Results for the first quarter of 2023

Peter Oswald, MM CEO, comments: “As expected, the MM Group recorded a restrained start into the year in the MM Board & Paper division in the 1^st quarter of 2023 against the background of a slow destocking of high customer inventory levels as well as inflation-related restrained demand. In addition to the planned capex-related shutdowns in the cartonboard mills Frohnleiten and Neuss, considerable market-related downtimes were necessary. In the division MM Packaging, demand tended to be weaker in the first months, but was overall still resilient. The significant growth of MM Packaging compared to the 1^st quarter of the previous year results mainly from the inclusion of last year’s acquisitions in the pharma packaging sector, Essentra Packaging and Eson Pac. Structural adjustments were continued and affected one packaging site in Germany.

As a result of ongoing weaker demand and the implementation of major investments in our cartonboard mills Frohnleiten, Neuss and Kolicevo in the first three quarters, a decline in volume and result is foreseeable in the Board & Paper division for 2023, as already indicated. At MM Packaging, the focus is primarily on the integration of the Ex-Essentra Packaging business with cost optimization and structural adjustments.

Accordingly, 2023 will be a transition year for MM Board & Paper on the one hand and an integration year for MM Packaging on the other hand. While profitability was above the trend line in 2022, it is expected to be below in 2023.”

The reduction of high inventory levels in the supply chain continued on the cartonboard markets in the 1^st quarter of 2023 as already in the last months of the previous year, resulting in a persistent weak demand with low visibility. The volume decline of around 20 % in Europe in the 1^st quarter was historically unusual and also driven by the loss of the Russian market and weak or highly competitive overseas markets. In addition, the Frohnleiten and Neuss mills experienced the planned major capex-related downtimes, resulting in a significant decrease in volumes and results compared with the record levels of the previous year.

On the procurement markets some input prices decreased due to the currently lower demand (e.g. recovered paper), so that gradually more pressure was built up on the sales prices of individual product grades.

As part of the three strategic machine modernizations scheduled for this year at the Frohnleiten, Neuss and Kolicevo mills, the modernized board machine 3 in Frohnleiten resumed production as planned at the end of the 1^st quarter. The aim is to provide our customers with higher quality and better sustainability by lower basis weight, reduced energy and water consumption, as well as more innovation and improved efficiency through these projects.

The division’s average order backlog in the 1^st quarter was 143,000 tonnes, compared with 184,000 tonnes in the previous year’s period.

Sales at EUR 521.2 million were volume-related EUR 135.1 million below the comparable figure (1Q 2022: EUR 656.3 million). The operating profit amounted to EUR 27.7 million (1Q 2022: EUR 70.1 million), while the operating margin was 5.3 % (1Q 2022: 10.7 %).

Both tonnage produced and sold at 488,000 tonnes and 473,000 tonnes, respectively, were below previous year’s figures (1Q 2022: 659,000 tonnes and 657,000 tonnes, respectively).

The 1^st quarter 2023 was overall characterized by continuous capacity utilization, although demand in some markets gradually weakened against the backdrop of declining consumer purchasing power. The significant growth compared to the previous year’s period resulted primarily from the inclusion of the prior-year acquisitions in the pharma packaging sector, Essentra Packaging and Eson Pac, which contrasted with the sale of the Russian sites.

Necessary structural adjustments were continued as announced and affected a packaging site in Germany. This resulted in one-off expenses of EUR 15.5 million. Even though we are still in the early stages of integrating Ex-Essentra Packaging, it can be confirmed that we are on the right track with the turnaround and the leveraging of synergies. In contrast, Eson Pac, acquired in April last year, has already far exceeded our expectations. In addition, the recent expansion of competitive sites has further contributed to organic growth.

At EUR 656.7 million, sales were mainly acquisition-related EUR 201.8 million above the previous year’s figure of EUR 454.9 million.

The operating profit of EUR 33.9 million (1Q 2022: EUR 41.0 million) was influenced in particular by the aforementioned one-off expenses but also the discontinuation of the profitable business in Russia. The operating margin thus amounted to 5.2 % (1Q 2022: 9.0 %).

At 1,094 million m², produced volume was 14.1 % above the previous year’s level (1Q 2022: 959 million m²). After eliminating the acquisition effects, MM Packaging recorded organic growth of approximately 2 %.