-employment shareholding
requirement for executive directors, for
two years post-employment
e reduction of the pension allowance, for
new executive director appointments, in
line with the majority of the workforce in
the relevant location
e reduction in pension allowance for
existing executive directors
e adjusting maximum bonus and LTIP
opportunities to take account of market
norms, accompanied by a reduction
in the on-target bonus (percentage of
maximum), and a commitment to limit
bonus and LTIP award levels in 2020
below the policy maximum.
We have consulted on the proposed
changes with our largest shareholders and
with proxy voting agencies, and received a
good level of support from respondents.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 120
Remuneration report
Performance and remuneration for 2019
As described in the Strategic report,
Mondi’s financial performance, which has a
weighting of 70% of the annual bonus, was
robust against a backdrop of challenging
trading conditions. ROCE performance
was 19.8% and underlying EBITDA was
€1,658 million, relative to challenging
targets of 22% and €1,795 million
respectively. While financial performance
was strong, outcomes were below the
demanding targets set by the committee.
This is reflected in the bonuses that were
paid. Bonus performance outcomes relative
to the targets that were set are outlined
in the annual report on remuneration.
Performance outcomes
Annual bonus
Performance outcomes are reflected in the
remuneration received by directors:
e Annual bonuses of 44% of the maximum
have been awarded in respect of
performance in 2019 for Peter Oswald
and Andrew King. This recognises the
Group’s financial performance as well
as performance against the personal,
operational and strategic objectives that
were set at the start of the year.
e The performance period for the 2017 LTIP
ended on 31 December 2019. Half of the
award was based on ROCE performance
and half on relative TSR performance.
ROCE for the three-year performance
period was 20.9%, above the stretch
performance requirement of 18%.
The Group’s TSR over the period was
22.3%, which placed it above the median
of the comparator group. As a result of
this performance, 100% of the ROCE
element, and 34.4% of the TSR element,
and therefore 67.2% of the overall LTIP
award, vested.
e The Committee considered whether any
discretion should be exercised to override
the outcomes for 2019, for bonus and
LTIP, and decided this was not necessary
as the outcomes are a fair reflection
of the overall performance achieved
for shareholders.
Formulaic
Personal
28%
16%
Final
outcome
44%
Performance shares (LTIs)
ROCE
TSR
50%
17.2%
Underlying EBITDA
€1,658 million
3-year ROCE
ROCE
TRCR
Read more
Pages 133 to 135
19.8%
TSR peer rank
0.59
TSR
Read more
Page 136
Remuneration outcomes
Final
outcome
67.2%
20.9%
8th
34.4%
Peter Oswald Group CEO
Andrew King Group CFO
2019
40%
2018
33%
2017
40%
21%
39%
€3,800,781
2019
46%
18% 36%
35%
32%
€4,416,016
2018
34%
28%
38%
€2,229,187
€2,809,404
27%
33%
€3,679,789
2017
60%1
15%
25%
€3,769,548
2016
36%
20%
44%
€3,930,9441
2016
36%
20%
44%
€2,724,990
Salary, benefits, pension & other
Annual bonus
Performance shares (LTIPs)
1
Includes one-off relocation assistance for relocation from South Africa to UK
1 Peter Oswald’s remuneration is shown for 2016, albeit he wasn’t CEO
Executive directors’ shareholdings
Peter Oswald Group CEO
Andrew King Group CFO
Shares at 31/12/19:
191,518
Read more
Page 139
% base salary:
346%
Shares at 31/12/19:
73,178
Read more
Page 139
% base salary:
208%
Mondi Group Integrated report and financial statements 2019 Remuneration report
2020 implementation of the Directors’ remuneration policy
121
Conclusion
Thank you for the strong support you
have given our remuneration approach
in prior years. I very much hope that you
will give your support to the remuneration
resolutions at the 2020 AGM.
Tanya Fratto
Chair of the remuneration committee
Salary
Peter Oswald’s base salary has been
increased by 2.6%, effective from 1 January
2020, in line with that of the UK workforce
average of 2.6%. As CFO Andrew King’s base
salary was also increased by 2.6%. As CEO,
with effect from 1 April 2020, Andrew King’s
base salary will increase to £970,000, the
same level as Peter Oswald at prevailing
exchanges rates, on an annualised basis.
Pension
Subject to approval of the new policy, for
the period 1 January to 31 March 2020,
Peter Oswald and Andrew King’s pension
allowance will reduce from the current
25% of base salary to 23%. With effect
from 1 April 2020, Andrew King’s pension
allowance will reduce to that of the majority
of the UK workforce, expected to be 8%.
Variable pay
For 2020, Peter Oswald’s maximum bonus
opportunity will be set at 185% of base
salary, this will be pro-rated for the part of
the year worked. Andrew King’s maximum
bonus opportunity will be 155% of his base
salary as CFO. This will be pro-rated for
the period in 2020 as CFO. These awards
are 15 and 45 percentage points, below the
new policy maximum and FTSE 100 market
median. As CEO, Andrew will receive a
maximum bonus opportunity of 185% of
base salary, pro-rated in 2020 for the period
Andrew serves as CEO.
As with the annual bonus, we will continue
to use the capacity in the policy for the LTIP
conservatively. For 2020, Peter Oswald will
not receive a LTIP grant. Andrew King will
receive a grant level set at 230% of his CEO
base salary, 20 percentage points below
the new policy maximum and the FTSE
100 median.
We will continue to set robust and
challenging performance targets for bonus
and LTIP.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 122
Remuneration report
2020 implementation of the Directors’ remuneration policy
Summary of proposed changes at a glance
Minimum Shareholding Requirement (MSR)
Annual bonus
Increased in-employment MSR to 300% of base salary for the
CEO, and 250% for the CFO (currently 200% of base salary for
both). New appointees will be required to meet this requirement
within five years of appointment.
As CEO, Andrew King will be required to meet the new
requirement of 300% within a reasonable time period.
Reduction in bonus payable for on-target financial performance,
as a percentage of maximum from 62.5% of maximum to 50%.
Increased annual bonus maximum in the policy to 200% of base
salary (currently 175%). For the financial year 2020, Peter Oswald’s
maximum bonus opportunity will be 185% of base salary, pro-
rated for the period worked. As CFO, Andrew King’s maximum
bonus opportunity will be 155% of base salary, pro-rated for the
period he serves as CFO. As CEO, Andrew’s maximum bonus
opportunity will be 185% of base salary, pro-rated for the period
he serves as CEO.
Post-employment shareholding requirement
LTIP
Introduction of a post-employment shareholding requirement
for current and future executive directors to retain a shareholding
for two years post-employment.
Increased LTIP maximum in the policy to 250% of base salary.
For 2020, Peter Oswald will not receive a grant. Andrew King
will receive a grant of 230% of his CEO base salary
(20 percentage points below the new policy maximum).
Pension
Dividend equivalents
Pension allowances for new executive director appointments
will be reduced to align with the majority of the workforce in
the relevant location.
For grants from 2020 onwards, any dividend equivalents
delivered on the deferred bonus, or under the LTIP, will be in
shares, and will only vest to the extent the award vests.
For the period from 1 January to 31 March 2020, existing
executive directors’ pension allowances will reduce from 25% to
23%. On his appointment as CEO on 1 April 2020, Andrew
King’s pension allowance will align with the majority of the UK
workforce, expected to be 8%.
Mondi Group Integrated report and financial statements 2019 Remuneration report
Directors’ remuneration policy
123
The report
The report has been prepared by
the remuneration committee and
approved by the Board of Mondi plc.
PricewaterhouseCoopers LLP has
independently audited the items stipulated
in the regulations:
e executive directors’ and non-executive
directors’ remuneration and associated
footnotes on page 132;
e the table of share awards granted to
executive directors and associated
footnotes on page 141; and
e the statement of directors’ shareholdings
and share interests in Mondi on page 139.
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) Regulations 2008 (as
amended). The policy has been developed
taking into account the principles of the
UK Corporate Governance Code and
the views of our major shareholders.
The policy is submitted for approval by
a binding shareholder vote at the Mondi
plc Annual General Meeting on 7 May
2020. The key changes proposed to the
policy are summarised in the table in the
committee chair’s introductory statement
to the remuneration report. The committee
consulted with major shareholders on the
proposed changes.
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.
Remuneration policy for executive directors
is framed around the following key
principles:
e remuneration packages should be set
at levels that are competitive in the
relevant market;
e the structure of remuneration 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;
e a significant proportion of the
remuneration of executive directors
should be performance-based;
e the performance-based element of
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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 124
Remuneration report
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:
Purpose and
link to strategy
Operation
Base salary
To recruit and reward
executives of a
suitable calibre for
the role and duties
required.
Reviewed annually by the committee, taking account of Group
and individual performance, changes in responsibility and levels
of increase for the broader employee population.
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.
Benefits
To provide market
competitive benefits.
Pension
To provide market
competitive pension
contributions or
allowances.
The Group typically provides:
e car allowance or company car;
e medical insurance;
e death and disability insurance;
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.
Defined contribution to pension, or cash allowance of
equivalent value. Only base salary is pensionable.
Maximum opportunity
There is no prescribed maximum
base salary or annual increase.
However, increases will normally
be no more than the general level
of increase in the UK business
or the locations in which the
executive is based. 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.
Maximum values are determined
by reference to market practice,
avoiding paying more than is
necessary.
For new appointments, the
maximum company pension
allowance will be no more than
available to the majority of the
workforce in the relevant country
from time to time.
For the period from 1 January to
31 March 2020, existing executive
directors’ pension allowances
will reduce from 25% to 23%.
On his appointment as CEO
on 1 April 2020, Andrew King’s
pension allowance will align with
the majority of the UK workforce,
expected to be 8%.
Mondi Group Integrated report and financial statements 2019 Purpose and
link to strategy
Operation
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, percentage ROCE
and safety. These have the highest weighting (currently 35%,
35% and 10% respectively of the total). Individual performance
is also assessed against suitable objectives, and currently has
a 20% weighting. These metrics are selected as they provide
strong alignment to Mondi’s strategy.
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 normally delivered in cash and half in
deferred shares which normally vest after three years (subject
to service conditions), and with no matching element. For
grants from 2020 onwards, any dividend equivalents accruing
on shares between the date when the awards were granted
and when they vest, will be delivered in shares.
Malus and clawback provisions apply to both the cash and
share based element of awards, for a period of three years;
from the date of payment (cash) or date of release (shares) in
the event of:
e misstatement of financial results;
e misstatement of performance;
e gross or serious misconduct;
e corporate failure;
e severe downturn in financial or operational performance; or
e severe reputational damage.
125
Maximum opportunity
The maximum annual bonus is
200% of base salary (increased
from 175% under the previous
policy).
The committee retains discretion
to set the actual maximum below
the policy maximum.
For the 2020 financial year, the
CEO’s maximum annual bonus
opportunity will be set at 185%
of base salary (pro-rated for time
worked), and that of the CFO
at 155% of base salary (pro-rated
for the period as CFO) (i.e below
policy maximum).
As CEO, Andrew King’s maximum
annual bonus opportunity for
2020 will be set at 185% of his
CEO base salary for the period
he serves as CEO.
The on-target bonus, as a
percentage of maximum, will be
reduced from 62.5% to 50% for
financial targets from the 2020
performance year.
The bonus payable at threshold
(entry level) performance is 25%
of the maximum.
The implementation of the
policy in the 2020 financial year
is detailed in later sections of
this report.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 126
Remuneration report
Directors’ remuneration policy
Purpose and
link to strategy
Operation
Long-Term
Incentive
Plan (LTIP)
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.
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 2020, metrics comprise TSR
against a suitable peer group, and percentage ROCE, each
with a 50% weighting.
The vesting outcome can be reduced, if necessary, to reflect
the underlying or general performance of the Group.
For awards granted from 2020 onwards, any dividend
equivalents will be delivered in shares, at the end of the vesting
period, based on the proportion of the award that vests.
Malus and clawback provisions apply to awards made, for a
period from grant to the third anniversary of vesting of the
award, in the event of:
e misstatement of financial results;
e misstatement of performance;
e gross or serious misconduct;
e corporate failure;
e severe downturn in financial or operational
performance; or
e severe reputational damage.
A two-year post-vesting holding period applies for LTIP shares
that vest (net of tax). The two-year holding requirement will
continue if the director leaves employment during the holding
period, or is permitted to retain any part of an award as a
good leaver. The shares held will count towards the executive
director’s normal holding requirement.
Maximum opportunity
The maximum grant limit is 250%
of base salary (face value of
shares at grant), to any individual
in a single year (increased from
225% in the previous policy).
For 2020, Peter Oswald will not
receive a grant. Andrew King will
receive a grant of 230% of his
CEO base salary (20 percentage
points below the maximum).
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.
Mondi Group Integrated report and financial statements 2019 127
Maximum opportunity
Not applicable.
Purpose and
link to strategy
Operation
Share
ownership
policy
To further align the
interests of executive
directors with those
of shareholders.
The Minimum Shareholding Requirement (MSR) for the CEO
is increased to 300% of base salary and to 250% for the CFO,
(the MSR under the previous policy was 200% of base salary
for both roles). A new executive director is normally required to
meet the MSR within five years from the date of appointment
to the Board.
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 holding requirement 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 holding requirement.
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 holding requirement.
Previously compliant directors who do not meet the minimum
requirements on annual assessment are normally required 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.
Post-employment MSR:
A post-employment shareholding requirement applies.
Under the new policy, executive directors will be required to
retain a shareholding for two-years post-employment.
For the first year post-employment, the full in-employment
MSR level applies. For the second year post-employment,
one-half of the in-employment MSR level applies. New executive
directors who have not achieved the necessary in-employment
MSR level at date of exit will be required to retain the level of
shares held at date of exit, reducing in the second year to the
lessor of one-half of the in-employment MSR, or the actual
shares held.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 128
Remuneration report
Directors’ remuneration policy
Choice of performance measures and approach to target setting
Bonus Share Plan (BSP)
The table below shows the metrics for 2019, why the metrics were chosen and how targets are set.
Metric
Underlying EBITDA (35%)
KPI
Page 22
ROCE (35%)
KPI
Page 22
Safety (10%)
KPI
Page 23
Personal performance (20%)
Why chosen?
Underlying EBITDA provides a measure of
the cash-generating ability of the business
that is comparable from year to year.
ROCE provides a measure of the efficient
and effective use of capital in our
operations.
How targets are set
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
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 2019 grants, why they were chosen and how targets are set.
Metric
TSR, relative to a peer group of competitors
(50%)
ROCE (50%)
Why chosen?
TSR measures the total returns to
Mondi’s shareholders, including both
share appreciation and dividends paid, so
provides close alignment with shareholder
interests.
How targets are set
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.
ROCE provides a measure of the efficient
and effective use of capital in our
operations.
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 2019 129
Executive directors’ existing service contracts, and policy on loss of office
CEO
As announced on 10 January 2020, Peter Oswald will step down as Group CEO on 31 March 2020, and leave the Group. Details of the
remuneration arrangements applying to him on departure are included in this Remuneration Report.
Peter Oswald’s contract is, as required under Austrian law, for a fixed period, which expires on 30 April 2022. However, it can be terminated
before that date on one year’s notice by either party. In the event of termination by Mondi, other than for ‘cause’, the 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.
Andrew’s new service contract as CEO, which will take effect on 1 April 2020, provides for termination on one year’s notice by either party.
The Group may elect to make a payment in lieu of notice and, if it does so, to apply mitigation. Payment in lieu of notice would comprise base
salary, benefits and pension contributions for the notice period (or, if applicable, the balance of the notice period).
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
Contract terminates on 31 March 2020
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 payment of the base salary, pension contribution and benefits in respect of the unexpired portion of the 12-month notice 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.
Policy on loss of office
Notice periods will not normally exceed 12 months (as described above). The Group may elect to make a payment in lieu of notice and, if
it does so, to apply mitigation. The Group would seek to apply the principles of mitigation to any payment in lieu of notice 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.
An executive director’s eligibility for bonus on cessation of employment will be determined by the committee in accordance with the
relevant plan rules (taking into account the reason for their departure). Where eligible, the departing director’s bonus would typically be
determined in the normal way after the relevant year end, i.e. based on the applicable performance conditions, pro-rated for the period
worked in that year, save that no portion would be required to be deferred into a BSP award. However, the committee has the discretion to
apply different treatment.
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 leaver’ status can be applied. For good leavers, vesting of BSP awards is
accelerated to as soon as practical after employment termination (as they are not subject to performance conditions). Typically, 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 apply different treatment (including 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. Post-vesting holding periods will continue to apply, notwithstanding any cessation of employment.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 130
Remuneration report
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 to 127.
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
51%
14%
14%
21%
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
32%
14%
14%
40%
100%
49%
13%
13%
25%
40%
15%
15%
30%
30%
12%
12%
46%
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 = 53% 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 2020
2 Benefit values for both the Group CEO and the Group CFO 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
Committee discretion
The Committee, consistent with market practice, retains discretion over a number of areas relating to the operation and administration of
the policy. These include (but are not limited to) the following:
e who participates in the incentive plans;
e the timing of award grants and/or payments;
e the size of an award and/or a payment (within the limits set out in the policy table on pages 124 to 127);
e the choice and weighting of performance metrics (in accordance with the statements made in the policy table on pages 124 to 127);
e in exceptional circumstances, determining that any share-based award (or any dividend equivalent) shall be settled (in full or in part) in cash;
e discretion relating to the measurement of performance in the event of a change of control or restructuring;
e determination of a good leaver (in addition to any specified categories) for incentive plan purposes based on the rules of each plan and the
appropriate treatment in such circumstances;
e determining the extent of payment or vesting of an award based on the assessment of any performance conditions, including discretion as to
the basis on which performance is to be measured if an award vests in advance of normal timetable (on cessation of employment as a good
leaver or on the occurrence of a corporate event) and whether (and to what extent) pro-ration shall apply in such circumstances;
e whether (and to what extent) malus and/or clawback shall apply to any award;
e adjustments required in certain circumstances (e.g. rights issues, corporate restructuring, on a change of control and special dividends); and
e the ability to adjust existing performance conditions for exceptional events so that they can still fulfil their original purpose while being no
less stretching.
Mondi Group Integrated report and financial statements 2019
131
Remuneration policy for non-executive directors
Remuneration policy for non-executive directors
Element
Non-executive
board chair
fees
Purpose and link to strategy
To attract and retain a high-calibre
chair, 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.
Operation
The Chair receives an all-inclusive fee.
Maximum opportunity
The Chair’s 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 Chair 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 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 Meeting. Appointments may be terminated by either party
with six months’ notice. No compensation is payable on termination, other than accrued fees and expenses.
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 base 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 Board receives feedback on these survey results.
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 2019OverviewStrategic reportGovernanceFinancial statements 132
Annual report on remuneration
2019 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 fees1
2019 €1,105,000
Benefits2
Pension
contribution12
€61,208 €276,250
Annual bonus
including grant
value
of BSP
award
Value of LTIP
vesting at
date of
grant4
€807,974 €1,466,211 €1,481,769
Value of LTIP
vesting in the
performance
year3
Share price
gain on vesting
LTIP award
between
grant and
vest dates5
€0
Other6
Total
€84,138 €3,800,781
2018 €1,076,000 €46,962 €269,015 €1,562,352 €1,417,326 €1,162,023 €255,303
€44,361 €4,416,016
2019 €680,296 €45,734 €170,074 €405,149
€811,648
€784,241
€27,408
€116,286 €2,229,187
2018 €654,467
€64,001 €163,617 €786,326 €1,060,880 €830,806 €230,075
€80,113 €2,809,404
2019 €228,936
2018 €331,159
2019 €383,904
2018 €331,159
2019
2018
2019
2018
2019
€114,121
€111,773
€32,057
Nil
€111,517
2018 €109,625
2019 €116,903
2018
2019
€107,127
€109,161
2018 €66,950
€2,050 €230,986
€2,035
€333,194
€383,904
€331,159
€114,121
€111,773
€32,057
Nil
€111,517
€109,625
€118,953
€109,162
€109,161
€66,950
€2,050
€2,035
Peter
Oswald
Andrew
King7,8
Fred
Phaswana9
David
Williams
Tanya Fratto
Enoch
Godongwana10
Stephen
Harris
Dominique
Reiniche
Stephen
Young11
1
The non-executive directors’ fees are 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 2.6% with effect from 9 May 2019 following the passing of a resolution at the Annual General Meeting. See the table on page 143 for current fee levels
2 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
3
4
5
6
the ‘Benefits’ column includes €8,004.09 in respect of accommodation cost for his business travel and the cost of any grossed up income tax paid during the year.
For 2019, the three-year performance cycle of the 2017 LTIP award ended on 31 December 2019. The award value shown has been based on the average share price over the last three months of the financial period.
The 2017 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 2018, the
three-year performance cycle of the 2016 LTIP award ended on 31 December 2018. The award value shown in the 2018 remuneration report was an estimate based on the average share price over the last three
months of the financial period which was £17.65 for Mondi plc LTIP awards and ZAR 329.45 for Mondi Limited LTIP awards. The actual award price on vesting was £17.91 for Mondi plc LTIP awards and ZAR 340.63 for
Mondi Limited LTIP awards. The award values for 2018 have been restated on this basis
For 2019, the value is shown of the 2017 LTIP award made at the start of the three-year performance cycle, and for 2018, the value of the 2016 LTIP award made at the start of the three-year performance cycle
For 2019, the value shown of the 2017 Mondi plc LTIP is based on the share price loss between grant and the average share price over the last three months of the financial period. The value of Mondi plc’s shares
decreased from £18.76 to £16.49 during this time. As a consequence a zero gain is shown for Peter Oswald. Peter’s loss due to share price depreciation was €15,558. For 2018, the enhanced value is shown of the 2016
LTIP that vested based on share price appreciation during the holding period. The value of Mondi plc’s shares increased from £12.88 to £17.91, and the value of Mondi Limited shares from ZAR 282.00 to ZAR 340.63
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 141. Peter Oswald received equivalent dividends to the value of €84,138, Andrew King €61,375. 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 €54,911.21 in respect of accommodation costs for his
business travel and the cost of any grossed up income tax paid during the year. Fred Phaswana and Dominique Reiniche received tax advice in the year to the value of €2,050 each
7 Andrew King’s salary is denominated in pound sterling. His 2018 salary was £579,000, and 2019 was £594,500
8 Andrew King’s 2017 LTIP grant was awarded in Mondi plc and Mondi Limited shares. After the corporate simplification, the Mondi Limited shares were converted to Mondi plc shares on a 1:1 basis. The value shown for
2019 for the LTIP vesting at date of grant and share price gain are solely based on the Mondi plc shares including those converted.
Fred Phaswana’s fees for 2019 cover the period to his retirement from the Board on 31 August 2019
9
10 Enoch Godongwana’s fees for 2019 cover the period from his appointment to the Board on 1 September 2019
11 Stephen Young’s fees for 2018 cover the period from his appointment to the Board on 1 May 2018
12 None of the executive directors have 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 and
no payments were made to past directors for loss of office
Corporate Simplification
During 2019, Mondi completed the simplification of its dual listed company structure into a single holding company structure under Mondi
plc. Therefore, in line with all other shareholders, executive directors holding, or granted, Mondi Limited shares had these converted to
Mondi plc shares on the same basis as other shareholders. Therefore, the shareholding of Andrew King reflects him solely holding Mondi
plc shares from 2019. In addition, the performance assessment of the 2017 LTIP grant onwards, will solely be based on Mondi plc’s TSR.
Mondi Group Integrated report and financial statements 2019
133
Departure of Peter Oswald
As we announced on 10 January 2020, on 31 March 2020 Peter will step down as Group CEO and leave the employment of Mondi.
The remuneration committee has considered the treatment of Peter’s remuneration as a result of his departure, in accordance with the Directors’
Remuneration Policy, his service contract, the relevant incentive plan rules, and best practice principles
Peter’s 12 month notice period commenced on 10 January 2020 when we announced his forthcoming departure. He continues working as
Group CEO for the initial period to 31 March 2020. During this period when he remains in post, he continues to receive his base salary, pension
allowance and benefits. He is also eligible for a pro-rata annual bonus for this part of 2020 that he remains in post (i.e. up to 31 March 2020); the
bonus is subject to the normal performance conditions and any amount earned is payable in 2021 following the committee’s usual assessment
of performance.
As disclosed in the Remuneration Report, Peter also received a bonus for 2019 performance, which was determined in accordance with the
normal performance conditions and assessment.
Peter will not receive any pay in lieu of notice (PILON) for the remainder of his notice period (i.e. from 1 April 2020 to 9 January 2021). Peter will
also not receive a LTIP award in 2020.
The committee determined, in accordance with the Plan rules, that Peter should be permitted to retain his subsisting deferred bonus share plan
(BSP) awards, as these had been earned based on previous performance in prior years. Peter has also been permitted to retain his subsisting
LTIP awards granted in prior years but on a pro-rated basis, according to the relevant portion of the performance period that he has worked.
These awards will vest in the normal time horizon and remain subject to the performance conditions. All awards remain subject to malus and
clawback provisions.
Peter is required to retain a shareholding in Mondi for an extended period after employment. He is required to retain shares from LTIP vestings in
2020, 2021 and 2022, (net of sales to settle tax on vesting) for a further two years after vesting. This means the holding period can extend up to
2024, four years after leaving employment.
Annual bonus
2019 bonus outcomes (audited)
For the annual bonus in respect of 2019 performance, the performance measures and achievement levels were:
Weight
Outcomes:
Peter Oswald
Andrew King
Underlying EBITDA
35
15
15
BSP performance measures
ROCE
35
13
13
Safety
10
0
0
Personal
20
16
16
Total
100
44
44
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 134
Annual report on remuneration
Financial element of 2019 bonus (audited)
Financial performance was assessed against the underlying EBITDA and ROCE ranges that were set for 2019. The ranges and outcomes were:
2019 Financial bonus elements
Threshold
Underlying EBITDA (€m)
€1,526m
Bonus outcome (points)
8.75
Outcome
€1,658m
ROCE (%)
18.7%
Bonus outcome (points)
8.75
Outcome
19.8%
Maximum
€2,064m
35.0
Maximum
25.3%
35.0
Safety element of 2019 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:
2019 Safety bonus elements
TRCR
Bonus outcome (points)
Threshold
0.73
1
Maximum
0.65
5
Outcome
0.59
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.
As a result of the tragic and unacceptable two contractor fatalities in 2019, as reported on page 37, zero payment was made under the
safety element of the 2019 bonus. The two fatalities are highly regrettable as they are set against a backdrop of 2019 having the lowest
level of recorded accidents (TRCR) in the history of Mondi, and among the lowest in our industry. The committee considered whether to
exercise any discretion to reduce the bonus further in light of the fatalities. As the effect of the fatalities was already to reduce the award
for the entire safety metric to zero, and in view of the low overall accident rate (TRCR) and that there was an improvement in life altering
injuries in 2019 (two compared to five in 2018), the committee concluded that it was not necessary to override the calculated outcome
under the metrics. Nonetheless, we strive for continued improvement. From 2020, we are moving from focusing mainly on our controls,
to focusing on risk-taking behaviours, including focusing on the mindset of our employees and contractors, and emphasising the inputs.
Focusing on the inputs (lead) as much as the outputs (lag) of our performance. This was piloted in 2019 and contributed to the TRCR being
the lowest in our history and among the best in our industry.
The TRCR that was achieved for 2019 was 0.59, however because of the two fatalities no points were therefore awarded for this part of the
safety element.
Mondi Group Integrated report and financial statements 2019 135
Personal objectives of executives for 2019 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 2019, included:
Strategy development
and execution
Organisational performance
Financial efficiency
and financing
Organisational structure
and resourcing
Growing Responsibly
e Successful ramp-up of the modernisation and expansion of the cost-advantaged Štětí mill (Czech Republic)
e Good progress with investment in a new 300,000 tonne per annum kraft top white machine in Ružomberok
(Slovakia), while related pulp line rebuild started up in the year
e Ongoing investment to debottleneck the Syktyvkar mill (Russia)
e Initiated modernisation of the Richards Bay mill (South Africa) to improve reliability, including upgrade of
chemical and energy plants
e Continued focus on evaluating value enhancing capital investment and acquisitions
e Corporate simplification completed, simplifying cash and dividend flows, increasing transparency, removing
the complexity associated with the previous dual listed company structure and enhancing strategic flexibility
e Strong operational performance across the Group
e Continuous improvement initiatives to enhance productivity and efficiency and reduce costs
e Targeted digitalisation projects started across all business units
e Maintained Moody’s Baa1 and Standard & Poor’s BBB+ credit ratings
e Maintained a robust liquidity position
e Further progress on tax risk mitigation
e Reorganisation of business units to strengthen value chain integration and improve customer focus
e Key senior appointments made during the year
e Continued focus on safety performance with best TRCR to date and six of our nine paper mills completing
injury free shuts in 2019
e Improved initiatives to engage our people with special attention to diversity and inclusion
e Approved science-based climate commitment that runs to 2050
e Good progress on developing post-2020 sustainability commitments to build on achievements and enable
Mondi’s future success
Stakeholder relationships
The ratings of the two
executive directors were:
e Extensive roadshows and individual meetings held throughout the year with existing and potential investors
e Virtual leadership meetings to enhance communication with senior leaders
e Award-winning planetmondi intranet platform rolled out to all operations
Peter Oswald 16/20
Andrew King 16/20
Detail of annual bonus awarded in the year
Name
Peter Oswald1
Andrew King
Maximum
bonus2
€1,823,250
€918,400
% of
maximum
44
Awarded
in cash
€807,974
Awarded
in shares
—
44
€202,574
€202,575
Total
€807,974
€405,149
1 Peter Oswald’s bonus was paid in cash as he is leaving the business on 31 March 2020. Following his leaving date, the plan rules permit any deferred bonus he holds to be encashed
2 Peter Oswald and Andrew King’s maximum bonus awards in 2019 were 165% and 135% of base salary respectively. Both below the policy maximum.
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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 136
Annual report on remuneration
Long-Term Incentive Plan (LTIP) (audited)
Vesting of the 2017 awards
The LTIP awards that were made in 2017, with a three-year performance period ending on 31 December 2019, were assessed by the committee
in February 2020, against the (equally weighted) relative TSR and ROCE performance conditions.
The three-year ROCE that was achieved was 20.9% (19.3% in 2017, 23.6% in 2018 and 19.8% in 2019). As this exceeded the 10% to 18% ROCE
target range for these awards, 100% of the shares attributable to the ROCE performance condition vested in March 2020.
Vesting of the 2017 awards
Threshold
Three-year ROCE (%)
10%
Maximum
18%
Outcome
20.9%
Mondi plc achieved a TSR of 22.3%, over the performance period and Mondi’s rank within the TSR peer group was 8th. 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, 34.4% 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
8th
34.4%
Maximum
Upper
quartile
100%
Overall, 67.2% of the 2017 LTIP shares under award therefore vested with the remainder lapsing. For Peter Oswald, 66,901 of the 99,555
shares under award vested. For Andrew King, 35,408 of the 52,690 Mondi plc shares under award vested. No discretion was exercised
by the committee in determining the vesting outcomes.
As shares vested on 5 March 2020, 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 132. The average share price
was £16.49.
Awards granted in 2019
The maximum award that can be made to any LTIP participant in any year under the policy approved at the 2017 AGM is equal to 225%
of base salary. For 2019, 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 2019, 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 2021. 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
Bemis2
BillerudKorsnäs
Domtar
DSSmith
Holmen
Huhtamaki (2017)1
International Paper
Mayr-Melnhof
Metsä Board
RPC (2017)1,3
Sappi
Smurfit Kappa
Stora Enso
The Navigator Company
UPM
WestRock
1 Huhtamaki and RPC were added to the peer group for 2017 and subsequent awards
2 Bemis merged with Amcor in 2019. This was taken into account in calculating the TSR for the 2017 grant
3 RPC was acquired by Berry Global Group in 2019. This was taken into account in calculating the TSR for the 2017 grant
4 The remuneration committee will review replacements for Bemis and RPC for future awards
Mondi Group Integrated report and financial statements 2019 137
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 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).
While the peer group for 2020 awards will remain the same, consideration will be given to replacements for Bemis and RPC.
Details of the awards granted in 2019 can be found on page 141.
Mondi’s TSR performance over the last ten years
The following graph sets out the comparative TSR of Mondi plc relative to the FTSE All-Share Index, for the period between 31 December
2009 and 31 December 2019 as required in the reporting regulation. This index was chosen because it is the broad equity market index of
Mondi plc.
FTSE All-Share Index
Total shareholder return
Source: FactSet
10 year Mondi plc
10 year FTSE All-Share
)
£
(
e
u
a
V
l
1,000
800
600
400
200
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
This graph shows the value, by 31 December 2019 of £100 invested in Mondi plc on 31 December 2009, compared with the value of £100 invested in the FTSE All-Share Index on the same date
CEO remuneration from 2010
Year
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
Total remuneration
€3,800,781
% of maximum bonus earned
44
% of LTI vested
67.2
€4,416,0161
€3,828,0772
€5,786,958
€7,016,785
€7,763,908
€5,900,140
€6,305,794
€12,824,1123
€3,160,318
88
63
68.7
89.6
91.6
73
80
78
89
76.6
72.5
92.5
100
100
100
100
92
33
1 The three-year performance cycle of the 2016 LTIP award ended on 31 December 2018. The award value shown in the 2018 Remuneration report was an estimate based on the average share price over the last three
months of the financial year which was £17.65 for Mondi plc LTIP awards and ZAR 329.45 for Mondi Limited LTIP awards. The actual share price on vesting was £17.91 for Mondi plc LTIP awards and ZAR 340.63 for
Mondi Limited LTIP awards. The total remuneration for 2018 has been restated on this basis
2 For 2017 the CEO remuneration reflects David Hathorn’s remuneration up to his retirement from the Board 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
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
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
138
Annual report on remuneration
Comparison of 2019 and 2018 remuneration of CEO with other employees
CEO1
Mondi Group2
Percentage change in remuneration elements from 2018 to 2019
Base Salary
2.7%
4.9%
Benefits
30.3%
N/A3
Bonus
-48.3%
-6.94
1 The CEO’s benefits have increased due to travel and accommodation costs and are now reflected in benefits costs. Plus there was increased travel to the UK and more consequential tax advice.
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 2019 are compared with those paid in 2018. 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 (underlying)
2 A special dividend of €484m was paid in 2018 in addition to the 2017 ordinary dividend.
Non-executive directors’ remuneration (audited)
Fee levels during 2019 were as follows:
Role
Joint Board Chair fee1
Sole Chair fee1,2
Non-executive base fee
Additional fees:
Supplement for audit committee chair
Supplement for remuneration committee chair fee
Supplement for sustainable development committee chair
Supplement for senior independent director
2019
396
1,072
2018
3092
1,039
% change
28%
3%
Annual fee3
£304,500
£400,000
£48,630
£12,160
£11,570
£11,570
£11,570
£6,320
£6,080
£1,820
Supplement for senior independent director role if held by a non-executive who already chairs a committee
Attendance fee for meetings outside country of residence (per meeting)
Attendance fee for meetings inside country of residence (per day)
1 No supplement is payable for additional commitments in relation to this role
2 Payable from 1 September 2019, when David Williams became the sole chair
3 Fees are determined in pound sterling. In the remuneration table on page 132, euro amounts are reported based on exchange rates on the dates actual payments were made
The board chair and the other non-executive directors are appointed by Mondi plc. The terms of their appointment provide for the
appointment to be terminable on six months’ notice.
CEO pay ratio (audited)
The table below sets out the CEO pay ratio at the median, 25th and 75th percentile and the pay details for the individuals at
each percentile:
€ million
Total Pay Ratio
Base Salary
Total pay
CEO
pay
P25
(lower quartile)
126:1
£970,080
£3,336,706
£21,995
£26,084
P50
(median)
98:1
£31,157
£33,399
P75
(upper quartile)
67:1
£48,500
£48,500
Mondi’s UK annual average employee number in 2019 was 261, c1% of our global workforce. The overwhelming majority of our UK
workforce are production workers. A significant proportion of the CEO’s pay is delivered in LTI awards, which are linked to Mondi
performance and share price movement. Mondi has chosen to use Option A under the regulations, where the total annual pay for all UK
colleagues is calculated to identify those at median, 25th and 75th percentile. This calculation methodology was selected as the data was
felt to be the most accurate way of identifying the percentiles. The lower quartile, median and upper quartile employees were calculated
based on full-time equivalent base data as at 31 December 2019.
Mondi Group Integrated report and financial statements 2019 139
Statement of directors’ shareholdings and share interests (audited)
Until the Annual General Meeting in May 2017, the CEO was required to achieve and maintain a minimum shareholding equivalent to 150%
of base salary, and other executive directors a minimum shareholding of 100% of base salary. From the AGM in 2017, all executive directors
were 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
Board. As at 31 December 2019, Peter Oswald and Andrew King each exceeded the requirement.
The beneficial and non-beneficial share interests of the directors and their connected persons as at 1 January 2019 (or, if later,
on appointment), and as at 31 December 2019 (or as at their date of resignation if earlier) were as follows:
Executive directors (audited)
Shareholding
at 1 Jan
2019
172,391
65,000
Shareholding
at 31 Dec
2019
191,518
Total
shareholding
as multiple of
base salary (%)
346%
Deferred
BSP shares
outstanding
at 31 Dec 20191
78,628
Deferred
BSP shares as
multiple
of base salary
(%)
142%
73,178
208%
44,155
126%
Deferred
LTIP shares
outstanding
at 31 Dec
20192
316,919
164,088
Deferred
LTIP shares as
multiple
of base salary
(%)
572%
467%
Peter Oswald
Andrew King3
1 BSP shares subject to service condition
2 LTIP shares subject to service and performance conditions
3 Prior to the Simplification, Andrew held 208 Mondi Limited shares in addition to his Mondi plc shares. As a result of the Simplification, these shares were exchanged for Mondi plc shares on a 1:1 basis. The same applied
to his Mondi Limited BSP and LTIP shares
Non-executive directors (audited)
Fred Phaswana1
David Williams
Stephen Harris
Tanya Fratto
Enoch Godongwana2
Dominique Reiniche
Stephen Young
1. Fred Phaswana held 5,773 as at his retirement date, 31 August 2019
2. Enoch Godongwana held no shares on his appointment date, 1 September 2019
Shareholding at
1 Jan 2019
5,773
Shareholding at
31 Dec 2019
5,773
5,000
1,000
1,000
—
1,000
2,026
5,000
1,000
1,000
—
1,000
2,026
There has been no change in the interests of the directors and their connected persons between 31 December 2019 and the date of
this report.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 140
Annual report on remuneration
Remuneration committee governance
The remuneration committee
The remuneration committee is a formal committee of the Board. Its remit is set out in terms of reference adopted by the Board. 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 Board 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 Board Chair; 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
6/6
6/6
6/6
6/6
1 The maximum number of scheduled meetings held during the year that each director could attend is shown next to the number attended. Additional meetings were held as required.
Other regular attendees
e Group CEO
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 2019, Aon provided remuneration advice and benchmarking data to the committee. Aon 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. Aon provides actuarial advice to the trustees of Mondi’s three UK pension schemes and pension
administration services, as well as certain insurance broking services. In addition, Aon provides actuarial advice to Mondi’s deferred benefit
schemes globally. These services are entirely independent of the advice to the committee. Aon is a signatory to The Code of Conduct
of the Remuneration Consultants Group, which requires the advice Aon provides to be objective and impartial. Total fees paid to Aon as
remuneration advisers in respect of the year under review were £227,272 based on consulting time required by the committee.
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 plc
(‘the Company’), or while a director of the Company, as a director of any of the Company’s subsidiary undertakings, or as a director of any
other undertaking of which he/she was (while a director of the Company) a director by virtue of the Company’s nomination, or otherwise in
connection with the management of the Company or any undertaking during the year to 31 December 2019.
Mondi Group Integrated report and financial statements 2019 141
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 plc
Peter Oswald
Andrew King
Andrew King3
Awards held
at beginning
of year or on
appointment
to the
Boards
30,258
17,730
23,030
86,073
99,555
104,879
15,599
8,427
12,501
44,022
36,894
52,719
Type of
award1
BSP
BSP
BSP
BSP
LTIP
LTIP
LTIP
LTIP
BSP
BSP
BSP
BSP
LTIP
LTIP
LTIP
LTIP
Awards held
at beginning
of year or on
appointment
to the
Boards
6,744
3,608
19,032
15,796
Type of
award1
BSP SA
BSP SA
LTIP SA
LTIP SA
Awards
granted
during
year
Shares
lapsed
Awards
exercised
during
year
30,258
Award
price basis
(GBp)
1288
Date of
award
Mar 16
Awards held as
at 31 December
2019
—
20,141
65,932
15,599
10,301
33,721
37,868
112,485
19,619
58,679
1876
1922
1773
1288
1876
1922
1773
1288
1876
1922
1773
1288
1876
1922
1773
Mar 17
Mar 18
Mar 19
Mar 16
May 17
Mar 18
Mar 19
Mar 16
Mar 17
Mar 18
Mar 19
Mar 16
May 17
Mar 18
Mar 19
17,730
23,030
37,868
—
99,555
104,879
112,485
—
8,427
12,501
19,619
—
36,894
52,719
58,679
Release
date
Mar 19
Mar 20
Mar 21
Mar 22
Mar 19
Mar 20
Mar 21
Mar 22
Mar 19
Mar 20
Mar 21
Mar 22
Mar 19
Mar 20
Mar 21
Mar 22
Awards
granted
during
year
Shares
lapsed
Awards
exercised
during
year
6,744
4,453
14,579
Award
price basis
(ZAc)
28200
30352
28200
30352
Date of
award
Mar 16
Mar 17
Mar 16
May 17
Awards held as
at 31 December
2019
—
3,608
—
15,796
Release
date
Mar 19
Mar 20
Mar 19
Mar 20
1 The value on award of the 2019 BSP awards set out in this table were:
Peter Oswald
£671,399.64
The LTIP performance measures for the awards made in 2019 as set out in this table are detailed on pages 136 and 137 of this report. The face values of the 2019 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 2019, the executive directors also received the following cash amounts
£1,994,359.05
£1,040,378.67
Andrew King
Andrew King
£347,844.87
of equivalent value to dividends on vested shares over the vesting period, in accordance with the plan rules:
Peter Oswald
3 As a result of the completion of the corporate simplification, all of Andrew King’s Mondi Limited shares were converted to Mondi plc shares on a 1:1 basis
€193,388.48 (£166,082.03)
Andrew King
€267,475.53
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements
142
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
Andrew King1
Shares held at
beginning of year or
on appointment to
the Boards
5,760
Partnership shares
acquired during
the year
106
Matching shares
awarded during
the year
106
Shares released
during year
—
Total shares held as at
31 December 2019
5,972
1 Since 1 January 2020 up to the date of this report Andrew King acquired 18 partnership shares and was awarded 18 matching shares
Mondi plc share prices
The closing price of a Mondi plc ordinary share on the London Stock Exchange on 31 December 2019 was £17.725 and the range during the
period between 1 January 2019 and 31 December 2019 was £15.105 (low) to £18.980 (high).
Statement of voting at Annual General Meetings
The Annual General Meeting was held on 9 May 2019. All resolutions were passed. The voting result in respect of the remuneration report
is given below. Overall in excess of 72% of the total Group shares were voted.
Resolution
To approve the remuneration report (other than the policy)
Votes for
%
345,529,772 98.71
Votes against
4,523,493
%
1.29
Votes total Votes withheld
2,203,911
350,053,265
The remuneration policy was last approved 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.
Statement of implementation of directors’ remuneration policy in 2020
Current salary levels, and increases awarded in January 2020, are as follows:
Name
Peter Oswald
Andrew King
Base salary effective
1 Jan 2020
€1,134,000
Previous base salary
€1,105,000
£610,000
£594,500
% change
2.6
2.6
The executive directors’ base salaries were reviewed at the normal 1 January 2020 review date. Peter Oswald’s (CEO) and Andrew King’s
(CFO) salaries were increased by 2.6%,which is in line with the average percentage increase for Mondi’s wider workforce. Andrew will
receive £610,000 pro-rated for the period in 2020 he serves as CFO. For the period that Andrew serves as CEO, he will receive an
annualised pro-rated base salary of £970,000, the same level as Peter Oswald at prevailing exchange rates.
Mondi Group Integrated report and financial statements 2019 143
BSP and LTIP structure for 2020
Half of any bonus earned in respect of 2020 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 2020 will remain as it was for 2019. 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 Board
considers the 2020 annual bonus performance targets to be commercially sensitive. Targets will be disclosed in next year’s report.
LTIP awards that are made in 2020 will continue to have two performance conditions of equal weight – TSR and ROCE, measured over
a three-year performance period commencing on 1 January 2020.
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 136, 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 implemented with effect from 1 January 2020, are shown in the table below. Other than
for the Chair, whose fee has increased with effect from 1 September 2019, to reflect his position as sole Chair from this date, increases of circa
2.6% were implemented.
Role
Board Chair fee1
Non-executive base fee
Additional fees:
Supplement for audit committee chair
Supplement for remuneration committee chair
Supplement for sustainable development 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 for meetings outside country of residence (per meeting)
Attendance fee for meetings inside country of residence (per day)
1 The Chair’s fee was increased with effect from 1 September 2019, the point at which David Williams became the sole Chair
This report was approved by the Board on 26 February 2020 and is signed on its behalf.
Tanya Fratto
Chair of the remuneration committee
2019 Annual fee
£304,500
£48,630
Fee with
effect from
1 January 2020
£400,000
£49,890
£12,160
£11,570
£11,570
£11,570
£6,320
£6,080
£1,820
£12,470
£11,870
£11,870
£11,870
£6,490
£6,230
£1,870
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 144
Other statutory information
For the purposes of the Companies Act 2006, the disclosures below, including those incorporated by reference, together with the
Corporate governance report set out on pages 84 to 118, 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 page 32
e Financial risk management objectives and policies pages 64-65
e Principal risks pages 52 to 60
e Likely future developments in the business pages 14-15, 24 to 33, 68 to 83
e Research and development activities pages 31-32, 51
e Greenhouse gas (GHG) emissions pages 43-44
e Employees pages 37 to 41
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 177.
The information required under rules 9.8.4 (12) and (13) in relation to dividend waivers can be found on page 188. 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.
Employee and stakeholder engagement
Information relating to engagement with employees and other stakeholders, including customers and suppliers, can be found in the
Strategic report on pages 18 to 21 and in the Corporate governance report on pages 100 to 103.
Share capital
Full details of the Group’s share capital can be found in note 21 to the financial statements.
Substantial interests
As at 31 December 2019, the company 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
Public Investment Corporation Limited
BlackRock, Inc
Investec Asset Management Limited
AXA S.A.
Standard Life Investments Limited
Norges Bank
Old Mutual plc
Sanlam Investment Management Proprietary Limited
Number of voting rights
38,278,564
21,530,677
18,352,708
17,210,471
16,476,021
17,622,617
11,978,984
10,936,128
1 Percentage provided was correct at the date of notification. No further notifications have been received under DTR Rule 5 as at the date of this report, except as detailed below.
The following changes in interests have been notified between 1 January 2020 and the date of this report.
Date
21 January 2020
Shareholder
Public Investment Corporation
Limited
Number of voting rights
33,768,509
%1
7.88
5.86
4.99
4.69
4.49
3.66
3.26
3.00
%
6.96
Mondi Group Integrated report and financial statements 2019 145
Additional information for shareholders
The information for shareholders required pursuant to the Companies Act 2006 can be found on pages 226 and 227 of this report.
Political donations
No political donations were made during 2019 and it is Mondi’s policy not to make such donations.
Corporate simplification
In 2019, Mondi simplified its structure from the dual listed company structure to a single parent company structure under Mondi plc.
Further details can be found in note 21 to the financial statements.
Auditors
Each of the directors of 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 LLP (PwC) has indicated its willingness to continue as auditor of Mondi plc. The Board has decided that a
resolution to reappoint PwC will be proposed at the Annual General Meeting scheduled to be held on 7 May 2020.
The reappointment of PwC has the support of the audit committee, which will be responsible for determining its audit fee on behalf of the
directors (see page 115 for more information).
Note 4 to the financial statements sets out the auditor’s fees both for audit and non-audit work.
Events occurring after 31 December 2019
In addition to the final ordinary dividend proposed for 2019, included in note 9 to the financial statements, there have been the following
material reportable events since 31 December 2019:
e the Group has concluded the consultation with employee representatives relating to the closure of two consumer flexibles plants in
the UK. Restructuring and closure costs and related impairment of assets of €4 million were recognised as a special item in 2019.
Total restructuring and closure costs are expected to exceed €10 million
e in February 2020, the Group entered into a €250 million debt facility maturing in August 2021
Annual General Meeting
The Annual General Meeting will be held at 10:30 (UK time) on Thursday 7 May 2020 at Haberdashers’ Hall, 18 West Smithfield, London
EC1A 9HQ, UK. The notice convening the meeting, which is sent separately to shareholders, details the business to be considered and
includes explanatory notes for each resolution. The notice is available on the Mondi Group website at: www.mondigroup.com.
This Directors’ report was approved by the Board on 26 February 2020 and is signed on its behalf.
Jenny Hampshire
Company Secretary
Mondi plc
Building 1, 1st Floor
Aviator Park
Station Road
Addlestone
Surrey
KT15 2PG
Registered No. 6209386
26 February 2020
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 146
Customer - centric
approach to
sustainable
solutionS
Mondi Group
Integrated report and financial statements 2019
What this means for customers…
With numerous competing routes to
sustainability, we work with customers to
help them make the right packaging and
paper choices. With our EcoSolutions
approach, we are uniquely placed to help
navigate the complex landscape, from
sourcing sustainable raw materials to
minimising product carbon footprint and
designing for recycling.
147
financial
statements
Directors’ responsibility statement
Independent auditors’ report
Financial statements
149
150
160
Production statistics and exchange rates 223
Group financial record
Additional information
for Mondi plc shareholders
Shareholder information
Glossary of terms
224
226
228
232
What this means for partners,
governments and regulators…
We believe global partnerships and
initiatives can bring about meaningful
change. Sharing resources and
best-practice gives us the best chance
of finding sustainable solutions together,
and being able to scale up our
collective action.
What this means for employees…
We all want to work for an organisation
that shares our sense of purpose. Mondi’s
focus on working with customers to develop
innovative and sustainable products gives
our people the confidence that their work
is contributing to a better world.
Mondi Group
Integrated report and financial statements 2019
OverviewStrategic reportGovernanceFinancial statements 148
Financial statements
Directors’ responsibility statement
Independent auditors’ report to the members of Mondi plc
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements:
Note 1
Note 2
Basis of preparation
Operating segments
Notes 3–7
Notes to the consolidated income statement
Notes 8–9
Per share measures
Notes 10–18
Notes to the consolidated statement of financial position
Notes 19–22
Capital management
Note 23
Note 24
Retirement benefits
Notes to the consolidated statement of cash flows
Notes 25–30 Other disclosures
Note 31
Accounting policies
Mondi plc parent company balance sheet
Mondi plc parent company statement of changes in equity
Notes to the Mondi plc parent company financial statements
149
150
160
161
162
163
164
165
165
170
175
177
184
190
194
196
204
214
214
215
Mondi Group Integrated report and financial statements 2019 Directors’ responsibility statement
149
The directors are responsible for preparing the Integrated report, Remuneration report and Financial statements in accordance with
applicable laws and regulations.
Under the Companies Act 2006, the directors are required to prepare the Group financial statements in accordance with International
Financial Reporting Standards (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). In preparing the Group’s financial statements, the directors have also elected to comply with IFRS, issued by the
International Accounting Standards Board (IASB). 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 Group and the parent company and of
the profit or loss of the Group and the parent company for that period.
In preparing the Group’s 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 is 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 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
company’s transactions; disclose with reasonable accuracy, at any time, the financial position of the Group and parent company; and enable
them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and parent company 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 United Kingdom 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 audited in accordance with the applicable requirements of the Companies Act 2006.
The Board confirms that to the best of its knowledge:
e the financial statements of the Group prepared in accordance with 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 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 plc and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it
faces; and
e the Integrated report and financial statements 2019, 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 consolidated financial statements, and related notes 1 to 31, were approved by the Board and authorised for issue on
26 February 2020, and were signed on its behalf by:
David Williams
Chair
Andrew King
Director
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 150
Independent auditors’ report to the members of Mondi plc
Report on the audit of the financial statements
Opinion
In our opinion:
e Mondi plc’s Group financial statements and parent company financial statements (the “financial statements”) give a true and fair view of
the state of the Group’s and of the parent company’s affairs as at 31 December 2019 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 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 Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Integrated report and financial statements 2019 (the “Integrated Report”),
which comprise: the consolidated statement of financial position and Mondi plc parent company balance sheet as at 31 December 2019;
the consolidated income statement and consolidated statement of comprehensive income, the consolidated statement of cash flows, and
the consolidated and Mondi plc parent company statement of changes in equity for the year then ended; and the notes to the financial
statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under 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 opinion.
Independence
We 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 the parent company.
Other than those disclosed in Note 4 of the Group financial statements, we have provided no non-audit services to the Group or the parent
company in the period from 1 January 2019 to 31 December 2019.
Mondi Group Integrated report and financial statements 2019 151
Our audit approach
Overview
Overall Group materiality: €55 million (2018: €55 million), based on approximately 5% of profit before tax adjusted for special items.
Overall parent company materiality: €35 million (2018: €29 million), based on approximately 1% of total assets.
We identified three components (2018: three) as individually significant components which required an audit of their complete financial
information due to their financial significance to the Group and a further four components (2018: seven) where we have concluded
that the component engagement leader is a Key Audit Partner (as defined under ISAs (UK)). These seven components (2018: ten) are
located in Austria, the Czech Republic, Poland, Russia, Slovakia and South Africa (2018: Austria, the Czech Republic, Germany, Poland,
Russia, Sweden, Slovakia and South Africa).
We obtained full scope audit reporting from an additional 21 components (2018: 18), including operating units and treasury operations.
Audit of specific financial statement line items was performed at a further 21 components (2018: 19).
We assessed the risks of material misstatement in the financial statements and determined the following key audit matters for 2019:
e Taxation (Group);
e Impairment assessment of goodwill (Group);
e Special items (Group); and
e Simplification of the corporate structure (Group and parent company).
The acquisition of Powerflute Group Holdings Oy (Powerflute) and the adoption of IFRS 16 ‘Leases’ were considered key audit matters
for 2018, but as they were event driven matters in the prior year they were not areas of most significance in the audit of the financial
statements in 2019.
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.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and 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 58
and 60 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 preparation of the financial statements such as
the Companies Act 2006 and the UK Listing Rules. 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 and judgements. The Group engagement
team shared this risk assessment with the component auditors so that the component auditors 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 internal legal counsel, 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 its accounting estimates or judgements, in particular in relation
to taxation, assessment of impairment of goodwill, matters classified as special items and the accounting for the simplification of the
corporate structure (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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 152
Independent auditors’ report to the members of Mondi plc
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 and 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 (Group)
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.
In addition, the Group adopted IFRIC 23 ‘Uncertainty over income
tax treatments’ (IFRIC 23) as issued by the IFRS Interpretations
Committee in the financial year.
Refer to notes 7 and 31, and the Audit Committee’s views set out
on page 113.
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 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 were recognised in accordance with the relevant
accounting standards.
We considered the appropriateness of the related disclosures in
note 7 and note 31 to the financial statements.
Based on the procedures performed, we noted no material issues
from our work.
Mondi Group Integrated report and financial statements 2019 153
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of goodwill (Group)
The Group has goodwill of €948 million (2018: €942 million).
In October 2019, the Group announced a reorganisation of
business units which led to a change in the Group’s internal
reporting and identification of operating segments. The
reorganisation changed the level at which goodwill was monitored
by the Group and required re-allocation of goodwill previously
monitored in Consumer Packaging of €419 million to the groups
of cash generating units (CGUs) of the new business unit structure
of Engineered Materials and Flexible Packaging.
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 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, 2, 12 and 31, and the Audit Committee’s views set
out on page 113.
We satisfied ourselves as to the level at which goodwill is monitored
for impairment by review of the internal reporting of financial
performance by the Group to ensure the level of monitoring
is consistent with, and not at a higher level than, the Group’s
identified operating segments.
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 the goodwill balance allocated to
Engineered Materials, as the carrying value of goodwill is a higher
proportion of the asset base of this group of CGUs, relative to other
goodwill balances, and therefore has a greater inherent sensitivity to
changes in the assumptions used in the impairment test.
We also requested management to perform an impairment
assessment on goodwill balances at the date of the reorganisation of
segments, which was completed in October 2019, to ensure that the
goodwill was recoverable prior to its re-allocation to the new groups
of CGUs. We tested key assumptions to supporting evidence and
performed a comparison with the key assumptions applied in the
annual impairment test performed subsequent to the reorganisation.
We assessed management’s re-allocation of the goodwill balance
previously monitored in Consumer Packaging of €419 million to
the Engineered Materials and Flexible Packaging groups of CGUs,
based on their relative fair value, by testing key assumptions such
as forecast cash flows, discount rate and medium-term growth
rates, and performing sensitivity analysis on the relative fair
value calculation.
Based on the procedures performed, we noted no material issues
from our work.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 154
Independent auditors’ report to the members of Mondi plc
Key audit matter
Special items (Group)
The classification of certain transactions as ‘special items’, which
is defined in note 31 to the Group financial statements, is a key
judgement because of its impact on the reported underlying
financial performance of the Group.
The Group has recognised a net €16 million expense in special
items during the financial year, principally related to the following:
e Impairment of assets at the Neusiedler operation in Austria –
€39 million expense;
e Implementation of a new law resulting in a third party assuming
the obligation for future contributions related to the Group’s
Austrian health insurance fund – €41 million income; and
e Transaction costs incurred in relation to the simplification of the
corporate structure (Simplification) – €14 million expense.
In addition, a net €4 million expense was recorded in special
items relating to other matters.
Refer to notes 3 and 31 and the Audit Committee’s views set out
on page 112.
How our audit addressed the key audit matter
Our testing was directed at the significant amounts classified within
special items in 2019 related to the impairment of assets and the
impact of the change in law related to the Austrian health insurance
fund. The costs associated with the Simplification were tested as
part of the key audit matter described separately below.
Impairment of Neusiedler assets
We satisfied ourselves as to the appropriateness of the judgement
related to the level at which impairment of property, plant and
equipment is assessed, being the lowest level at which largely
independent cash inflows can be identified (the CGU). We also
evaluated management’s assessment of impairment indicators, as well
as indicators of impairment reversal, including the conclusions reached.
We specifically tested the impairment related to property, plant and
equipment at the Neusiedler operation in Austria. We challenged the
basis for management’s estimates of growth rates and future cash
flows with previous reference to historical trading performance, market
expectations and management forecasts. We also used our internal
valuation experts to independently recalculate the discount rates
applied by management and medium-term growth assumptions and
checked the mathematical accuracy of management’s valuation models.
In addition, where management had obtained independent, third
party valuations to determine the fair value less costs of disposal
of individual assets in the Neusiedler CGU, specifically land and
buildings, we assessed the external valuation reports and the
qualifications of these third party valuers.
Changes related to the Group’s Austrian health insurance fund
We assessed the Group’s analysis of the change in law and related
accounting by reading correspondence with management’s external
legal counsel in Austria and discussing the impact of the change
in law directly with them to confirm our understanding. We also
assessed the accounting applied by the Group, supported by our
accounting specialists, and read the disclosure of the matter in
Note 23.
We tested the scheme asset and defined benefit obligation at
the year-end date by deploying local actuarial experts to review
the scheme valuation as well as the key assumptions applied and
testing scheme assets to supporting evidence. We also read the
trust deed established by the Group for existing members of the
health insurance fund to determine whether any future obligations
remain with the Group beyond 2019 following establishment of the
independent trust and transfer of future obligations to the Republic
of Austria.
Overall presentation
We considered and challenged each item disclosed in ‘special items’
with reference to the guidance from the Financial Reporting Council
and European Securities & Market Authority.
We determined whether such categorisation is appropriate and
consistent with the Group’s stated policy and past practice for
recognition of such items. Based on the procedures performed
above, we noted no material issues from our work.
Mondi Group Integrated report and financial statements 2019 155
Key audit matter
How our audit addressed the key audit matter
Simplification of the corporate structure (Group and parent company)
The Group completed the Simplification of the corporate structure
in July 2019 which resulted in a transition to a single holding
company structure under Mondi plc. This was completed through
a scheme of arrangement, whereby Mondi plc became the
shareholder of all Mondi Limited ordinary shares and the dual listed
company (‘DLC’) structure was terminated.
The Simplification involved significant accounting judgements,
which affected both the Group and the parent company financial
statements.
For the Group financial statements, the Simplification was
accounted for outside the scope of IFRS 3 ‘Business combinations’
and the carrying value of the assets and liabilities of Mondi Limited
were not adjusted to fair value, with the result that the share
transactions were recorded directly in equity. The transaction costs
incurred were recorded as a financing special item, except for costs
directly related to the issuance of new equity shares of Mondi plc,
which were deducted from the retained earnings in equity.
For the parent company financial statements, the transaction
required the directors to fair value the equity investment in Mondi
Limited at the date of the transaction, with a merger reserve
established based on the fair value of Mondi plc shares issued
less the nominal value of the shares issued and amounts allocated
to the premium paid for termination of the DLC structure.
Mondi plc recognised an investment in Mondi Limited of €783
million (including the direct costs of acquisition) in the parent
company financial statements and this required consideration by
management of key internal inputs and the use of external market
data. In addition, there were numerous material accounting entries
posted as a result of the Simplification. Therefore, we considered
it to be a key audit matter.
Refer to notes 21 and 31 of the Group financial statements, and
notes 1 and 5 of the parent company financial statements, and the
Audit Committee’s views set out on page 112.
We assessed management’s transaction step plan to effect the
Simplification and management’s expert’s opinion on the accounting
for the Simplification, including the implications for the Group and
parent company financial statements. We used our accounting
specialists to help assess the accounting entries recorded by the
Group and parent company, including consideration of possible
alternative accounting treatments.
We tested the implementation of the transaction step plan by
corroboration to supporting evidence for the journals recorded.
For the parent company, we tested the appropriateness of
management’s valuation of Mondi Limited through involvement
of internal valuation experts and assessment of the valuation
methodology. The testing included obtaining supporting evidence
for key inputs such as discount rate, forecast cash flows, growth
rates and the appropriateness of comparable companies used in
benchmarking the overall valuation. We also tested the mathematical
accuracy of the valuation model and performed a cross check
of the equity value recorded by comparison with the Group’s
market capitalisation at the date of the transaction. In addition, we
recalculated management’s assessment of the sensitivity that is
disclosed in the financial statements.
Our testing of the transaction costs incurred included verification
to underlying supporting documents and consideration of
management’s allocation of costs between equity and the income
statement.
We considered the appropriateness of the related disclosures in
notes 21 and 31 to the Group financial statements and notes 1 and 5
to the parent company financial statements.
Based on the procedures performed, we noted no material issues
from our work.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 156
Independent auditors’ report to the members of Mondi plc
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the parent company, 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 (2018: three) as significant components (as defined within ISAs (UK)) 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 four components (2018: seven), where we concluded that the component engagement leader is a Key
Audit Partner (as defined under ISAs (UK)), and an additional 21 components where full scope audits were performed (2018: 18). Together,
these components were in 11 countries (2018: 11), representing the Group’s principal businesses, and accounted for 66% (2018: 67%) of the
Group’s revenue.
Audit of specific financial statement line items was performed at a further 21 (2018: 19) 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 82% (2018: 81%) 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’s
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 audit
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, including all significant components and the further four components where we
concluded that the component engagement leader is a Key Audit Partner.
In addition, senior members of the Group engagement team visited component teams in Austria, the Czech Republic, Finland, Germany,
Poland, Turkey, Russia, Slovakia and South Africa. These visits included meetings with local management and with the component auditors,
and typically involved operating site tours.
Mondi Group Integrated report and financial statements 2019 157
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:
Group financial statements
Parent company financial statements
Overall materiality
€55 million (2018: €55 million).
€35 million (2018: €29 million).
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.
Based on approximately 1% of total assets.
For overall Mondi plc parent company materiality,
we 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, we determined materiality for this year
at €35 million (2018: €29 million), which equates to
approximately 1% of the current year’s total assets.
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 €2.5 million (2018: €2 million) and €35 million (2018: €40 million).
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €2.5 million
(2018: €2 million) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add
or draw attention to in respect of the directors’ statement in the
financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the financial statements and the directors’ identification
of any material uncertainties to the Group’s and the parent
company’s ability to continue as a going concern over a period
of at least twelve months from the date of approval of the
financial statements.
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 parent company’s ability to continue as a going concern.
For example, the terms of the United Kingdom’s withdrawal from
the European Union 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.
We have nothing to report.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 158
Independent auditors’ report to the members of Mondi plc
Reporting on other information
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 Directors’ Report, we also considered whether the disclosures required by the Companies Act
2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the 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 Directors’
Report for the year ended 31 December 2019 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 parent company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
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 53 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 61 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 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 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 149, 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 parent company’s position and
performance, business model and strategy is materially inconsistent with our knowledge of the Group and parent company obtained
in the course of performing our audit.
e The section of the Integrated Report on pages 110 to 116 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 the parent company’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
Companies Act 2006. (CA06)
Mondi Group Integrated report and financial statements 2019 159
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, 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 they 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 the parent company’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 or the parent company 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 (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 our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do 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 our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the 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 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 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 is three
years, covering the years ended 31 December 2017 to 31 December 2019.
Andrew Kemp
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 February 2020
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 160
Consolidated income statement
for the year ended 31 December 2019
€ 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
Investment income
Foreign currency losses
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
Notes
Underlying
2019
Special items
(note 3)
7,268
(3,449)
(549)
3,270
(363)
(1,072)
(177)
1,658
(435)
1,223
—
8
(3)
(109)
1,119
(257)
862
33
829
—
—
—
—
—
40
(1)
39
(41)
(2)
—
—
—
(14)
(16)
—
(16)
1
(17)
2
5
2
6
6
6
7a
29
8
8
8
8
2018
Special items
(note 3)
—
—
—
—
—
(15)
(30)
(45)
(81)
(126)
—
—
—
—
(126)
34
(92)
—
(92)
Total
Underlying
7,268
7,481
(3,449)
(3,526)
(549)
3,270
(363)
(534)
3,421
(346)
(1,032)
(1,039)
(272)
1,764
(446)
1,318
1
8
(4)
(92)
1,231
(273)
958
42
916
(178)
1,697
(476)
1,221
—
8
(3)
(123)
1,103
(257)
846
34
812
167.6
167.6
171.1
171.1
Total
7,481
(3,526)
(534)
3,421
(346)
(1,054)
(302)
1,719
(527)
1,192
1
8
(4)
(92)
1,105
(239)
866
42
824
170.1
170.0
189.1
189.0
Mondi Group Integrated report and financial statements 2019 Consolidated statement of comprehensive income
for the year ended 31 December 2019
161
€ million
Profit for the year
Items that may subsequently be reclassified to the
consolidated income statement
Fair value (losses)/gains arising from cash flow hedges
Exchange differences on translation of foreign operations
Items that will not subsequently be reclassified to the
consolidated income statement
Remeasurements of retirement benefits plans:
Return on plan assets
Actuarial gains/(losses) arising from changes in
demographic assumptions
Actuarial (losses)/gains arising from changes in financial
assumptions
Actuarial gains arising from experience adjustments
Other comprehensive income/(expense) for the year
Other comprehensive income/(expense) attributable to:
Non-controlling interests
Shareholders
Total comprehensive income attributable to:
Non-controlling interests
Shareholders
Total comprehensive income for the year
2019
2018
Before tax
amount
Tax
credit
Net of tax
amount
Before tax
amount
Tax
charge
Net of tax
amount
(4)
143
(21)
10
12
(47)
4
118
(9)
127
—
—
3
3
—
3
866
—
—
1
(219)
(1)
(13)
846
(4)
143
(18)
1
(219)
(12)
(6)
(24)
16
2
121
(230)
(1)
(231)
(9)
130
(12)
(218)
—
(1)
(12)
(219)
25
942
967
30
605
635
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 162
Consolidated statement of financial position
as at 31 December 2019
€ 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
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
24b
20
17
18
20
23
7b
18
21
2019
4,800
948
81
411
14
31
49
17
6,351
984
1,111
15
5
74
—
2,189
8,540
(780)
(1,143)
(101)
(47)
(9)
(2,080)
(1,496)
(225)
(301)
(37)
(16)
(2,075)
(4,155)
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)
4,385
3,825
97
3,918
4,015
370
4,385
542
2,943
3,485
340
3,825
The Group’s consolidated financial statements, and related notes 1 to 31, were approved by the Board and authorised for issue on
26 February 2020 and were signed on its behalf by:
David Williams
Chair
Andrew King
Director
Mondi Group Integrated report and financial statements 2019 Consolidated statement of changes in equity
for the year ended 31 December 2019
163
Treasury
shares
Retained
earnings
Other
reserves
Equity
attributable
to
shareholders
Non-
controlling
interests
€ million
At 1 January 2018
Total comprehensive income/(expense) for the year
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
Share capital
and stated
capital
542
—
—
—
—
—
—
—
—
(27)
—
—
(15)
16
—
—
—
—
3,571
824
(793)
—
(16)
—
11
(4)
(4)
At 31 December 2018
542
(26)
3,589
—
—
—
—
—
—
23
(37)
(431)
—
—
97
—
—
(17)
18
—
—
—
—
—
—
—
812
(396)
—
(18)
—
13
(6)
8
—
(30)
(9)
(25)
3,963
Total comprehensive income 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
Issue of ordinary shares, net of expenses
(see note 21)
Cancellation of deferred shares (see note 21)
Transfer of ordinary shares from Mondi Limited
shareholders to Mondi plc (see note 21)
Retirement benefit plan settlement transferred to
retained earnings
Other movements in non-controlling interests
At 31 December 2019
Other reserves
€ million
Cumulative translation adjustment reserve
Post-retirement benefits reserve
Share-based payment reserve
Cash flow hedge reserve
Merger reserve1
Other sundry reserves
Total other reserves
Note:
(403)
(219)
—
—
—
11
(13)
4
—
(620)
130
—
5
—
11
(13)
(23)
29
431
30
—
(20)
3,683
605
(793)
(15)
—
11
(2)
—
(4)
324
30
(18)
—
—
—
—
—
4
Total
equity
4,007
635
(811)
(15)
—
11
(2)
—
—
3,485
340
3,825
942
(396)
(12)
—
11
—
(6)
—
—
—
(9)
4,015
25
(3)
—
—
—
—
—
—
—
—
8
967
(399)
(12)
—
11
—
(6)
—
—
—
(1)
370
4,385
2019
(680)
(52)
20
(4)
667
29
(20)
2018
(820)
(75)
22
—
259
(6)
(620)
1 The movement in the merger reserve is driven by the Simplification of the corporate structure. Further detail is provided in notes 21 and 31
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 164
Consolidated statement of cash flows
for the year ended 31 December 2019
€ 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
Acquisition of businesses, net of cash and cash equivalents
Proceeds from the disposal of businesses, net of cash and cash equivalents
Loans advanced to related and 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
Net (repayment)/proceeds from short-term borrowings
Repayment of lease liabilities
Interest paid
Transaction costs relating to the issue of share capital
Dividends paid to shareholders
Dividends paid to non-controlling interests
Purchases of treasury shares
Financing special item
Net cash inflow/(outflow) from derivatives
Other financing activities
Net cash used in financing activities
Net (decrease)/increase 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
Notes
2019
2018
24a
13
14
24c
24c
24c
21
9
9
3
24c
24c
24b
1,635
1
(248)
1,388
(757)
(12)
(48)
(5)
12
(2)
20
(9)
7
1,654
1
(248)
1,407
(709)
(10)
(53)
(7)
13
(402)
3
—
8
(794)
(1,157)
—
(48)
—
(20)
(23)
(96)
(6)
165
—
600
9
(25)
(73)
—
(396)
(793)
(3)
(12)
(14)
3
5
(610)
(16)
8
(16)
1
(7)
(18)
(15)
—
(25)
(8)
(183)
67
(66)
67
7
8
Mondi Group Integrated report and financial statements 2019 Notes to the consolidated financial statements
for the year ended 31 December 2019
165
1 Basis of preparation
These consolidated financial statements as at and for the year ended 31 December 2019 comprise Mondi plc and its subsidiaries (referred
to as the ‘Group’), and the Group’s share of the results and net assets of its associates and joint ventures.
On 9 May 2019 the Group’s shareholders approved the Simplification of the corporate structure from a dual listed company (DLC) structure
into a single holding company structure under Mondi plc. With effect from 26 July 2019, Mondi plc became the holder of all the Mondi
Limited ordinary shares while, by other related actions, the DLC arrangements were terminated. Prior to the Simplification, Mondi Limited
and Mondi plc operated under a DLC structure as a single economic entity, and as such, together with their respective subsidiaries, were
reported on a combined and consolidated basis as a single reporting entity. Post Simplification, the Group is reported on a consolidated
basis. Further detail is provided in note 21.
The Group’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
and IFRS Interpretations Committee (IFRS IC) interpretations, as adopted by the European Union (EU), and the Financial Pronouncements
as issued by the Financial Reporting Standards Council. The Group complies with Article 4 of the EU IAS Regulation and with those parts
of the Companies Act 2006 applicable to companies reporting under IFRS. The principal accounting policies adopted are set out in note 31.
There are no differences for the Group in applying IFRS as issued by the International Accounting Standards Board (IASB) and IFRS as
adopted by the EU.
The 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 61 under the historical cost basis of accounting, as modified by forestry assets and
financial assets and financial liabilities held at fair value through profit and loss.
Critical accounting judgements and significant accounting estimates
The preparation of the Group’s 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 significant accounting estimates and critical accounting judgements in terms of IAS 1, ‘Presentation of Financial
Statements’, are:
Significant accounting estimates
e Fair value of forestry assets – refer to note 14
e Actuarial valuations of retirement benefit obligations – refer to note 23
Critical accounting judgements
e Accounting for the Simplification of corporate structure – refer to notes 21 and 31
e Goodwill allocation relating to the reorganisation of the Group’s business units – refer to notes 2 and 12
e Accounting for and presentation of the Group’s Austrian health insurance fund – refer to notes 3, 5 and 23
The consolidated financial statements include other areas of judgement and accounting estimates. While these areas do not meet the
definition under IAS 1 of significant accounting estimates or critical accounting judgements, the recognition and measurement of certain
material assets and liabilities are based on assumptions and/or are subject to longer term uncertainties.
Other areas of judgement and accounting estimates
e Taxation – refer to notes 7 and 31
e Impairment of non-current non-financial assets – refer to notes 10, 11, 12, 13 and 31
e Residual values and useful economic lives of property, plant and equipment – refer to notes 10 and 31
2 Operating segments
The Group reorganised its business units to strengthen value chain integration and improve customer focus effective from 7 October 2019.
The Group’s four business units (previously three business units) are as follows:
e Corrugated Packaging, comprising the operations of containerboard and corrugated solutions;
e Flexible Packaging, comprising kraft paper, paper bags and consumer flexibles operations;
e Engineered Materials, comprising personal care components, extrusion solutions and release liner operations; and
e Uncoated Fine Paper, which remains unchanged.
Prior year figures have been restated to reflect the new organisational structure. The reorganisation has no impact on the overall
Group result.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 166
2 Operating segments
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 €59 million (2018: €57 million) in the current financial year.
The material product types from which the Group’s externally reportable segments derive their internal and external revenues are
as follows:
Operating segments
Corrugated Packaging
Flexible Packaging
Product types
Containerboard
Corrugated solutions
Pulp
Kraft paper
Paper bags
Consumer flexibles
Pulp
Engineered Materials
Personal care components
Release liner
Extrusion solutions (extrusion coatings and technical films)
Uncoated Fine Paper
Uncoated fine paper
Newsprint
Pulp
Year ended 31 December 2019
€ million, unless otherwise stated
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
Trailing 12-month average capital employed
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
Corrugated
Packaging
Flexible
Packaging
Engineered
Materials
Uncoated
Fine Paper
Corporate
Intersegment
elimination
2,014
(30)
1,984
583
(118)
(6)
459
—
2,407
2,166
1,846
275
257
28.9
24.9
6.7
2,708
(71)
2,637
543
(142)
(12)
389
(4)
3,094
2,603
2,485
256
248
20.1
15.7
10.4
979
(45)
934
122
(28)
(8)
86
—
723
612
622
37
32
12.5
13.8
2.4
1,758
(45)
1,713
444
(118)
(2)
324
2
2,082
1,758
1,290
310
220
25.3
25.1
6.3
—
—
—
(34)
(1)
—
(35)
(14)
7
(7)
(81)
—
—
—
—
0.1
(191)
191
—
—
—
—
—
—
(117)
—
—
—
—
—
—
—
Total
7,268
—
7,268
1,658
(407)
(28)
1,223
(16)
8,196
7,132
6,162
878
757
22.8
19.8
25.9
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 167
Year ended 31 December 2018 (restated)
€ million, unless otherwise stated
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
Trailing 12-month average capital employed
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
Corrugated
Packaging
Flexible
Packaging
Engineered
Materials
Uncoated
Fine Paper
Corporate
Intersegment
elimination
2,115
(41)
2,074
707
(116)
(9)
582
—
2,277
2,001
1,679
535
157
33.4
34.7
6.5
2,708
(69)
2,639
461
(146)
(14)
301
(102)
2,944
2,442
2,112
396
360
17.0
14.3
10.6
984
(45)
939
112
(30)
(9)
73
(3)
789
672
640
35
31
11.4
11.4
2.4
1,877
(48)
1,829
516
(119)
(2)
395
(21)
1,852
1,494
1,240
280
161
27.5
31.9
6.5
—
—
—
(32)
(1)
—
(33)
—
4
(9)
(88)
—
—
—
—
0.1
(203)
203
—
—
—
—
—
—
(132)
—
—
—
—
—
—
—
Total
7,481
—
7,481
1,764
(412)
(34)
1,318
(126)
7,734
6,600
5,583
1,246
709
23.6
23.6
26.1
2019
Segment
assets
8,196
Segment
net assets
7,132
2018
Segment
assets
7,734
Segment
net assets
6,600
14
49
204
8,463
77
8,540
14
(252)
(302)
6,592
(2,207)
4,385
9
49
189
7,981
61
8,042
9
(204)
(360)
6,045
(2,220)
3,825
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 168
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
Czech Republic
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
2019
539
50
589
1,097
856
43
720
2,716
536
1,059
891
2,486
889
490
—
98
7,268
2018
609
43
652
1,106
887
64
623
2,680
483
1,161
952
2,596
944
525
—
84
7,481
2019
402
289
691
150
939
205
1,437
2,731
184
599
829
1,612
707
757
112
658
7,268
2018
459
264
723
160
985
233
1,470
2,848
183
636
867
1,686
694
731
100
699
7,481
There were no external customers which account for more than 10% of the Group’s total external revenue in either year.
There are no contract assets and contract liabilities as at 31 December 2019 (2018: €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 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 169
2019
2018
Non-current
non-financial
assets
Segment
assets
Segment
net assets
Non-current
non-financial
assets
Segment
assets
Segment
net assets
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
Czech Republic
Poland
Rest of emerging Europe
Emerging Europe total
Russia
North America
Asia and Australia
Group total
819
63
882
467
46
1,245
1,758
824
781
892
2,497
832
167
104
6,240
972
124
1,096
857
78
1,634
2,569
897
992
1,137
3,026
1,002
335
168
8,196
865
117
982
621
69
1,447
2,137
799
884
978
2,661
896
300
156
7,132
724
56
780
508
44
1,243
1,795
728
793
698
2,219
653
166
100
5,713
Average number of employees by principal location of employment1
thousands
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
869
103
972
883
65
1,687
2,635
824
1,022
969
2,815
793
346
173
7,734
2019
1.4
0.4
7.3
9.1
5.3
1.7
0.7
25.9
755
100
855
601
53
1,500
2,154
734
916
784
2,434
693
303
161
6,600
2018
1.5
0.3
7.3
8.9
5.5
1.9
0.7
26.1
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 170
3 Special items
€ million
Operating special items
Impairment of assets
Reversal of impairment of assets
Restructuring and closure costs:
Personnel costs
Other restructuring and closure costs
Third party contribution relating to the Group’s Austrian health insurance fund (see note 23)
Provision relating to the 2012 Nordenia acquisition
Total operating special items
Financing special item
Simplification of corporate structure (see note 21)
Total special items before tax
Tax credit (see note 7)
Total special items
Attributable to:
Non-controlling interests
Shareholders
The special items during the year comprised:
e Flexible Packaging
2019
2018
(42)
1
(1)
4
41
(5)
(2)
(14)
(16)
—
(16)
1
(17)
(83)
2
(15)
(30)
—
—
(126)
—
(126)
34
(92)
—
(92)
— Announced closure of two consumer flexibles plants in the UK. Restructuring and closure costs of €1 million and related impairment
of assets of €3 million were recognised. Additional restructuring costs will be incurred in 2020 with total costs expected to exceed
€10 million.
— Release of restructuring and closure provisions of €5 million, partly offset by additional restructuring costs of €1 million, and reversal of
impairment of assets of €1 million were recognised. All credits/(charges) related to special items from prior years.
— Additional provision of €5 million relating to the 2012 Nordenia acquisition was recognised. The provision relates to a special item from
prior years.
e Uncoated Fine Paper
— Impairment of the Neusiedler operation in Austria. Impairment of assets of €39 million was recognised.
— On 13 December 2018 a change in the Austrian Social Security Law was enacted. Effective 1 January 2020, the law states that the
plan liabilities of the Group’s Austrian health insurance fund are assumed by the Republic of Austria. The effect of the change in law is
classified as a third party taking on the obligation for future contributions which is a one-off non-cash benefit to the Group of €41 million.
Further detail is provided in note 23.
e Corporate
— To effect the Simplification of the corporate structure from a DLC structure into a single holding company structure under Mondi plc, the
Group incurred one-off transaction costs of €20 million, of which €14 million were charged as a financing special item to the consolidated
income statement and €6 million were attributed to equity in accordance with IAS 32. Further detail is provided in note 21.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 4 Auditors’ remuneration
€ million
Fees payable to the auditors for the audit of Mondi plc’s annual financial statements
Fees payable to the auditors and their associates for the audit of Mondi plc’s subsidiaries1
Total audit fees
Audit-related and other assurance services
Tax compliance services
Other services
Total non-audit fees
Total fees
Note:
171
2019
1.1
3.5
4.6
0.5
—
—
0.5
5.1
2018
0.4
3.7
4.1
0.4
—
—
0.4
4.5
1 Includes fees payable to the auditors for the audit of Mondi Limited’s annual financial statements reported separately prior to the Simplification of the corporate structure
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 net of gain 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)
Third party contribution relating to the Group’s Austrian health insurance fund (see notes 3 and 23)
Total within special items (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
2019
865
178
14
4
11
2018
835
172
13
8
11
1,072
1,039
1
(41)
(40)
5
4
9
15
—
15
5
3
8
1,041
1,062
25.9
26.1
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 172
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 before special item
Financing special item
Simplification of corporate structure (see notes 3 and 21)
Net finance costs after special item
2019
2018
8
(3)
(90)
(13)
(9)
(112)
3
(109)
(104)
(14)
(118)
8
(4)
(77)
(14)
(8)
(99)
7
(92)
(88)
—
(88)
Net interest expense, as defined in note 31, for the year was €95 million (2018: €83 million). The effective interest rate was 4.2%
(2018: 4.2%) based on trailing 12-month average net debt of €2,243 million (2018: €1,979 million).
The weighted average interest rate applicable to capitalised interest on general borrowings for the year ended 31 December 2019 was 4.9%
(2018: 4.1%) and was related to investments in the Czech Republic (2018: the Czech Republic and South Africa).
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 2019 was 23% (2018: 22%).
€ million
UK corporation tax at 19% (2018: 19%)
Overseas tax1
Current tax in respect of prior years
Current tax
Deferred tax in respect of the current year
Deferred tax in respect of prior years
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
Note:
1 Includes SA corporation tax at a statutory rate of 28% reported separately prior to the Simplification of the corporate structure
2019
1
218
(1)
218
47
(8)
257
(1)
1
—
257
2018
1
265
—
266
15
(8)
273
(2)
(32)
(34)
239
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 173
Factors affecting tax charge for the year
The Group’s total tax charge for the year can be reconciled to the tax on the Group’s profit before tax at the UK corporation tax rate of 19%
(2018: 19%1), as follows:
€ million
Profit before tax
Tax on profit before tax calculated at the UK corporation tax rate of 19% (2018: 19%)
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
Other adjustments
Current tax prior year adjustments
Tax incentives2
Effect of differences between local rates and UK rate
Other adjustments
Tax charge for the year
Notes:
2019
1,103
210
10
4
6
—
1
7
(6)
36
(1)
(9)
28
18
257
Restated1
2018
1,105
210
10
—
10
(1)
(6)
12
(18)
26
—
(11)
22
15
239
1 Prior to the Simplification the Group’s total tax charge for the year was reconciled to the tax on the Group’s profit before tax at the weighted average UK and SA
corporation tax rate (2018: 19.67%). The 2018 disclosure has been restated for comparability purposes to reconcile to the tax on the Group’s profit before tax at the UK
corporation tax rate
2 The tax incentives principally relate to capital investments in Slovakia and the Czech Republic (2018: Russia and Slovakia)
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 174
7 Taxation
(b) Deferred tax
€ million
At 1 January
(Charged)/credited to the consolidated income statement
Credited/(charged) to the consolidated statement of comprehensive
income
Acquired through business combinations
Reclassification
Currency movements
At 31 December
The amount of deferred tax (charged)/credited to the consolidated income statement comprises:
€ million
Capital allowances in excess of depreciation
Fair value adjustments
Tax losses (derecognised)/recognised
Other temporary differences
Total
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
2019
49
(1)
1
—
—
—
49
2018
26
19
1
—
3
—
49
2019
(253)
(39)
2
—
—
(11)
(301)
2019
(11)
(15)
(1)
(13)
(40)
Deferred tax assets
Deferred tax liabilities
2019
(11)
1
24
35
49
2018
(20)
—
21
48
49
2019
(271)
(108)
9
69
(301)
2018
(248)
6
(2)
(24)
(3)
18
(253)
2018
8
(10)
10
17
25
2018
(241)
(89)
14
63
(253)
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
2019
26
23
49
2018
23
26
49
2019
(1)
(300)
(301)
2018
(1)
(252)
(253)
The Group has the following amounts in respect of which no deferred tax asset has been recognised as it is not considered probable that
there will be future profit streams or gains against which these could be utilised:
€ million
Tax losses – revenue
Tax losses – capital
Other temporary differences
Total
Note:
2019
1,564
16
13
Restated1
2018
1,577
16
11
1,593
1,604
1 Following a review, an additional €171 million of tax losses (revenue) were identified as being available from an entity in the holding company structure. The 2018 disclosure
has been restated to include these additional tax losses in respect of which no deferred tax asset has been recognised
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 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
Note:
175
2019
1
3
44
1,532
1,580
Restated1
2018
2
25
53
1,513
1,593
1 Following a review, an additional €171 million of tax losses (with no expiry date) were identified as being available from an entity in the holding company structure. The 2018
disclosure has been restated to include these additional tax losses in respect of which no deferred tax asset has been recognised
No deferred tax liability is recognised on gross temporary differences of €1,233 million (2018: €760 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. The increase in unrecognised gross temporary differences is partly due to the inclusion
of unremitted earnings of SA subsidiaries as a result of the Simplification of the corporate structure. 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 2019 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)
(euro cents)
Basic EPS
Diluted EPS
Basic underlying EPS
Diluted underlying EPS
Basic headline EPS
Diluted headline 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 attributable to shareholders (see note 3)
Related tax (see note 3)
Underlying earnings for the year
Special items not excluded from headline earnings
Gain on disposal of property, plant and equipment
Net (gain)/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
Earnings
2019
812
17
—
829
25
(2)
(9)
2
(9)
836
EPS attributable to shareholders
2019
167.6
167.6
171.1
171.1
172.5
172.5
2018
170.1
170.0
189.1
189.0
184.8
184.7
2018
824
126
(34)
916
(45)
(1)
3
2
20
895
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 176
8 Earnings per share (EPS)
million
Basic number of ordinary shares outstanding
Effect of dilutive potential ordinary shares
Diluted number of ordinary shares outstanding
9 Dividends
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
Weighted average number of shares
2019
484.6
—
484.6
2019
54.55
—
27.28
2018
484.4
0.2
484.6
2018
42.90
100.00
21.45
Final ordinary dividend proposed for the year ended 31 December
55.72
54.55
€ 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
Declared by Group companies to non-controlling interests
2019
264
—
132
396
270
3
2018
207
484
102
793
264
18
Dividends proposed and paid to the shareholders of Mondi Limited and Mondi plc prior to the effective date of the Simplification of the
corporate structure (see note 21) are presented on a combined basis.
The final ordinary dividend proposed has been recommended by the Board and is subject to the approval of the shareholders of Mondi plc
at the Annual General Meeting scheduled for 7 May 2020.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 177
10 Property, plant and equipment
€ million
Net carrying value
At 1 January 2018
Acquired through business combinations
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
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 2019
Cost
Accumulated depreciation and impairments
Notes:
Land and
buildings1
Plant and
equipment
Assets under
construction
Other
Total
1,207
2,429
32
42
(6)
(3)
(69)
(20)
1
43
(3)
(44)
1,180
2,033
(853)
108
(14)
(3)
(72)
—
1
115
2
33
1,350
2,250
(900)
97
167
(6)
(3)
(304)
(51)
1
142
(2)
(96)
2,374
6,765
(4,391)
300
(4)
(6)
(292)
(43)
—
330
(2)
61
2,718
7,322
(4,604)
377
5
512
(3)
(2)
—
—
—
(198)
—
(24)
667
674
(7)
364
—
(1)
—
(1)
—
(463)
1
25
592
599
(7)
115
2
41
(4)
—
(37)
(3)
—
9
2
(6)
119
394
(275)
46
(3)
—
(41)
—
—
14
(1)
6
140
436
(296)
4,128
136
762
(19)
(8)
(410)
(74)
2
(4)
(3)
(170)
4,340
9,866
(5,526)
818
(21)
(10)
(405)
(44)
1
(4)
—
125
4,800
10,607
(5,807)
1 The land carrying value included in ‘Land and buildings’ is €179 million (2018: €171 million)
2 Impairment losses include €42 million (2018: €72 million) classified as special items and €2 million (2018: €2 million) of other impairments
3 Impairment losses reversed are classified as special items
Included in the additions above is €3 million (2018: €7 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 2019OverviewStrategic reportGovernanceFinancial statements 178
11 Leases
The Group has entered into various lease agreements. Leases over land and buildings have a weighted average term of 40 years (2018: 39
years), plant and equipment a weighted average term of 13 years (2018: 12 years) and other assets a weighted average term of four years
(2018: 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.
Russian forestry leases
The majority of the forestry lease agreements were entered into by the Group in 2007, 2008, 2014 and 2015 for an average term of 46
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, consistent with prior years.
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.
Right-of-use assets
€ million
Land and buildings
Plant and equipment
Other
Total
Additions to the right-of-use assets during 2019 were €62 million (2018: €25 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 2019 was €39 million (2018: €41 million).
Right-of-use assets
Depreciation charge
2019
133
43
8
184
2018
120
19
9
148
2019
(13)
(7)
(5)
(25)
2019
37
95
302
434
218
25
193
2018
(14)
(7)
(6)
(27)
2018
34
84
267
385
184
22
162
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 Amounts recognised in the consolidated income statement
€ million
Depreciation charge
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
Disposal of businesses
Currency movements
At 31 December
(b) Assumptions
179
2019
(25)
(13)
(2)
(1)
2019
942
—
(2)
8
948
2018
(27)
(14)
(1)
(1)
2018
698
257
—
(13)
942
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:
2019/€ million, unless otherwise stated
Corrugated Packaging
Flexible Packaging
Engineered Materials
Uncoated Fine Paper
Total goodwill
Weighted
average pre-tax
discount rate
Medium-term
growth rate
Carrying value
10.3%
9.8%
9.1%
11.4%
2.7%
1.3%
1.6%
0.0%
343
359
214
32
948
As a result of the reorganisation of the Group’s business units (see note 2), the Group has changed the allocation of goodwill to
its respective groups of CGUs with four groups of CGUs being identified as the lowest level at which goodwill is monitored for
management purposes:
e Corrugated Packaging, comprising the former groups of CGUs of Containerboard and Corrugated Packaging;
e Flexible Packaging, comprising the former groups of CGUs of Kraft Paper and Industrial Bags, and a proportionate share of the former
group of CGUs of Consumer Packaging;
e Engineered Materials, comprising the former group of CGUs of Extrusion Coatings and a proportionate share of the former group of
CGUs of Consumer Packaging; and
e Uncoated Fine Paper, which remains unchanged.
The goodwill previously allocated to the Consumer Packaging group of CGUs was split in accordance with IAS 36 based on the relative fair
values of the consumer flexibles operations and the personal care components and release liner operations respectively, with €210 million
allocated to the Flexible Packaging group of CGUs and €209 million allocated to the Engineered Materials group of CGUs.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 180
12 Goodwill
In the prior year, prior to the reorganisation, goodwill was allocated to the groups of CGUs as follows:
2018/€ 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
Medium-term
growth rate
Carrying value
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%
419
304
83
62
36
31
7
942
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 Board covering the three-year period to
31 December 2022;
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 and expected 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.
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 100 bps increase in discount rate;
e 0% medium-term growth rate assumed for cash flow projections beyond three years;
e 5% decrease in sales prices in the Corrugated Packaging, Flexible Packaging and Uncoated Fine Paper groups of CGUs; and
e 3% decrease in gross margin in the Engineered Materials group of CGUs.
None of these downside sensitivity analyses in isolation indicated the need for an impairment.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 13 Intangible assets
€ million
Net carrying value
At 1 January
Acquired through business combinations
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
Research and development expenditure incurred by the Group and charged to the consolidated income statement during the year
amounted to €25 million (2018: €22 million).
14 Forestry assets
€ million
At 1 January
Capitalised expenditure
Acquisition of assets
Acquired through business combinations
Fair value gains
Felling costs
Currency movements
At 31 December
Mature
Immature
2019
340
46
2
—
71
(64)
16
411
251
160
The Group has 253,680 hectares (2018: 254,328 hectares) of owned and leased land available for forestry activities, all of which is in South
Africa. 80,238 hectares (2018: 80,144 hectares) are set aside for conservation activities and infrastructure needs. 1,045 hectares (2018: 1,045
hectares) relate to non-core activities. The balance of 172,397 hectares (2018: 173,139 hectares) are under afforestation which forms the
basis of the valuation set out above.
181
2019
2018
91
—
12
—
(28)
4
2
81
325
(244)
111
14
10
(11)
(34)
4
(3)
91
316
(225)
2019
2018
44
20
13
4
81
40
28
18
5
91
2018
325
46
7
14
43
(60)
(35)
340
197
143
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 182
14 Forestry assets
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 16.5 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 2019, the net selling
price used ranged from the South African rand equivalent of €17 per tonne to €48 per tonne (2018: €15 per tonne to €38 per tonne)
with a weighted average of €31 per tonne (2018: €26 per tonne).
e The conversion factor, which is used to convert hectares of land under afforestation to tonnes of standing timber, is dependent on the
species, the maturity profile of the timber, the geographic location, climate and a variety of other environmental factors. In 2019, the
conversion factors ranged from 8.5 to 24.3 (2018: 8.4 to 24.5).
e The risk premium on immature timber of 13.9% (2018: 13.0%) is based on an assessment of the risks associated with forestry assets
in South Africa and is applied for the years the immature timber has left to reach maturity. A risk premium on mature timber of 3.5%
(2018: 0.0%) was applied from 2019. The increase in the proportion of mature timber and the risks associated with forestry assets in South
Africa triggered a change in estimate.
The valuation of the Group’s forestry assets is determined in South African rand and converted to euro at the closing exchange rate on
31 December of each year.
The Group has performed sensitivity analyses of reasonably possible changes in the significant assumptions and EUR/ZAR exchange rate,
taking into account historical experience. 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 €5/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 10% increase in EUR/ZAR exchange rate
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
Consolidated income statement
Cost of inventories recognised as an expense
Write-down of inventories to net realisable value
Aggregate reversal of previous write-downs of inventories
Green energy sales and disposal of emissions credits
2019
65
4
(6)
(37)
2019
2018
37
11
33
81
390
121
392
903
984
128
35
11
26
72
392
116
388
896
968
127
(3,032)
(3,104)
(37)
21
88
(21)
13
88
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 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
183
2019
953
(28)
925
34
122
30
1,111
2018
1,052
(35)
1,017
30
114
29
1,190
The Group has a large number of unrelated customers and does not have 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
2019
2018
953
(793)
160
1,052
(861)
191
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 €4 million (2018: €8 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.
To the extent that recoverable amounts are expected to be less than their associated carrying values, impairment charges have been
recorded in the 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 €50 million (2018: €55 million).
Included within the Group’s aggregate trade receivables balance are specific debtor balances with customers totalling €31 million
(2018: €35 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
2019
894
21
4
1
5
2018
982
23
4
3
5
925
1,017
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 184
16 Trade and other receivables
Movement in the allowance account for bad and doubtful debts
€ million
At 1 January
Increase in allowance recognised in 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
18 Provisions
€ million
At 1 January 2019
Charged to consolidated income statement
Disposal of businesses
Released to consolidated income statement
Amounts applied
Reclassification
Currency movements
At 31 December 2019
Current
Non-current
Restructuring
costs
Employee related
provisions
Environmental
restoration
37
5
—
—
(27)
(1)
1
15
13
2
35
7
(1)
(1)
(8)
—
(1)
31
5
26
4
—
—
—
—
—
—
4
—
4
2019
35
7
(14)
—
28
2019
574
119
52
53
345
1,143
Other
31
19
—
(3)
(17)
1
3
34
29
5
2018
32
11
(6)
(2)
35
2018
601
113
57
52
363
1,186
Total
107
31
(1)
(4)
(52)
—
3
84
47
37
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 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 24c)
Capital employed
Trailing 12-month average capital employed
2019
4,015
370
4,385
2,207
6,592
6,162
2018
3,485
340
3,825
2,220
6,045
5,583
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.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 185
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.
The principal loan arrangements in place are the following:
€ million
Financing facilities
Maturity
Interest rate %
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
2019
750
500
500
600
52
2
72
2,476
(1,816)
660
2018
750
500
500
600
62
15
60
2,487
(1,871)
616
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:
Pre-tax weighted average cost of capital (%)
Gearing (%)
Net debt to 12-month trailing underlying EBITDA (times)
Return on capital employed (%)
2019
10.5
33.5
1.3
19.8
2018
10.5
36.7
1.3
23.6
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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 186
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
Committed facilities drawn
Uncommitted facilities drawn
2019
2018
Current
Non-current
Total
Current
Non-current
Total
—
25
25
500
250
5
755
780
—
193
193
1,094
204
5
1,303
1,496
—
218
218
1,594
454
10
2,058
2,276
1,816
460
2
22
24
—
237
7
244
268
—
162
162
1,592
245
3
1,840
2,002
The Group’s borrowings as at 31 December are analysed by nature and underlying currency as follows:
2019/€ million
Euro
Pounds sterling
South African rand
Turkish lira
US dollar
Russian rouble
Other currencies
Carrying value
Fair value
2018/€ million
Euro
Pounds sterling
South African rand
Turkish lira
US dollar
Russian rouble
Other currencies
Carrying value
Fair value
Floating rate
borrowings
Fixed rate
borrowings
Total carrying
value
158
106
70
40
13
—
29
416
416
1,679
3
29
26
14
85
24
1,860
1,927
1,837
109
99
66
27
85
53
2,276
Floating rate
borrowings
Fixed rate
borrowings
Total carrying
value
196
186
6
52
11
1
17
469
469
1,640
6
28
14
20
71
22
1,801
1,818
1,836
192
34
66
31
72
39
2,270
2
184
186
1,592
482
10
2,084
2,270
1,871
399
Fair value
1,903
109
99
66
27
85
54
2,343
Fair value
1,853
192
34
65
31
73
39
2,287
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 187
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.
The maturity analysis of the Group’s borrowings, presented net of interest, is as follows:
2019/€ 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
2018/€ million
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 year
1–2 years
2–5 years
> 5 years
500
250
25
5
780
51
831
—
170
16
2
188
32
220
497
30
38
3
568
77
645
< 1 year
1–2 years
2–5 years
—
239
22
7
268
63
331
499
31
18
—
548
36
584
—
200
30
3
233
79
312
597
4
139
—
740
182
922
> 5 years
1,093
14
114
—
1,221
180
1,401
Total1
1,594
454
218
10
2,276
342
2,618
Total1
1,592
484
184
10
2,270
358
2,628
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 27.
21 Share capital and stated capital
Since its formation in 2007, the Group had been an integrated corporate group established under a DLC structure with dual holding
companies, Mondi Limited and Mondi plc. The substance of the DLC structure was such that Mondi Limited, Mondi plc and their respective
subsidiaries operated together as a single economic entity through a sharing agreement, with neither parent entity assuming a dominant
role. Accordingly, Mondi Limited and Mondi plc were reported on a combined and consolidated basis as a single reporting entity.
On 9 May 2019 the Group’s shareholders approved the Simplification of the corporate structure from a DLC structure into a single holding
company structure under Mondi plc by way of a South African scheme of arrangement (the ‘Scheme’) proposed by the Mondi Limited
board between Mondi Limited and the Mondi Limited ordinary shareholders. On 11 July 2019 the Scheme became unconditional and,
with effect from 26 July 2019, Mondi plc became the holder of all the Mondi Limited ordinary shares while, by other related actions, the
DLC arrangements were terminated. Pursuant to the Scheme, Mondi Limited shareholders received one new Mondi plc ordinary share in
exchange for each Mondi Limited ordinary share held.
As a result of the Simplification, each Mondi plc shareholder has the same voting and capital interests in the Group as each Mondi
plc ordinary shareholder and Mondi Limited ordinary shareholder had under the DLC structure. The Simplification did not result in any
changes to the management, operations, locations, activities or staffing levels of the Group, nor, save for one-off expenses to effect the
Simplification as disclosed below, did it have any significant impact on the reported profits or net assets of the Group.
Depending on the nature of costs incurred, the Group recognised related transaction costs of €6 million as a deduction from equity
in accordance with IAS 32 and €14 million as a financing special item charge, as described in note 3, to effect the Simplification of the
corporate structure.
Mondi plc is not restricted in the number of shares that can be issued. Any issue of shares is subject to shareholder approval. Mondi plc
ordinary shares issued on the London Stock Exchange and Johannesburg Stock Exchange have a nominal value of €0.20. All ordinary
shares are called up, allotted and fully paid.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 188
21 Share capital and stated capital
Mondi plc
Share capital1
At 1 January 2019
Conversion of special converting shares2
Cancellation of deferred shares
Issue of new ordinary shares3
At 31 December 2019
Ordinary shares
Special converting shares
Deferred shares
Total
Number of shares
€ million Number of shares
€ million Number of shares
€ million
€ million
367,240,805
—
—
118,312,975
485,553,780
74
—
—
23
97
118,312,975
(118,312,975)
24
(24)
146,896,322
118,312,975
—
—
—
—
—
—
(265,209,297)
—
—
5
24
(29)
—
—
103
—
(29)
23
97
Mondi Limited
Stated capital1
At 1 January 2019
Ordinary shares
Special converting shares
Deferred shares
Total
Number of shares
€ million Number of shares
€ million Number of shares
€ million
€ million
118,312,975
431
367,240,805
Conversion of special converting shares2
Cancellation of deferred shares
Transfer of ordinary shares from Mondi
Limited shareholders to Mondi plc3
At 31 December 2019
Notes:
—
—
(118,312,975)
—
—
—
(431)
—
(367,240,805)
—
—
—
1 There were no movements in share capital of Mondi plc and stated capital of Mondi Limited in 2018
8
(8)
—
—
—
—
367,240,805
(367,240,805)
—
—
—
8
(8)
—
—
439
—
(8)
(431)
—
2 The special converting shares of Mondi Limited and Mondi plc were converted to deferred shares immediately prior to the effective date and time of the Scheme
3 111,430,518 (€22 million) of Mondi Limited ordinary shares were acquired by Mondi plc in exchange for newly issued Mondi plc ordinary shares on a one for one basis
pursuant to the transfer mechanism under the Scheme. 6,882,457 (€1 million) of Mondi Limited ordinary shares were acquired by Mondi plc pursuant to the Buyback Option
under the Scheme. There were no notices given under section 164(3) of the Companies Act of South Africa 2008
Treasury shares
Treasury shares represent the cost of shares in Mondi plc purchased in the market to satisfy share awards under the Group’s employee
share schemes (see note 22). These costs are reflected in the consolidated statement of changes in equity. Prior to the Simplification,
treasury shares represented the cost of shares in Mondi Limited (held by the Mondi Incentive Schemes Trust) and Mondi plc (held by
the Mondi Employee Share Trust). The Simplification resulted in the exchange of the Mondi Limited shares held by the Mondi Incentive
Schemes Trust for shares in Mondi plc. Mondi plc assumed the rights and obligations of the Mondi Incentive Schemes Trust and became
the residual beneficiary.
at 31 December
Mondi Incentive Schemes Trust
Treasury shares held
2019
2018
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
Mondi plc €0.20 ordinary shares
Mondi Employee Share Trust
Mondi plc €0.20 ordinary shares
266,788
ZAR222.25
—
—
626,265
GBP17.66
810,641
GBP19.07
A dividend waiver is in place in respect of shares held by the Mondi Employee Share Trust.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 189
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:
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
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)
ROCE component
TSR component2
Grant date fair value per instrument (ZAR)
ROCE component
TSR component2
Number of shares conditionally awarded
Notes:
BSP 2019
BSP 2018
BSP 2017
29 March 2019 27 March 2018 24 March 2017
3
5
16.98
318.78
365,679
3
5
19.31
316.76
266,721
3
5
19.29
300.25
301,175
LTIP 2019
LTIP 2018
LTIP 20171
29 March 2019 27 March 2018 24 March 2017
3
5
100
25
16.98
4.25
318.78
79.70
3
5
100
25
19.31
4.83
316.76
79.19
3
5
100
25
19.52
4.88
312.04
78.01
465,710
450,955
554,944
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 were settled by the award of ordinary shares in either Mondi Limited or Mondi plc prior to the Simplification of
the corporate structure (see note 21). Post the Simplification all of these schemes awards are settled by the awards of ordinary shares in
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
2019
2018
6
5
11
6
5
11
2019
2018
ZAR329.50
ZAR327.48
GBP17.81
GBP19.81
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 190
22 Share-based payments
A reconciliation of share award movements for the Mondi share schemes is shown below:
number of shares
At 1 January 2018
Shares conditionally awarded
Shares vested
Shares lapsed
At 31 December 2018
Shares conditionally awarded
Shares vested
Shares lapsed
Transfer1
At 31 December 2019
Note:
Mondi Limited
119,512
20,930
(46,841)
(8,202)
85,399
27,071
(44,968)
—
(67,502)
—
BSP
Mondi plc
790,503
245,791
(302,829)
(15,324)
718,141
338,608
(368,199)
(30,244)
67,502
725,808
Total
Mondi Limited
LTIP
Mondi plc
1,412,613
431,790
Total
1,597,045
450,955
(499,002)
(574,285)
(16,365)
(27,428)
1,329,036
1,446,287
445,408
(387,584)
(197,954)
76,087
465,710
(434,668)
(212,336)
—
184,432
19,165
(75,283)
(11,063)
117,251
20,302
(47,084)
(14,382)
(76,087)
—
1,264,993
1,264,993
910,015
266,721
(349,670)
(23,526)
803,540
365,679
(413,167)
(30,244)
—
725,808
1 The Simplification resulted in the exchange of the Mondi Limited shares held by the Mondi Incentive Schemes Trust for shares in Mondi plc
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 €14 million (2018: €13 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 2020 are €13 million.
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.
Developments in 2019
On 13 December 2018 a change in the Austrian Social Security Law was enacted. Effective 1 January 2020, the law states that the
plan liabilities of the Group’s Austrian health insurance fund are assumed by the Republic of Austria. The law permitted the Group to
establish an independent trust to which it could contribute the health insurance fund plan assets for the benefit of the plan participants.
Following further assessment and clarification of the law, and necessary implementation steps, the Group elected to use this option in 2019
and applied the accounting policy as described below.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 191
The accounting treatment and presentation in the consolidated statement of financial position and in this note is considered a critical
accounting judgement, in particular whether the change in law is accounted for as a reimbursement right or a third party contribution.
The impact of the change in law is presented at year end 31 December 2019 by analogy to paragraphs 92-94 of IAS 19 (Revised) due to
a third party taking on the obligation for future contributions. As there is no requirement under the law for the Group to make continued
contributions to fund the current deficit and the current deficit will be funded by another party (the Austrian State and an independent
trust), none of that deficit is attributable to the Group at year end. In respect of the future service costs, there is no obligation for the Group
to fund these costs. When, subsequent to 31 December 2019, the future service costs are recognised for this health insurance fund, those
costs will be covered by the contributions of another party (the Austrian State and an independent trust) at that point in time and are not
an obligation of the Group.
The effect of the change in law is classified as a third party taking on the obligation for future contributions which is a one-off non-cash
benefit to the Group recognised as a special item reducing total personnel costs by €41 million in 2019. The third party contribution
by the Austrian state and the contribution of the plan assets to an independent trust is classified as a special item and presented in
the consolidated income statement. An adjustment to the plan liability for the amount to be assumed by the Austrian state is reflected
in the consolidated statement of financial position, with a corresponding adjustment to the plan assets for the transfer of assets to an
independent trust. The effect of the law change and establishment of an independent trust is presented on a ‘net’ basis in the consolidated
statement of financial position (a net nil position) at year end 2019.
Except for the actuarial risks set out below, the Group has not identified any additional specific risks in respect of these plans.
Defined benefit plans typically expose the Group to the following actuarial risks:
Investment risk (Asset volatility)
Interest risk
Longevity risk
Salary 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.
Medical cost inflation risk
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
2019
2018
South Africa
Europe
Other regions
South Africa
Europe
Other regions
9.2
5.5
6.5
—
7.0
1.2
2.2
2.4
2.8
3.7
8.5
4.7
6.3
4.0
—
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
—
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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 192
23 Retirement benefits
Mortality assumptions
The assumed remaining life expectancies on retirement at age 65 are:
years
Retiring today
Males
Females
Retiring in 20 years
Males
Females
2019
2018
South
Africa
Europe
Other
regions
South
Africa
Europe
Other
regions
16.2
20.3
21.8
25.9
14.1-22.9
15.3-20.7
17.8-27.4
17.7-25.3
14.1-25.5
15.3-21.0
17.8-27.8
17.7-25.3
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
The mortality assumptions have been based on published mortality tables in the relevant jurisdictions.
The amounts recognised in the 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
Plan liabilities net of plan assets
Amounts reported in 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
South
Africa
(47)
—
(47)
—
(47)
—
—
—
(47)
(47)
2019
Europe
(129)
(140)
(269)
130
(139)
17
17
(156)
—
(156)
Other
regions
(20)
(2)
(22)
—
(22)
—
—
(22)
—
(22)
South
Africa
(45)
—
(45)
—
(45)
—
—
—
(45)
(45)
2018
Europe
(126)
(173)
(299)
135
(164)
6
6
(149)
(21)
(170)
Other
regions
(16)
(3)
(19)
—
(19)
—
—
(19)
—
(19)
Total
(196)
(142)
(338)
130
(208)
17
17
(178)
(47)
(225)
Total
(187)
(176)
(363)
135
(228)
6
6
(168)
(66)
(234)
The changes in the present value of defined benefit liabilities and fair value of plan assets are as follows:
Defined benefit liabilities
Fair value of plan assets
Net liability
€ million
At 1 January
Included in consolidated income statement
Current service cost
Past service cost
Gain/(loss) from settlement
Interest
Included in consolidated statement of comprehensive income
Remeasurement losses
Return on plan assets
Acquired through business combinations
Disposal of businesses
Contributions paid by scheme members
Contributions paid by employer
Benefits paid
Currency movements
At 31 December
2019
(363)
2018
(367)
(5)
(1)
59
(12)
(31)
—
—
2
(3)
—
25
(9)
(5)
(1)
(2)
(11)
(6)
—
(1)
—
(3)
—
24
9
(338)
(363)
2019
135
—
—
(16)
3
—
10
—
(2)
3
1
(10)
6
130
2018
142
2019
(228)
2018
(225)
—
—
—
3
—
(6)
—
—
3
3
(10)
—
135
(5)
(1)
43
(9)
(31)
10
—
—
—
1
15
(3)
(5)
(1)
(2)
(8)
(6)
(6)
(1)
—
—
3
14
9
(208)
(228)
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 193
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
2019
2018
Defined benefit
pension plans
Post-retirement
medical plans
10
11
31
227
4
4
14
118
Total
14
15
45
345
Defined benefit
pension plans
Post-retirement
medical plans
10
13
31
248
11
4
13
133
Total
21
17
44
381
The weighted average duration of the defined retirement benefits liability for South Africa is nine years (2018: nine years), Europe 14 years
(2018: 15 years) and other regions 13 years (2018: 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 2020 are €15 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
2019
2018
Quoted
Unquoted
Total
Quoted
Unquoted
12
32
11
1
59
115
—
—
15
—
—
15
12
32
26
1
59
130
12
51
—
8
47
118
—
—
17
—
—
17
Total
12
51
17
8
47
135
The majority of the Group’s plan assets are located in the UK and the asset-liability matching/investing strategy in the UK is that the
trustees invest in diverse portfolios of pooled funds and insured annuities. 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 gain of €13 million (2018: loss of €3 million).
The market value of assets is used to determine the funding level of the plans and is sufficient to cover 92% (2018: 77%) 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 2019, 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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 194
23 Retirement benefits
The sensitivity table is based on an illustrative 1% change, however the estimates may vary by greater amounts. Therefore the Group
considers the retirement benefit obligations a key estimate.
€ million
Discount rate
(Decrease)/increase in current service cost
(Decrease)/increase in net retirement benefits liability
Rate of inflation
Increase in current service cost
Increase/(decrease) in net retirement benefits liability
Rate of increase in salaries
Increase 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
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 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
Decrease/(increase) in operating receivables
(Decrease)/increase in operating payables
Fair value gains on forestry assets
Felling costs
Profit on disposal of property, plant and equipment
Net (profit)/loss from disposal of businesses and equity accounted investees
Other adjustments
Cash generated from operations
1% increase
1% decrease
(1)
(39)
1
33
1
11
—
19
—
4
1 year increase
—
12
2019
1,103
433
2
11
(6)
104
—
(23)
(1)
91
(55)
(71)
64
(2)
(9)
(6)
1
47
—
(29)
—
(11)
—
(16)
(1)
(3)
2018
1,105
444
2
11
97
88
(1)
(7)
(112)
(84)
79
(43)
60
(1)
3
13
1,635
1,654
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 195
(b) Cash and cash equivalents
€ million
Cash and cash equivalents per consolidated statement of financial position
Bank overdrafts included in short-term borrowings
Cash and cash equivalents per consolidated statement of cash flows
The fair value of cash and cash equivalents approximate their carrying values presented.
2019
74
(81)
(7)
2018
52
(44)
8
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.
(c) Movement in net debt
The Group’s net debt position is as follows:
€ million
At 1 January 2018
Cash flow
Additions to lease liabilities
Disposal of lease liabilities
Acquired through business
combinations
Movement in unamortised loan costs
Net movement in derivative financial
instruments
Reclassification
Currency movements
At 31 December 2018
Cash flow
Additions to lease liabilities
Disposal of lease liabilities
Disposal of businesses
Movement in unamortised loan costs
Net movement in derivative financial
instruments
Reclassification
Currency movements
At 31 December 2019
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
(66)
67
—
—
—
—
—
—
7
8
(16)
—
—
—
—
—
—
1
(7)
1
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
1
(65)
67
—
—
—
—
—
—
7
9
(16)
—
—
—
—
—
—
1
(187)
16
(5)
2
(31)
—
—
(39)
20
(1,280)
(765)
(19)
4
(1)
(2)
—
42
19
(224)
(2,002)
43
(10)
2
1
—
—
(517)
6
48
(48)
9
—
(2)
—
517
(18)
(6)
(699)
(1,496)
—
—
—
—
—
—
(2)
—
(1)
(3)
—
—
—
—
—
(3)
—
—
(6)
Total debt
Total net
debt
(1,467)
(1,532)
(749)
(24)
6
(32)
(2)
(2)
3
38
(682)
(24)
6
(32)
(2)
(2)
3
45
(2,229)
(2,220)
91
(58)
11
1
(2)
(3)
—
(12)
75
(58)
11
1
(2)
(3)
—
(11)
(2,201)
(2,207)
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 196
24 Consolidated cash flow analysis
(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
Transaction costs relating to the issue of share capital
Financing special item
Net cash inflow/(outflow) from derivatives
Other financing activities
Cash flow generation
25 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
Total capital commitments
2019
1,388
(50)
(794)
757
5
(20)
2
(123)
(96)
(3)
(12)
(6)
(14)
3
5
2018
1,407
(42)
(1,157)
709
7
(3)
402
(139)
(73)
(18)
(15)
—
—
(25)
(8)
1,215
1,226
2019
442
1,214
1,656
2019
47
1,609
1,656
2019
744
487
425
2018
434
1,606
2,040
2018
40
2,000
2,040
2018
842
663
535
1,656
2,040
Capital commitments are based on capital projects approved by the end of the financial year and the budget approved by the Board.
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.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 197
26 Contingent liabilities
Contingent liabilities comprise aggregate amounts as at 31 December 2019 of €3 million (2018: €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 consolidated
statement of financial position for either year presented.
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 fully, or partly, insured 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 judgement 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.
27 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 Board
and are overseen by the executive committee. In turn, the 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
2019/€ million
Financial assets
Trade and other receivables1
Financial asset investments
Derivative financial instruments
Cash and cash equivalents
Total
2018/€ 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
959
12
—
74
1,045
—
19
5
—
24
—
—
—
—
—
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
Total
959
31
5
74
1,069
Total
1,047
21
9
52
1,129
1 Excludes tax, social security, prepayments and accrued income
The fair values of financial assets investments represent the published prices of the securities concerned.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 198
27 Financial instruments
2019/€ million
Financial liabilities
Borrowings – bonds
Borrowings – loans and overdrafts
Lease liabilities
Trade and other payables1
Derivative financial instruments
Other non-current liabilities
Total
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 and deferred income
(b) Fair value measurement
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
(1,594)
(464)
(218)
(1,084)
—
(16)
(3,376)
—
—
—
—
(7)
—
(7)
—
—
—
—
(2)
—
(2)
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)
(1,121)
—
(14)
(3,405)
—
—
—
—
(12)
—
(12)
—
—
—
—
(1)
—
(1)
Total
(1,594)
(464)
(218)
(1,084)
(9)
(16)
(3,385)
Total
(1,592)
(494)
(184)
(1,121)
(13)
(14)
(3,418)
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 consolidated financial
statements approximate their fair values.
€ million
Financial liabilities
Borrowings
(c) Financial risk management
Market risk
Carrying amount
2019
2018
Fair value
2019
2018
2,276
2,270
2,343
2,287
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.
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
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 199
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.
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
2019
EUR
Other
2018
EUR
Other
—
(3)
1
(11)
(26)
(41)
(5)
(68)
(4)
(3)
1
1
(1)
—
1
12
—
(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
consolidated income statement if these currency movements had occurred.
€ million
Functional currency zones
Czech koruna
Swedish krona
Other
Income/(expense)
2019
+5%
—
2
5
-5%
—
(2)
(5)
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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 200
27 Financial instruments
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.
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.
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 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
2019
2018
EUR
1,837
(1,608)
(71)
(13)
145
Other
439
(34)
(147)
(61)
197
Total
2,276
EUR
1,836
(1,642)
(1,593)
(218)
(74)
342
(47)
(10)
186
Other
434
(24)
(137)
(42)
231
Total
2,270
(1,617)
(184)
(52)
417
Included in other is net variable exposure to various currencies, the most significant of which are Polish zloty and South African rand
(2018: South African rand and Turkish lira).
The Group did not have any outstanding interest rate swaps at 31 December 2019 (2018: €nil).
The potential impact on the Group’s 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
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 against the euro
2019
2018
(48)
369
339
28
40
50
141
919
(145)
378
285
(91)
39
54
118
638
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 201
Credit risk
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.
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 committed facilities available (see note 19)
2019
57
603
660
2018
48
568
616
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 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 2019, the Group recognised total derivative assets of €5 million (2018: €9 million) and derivative liabilities of €9 million
(2018: €13 million). The full net liability of €4 million (2018: net liability of €4 million) will mature within one year.
The notional amount of €1,691 million (2018: €1,725 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 €1,691 million (2018: €1,725 million) aggregate notional amount, €1,301 million
(2018: €1,300 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 consolidated 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 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.
Fair value losses of €2 million (2018: €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 consolidated income statement arising on cash flow hedges for both
years presented.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 202
28 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 plc and its subsidiaries, which are related parties, and transactions between its subsidiaries 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
2019
23
213
1
36
2018
18
208
2
44
Compensation for the Board 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 plc. The Board and those members of the Group 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
2019
7.4
1.1
0.9
0.9
4.8
15.1
2018
8.4
1.1
0.9
0.7
5.1
16.2
Details of the transactions between the Group and its pension and post-retirement medical plans are disclosed in note 23.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 203
29 Group companies
Composition of the Group
The subsidiaries of the Group as at 31 December 2019 are set out in note 11 of the Mondi plc parent company financial statements. All of
these interests are 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.
A list of subsidiaries taking advantage of an exemption from audit under section 479A of the Companies Act 2006 is disclosed in note 9 of
the Mondi plc parent company financial statements.
Details of non-wholly-owned subsidiaries
€ million, unless otherwise stated
Mondi SCP, a.s.
Individually immaterial subsidiaries with
non-controlling interests
Total
Proportion of ownership
interests and voting rights held by
non-controlling interests (%)
2019
49
2018
49
Profit attributable to
non-controlling interests
Equity attributable to
non-controlling interests
2019
22
12
34
2018
30
12
42
2019
297
73
370
2018
278
62
340
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 outflow
The summarised financial information represents amounts before intra-group eliminations.
2019
2018
687
253
(196)
(129)
615
318
297
759
(713)
46
24
22
46
—
93
(183)
(1)
(91)
542
352
(193)
(126)
575
297
278
806
(743)
63
33
30
63
15
113
(79)
(34)
—
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 204
30 Events occurring after 31 December 2019
In addition to the final ordinary dividend proposed for 2019 (see note 9), there have been the following material reportable events since
31 December 2019:
e The Group has concluded the consultation with employee representatives relating to the closure of two consumer flexibles plants
in the UK. Restructuring and closure costs and related impairment of assets of €4 million were recognised as a special item in 2019.
Total restructuring and closure costs are expected to exceed €10 million.
e In February 2020, the Group entered into a €250 million debt facility maturing in August 2021.
31 Accounting policies
Basis of consolidation
The consolidated financial statements incorporate the revenues, expenses, assets, liabilities, equity and cash flows of Mondi plc and its
subsidiaries (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.
Prior to the Simplification (see note 21), Mondi Limited and Mondi plc were reported on a combined and consolidated basis as a single
reporting entity. The combined and consolidated financial statements incorporated the revenues, expenses, assets, liabilities, equity and
cash flows of Mondi Limited and Mondi plc, and its respective subsidiaries and the Group’s share of equity accounted investees.
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 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
consolidated income statement and are classified as either operating or financing consistent with the nature of the monetary item giving
rise to them.
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 or loss only on disposal or partial
disposal of the overseas operation.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 205
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
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.
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.
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 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 four distinct segments (2018: three distinct segments).
Measurement of operating segment revenues, profit or 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.
Revenue from contracts with customers (note 2)
Sale of goods
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
Transport revenue is considered distinct when the Group provides transport services after the point in time when control of goods has
passed to the customer. Such revenue is recognised over time.
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
consolidated income statement when ownership rights pass to the buyer. Any unsold green energy credits are recorded in inventory.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 206
31 Accounting policies
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.
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 subject 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 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.
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 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
The basic EPS is calculated by dividing net profit attributable to ordinary shareholders by the weighted average number of Mondi plc
shares in issue during the year, net of treasury shares.
Prior to the Simplification (see note 21) the basic EPS was 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.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 207
Diluted EPS
For diluted EPS, the weighted average number of 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.
Prior to the Simplification (see note 21), for diluted EPS the weighted average number of the sum of Mondi Limited and Mondi plc ordinary
shares in issue, net of treasury shares, was adjusted to assume conversion of all dilutive potential ordinary shares.
Non-current non-financial assets excluding goodwill, deferred tax and net retirement benefit assets
Property, plant and equipment (note 10)
Property, plant and equipment principally comprise land and buildings, plant and equipment and assets under construction.
Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Land and assets under 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 recognised immediately
as an expense.
Depreciation is charged to the consolidated income statement so as to write off the cost of assets, other than freehold land and assets
under 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 25 years (2018: three years to 20 years) for items of plant and equipment and other
categories and to a maximum of 50 years for buildings.
The Group has revised the estimated useful economic lives of plant and equipment. In accordance with IAS 8, ‘Accounting Policies,
Changes in Accounting Estimates and Errors’, the effect of the change in accounting estimate has been recognised prospectively in the
consolidated income statement and is considered not material.
Leases (note 11)
To the extent that a right-of-control exists over an asset subject to a lease, 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
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 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 implicit interest rate cannot be readily determined, the lessee’s incremental borrowing rate
is used. Finance charges are recognised in the 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 not recognised in the consolidated statement
of financial position, and are charged to the consolidated income statement when incurred. Low-value assets are determined based on
quantitative criteria.
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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 208
31 Accounting policies
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.
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 (taking into account depreciation or amortisation in the intervening period) had no impairment been
recognised for the asset, or CGU, in prior years. A reversal of an impairment is recognised in the consolidated income statement.
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 consolidated income statement within other net operating expenses. At point of harvest, the
carrying value of forestry assets is transferred to inventory and recorded as a felling cost reduction to the fair value of forestry assets.
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.
Goodwill (note 12)
Any excess of the consideration 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 Board. 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 consolidated income statement. Impairments of goodwill are not subsequently reversed.
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.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 209
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 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 Mondi plc, net of any directly attributable incremental
transaction costs and the related tax effects.
Prior to the Simplification (see note 21), the purchase by any Group entity of either Mondi Limited’s or Mondi plc’s equity instruments
resulted in the recognition of treasury shares. The consideration paid was deducted from equity. Where treasury shares were subsequently
sold, reissued or otherwise disposed of, any consideration received was 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)
The dividend distributions to Mondi plc’s ordinary shareholders are recognised as a liability when the dividends are declared and approved.
Final dividends are accrued when approved by Mondi plc’s ordinary shareholders at its Annual General Meeting and interim dividends are
recognised when approved by the Board.
Prior to the Simplification (see note 21) the dividend distributions to Mondi Limited’s and Mondi plc’s ordinary shareholders were recognised
as a liability when the dividends were declared and approved. Final dividends were accrued when approved by both Mondi Limited’s and
Mondi plc’s ordinary shareholders at their respective Annual General Meetings and interim dividends were 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
consolidated income statement, with a corresponding adjustment to equity.
Financial instruments (note 27)
Financial assets and financial liabilities are recognised in the Group’s 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
consolidated income statement.
Cash and cash equivalents (note 24b)
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 consolidated
statement of financial position. Cash and cash equivalents presented in the consolidated statement of cash flows are net of overdrafts.
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 an allowance for impairment.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 210
31 Accounting policies
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.
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
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. 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 consolidated income statement in the period in which they are incurred.
Derivative financial instruments and hedge accounting (note 27d)
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 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 consolidated income statement and are classified within operating profit or net finance costs, depending on the type of
risk to which the derivative relates.
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 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
consolidated income statement in the same period in which the hedged item affects profit or 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 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 consolidated income statement.
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 consolidated income statement is the contributions paid or payable during the
reporting period.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 211
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 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 consolidated income statement within 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 consolidated income statement, but those amounts
recognised in other comprehensive income may be transferred within equity.
Simplification accounting (note 21)
With the effect of the Simplification, Mondi Limited became a wholly owned subsidiary of Mondi plc and subsequently the stated capital
of Mondi Limited is eliminated in the consolidated statement of changes in equity. The difference between the nominal value of new
shares issued by Mondi plc (€23 million) and the stated capital of Mondi Limited recorded within the Group equity immediately prior to the
Simplification (€431 million) is recognised in the merger reserve within equity.
The Simplification was accounted for outside the scope of IFRS 3, and consequently, the carrying values of the assets and liabilities of
Mondi Limited were not adjusted to fair value, but continue to be reported under the same measurement principles as applied prior to
the transaction.
Transaction costs incurred to effect the Simplification are charged as a financing special item in the consolidated income statement, except
for costs incremental and directly attributable to the issuance of new shares of Mondi plc, which are debited directly to retained earnings
within equity in accordance with IAS 32.
The Simplification accounting is identified as a critical accounting judgement in terms of IAS 1 due to the exceptional nature of the
underlying transaction and the limited guidance available in IFRS, in particular the judgement applied by management that the transaction
does not represent a business combination and so assets and liabilities of the Mondi Limited group were not remeasured to their fair value
as at the transaction date. Instead the assets and liabilities continued to be held at their previous carrying amounts.
New accounting policies, early adoption and future requirements
Amendments to published Standards effective during 2019
The following amendments to Standards and a new Interpretation have been adopted for the financial year beginning on 1 January 2019,
and have had no significant impact on the Group’s results:
e Annual improvements 2015-2017 cycle
e Amendments to IFRS 9 – Financial Instruments
e Amendments to IAS 19 – Employee Benefits
e Amendments to IAS 28 – Investments in Associates and Joint Ventures
e IFRIC 23 – Uncertainty over Income Tax Treatments
New Standards and amendments to published Standards that are not yet effective
The following amendments to Standards will be effective for the financial year beginning on 1 January 2020 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 Amendments to IFRS 3 – Business Combinations
e Amendments to IAS 1 – Presentation of Financial Statements
e Amendments to IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors
e Amendments to References to the Conceptual Framework in IFRS Standards
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 212
31 Accounting policies
Alternative Performance Measures (APMs)
The Group presents certain measures of financial performance, position or cash flows in the consolidated financial statements that are not
defined or specified according to IFRS. These measures, referred to as APMs, are prepared on a consistent basis for all periods presented
in this report.
The most significant APMs are:
Special items (note 3)
Those financial items which the Group considers should be separately disclosed on the face of the 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 (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.
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 (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 operating profit margin
Underlying operating profit expressed as a percentage of revenue provides a measure of the profitability of the operations relative
to revenue.
Underlying profit before tax (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 earnings (and per share measure) (note 8)
The presentation of headline earnings (and the related per share measure based on the basic, weighted average number of ordinary
shares outstanding) is mandated under the Listings Requirements of the JSE Limited and is calculated in accordance with Circular 1/2019,
‘Headline Earnings’, as issued by the South African Institute of Chartered Accountants.
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. ROCE provides a measure of the efficient and effective use of capital in the business.
Capital employed (and related trailing 12-month average capital employed) (notes 2 and 19)
Capital employed comprises equity, non-controlling interests in equity and net debt providing a measure of the level of invested capital in
the business. Trailing 12-month average capital employed is the average capital employed over the last 12 months adjusted for spend on
major capital expenditure projects which are not yet in production.
Mondi Group Integrated report and financial statements 2019Notes to the consolidated financial statementsfor the year ended 31 December 2019 213
Net debt (note 24c)
A measure comprising short, medium, and long-term interest-bearing borrowings and the fair value of debt-related derivatives less
cash and cash equivalents, net of overdrafts, and current financial asset investments. Net debt provides a measure of the Group’s net
indebtedness or overall leverage.
Operating segment assets and operating segment net assets (note 2)
Operating segment assets and operating segment net assets comprise total assets (excluding financial instruments) and capital employed
respectively but excludes investment in equity accounted investees, deferred tax assets and liabilities and other non-operating assets and
liabilities, and provide a measure of the operating assets in the business.
Working capital as a percentage of revenue
Working capital, defined as the sum of trade and other receivables and inventories less trade and other payables, expressed as a
percentage of annualised Group revenue. A measure of the Group’s effective use of working capital relative to revenue.
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)
Annualised net interest expense expressed as a percentage of trailing average net debt over the period 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.
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.
Gearing (note 19)
Net debt expressed as a percentage of capital employed provides a measure of the financial leverage of the Group.
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.
Cash flow generation (note 24d)
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.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 214
Mondi plc parent company balance sheet
as at 31 December 2019
€ million
Fixed asset investments
Total debtors: due within one year
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
Merger reserve
Legal reserve
Share-based payments reserve
Total shareholders’ funds
Notes
5
6
7
8
2019
3,721
35
3,756
(12)
(1)
(13)
3,743
97
2,846
754
29
17
2018
2,938
3
2,941
(451)
(2)
(453)
2,488
103
2,367
—
—
18
3,743
2,488
Mondi plc reported a profit of €818 million (2018: profit of €292 million) for the year ended 31 December 2019. 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 26 February 2020
and were signed on its behalf by:
Andrew King
David Williams
Chair
Director
Mondi plc company registered number: 6209386
Mondi plc parent company statement of changes in equity
for the year ended 31 December 2019
€ million
At 1 January 2018
Share capital
103
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 Limited
At 31 December 2018
Total comprehensive income for the year
Dividends
Issue of shares under employee share schemes
Purchases of treasury shares
Mondi share schemes’ charge
Cancellation of deferred shares
Acquisition of Mondi Limited
At 31 December 2019
—
—
—
—
—
—
103
—
—
—
—
—
(29)
23
97
Profit or loss
account
Merger reserve
Legal reserve
Share-based
payments reserve
2,952
292
(603)
11
(16)
—
(269)
2,367
818
(332)
11
(12)
—
—
(6)
2,846
—
—
—
—
—
—
—
—
—
—
—
—
—
—
754
754
—
—
—
—
—
—
—
—
—
—
—
—
—
29
—
29
19
—
—
(11)
—
10
—
18
—
—
(11)
—
10
—
—
17
Total
equity
3,074
292
(603)
—
(16)
10
(269)
2,488
818
(332)
—
(12)
10
—
771
3,743
Mondi Group Integrated report and financial statements 2019 Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2019
215
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 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 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 31 to the 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, that 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.
Costs incremental and directly attributable to the acquisition of investments are capitalised.
Simplification accounting
With the effect of the Simplification (see note 21 of the consolidated Group financial statements), Mondi plc became the sole holder of
issued shares in Mondi Limited and recognised a fixed asset investment on the statement of financial position, as set out above. Mondi plc
applied merger relief in accordance with Section 612 of the Companies Act 2006.
The difference between the nominal value (€23 million) and the fair value (€2,403 million) of new shares issued by Mondi plc netted by the
fair value of the premium for the DLC structure cancelled (€1,626 million) at the transaction date is recognised in the merger reserve within
equity (€754 million).
The cancellation of the deferred shares of Mondi plc is recognised in the legal reserve within equity in accordance with Section 733 of the
Companies Act 2006.
Costs incremental and directly attributable to the issuance of new shares of Mondi plc are debited directly to the profit or loss account
within equity in accordance with IAS 32.
The Simplification accounting is identified as a critical accounting judgement in terms of IAS 1 due to the exceptional nature of the
underlying transaction and the limited guidance available in IFRS, in particular:
e whether the transaction is in scope of the merger relief in accordance with Section 612 of the Companies Act 2006, under which the
share premium that would otherwise have resulted on the issue of Mondi plc shares to cancel the DLC structure are not classified as a
share premium but as merger reserve, and
e the presentation of the corresponding movements in equity, whether there should be separate gross entries reflecting the fair value
of new Mondi plc shares issued to cancel the DLC structure (credit to merger reserve) and the fair value of the premium for the DLC
structure cancelled (debit to merger reserve), or whether it is appropriate for these items to be reported net.
In the absence of any further guidance, management decided to report a net entry to merger reserve as a result of the shares issued to
cancel the DLC structure, as management believes that this is a fair representation of the transaction.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 216
Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2019
1 Accounting policies
Critical accounting judgements and significant accounting 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 significant accounting estimates and critical accounting judgements in terms of IAS 1, ‘Presentation of Financial Statements’,
are:
Significant accounting estimates
e Valuation of fixed asset investments – refer to note 5
Critical accounting judgements
e Accounting for Simplification of corporate structure – as described in this note
2 Auditors’ remuneration
Disclosure of the audit fees payable to the auditors for the audit of Mondi plc’s financial statements is set out in note 4 of the Group’s
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
consolidated financial statements.
4 Deferred tax
A deferred tax asset of €2 million (2018: €2 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 €26 million
(2018: €25 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
2019
2018
3,721
2,938
The investments are in Mondi Investments Limited (incorporated in the UK), a wholly-owned subsidiary which acts as an investment holding
company, and Mondi South Africa (Pty) Limited (previously Mondi Limited, incorporated in South Africa), a wholly-owned subsidiary which
manages forestry operations and manufactures pulp, uncoated fine paper and containerboard.
On 9 May 2019 the Group’s shareholders approved the Simplification of the corporate structure from a DLC structure into a single holding
company structure under Mondi plc by way of a South African scheme of arrangement (the ‘Scheme’) proposed by the Mondi Limited
board between Mondi Limited and the Mondi Limited ordinary shareholders. On 11 July 2019 the Scheme became unconditional and,
with effect from 26 July 2019, Mondi plc became the holder of all the Mondi Limited ordinary shares while, by other related actions, the
DLC arrangements were terminated. Pursuant to the Scheme, Mondi Limited shareholders received one new Mondi plc ordinary share in
exchange for each Mondi Limited ordinary share held.
Mondi Group Integrated report and financial statements 2019 217
Mondi plc measured the fair value of the investment in Mondi South Africa (Pty) Limited on the transaction date using an income approach
and valuation multiples from comparable companies. The key assumptions in the income approach were:
e cash flow forecasts which were derived from the budget most recently approved by the Board covering the period from the transaction
date to 31 December 2022;
e sales volumes, sales prices and variable input cost assumptions in the budget period were derived from a combination of economic
forecasts, industry forecasts, internal management projections, historical performance, and announced industry capacity changes;
e 12.9% post-tax discount rate was derived based on the weighted average cost of capital of Mondi South Africa (Pty) Limited;
e zero growth rate was applied beyond the budget period into perpetuity; and
e capital expenditure forecasts were based on historical experience and include expenditure necessary to maintain the projected cash
flows from operations at current operating levels.
The sensitivity analyses below have been determined based on reasonably possible changes to the significant assumptions, while holding
all other assumptions constant. Changes in the assumptions would have had the following effect on the carrying value of the fixed asset
investment in Mondi South Africa (Pty) Limited at the transaction date and remains unchanged at 31 December 2019:
€ million
Effect of 100 bps change in discount rate
Effect of 5% change in sales prices
Increase
Decrease
(28)
163
33
(163)
The carrying value of the investment in Mondi South Africa (Pty) Limited is subject to an annual impairment review and is sensitive to any
adverse future changes in key assumptions as outlined in the sensitivity analyses above.
6 Total debtors: due within one year
Amounts held on deposit in a cash pool facility with a subsidiary of €29 million (2018: €nil) are included within debtors due within one year.
7 Total creditors: due within one year
€nil (2018: €439 million) 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 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 (2018: €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
2019
79
32
2,890
3,001
2018
79
29
2,826
2,934
The following subsidiaries have taken advantage of an exemption from audit under section 479A of the Companies Act 2006. As the
ultimate parent, Mondi plc has provided a statutory guarantee for any outstanding liabilities of those subsidiaries. All subsidiaries
undertakings have been included in the consolidation of the Group.
e Mondi Glossop Ltd
e Mondi Packaging Limited
e Mondi Packaging UK Holdings Limited
e Mondi Scunthorpe Limited
e Powerflute Group Holdings Limited
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 218
Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2019
9 Contingent liabilities
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 2019
In addition to the final ordinary dividend proposed for 2019, included in note 9 of the Group’s consolidated financial statements, there has
been the following material reportable event since 31 December 2019:
e In February 2020, Mondi plc entered into a €250 million debt facility maturing in August 2021.
11 List of subsidiaries and associated undertakings and other significant holdings as at 31 December 2019
All shares are held indirectly through a subsidiary or associated undertaking except where noted. Except where stated, the shares held are
ordinary shares.
On 30 September 2019, the Group disposed its specialised extrusion solutions plant Mondi Belcoat N.V. in Duffel (Belgium).
Company
Austria
Mondi AG
Registered office
Principal activities
Marxergasse 4A, 1030 Vienna Holding, Corporate
Mondi Bags Austria
GmbH
Bahnhofstrasse 3, 8740
Zeltweg
Service, Flexible
Packaging
% of
shares
held by
Group
100.00
100.00
Mondi Coating Zeltweg
GmbH
Bahnhofstrasse 3, 8740
Zeltweg
Production, Engineered
Materials
100.00
Mondi Consumer
Packaging GmbH
Mondi Corrugated
Holding Österreich GmbH
Mondi Corrugated
Services GmbH
Mondi Engineered
Materials GmbH
Mondi Finance Europe
GmbH1
Marxergasse 4A, 1030 Vienna Holding, Flexible
100.00
Packaging
Marxergasse 4A, 1030 Vienna Holding, Corrugated
100.00
Packaging
Marxergasse 4A, 1030 Vienna Service, Corrugated
100.00
Packaging
Marxergasse 4A, 1030 Vienna Holding, Engineered
100.00
Materials
Marxergasse 4A, 1030 Vienna Service, Corporate
100.00
Company
Registered office
Principal activities
% of
shares
held by
Group
Mondi Uncoated Fine &
Kraft Paper GmbH
Marxergasse 4A, 1030 Vienna Holding, Corrugated
100.00
Packaging, Flexible
Packaging, Uncoated
Fine Paper
Papierholz Austria GmbH Frantschach 5, 9413 St.
Gertraud
Service, Flexible
Packaging
25.00
Sulbit Handels GmbH
Marxergasse 4A, 1030 Vienna Service, Flexible
100.00
Packaging
Ybbstaler Zellstoff GmbH Theresienthalstrasse 50, 3363
Ulmerfeld-Hausmening
Production, Uncoated
Fine Paper
51.00
Belgium
Mondi Poperinge N.V.
Bulgaria
Nijverheidslaan 11, 8970
Poperinge
Production, Flexible
Packaging
100.00
Mondi Stambolijski E.A.D 1 Zavodska Street,
Stambolijski 4210, Plovdiv
Region
Production, Flexible
Packaging
100.00
Mondi Frantschach
GmbH
Frantschach 5, 9413 St.
Gertraud
Production, Flexible
Packaging
100.00
China
Mondi Grünburg GmbH Steyrtalstrasse 5, 4594
Grünburg
Production, Corrugated
Packaging
100.00
Mondi (China) Film
Technology Co., Ltd.
Mondi Holdings Austria
GmbH
Mondi Industrial Bags
GmbH
Marxergasse 4A, 1030 Vienna Holding, Corporate
100.00
Marxergasse 4A, 1030 Vienna Holding, Flexible
100.00
Packaging
Mondi Trading (Beijing)
Co., Ltd.
Mondi Korneuburg
GmbH
Stockerauer Strasse 110, 2100
Korneuburg
Production, Flexible
Packaging
Mondi Neusiedler GmbH Theresienthalstrasse 50, 3363
Ulmerfeld-Hausmening
Production, Uncoated
Fine Paper
Côte d’Ivoire
Mondi Abidjan S.A.
100.00
51.00
No 29 Xinggang Road,
Taicang Port Development
Zone
0912, Air China Plaza, Building
1, No.36 Xiaoyun Road,
Chaoyang, Beijing
Production, Engineered
Materials
100.00
Dormant, Engineered
Materials
100.00
Zone Industrielle de
Yopougon 01, Abidjan, BP
5676
Production, Flexible
Packaging
50.00
Mondi Oman Holding
GmbH
Mondi Paper Sales
GmbH
Marxergasse 4A, 1030 Vienna Holding, Flexible
70.00
Czech Republic
Marxergasse 4A, 1030 Vienna Distribution, Corrugated
100.00
Packaging
Packaging
EURO WASTE a.s.2
Litoměřická 272, 41108 Štětí Service, Flexible
100.00
Mondi Release Liner
Austria GmbH
Waidhofnerstrasse 11, 3331
Hilm
Production, Engineered
Materials
100.00
Mondi Styria GmbH
Bahnhofstrasse 3, 8740
Zeltweg
Production, Flexible
Packaging
100.00
Packaging, Flexible
Packaging, Uncoated
Fine Paper
Labe Wood s.r.o.
Litoměřická 272, 41108 Štětí Production, Flexible
24.99
Packaging
Lignocel s.r.o
Poupětova 3, 17000 Prague 7 In liquidation, Flexible
20.00
Packaging
Mondi Bags Štětí a.s.
Litoměřická 272, 41108 Štětí Production, Flexible
100.00
Packaging
Mondi Group Integrated report and financial statements 2019 219
Company
Registered office
Principal activities
Mondi Bupak s.r.o.
Papírenská 41, 37052 České
Budějovice
Production, Corrugated
Packaging
% of
shares
held by
Group
100.00
Company
Registered office
Principal activities
Mondi Sendenhorst
GmbH
Thüringenstrasse 1-3, 97762
Hammelburg
Distribution, Flexible
Packaging
Mondi Coating Štětí a.s. Litoměřická 272, 41108 Štětí Production, Engineered
100.00
Mondi Trebsen GmbH
Materials
Erich-Hausmann-Strasse 1,
04687 Trebsen
Production, Flexible
Packaging
% of
shares
held by
Group
100.00
100.00
Mondi Štětí a.s.
Litoměřická 272, 41108 Štětí Production, Flexible
100.00
Packaging
Mondi Wellpappe
Ansbach GmbH
Robert-Bosch-Strasse 3,
91522 Ansbach
Production, Corrugated
Packaging
100.00
Mondi Štětí White Paper
s.r.o
Litoměřická 272, 41108 Štětí Production, Flexible
100.00
wood2M GmbH
Packaging
Hauptstrasse 16, 07366
Blankenstein
Service, Corporate
50.00
Roto a.s.
Litoměřická 272, 41108 Štětí Dormant, Flexible
Wood & Paper a.s.
Hlina 57/18, 66491 Brno
Packaging
Service, Flexible
Packaging
100.00
Greece
46.50
Mondi Thessaloniki A.E. Sindos Industrial Zone –
Block 18, 57022 Thessaloniki
Distribution, Flexible
Packaging
100.00
Egypt
Mondi Cairo for
Packaging Material S.A.E.
Plots No. 6 and No. 7 in
the Northern Expansion
Area, Industrial Zone, 6th of
October, Giza
Production, Flexible
Packaging
100.00
Suez Bags Company
(S.A.E.)3
30 Maadi Road, Katameya,
Kilo 138, Cairo
Production, Flexible
Packaging
98.34
Finland
Harvestia Oy
Selluntie 142, 70420 Kuopio
Mondi Finland Services
Oy
Peltotie 20, 28400 Ulvila
Mondi Powerflute Oy
Selluntie 142, 70420 Kuopio
France
Service, Corrugated
Packaging
Holding, Corrugated
Packaging
Production, Corrugated
Packaging
100.00
Mondi Gournay Sarl
5, rue Vernet, 75008 Paris
Service, Flexible
Packaging
Mondi Lembacel SAS
11 Rue de Reims, 51490
Bétheniville
Production, Flexible
Packaging
100.00
100.00
5, rue Vernet, 75008 Paris
Distribution, Corrugated
Packaging
100.00
Hungary
Mondi Bags Hungária Kft. Tünde u. 2, 4400 Nyíregyháza Production, Flexible
100.00
Packaging
Mondi Békéscsaba Kft.
Tevan Andor u. 2, 5600
Békéscsaba
Production, Flexible
Packaging
Mondi Szada Kft.
Vasút u. 13, 2111 Szada
Production, Flexible
Packaging
100.00
100.00
Iraq
94.70
Mondi Kaso Iraq Industrial
Bags Ltd.
Takya, Bazian, Sulaimaniyah
Production, Flexible
Packaging
34.55
100.00
Italy
Mondi Gradisac S.r.l.
Via dell´Industria 11, 34072
Gradisca d´Isonzo, Gorizia
Production, Flexible
Packaging
Mondi Italia S.r.l.
Via Balilla 32, 24058 Romano
di Lombardia, Bergamo
Production, Flexible
Packaging
Mondi Padova S.r.l.
Via Mazzini 21, 35010 San
Pietro in Gu, Padua
Production, Flexible
Packaging
Mondi Paper Sales Italia
S.r.l.
Via Fara Gustavo 35, 20124
Milano
Distribution, Corrugated
Packaging, Flexible
Packaging, Uncoated
Fine Paper
Mondi Silicart S.r.l.
Via Zanchetta 27, 35010 San
Pietro in Gu, Padua
Dormant, Engineered
Materials
Daimlerstrasse 8, 06449
Aschersleben
Production, Engineered
Materials
100.00
Mondi Tolentino S.r.l.
Via Giovanni Falcone 1, 62029
Tolentino, Macerata
Production, Flexible
Packaging
Mondi Bad Rappenau
GmbH
Wilhelm-Hauff-Strasse 41,
74906 Bad Rappenau
Production, Corrugated
Packaging
100.00
NATRO TECH S.r.l.
Via Balilla 32, 24058 Romano
di Lombardia, Bergamo
Service, Flexible
Packaging
Jöbkesweg 11, 48599 Gronau Holding, Flexible
100.00
Powerflute Italia S.r.l.
Packaging
Via Giacomo Matteotti 2,
21013 Gallarate
Distribution, Corrugated
Packaging
100.00
Mondi Eschenbach
GmbH
Am Stadtwald 14, 92676
Eschenbach
Production, Corrugated
Packaging
100.00
Mondi Gronau GmbH
Jöbkesweg 11, 48599 Gronau Production, Engineered
100.00
Materials
Japan
Mondi Tokyo KK
Jordan
7th floor 14-5, Akasaka
2-chrome, Minato-ku, Tokyo
Service, Engineered
Materials
100.00
Mondi Halle GmbH
Wielandstrasse 2, 33790
Halle
Production, Flexible
Packaging
100.00
Jordan Paper Sacks
Co. Ltd.
Al Salt, Industrial Area, P.O.
Box 119, 19374, Balqa
Production, Flexible
Packaging
67.74
Mondi Hammelburg
GmbH
Thüringenstrasse 1-3, 97762
Hammelburg
Production, Flexible
Packaging
100.00
Republic of Korea
Krauzen Co., Ltd.
Mondi Holding
Deutschland GmbH
Mondi Inncoat GmbH
Jöbkesweg 11, 48599 Gronau Holding, Corporate
100.00
Angererstrasse 25, 83064
Raubling
Production, Engineered
Materials
100.00
Mondi KSP Co., Ltd.
Mondi Jülich GmbH
Rathausstrasse 29, 52428
Jülich
Production, Engineered
Materials
100.00
Mondi Lindlar GmbH
Wielandstrasse 2, 33790
Halle
Dormant, Flexible
Packaging
100.00
Lebanon
Mondi Lebanon SAL
Mondi Paper Sales
Deutschland GmbH
Oberbaumbrücke 1, 20457
Hamburg
Distribution, Corrugated
Packaging
100.00
1420, Keumkang-Penterium
IT tower, 282 Hakeui-ro,
Dongang-gu, Anyang-si,
Gyunggi-do
48-29, 439 Hongandaero,
Dongang-gu, Anyang-si,
Gyunggi-do
Service, Flexible
Packaging
100.00
Production, Flexible
Packaging
95.00
7th Floor, Bloc C, Kassis
Building, Antelias Highway,
Antelias
Production, Flexible
Packaging
66.00
Mondi Paper Sales
France Sarl
Germany
Mondi Ascania GmbH
Mondi Consumer
Packaging International
GmbH
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 220
Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2019
11 List of subsidiaries and associated undertakings and other significant holdings as at 31 December 2019
Company
Registered office
Principal activities
% of
shares
held by
Group
Company
Norway
Registered office
Principal activities
% of
shares
held by
Group
Luxembourg
Mondi Packaging S.à r.l.
Mondi S.à r.l.
Mondi Services S.à r.l.
Malaysia
Mondi Kuala Lumpur
Sdn. Bhd.
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
1, rue Hildegard von Bingen,
1282
1, rue Hildegard von Bingen,
1282
1, rue Hildegard von Bingen,
1282
Holding, Corporate
100.00
Mondi Moss AS
Rådmann Sirasvei 1, 1712
Grålum
Distribution, Flexible
Packaging
100.00
Holding, Corporate
100.00
Oman
Holding, Corporate
100.00
Mondi Oman LLC
P.O. Box 20, 124, Muscat
Governorate, As Seeb, Al
Rusayl
Production, Flexible
Packaging
49.00
Lot Nos.PT 5034 & 5036,
Jalan Teluk Datuk 28/40,
40000 Shah Alam, Selangor
Production, Flexible
Packaging
Poland
62.00
Agromasa Sp. z o.o.
ul. Bydgoska 1, 86-100
Świecie
Service, Corrugated
Packaging
Fredonia Investments
Sp. z o.o.
ul. Bukowa 21, 87-148
Łysomice
Service, Corrugated
Packaging
Service, Flexible
Packaging
100.00
Mondi Bags Mielec Sp.
z o.o.
ul. Wojska Polskiego 12,
39-300 Mielec
Production, Flexible
Packaging
Mondi Bags Świecie Sp.
z o.o.
ul. Bydgoska 12, 86-100
Świecie
Production, Flexible
Packaging
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
Production, Flexible
Packaging
100.00
Service, Flexible
Packaging
100.00
Mondi BZWP Sp. z o.o.
ul. Zamenhofa 36, 57-500
Bystrzyca Kłodzka
Production, Corrugated
Packaging
100.00
Mondi Corrugated
Świecie Sp. z o.o.
ul. Bydgoska 1, 86-100
Świecie
Production, Corrugated
Packaging
100.00
Mondi Dorohusk
Sp. z o.o.
Mondi Kutno Sp. z o.o.
Brzezno 1, 22-174 Brzezno
Production, Corrugated
Packaging
100.00
ul. Żołnierska 1, 99-300
Kutno
In liquidation, Flexible
Packaging
Mondi Poznań Sp. z o.o. ul. Wyzwolenia 34/36,
62-070 Dopiewo
Production, Flexible
Packaging
Mondi Recykling Polska
Sp. z o.o.
ul. Bydgoska 1, 86-100
Świecie
Service, Corrugated
Packaging
Mondi Simet Sp. z o.o.
Grabonóg 77, 63-820 Piaski Production, Corrugated
100.00
Mondi Solec Sp. z o.o.
Solec, 05-532 Baniocha
Packaging
Production, Flexible
Packaging
100.00
Mondi Świecie S.A.
ul. Bydgoska 1, 86-100
Świecie
Production, Corrugated
Packaging
100.00
Mondi Szczecin Sp. z o.o. ul. Sloneczna 20, 72-123
Kliniska Wielkie
Production, Corrugated
Packaging
100.00
Mondi Warszawa Sp.
z o.o.
ul. Tarczyńska 98, 96-320
Mszczonów
Production, Corrugated
Packaging
100.00
Mondi Wierzbica Sp.
z o.o.
Kolonia Rzecków 76, 26-680
Wierzbica
Production, Flexible
Packaging
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Ensachage Moderne Sarl Rue Boukraa N1, Quartier
Industriel Dokkarat, Fes
Dormant, Flexible
Packaging
Pap Sac Maghreb SA
Km 16, Route d´El Jadida,
Casablanca
Production, Flexible
Packaging
Netherlands
Mondi Coating B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Holding, Engineered
Materials
Mondi Consumer Bags &
Films B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Holding, Flexible
Packaging
Mondi Consumer Bags &
Films Benelux B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Distribution, Flexible
Packaging
Mondi Corrugated B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Holding, Corrugated
Packaging
Mondi Corrugated
Poland B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Holding, Corrugated
Packaging
80.64
80.64
100.00
100.00
100.00
100.00
100.00
Mondi Heerlen B.V.
Imstenraderweg 15, 6422 PM
Heerlen
Production, Engineered
Materials
100.00
Świecie Rail Sp. z o.o.
ul. Bydgoska 1, 86-100
Świecie
Service, Corrugated
Packaging
Mondi Industrial Bags B.V. Fort Willemweg 1, 6219 PA
Maastricht
Holding, Flexible
Packaging
Mondi International
Holdings B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Holding, Corrugated
Packaging
100.00
100.00
Świecie Recykling Sp.
z o.o.
ul. Bydgoska 1/417, 86-100
Świecie
Service, Corrugated
Packaging
Romania
Mondi Maastricht N.V.
Fort Willemweg 1, 6219 PA
Maastricht
Production, Flexible
Packaging
100.00
Mondi Bucharest S.R.L.
Filderman Wilhelm Nr. 4/3/19,
Sector 3, 030353 Bucharest
Distribution, Flexible
Packaging
100.00
Mondi MENA B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Holding, Flexible
Packaging
Mondi Packaging Paper
B.V.
Fort Willemweg 1, 6219 PA
Maastricht
Holding, Flexible
Packaging
Mondi Paper Sales
Netherlands B.V.
Bruynvisweg 14, 1531 AZ
Wormer
Distribution, Corrugated
Packaging, Flexible
Packaging, Uncoated
Fine Paper
70.00
Russia
100.00
100.00
LCC Mondi Aramil
25 Klubnaya Street, 62400
Aramil, Sverdlovskii Region
Production, Flexible
Packaging
100.00
LLC Mondi Lebedyan
Lva Tolstogo, Building 80,
Office 52, 399612 Lebedyan,
Lipetsk Region
Production, Corrugated
Packaging
100.00
LLC Mondi Pereslavl
Mendeleeva sq. 2, Building 55,
152025 Pereslavl-Zalesski
Production, Flexible
Packaging
100.00
Mondi SCP Holdings B.V. Fort Willemweg 1, 6219 PA
Maastricht
Holding, Uncoated Fine
Paper
100.00
LLC Mondi Syktyvkar
Energy Company
pr. Bumazhnikov 2, 167026
Syktyvkar, Republic of Komi
Service, Uncoated Fine
Paper
100.00
Mondi Group Integrated report and financial statements 2019 221
% of
shares
held by
Group
100.00
100.00
100.00
100.00
Company
Registered office
Principal activities
OJSC Mondi Syktyvkar4 pr. Bumazhnikov 2, 167026
Syktyvkar, Republic of Komi
Production, Corrugated
Packaging, Uncoated
Fine Paper
OOO Mondi Sales CIS
2nd Brestskaya str. 8 Floor 13,
123047 Moscow
Distribution, Uncoated
Fine Paper
% of
shares
held by
Group
100.00
Company
Registered office
Principal activities
Zimshelf Eight Investment
Holdings Proprietary
Limited
4th Floor, No 3 Melrose
Boulevard, Melrose Arch, 2196
In liquidation, Uncoated
Fine Paper
100.00
Spain
Mondi Bags Ibérica S.L. Autovía A-2, Km 582, 08630
Abrera
Production, Flexible
Packaging
Serbia
Mondi Šabac d.o.o.
Šabac
Singapore
Nova 9, 15000 Šabac
Production, Flexible
Packaging
100.00
Mondi Ibersac S.L.
Calle La Perenal 4, 48840
Güeñes, Bizcaia
Production, Flexible
Packaging
Mondi Packaging Paper
Sales Asia Pte. Limited
3 Anson Road 27-01,
Springleaf Tower, 079909
Distribution, Flexible
Packaging
100.00
Slovakia
East Paper, spol. s.r.o.
Rastislavova 98, 04346
Kosice
Service, Corrugated
Packaging
Mondi SCP, a.s.
Tatranská cesta 3, 03417
Ružomberok
Production, Flexible
Packaging, Uncoated
Fine Paper
Obaly SOLO, s.r.o
Tatranská cesta 3, 03417
Ružomberok
Production, Uncoated
Fine Paper
51.00
Switzerland
Dipeco AG
Mondi Sales Ibérica S.L. Calle Joaquin Costa 36 2a,
28002 Madrid
Distribution, Flexible
Packaging
Powerflute International
S.L.
Josep Irla I Bosch, 1-3 P.6
PTA.2, 08034 Barcelona
Distribution, Corrugated
Packaging
100.00
Sweden
Mondi Dynäs AB
87381 Väja
26.01
51.00
Production, Flexible
Packaging
100.00
Mondi Örebro AB
Papersbruksallen 3A,
Box 926, 70130 Örebro
Production, Engineered
Materials
100.00
RECOPAP, s.r.o.
Bratislavska 18, 90051 Zohor Service, Corrugated
25.50
Slovpaper Recycling s.r.o. Tatranská cesta 3, 03417
Ružomberok
Packaging
Service, Corrugated
Packaging
SLOVWOOD
Ružomberok a.s.
Tatranská cesta 3, 03417
Ružomberok
Distribution, Uncoated
Fine Paper
STRÁŽNA SLUŽBA
VLA-STA s.r.o.
Tatranská cesta 3, 03417
Ružomberok
Distribution, Uncoated
Fine Paper
51.00
33.66
51.00
Thailand
Mondi Bangkok
Company, Limited
Mondi Coating (Thailand)
Co. Ltd.
South Africa
Arctic Sun Trading 17
Proprietary Limited
380 Old Howick Road, Mondi
House, Hilton, 3245
Distribution, Uncoated
Fine Paper
50.00
Bongani Development
Close Corporation
4th Floor, No 3 Melrose
Boulevard, Melrose Arch, 2196
Service, Uncoated Fine
Paper
100.00
Bruehlstrasse 5, 4800
Zofingen
Production, Flexible
Packaging
100.00
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
Production, Flexible
Packaging
100.00
Service, Engineered
Materials
100.00
Mondi TSP Company
Limited
110, Moo 3, Nong Chumphon
Nuea, Khao Yoi District,
Petchaburi Province, 76140
Production, Flexible
Packaging
97.55
Mondi Africa Holdings
Proprietary Limited
4th Floor, No 3 Melrose
Boulevard, Melrose Arch, 2196
Dormant, Uncoated
Fine Paper
100.00
Trinidad and Tobago
Mondi Forests Partners
Programme Proprietary
Limited
380 Old Howick Road, Mondi
House, Hilton, 3245
Service, Uncoated Fine
Paper
100.00
TCL Packaging Limited
Southern Main Road, Claxton
Bay
Production, Flexible
Packaging
20.00
Turkey
Mondi Newsprint
Proprietary Limited
Merebank Mill, Travencore
Drive, Merebank, 4052
In liquidation, Uncoated
Fine Paper
100.00
Mondi Istanbul Ambalaj
Limited Şti.
No. 12A Türkgücü OSB Mah.
Yilmaz Alpaslan Caddesi
Corlu, Tekirdag, 59870
Production, Flexible
Packaging
100.00
Mondi Sacherie Moderne
Holdings Proprietary
Limited
Merebank Mill, Travencore
Drive, Merebank, 4052
Holding, Uncoated Fine
Paper
100.00
Mondi South Africa (Pty)
Limited5
4th Floor, No 3 Melrose
Boulevard, Melrose Arch, 2196
Production, Corrugated
Packaging, Uncoated
Fine Paper
100.00
Mondi Timber (Wood
Products) Proprietary
Limited
Merebank Mill, Travencore
Drive, Merebank, 4052
Holding, Uncoated Fine
Paper
100.00
Ukraine
Mondi Zimele Job Funds
Proprietary Limited
380 Old Howick Road,
Mondi House, Hilton, 3245
Service, Uncoated Fine
Paper
100.00
Mondi Zimele Proprietary
Limited
380 Old Howick Road,
Mondi House, Hilton, 3245
Service, Uncoated Fine
Paper
100.00
MZ Business Services
Proprietary Limited
128 Lansdowne Road,
Jacobs, 4052
In liquidation, Uncoated
Fine Paper
100.00
MZ Technical Services
Proprietary Limited
380 Old Howick Road,
Mondi House, Hilton, 3245
In liquidation, Uncoated
Fine Paper
56.00
Mondi Kale Nobel
Ambalaj Sanayi Ve
Ticaret A.Ş.
Sevketiye Cobancesme
Kavsagi, A2 Blok, No. 229/230
Yeşilköy, Bakirköy/Istanbul
Production, Flexible
Packaging
100.00
Mondi Tire Kutsan Kagit
Ve Ambalaj Sanayi A.Ş.
Toki Mahallesi, Hasan Tahsin
Caddesi, No. 28, Tire, Izmir
35900
Production, Corrugated
Packaging
79.15
Mondi Packaging Bags
Ukraine LLC
Fabrychna Street 20,
Zhydachiv, Lviv Region, 81700
Production, Flexible
Packaging
100.00
UK
Frantschach Holdings UK
Limited
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey, KT15 2PG
Dormant, Flexible
Packaging
100.00
Hypac Limited
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey, KT15 2PG
Dormant, Corrugated
Packaging
100.00
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey, KT15 2PG
Service, Flexible
Packaging
100.00
Professional Starch
Proprietary Limited
380 Old Howick Road,
Mondi House, Hilton, 3245
In liquidation, Uncoated
Fine Paper
100.00
Medway Packaging
Pension Trustee Limited
Siyaqhubeka Forests
Proprietary Limited
4th Floor, No 3 Melrose
Boulevard, Melrose Arch, 2196
Service, Uncoated Fine
Paper
51.00
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 222
Notes to the Mondi plc parent company financial statements
for the year ended 31 December 2019
11 List of subsidiaries and associated undertakings and other significant holdings as at 31 December 2019
Company
Registered office
Principal activities
% of
shares
held by
Group
Company
Registered office
Principal activities
% of
shares
held by
Group
100.00
USA
Mondi Akrosil, LLC
251 Little Falls Drive,
Wilmington DE 19808
Production, Engineered
Materials
100.00
Mondi Bags USA, LLC
251 Little Falls Drive,
Wilmington DE 19808
Production, Flexible
Packaging
Distribution, Flexible
Packaging
Production, Flexible
Packaging
100.00
Service, Corporate
100.00
Mondi Jackson LLC
Holding, Corporate
100.00
Mondi Minneapolis, Inc.
251 Little Falls Drive,
Wilmington DE 19808
Production, Flexible
Packaging, Engineered
Materials
220 South Sixth Street, Suite
2200, Minneapolis 55402
Service, Engineered
Materials
100.00
100.00
100.00
100.00
Mondi Romeoville LLC
251 Little Falls Drive,
Wilmington DE 19808
Production, Flexible
Packaging
Mondi Tekkote LLC
251 Little Falls Drive,
Wilmington DE 19808
Production, Engineered
Materials
100.00
Dormant, Engineered
Materials
100.00
Dormant, Corrugated
Packaging
100.00
Notes:
1 % of shares held by the Group in 2018: nil
2 % of shares held by the Group in 2018: 33.33
3 % of shares held by the Group in 2018: 96.00
4 These companies have ordinary and preference shares
5 These companies are held directly
Mondi Aberdeen Limited Building 1, 1st Floor,
Mondi Consumer Goods
Packaging UK Ltd
Mondi Finance plc
Mondi German
Investments Limited
Mondi Glossop Ltd
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
Mondi Holcombe Limited Building 1, 1st Floor,
Mondi Investments
Limited5
Mondi Packaging (Delta)
Limited
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
Mondi Packaging Limited Building 1, 1st Floor,
Mondi Packaging UK
Holdings Limited
Mondi Pension Trustee
Limited5
Mondi Scunthorpe
Limited4
Mondi Services (UK)
Limited
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
Holding, Corporate
100.00
Dormant, Corrugated
Packaging
100.00
Dormant, Corrugated
Packaging
100.00
Dormant, Corrugated
Packaging
100.00
Service, Corporate
100.00
Dormant, Flexible
Packaging
100.00
Service, Corporate
100.00
Mondi UK Consumer
Packaging Holding 1 Ltd
Parkway, Deeside Industrial
Park, Deeside, Clwyd, Wales,
CH5 2NS
Holding, Flexible
Packaging
Mondi UK Consumer
Packaging Holding 2 Ltd
Parkway, Deeside Industrial
Park, Deeside, Clwyd, Wales,
CH5 2NS
Holding, Flexible
Packaging
100.00
100.00
Powerflute Group
Holdings Limited
Building 1, 1st Floor,
Aviator Park, Station Road,
Addlestone, Surrey, KT15 2PG
Dormant, Corrugated
Packaging
100.00
Mondi Group Integrated report and financial statements 2019 Production statistics
Containerboard
Kraft paper
Uncoated fine paper
Newsprint
Pulp
Internal consumption
Market pulp
Corrugated solutions
Paper bags
Consumer flexibles
Engineered materials
Exchange rates
versus euro
South African rand
Czech koruna
Polish zloty
Pound sterling
Russian rouble
Turkish lira
US dollar
223
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
’000 tonnes
million m2
million units
million m2
million m2
2019
2,524
1,162
1,526
201
4,387
3,883
504
1,653
5,228
2,457
5,506
Average
Closing
2019
16.18
25.67
4.30
0.88
72.45
6.36
1.12
2018
15.62
25.65
4.26
0.88
74.04
5.71
1.18
2019
15.78
25.41
4.26
0.85
69.96
6.68
1.12
2018
2,530
1,118
1,649
207
4,330
3,844
486
1,635
5,255
2,711
5,797
2018
16.46
25.72
4.30
0.89
79.72
6.06
1.15
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 224
Group financial record
Financial performance 2010–2019
Consolidated income statement
€ million, unless otherwise stated
Group revenue
Underlying EBITDA
Corrugated Packaging (restated1)
Flexible Packaging (restated1)
Engineered Materials (restated1)
Uncoated Fine Paper
Corporate
Discontinued and disposed
operations
Underlying operating profit
Special items
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)2
Notes:
2014
2013
2012
2011
5,790
5,739
2019
7,268
1,658
583
543
122
444
(34)
—
1,223
(16)
(104)
829
812
171.1
167.6
2018
7,481
1,764
707
461
112
516
(32)
—
1,318
(126)
(88)
916
824
189.1
170.1
2017
2016
7,096
1,482
6,662
1,366
2015
6,819
1,325
477
442
136
464
(37)
—
1,029
(61)
(85)
721
668
148.9
137.9
408
380
131
481
(34)
—
981
(38)
(101)
667
638
137.8
131.8
427
365
119
448
(34)
—
957
(57)
(105)
647
600
133.7
124.0
6,402
1,126
6,476
1,068
381
317
111
349
(32)
—
767
(52)
(97)
519
471
107.3
97.4
341
302
96
359
(30)
—
699
(87)
(115)
460
386
95.0
79.8
927
249
276
51
383
(32)
—
574
(91)
(110)
334
242
69.2
50.1
2010
5,610
798
211
198
39
379
(32)
3
458
(21)
964
284
294
34
394
(32)
(10)
622
(55)
(111)
(106)
340
330
68.1
57.5
206
224
40.6
37.8
83.0
76.0
62.0
57.0
52.0
42.0
36.0
28.0
26.0
20.0
1 Comparative information for 2010 to 2018 has been restated to reflect the changes from the reorganisation of the business units as described in note 2
2 A special dividend of 100 euro cents was paid in 2018 in addition to the 2017 ordinary dividend
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 (LSE) – Share price at end
of year (GBP pence per share)
Mondi plc (JSE) – Share price at end
of year (ZAR per share)
2019
(6.0)
22.8
16.8
19.8
1.3
2.1
12.2
2018
19.0
23.6
17.6
23.6
1.3
2.5
9.6
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
1,773
1,634
1,931
1,666
1,334
1,050
1,046
670
455
514
326
304
319
279
309
190
181
91
57
54
Market capitalisation (€ million)1
10,165
8,901
10,523
9,457
8,803
6,563
6,081
4,001
2,655
3,097
Note:
1 The number of shares of Mondi plc increased in 2019 as a result of the Simplification of the corporate structure as described in note 21 with the effect that the total number
of shares in issue was the same as the total in issue for the Group prior to Simplification
Mondi Group Integrated report and financial statements 2019 225
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
shareholders1
Note:
2019
1,635
35
(248)
(757)
(96)
2018
1,654
(117)
(248)
(709)
(73)
2017
1,363
(122)
(151)
(611)
(97)
2016
1,401
68
(173)
(465)
(82)
2015
1,279
9
(160)
(595)
(93)
2014
1,033
(87)
(106)
(562)
(125)
2013
1,036
(27)
(126)
(405)
(124)
2012
849
(83)
(109)
(294)
(92)
2011
917
(68)
(85)
(263)
(106)
2010
778
(121)
(47)
(394)
(117)
(396)
(309)
(273)
(274)
(209)
(193)
(138)
(128)
(126)
(54)
1 A special dividend of €484 million was paid in 2018 in addition to the 2017 ordinary dividend
Consolidated statement of financial position
€ million
2019
2018
Property, plant and equipment
4,800
4,340
Goodwill
Working capital
Other assets
Other liabilities
Net assets excluding net debt
Equity
Non-controlling interests in equity
Net debt1
Capital employed
Note:
2017
4,128
698
899
530
2016
2015
2014
2013
2012
2011
2010
3,788
3,554
3,432
3,428
3,709
3,377
3,976
681
799
532
590
794
422
545
811
434
550
711
429
561
764
503
202
575
408
274
660
466
948
952
620
942
972
540
(728)
(749)
(716)
(721)
(675)
(715)
(653)
(789)
(696)
(788)
6,592
4,015
370
2,207
6,592
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
4,465
2,591
255
1,619
4,507
4,465
4,748
2,572
301
1,875
4,748
3,866
2,586
449
831
4,588
2,763
461
1,364
3,866
4,588
1 Net debt prior to 2012 does not include the effect of net debt-related derivatives
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 226
Additional information for Mondi plc shareholders
The disclosures below form part of the Directors’ report on pages 144 and 145 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. On 26 July 2019, Mondi completed a simplification of its corporate structure, pursuant to which
Mondi plc adopted new articles of association and cancelled all shares issued under the previous dual listed company structure.
Share capital
Mondi plc’s issued share capital as at 31 December 2019 comprised 485,553,780 ordinary shares of 20 euro cents each (the Ordinary
Shares) representing 100% 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 their 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 they are 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 2019 227
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.
Notwithstanding the above, the relevant plan rules provide that any shares held by the trustee of the Mondi plc Share Incentive Plan from
time to time will not be voted.
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.
Notwithstanding the above, some of the Mondi plc employee share plans include restrictions on transfer of shares while the shares are
subject to such plan.
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. Each director shall
retire at the Annual General Meeting held in the third calendar year following the year in which the director was elected or last re-elected
by Mondi plc, or at such earlier Annual General Meeting as the directors resolve. 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 (or if the notice of the next Annual General Meeting
has already been sent at the time of such person’s appointment, the Annual General Meeting following that one) and shall then be eligible
for re-election.
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
All of Mondi plc’s employee 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 may be made in accordance with the provisions of the Companies Act by way of special resolution.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 228
Shareholder information
Mondi plc is a company registered in the UK. It has a premium listing on the London Stock Exchange and a secondary listing on the
JSE Limited.
Financial calendar
7 May 2020
7 May 2020
14 May 2020
6 August 2020
September 2020
15 October 2020
2020 Annual General Meeting
Trading update
Payment date for 2019 final ordinary dividend
2020 half-yearly results announcement
2020 interim ordinary dividend payment
Trading update
Analysis of shareholders
As at 31 December 2019 Mondi plc had 485,553,780 ordinary shares in issue, of which 152,963,432 were held on the South African
branch register.
By size of holding
Number of shareholders
2,022
469
554
449
348
53
3,895
Managing your shares
Registrars
% of shareholders
Size of shareholding
Number of shares
% of shares
51.91
12.04
14.22
11.53
8.94
1.36
100.00
1 – 500
501 – 1000
1,001 – 5,000
5,001 – 50,000
50,001 – 1,000,000
1,000,001 – highest
425,127
337,896
1,306,440
8,532,198
91,781,963
383,170,156
485,553,780
0.09
0.07
0.27
1.76
18.90
78.91
100.00
To manage your shares or if you have any queries, please contact the relevant Registrar:
Shares held on the UK register
Shares held on the South African branch register
Registrar
Link Asset Services
Link Market Services South Africa Proprietary Limited
(Link Market Services)
Postal address
Helpline number
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK
PO Box 4844
Johannesburg, 2000
South Africa
0371 664 0300
(calls are charged at the standard geographic rate and
will vary by provider; lines are open Monday to Friday
between 9:00am to 5:30pm excluding public holidays in
England and Wales)
011 713 0800
(if calling from South Africa)
+27 11 713 0800
(if calling from outside South Africa)
+44 371 664 0300 (if calling from outside the UK; calls
will be charged at the applicable international rate)
Email
Online
enquiries@linkgroup.co.uk
www.signalshares.com
info@linkmarketservices.co.za
Not available
Mondi Group Integrated report and financial statements 2019
229
Sign up to email communications
Many of our shareholders have chosen to receive shareholder information electronically rather than by post. Benefits include faster
notification of shareholder information, reduced costs and being more environmentally friendly.
Shareholders on the UK register can sign up to email communications by contacting Link Asset Services or via their online portal,
Signal Shares.
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 ecomms@linkmarketservices.co.za. 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
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
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
rather than post
e View your dividend payment history
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 or dividend confirmation.
Dividends
A proposed final ordinary dividend for the year ended 31 December 2019 of 55.72 euro cents per ordinary share will be paid to shareholders
in accordance with the below timetable.
Payment of the final ordinary dividend is subject to the approval of shareholders at the Annual General Meeting scheduled for 7 May 2020.
Last date to trade shares cum-dividend
JSE Limited
London Stock Exchange
Shares commence trading ex-dividend
JSE Limited
London Stock Exchange
Record date
Tue 31 March 2020
Wed 1 April 2020
Wed 1 April 2020
Thu 2 April 2020
Fri 3 April 2020
Last date for receipt of Dividend Reinvestment Plan (DRIP) elections by Central Securities Depository Participants
Thu 9 April 2020
Last date for DRIP elections to South African Transfer Secretaries by shareholders
Last date for DRIP elections to UK Registrar by shareholders
Payment date
DRIP purchase settlement dates
(subject to the purchase of shares in the open market):
South African Register
UK Register
Currency conversion dates
ZAR/euro
Euro/sterling
Tue 14 April 2020
Tue 21 April 2020
Thu 14 May 2020
Wed 20 May 2020
Mon 18 May 2020
Thu 27 February 2020
Tue 28 April 2020
Share certificates on Mondi plc’s South African register may not be dematerialised or rematerialised between Wednesday 1 April 2020
and Friday 3 April 2020, both dates inclusive, nor may transfers between the UK and South African registers take place between Tuesday
24 March 2020 and Friday 3 April 2020, both dates inclusive.
Dividend tax will be withheld from the amount of the gross final ordinary dividend paid to shareholders on the South African branch register
at the rate of 20%, unless a shareholder qualifies for an exemption.
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 230
Shareholder information
Your dividend currency
All dividends are declared and paid in euro with the following exceptions:
UK residents
South African residents
pound sterling
South African rand
Shareholders on the UK register resident in the UK may however elect to receive their dividends in euro and shareholders on the UK
register resident outside the UK may elect to receive their dividends in pound sterling.
Shareholders on the UK register wishing to elect to receive their dividends in an alternative currency should contact Link Asset Services
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.
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.
Shareholders on the South African branch register:
e The 2019 Interim dividend was the last dividend to be paid by cheque. Shareholders who previously received cheques should contact
Link Market Services, if they have not already done so, to provide their bank details and ensure they continue to receive their dividends.
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.
Reinvest your dividends
The dividend reinvestment plans (DRIPs) provide an opportunity for shareholders to have their cash dividends reinvested in Mondi plc
ordinary shares.
The plans are available to all 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 Asset Services in the UK or Link
Market Services in South Africa as appropriate.
South African dematerialisation
Mondi encourages 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.
Find out more by contacting Link Market Services or any CSDP.
Shareholders who previously held Mondi Limited shares
Prior to 26 July 2019, Mondi had a dual listed company (DLC) structure comprising Mondi Limited, a company registered in South Africa
and Mondi plc. Following the completion of the corporate simplification on 26 July 2019, this changed to a single holding company structure
under Mondi plc. Mondi Limited (now Mondi South Africa (Pty) Limited) became a subsidiary of Mondi plc and the DLC arrangements
between the two companies were terminated. Mondi Limited shareholders received Mondi plc shares held on the South African branch
register. Shareholders who have any questions relating to their old Mondi Limited shares should contact Link Market Services.
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 2019 231
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:
Shares held on the UK register
Shares held on the South African branch register
Postal address
ShareGift
PO Box 72253
London
SW1P 9LQ
UK
Helpline number
+44 (0)20 7930 3737
Email
Online
Fraud
help@sharegift.org
www.sharegift.org
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
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.
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 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.
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
Mondi Group Integrated report and financial statements 2019OverviewStrategic reportGovernanceFinancial statements 232
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 31 in the notes to the consolidated
financial statements. A full glossary of sustainability-related terms and partner organisations can be found in Mondi’s online Sustainable
development report 2019.
Sustainable Development report –
www.mondigroup.com/sd19
Certified wood
Certified wood is produced from wood fibre
which originates from sustainably managed
forest lands. The most recognised forest
certification schemes are PEFCTM and FSCTM.
FSCTM
Forest Stewardship CouncilTM 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
CertificationTM is an international not-
for-profit non-government organisation
dedicated to promoting sustainable forest
management through independent third-
party certification.
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 definitionTM
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.
Controlled wood (CW)
Controlled wood is a special category of
wood material which has been verified
as having a low probability of including
wood from:
e illegally harvested wood
e wood harvested in violation of traditional
and civil rights
e wood harvested in forests in which high
conservation values are threatened by
management activities
e wood harvested in forests being
converted from natural and semi-natural
forest to plantations and non-forest use
e wood from forests in which genetically
modified trees are planted
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 2019 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 position 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, Pulp and
Paper Products Council, Bumprom and SBO.
M
o
n
d
i
G
r
o
u
p
I
n
t
e
g
r
a
t
e
d
r
e
p
o
r
t
a
n
d
f
i
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
2
0
1
9
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 2019 suite of reports
Please visit our Group website where copies of our reports can be downloaded:
www.mondigroup.com/reports19
Mondi Group
Integrated report and
financial statements 2019
sustainable by design
make u
mondi
Integrated report and financial statements 2019
A balanced overview of Mondi’s performance in 2019
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/ir19
Sustainable Development report 2019
A comprehensive view of our approach to sustainable
development and our performance in 2019, prepared
in accordance with the GRI Standards: Core
option. Available online as an interactive pdf at:
www.mondigroup.com/sd19
Printed on certified Mondi PERGRAPHICA® Classic Rough in 300gsm, 120gsm and 90gsm
Printing: CPI Colour | www.cpicolour.co.uk
Design and production: Radley Yeldar | www.ry.com
M
o
n
d
i
G
r
o
u
p
I
n
t
e
g
r
a
t
e
d
r
e
p
o
r
t
a
n
d
f
i
n
a
n
c
a
i
l
s
t
a
t
e
m
e
n
t
s
2
0
1
9