Results for the first three quarters of 2017

The Group’s consolidated sales totaled EUR 1,749.1 million and were thus 2.1 %, or EUR 35.3 million above the previous year’s value (1-3Q 2016: EUR 1,713.8 million). Both divisions contributed to the slight increase.

With EUR 158.9 million, operating profit reached the previous year’s level (1-3Q 2016: EUR 160.2 million). The Group’s operating margin thus remained stable at 9.1 % (1-3Q 2016: 9.3 %).

Financial income of EUR 1.6 million (1-3Q 2016: EUR 2.3 million) contrasted with financial expenses of EUR -4.5 million (1-3Q 2016: EUR -4.7 million). As a result of the deconsolidation of the Tunisian packaging companies in the second quarter, a one-off expense of EUR 2.3 million was incurred due to accumulated foreign currency translation, which is reported under “Other financial result – net”.

Accordingly, profit before tax totaled EUR 151.9 million and was 2.6 % below the comparative figure of the previous year (1-3Q 2016: EUR 155.9 million). Income tax expense amounted to EUR 38.6 million (1-3Q 2016: EUR 40.4 million), resulting in an effective Group tax rate of 25.4 % (1-3Q 2016: 25.9 %).

At EUR 113.3 million, the profit for the period almost reached the previous year’s figure (1-3Q 2016: EUR 115.5 million).

Outlook

After a pickup in the middle of the year, the volume of incoming orders settled again to a stable level. General conditions, however, continue to be marked by intense competition, and require continuous measures for improvement in cost efficiency and product optimization. MM Karton as well as MM Packaging are successful in maintaining their profile in this, with future business performance likely to be characterized by continuity. Despite a slight easing in peak prices for recovered paper, fiber costs are currently still at a high level. Our aim for 2017, to reach the record result of 2016, remains intact, but owing to the strong closing quarter of the previous year further on challenging.

Following the gradual improvement in demand on the European cartonboard market throughout the first three quarters of 2017, MM Karton’s average order backlog increased to around 82,000 tons, after 47,000 tons in the first nine months of the previous year. At 98 % (1-3Q 2016: 98 %) capacities of the division continued to be almost fully utilized.

A special challenge was the significant price increase for the strategic raw material of recovered paper, which could be successfully offset by successive improvements in cartonboard prices and a selective sales policy. Prices for recovered paper were driven by strong demand from Asia in the first half-year, as well as stockpiling for new European corrugated base paper plants and increasingly strengthening demand in Europe.

Both cartonboard production as well as tonnage sold, at 1,269,000 tons and 1,266,000 tons respectively, were above the comparative figures for the previous year (1-3Q 2016: 1,255,000 tons and 1,258,000 tons respectively). With a share in sales of approximately 80 % to Europe and 20 % to markets outside of Europe, slightly more was sold to non-European markets (1-3Q 2016: 82 % and 18 % respectively).

Sales rose moderately to EUR 788.9 million (1-3Q 2016: EUR 777.5 million) due to prices and volumes. Operating profit, 
at EUR 54.6 million, was slightly above the comparative period (1-3Q 2016: EUR 54.4 million), thus the operating margin at 6.9 % was maintained at previous year’s level (1-3Q 2016: 7.0 %).

Following a restrained start of the year, demand on the European consumer goods market, and consequently also for folding cartons, has seen a slight upturn since the end of the second quarter. Incoming orders at MM Packaging followed this trend, resulting in overall improved capacity utilization but with continuing heterogeneity between the plants. Price competition remained intense, on the one hand because of high cost and optimization pressure in our customer industries, on the other hand as a consequence of sufficient production capacities on the European market. Additionally there was the need to pass on price increases for recycled cartonboard from the middle of the year.

MM Packaging, however, succeeded in maintaining the good profitability level under these challenging circumstances through a consistent focus on cost leadership as well as market and product development. Through increased investment activity growth opportunities in and outside of Europe were pursued, and new cost optimization potential addressed.

Sales climbed by 2.3 % to EUR 1,036.8 million (1-3Q 2016: EUR 1,013.4 million). At EUR 104.3 million, operating profit approached the previous year’s figure (1-3Q 2016: EUR 105.8 million). The operating margin was accordingly solid at 10.1 % (1-3Q 2016: 10.4 %).

Tonnage processed remained unchanged at 570,000 tons, while the sheet equivalent rose slightly to 1,707.4 million 
(1-3Q 2016: 1,689.3 million). 

Acquisition in Poland
At the beginning of October 2017, the divison MM Packaging acquired the folding carton site of ASG Poland in Bydgoszcz, Poland, in form of an asset deal for around EUR 9.0 million. The company produces packages for cosmetic and personal care products. Integration into the Group will be effected from the 4th quarter of 2017. 

Expansion in Iran and Vietnam
The development of our sites in Tehran, Iran, and Ho Chi Minh City, Vietnam, continued with the extension of our machinery in technology and capacity with a focus on high performance and quality. 

Expansion in Jordan
In Jordan, capacities at the site in Amman were expanded as well as technologically enhanced in order to allow further progress in the growth with international customers. 

New set-up in Tunisia
In Tunisia, the production of MM Packaging was transferred to the local market leader, Société Tunisienne des Emballages Modernes, in return for a share of 45 % in that company in order to exploit synergies.

Forthcoming results:
March 20, 2018 Financial results of 2017