Results for the 1st Quarter of 2017
- Solid sales and volumes
- Sharp increase in raw material costs at MM Karton weighs on profit
- MM Packaging maintains good level
- Cartonboard price increase is first priority
The Mayr-Melnhof Group was able to sustain overall good capacity utilization in both divisions and to maintain the previous year’s sales level in the first quarter of 2017. This was achieved despite restrained demand at the beginning of the year and persistently intense competition. The packaging division rec- orded a further quarter with high profitability. In contrast, the result of the car- tonboard division was weighed by another rise in recovered paper prices. Accordingly, passing on increased input costs through higher selling prices is now first priority with the aim to keep on long-term profitability in both segments.
Group Key Indicators – IFRS
1) as of December 31, 2016
The Group’s consolidated sales increased to EUR 584.5 million and were thus 1.5 % above the comparative figure of the previous year (1Q 2016: EUR 576.0 million). This slight rise primarily results from the packaging division.
Operating profit, at EUR 50.6 million, was 8.3 % or EUR 4.6 million below the comparative figure of the previous year (1Q 2016: EUR 55.2 million). A stable performance at a high level in the packaging division was contrasted by a decline in the cartonboard division. The Group’s operating margin reached 8.7 %, following 9.6 % in the first three months of the pre- vious year.
Financial income amounted to EUR 0.8 million (1Q 2016: EUR 0.7 million), financial expens- es to EUR -1.4 million (1Q 2016: EUR -1.6 million).
Profit before tax thus totaled EUR 49.2 million (1Q 2016: EUR 53.2 million). Income tax ex- pense was at EUR 12.3 million (1Q 2016: EUR 13.8 million), resulting in an effective Group tax rate of 25.0 % (1Q 2016: 25.9 %).
Profit for the period decreased by 6.3 % to EUR 36.9 million (1Q 2016: EUR 39.4 million), representing 6.3 % of sales (1Q 2016: 6.8 %).
Outlook
Our first priority currently is to pass on the increased raw material costs in a stable European market environment, however lacking impulses. Continuing highly competitive general condi- tions are sustaining margin pressure, which we are countering with targeted measures to reduce costs and increase business volume. Besides exploiting organic growth opportunities, we continue to focus on expansion through acquisitions.
Due to the strong profit development in the first half of the previous year supported by a fa- vorable product mix in the packaging division, as well as the successive compensation of increased raw material costs, interim results in the first half-year of 2017 will, as in the first quarter, come in below the comparative figure of last year. The target for 2017, however, re- mains to tie up with the challenging level of 2016 best possible.
Development in the Divisions
MM Karton
1) including interdivisional sales
Following a restrained beginning of the year, demand on the European cartonboard market improved slightly over the course of the first quarter of 2017. The average order backlog of MM Karton was around 69,000 tons, following 57,000 tons in the first three months of the previous year. At around 98 % (1Q 2016: 97 %), the capacities of the division were again almost fully utilized.
The major challenge in the first months of the year was the situation on the raw materials markets, which experienced a significant price increase in the strategic raw material of re- covered paper as well as in coating chemicals. Prices for recovered paper were driven in particular by strong demand from Asia and stockpiling for new European corrugated base paper machinery.
Therefore, MM Karton currently sets highest priority to passing on the increased input prices.
With 421,000 tons produced and 426,000 tons sold, volumes were similar to the previous year (1Q 2016: 419,000 tons and 427,000 tons respectively). Of this, 78 % was sold to Euro- pean markets and 22 % to markets outside of Europe (1Q 2016: 81 %; 19 %).
Owing to largely stable average prices, sales, at EUR 261.9 million, remained close to the previous year’s level (1Q 2016: EUR 263.4 million). In contrast, operating profit decreased as a result of the strong rise in raw material costs from EUR 20.2 million to EUR 15.9 million. The operating margin came in at 6.1 % following 7.7 % in the previous year’s period.
MM Packaging
1) including interdivisional sales
Also demand on the European folding carton market still proceeded without noticeable stimu- lus in the first three months of the year. Accordingly competition continued with unabated intensity.
Nevertheless MM Packaging was able to solidly maintain its position in this setting with a broad range of sales in various consumer goods sectors and regions as well as with the fo- cus on cost leadership. The good profit-level was held up for another quarter in succession, still with a heterogeneous profit contribution by the individual sites.
There are no signs of a sustained improvement in market dynamics recognizable. Thus, MM Packaging is continuing to focus on maximum efficiency in production as well as on long- term collaboration with successful customers. The success of this approach can also be seen in the first quarter of 2017.
Sales as well as operating profit, at EUR 344.6 million and EUR 34.7 million respectively, were able to match the high standards set in the comparative period of the previous year (1Q 2016: EUR 339.2 million and EUR 35.0 million). As a result, at 10.1 % the operating margin stayed at a high level (1Q 2016: 10.3 %).
At 190,000 tons, tonnage processed remained almost unchanged at the previous year’s level (1Q 2016: 189,000 tons), while the sheet equivalent increased by 1.4 % from 562.2 million to 569.9 million.
Quarterly Overview
1) including interdivisional sales
1) including interdivisional sales
The Interim Report for the first quarter of 2017 is available on
Forthcoming Results:
August 17, 2017 Half-Year Results 2017