2008 - XXVIII Convegno nazionale - Rappold

“Carton Board Packaging” Global Packaging Trends & Supply Chain Dynamics

Franz Rappold, Member of the Management Board GIFASP Conference, Venezia, 12.Giugnio 2008 MAYR-MELNHOF KARTON. Best in Business.

Agenda • • • • • • •

MMK AG – “Brief Introduction” European Cartonboard Market European Packaging Market Global Packaging Market Supply Chain Dynamics Outlook 2008 Conclusion

MAYR-MELNHOF KARTON. Best in Business.

MMK AG “Brief Introduction”

MAYR-MELNHOF KARTON. Best in Business.

Mayr-Melnhof Group 35 plants in 15 countries, ~8,657 employees

MM Karton The worldwide leading producer of recycled fiber based cartonboard

MM Packaging Europe’s largest manufacturer of folding cartons

MAYR-MELNHOF KARTON. Best in Business.

Consolidated Results 2007 consolidated in millions of EUR, IFRS

Sales Operating profit Operating margin

2007 1,737.0 169.4 9.8%

2006

+/-

1,512.5 158.6

+14.8% +6.8%

10.5%

Profit before tax Income tax expense

170.9 (54.3)

159.2 (51.9)

+7.3%

Profit for the year

116.6

107.3

+8.7%

% Sales

Cash earnings % Sales

6.7%

206.7 11.9%

7.1%

191.4

+8.0%

12.7%

Source: MMK AG, 2008

MAYR-MELNHOF KARTON. Best in Business.

MM Group – Production Sites in Europe MM Headquarters – Vienna (A) MM Karton Mills (8) MM Packaging Plants (27) PacProject – Innovation Centre

MAYR-MELNHOF KARTON. Best in Business.

European Cartonboard Market

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Cartonboard Market - total Sales (WE, CEE, OVS) 2004-2007 (in 1.000 tons) 4000 3500 3000 2500 SBB FBB WLC

2000 1500 1000 500 0 2004

2005

2006

2007

Source: CEPI Carton, 2008 (CEPI member and non-member estimates)

MAYR-MELNHOF KARTON. Best in Business.

Cartonboard Market: Split of Sales 2007 CEE 19% (+ 12,3%) OVS 13% (- 5,5%)

WE 68% (+ 1,8%)

Source: CEPI Carton, 2008 (CEPI member and non-member estimates)

MAYR-MELNHOF KARTON. Best in Business.

Cartonboard Market: Split of Products 2007 SBB 7%

FBB 36%

WLC 57%

Source: CEPI Carton, 2008 (CEPI member and non-member estimates)

MAYR-MELNHOF KARTON. Best in Business.

Ranking Cartonboard Producer 2007 (capacities in 1.000 to/a)

Mayr-Melnhof Stora Enso RdM & Cascades M-Real Iggesund / MoDo

SBS

SUB

FBB

WLC

Weig Cascades Smurfit / Kappa Kwidzyn / Int. Paper Buchmann 200

400

600

800

1000

1200

1400

1600

1800

Source: MMK Marketing, 2008

MAYR-MELNHOF KARTON. Best in Business.

European Folding Carton Market

MAYR-MELNHOF KARTON. Best in Business.

Folding Carton Output Development 2000-2006

Source: ECMA, 2007

MAYR-MELNHOF KARTON. Best in Business.

Relative Growth Carton Output 2000-2006

Source: ECMA, 2007

MAYR-MELNHOF KARTON. Best in Business.

Carton Converters European Ranking (tons)

Tonnage converted in thousands of tons Source: MMP estimate (12/2007) MAYR-MELNHOF KARTON. Best in Business.

Folding Cartons „SWOT“-Analyses Strengths

Weaknesses

- natural product - renewable resource - sustainable process - ecologically preferred - best on POS - shelf appeal/brilliance - “closed loop principle”

- weight - limited barrier - not “innovative” enough

MAYR-MELNHOF KARTON. Best in Business.

Folding Cartons „SWOT“-Analyses Opportunities

Threats

- to grow in CEE, Asia - combine it with plastic - optimize packing line performance - logistic advantage/modularity - environmental advantage

- political pressure/regulations - cost development - relative competitiveness

… We see clearly more opportunities than threats!

MAYR-MELNHOF KARTON. Best in Business.

Packaging Demand – Growth Factors • • • • • •

Economic development Ageing of the world population Trend towards smaller households Move towards smaller pack sizes New packaging material development Increasing awareness of environmental issues, and the adoption of new regulatory requirements on packaging recycling

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World Packaging Consumption: Total Consumption 2003-2009 (in $million) 600000

500000

400000

300000

Total

200000

100000

0 2003

2009

Source: World Packaging Organization, 2008

MAYR-MELNHOF KARTON. Best in Business.

World Packaging Consumption: Consumption By Sector 2003-2009 (in $million) 250000

200000

Paper & Board Rigid Plastics Flexible Plastics Metal Glass Other

150000

100000

50000

0 2003

2009

Source: World Packaging Organization, 2008

MAYR-MELNHOF KARTON. Best in Business.

World Packaging Consumption: Consumption By Sector 2003-2009 (in $million) – Plastics accumulated 250000

200000

150000

Paper & Board Plastics Metal Glass Other

100000

50000

0 2003

2009

Source: World Packaging Organization, 2008

MAYR-MELNHOF KARTON. Best in Business.

Packaging Consumption: Material Shares 2003 to 2009 (Plastics accumulated)

Metal 18%

Glas 7%

Other 6%

Paper & Board 39%

Plastics 30%

2003

Glas 7%

Metal 16%

Other 6% Paper & Board 38%

Plastics 33%

2009

Source: World Packaging Organization, 2008

MAYR-MELNHOF KARTON. Best in Business.

End-use sectors Forecast packaging consumption by end-use market, 2003-2009 ($million) 250000

200000

150000

Food Beverage Healthcare Cosmetics Other consumer Industrial/bulk packaging

100000

50000

0 2003

2009

Source: World Packaging Organization, 2008

MAYR-MELNHOF KARTON. Best in Business.

“Supply Chain Dynamics”

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Supply Chain The situation is quite complex….

LEGISLATION

CARTONBOARD PRODUCER

DESIGNER FOLDING CARTON PRODUCER

PACKER & FILLER

WASTE MANAGEMENT

RETAILER

CONSUMER

Flow of Information

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The leading “Endusers” (in mio. €) Nestle B A SF P ro cter & Gamble Unilever Glaxo SmithKline P fizer No vartis Kraft M ars & Wrigleys M cDo nalds Henkel Gro up Dano ne Reckitt B enckiser Ferrero P armalat Wrigleys Gro up

0

10000

20000

30000

40000

50000

60000

70000

Source: MMK Marketing, 2008

MAYR-MELNHOF KARTON. Best in Business.

The leading Retailers (in mio. â‚Ź)

Source: MMK Marketing, 2008

MAYR-MELNHOF KARTON. Best in Business.

Comparison - Size of Enterprise (in mio. â‚Ź)

Source: MMK Marketing, 2008

MAYR-MELNHOF KARTON. Best in Business.

Market Consolidation •

Cartonboard Producers – Well ahead – The Top 5 represent around 60% of the total European Cartonboard Manufactures

•

Cartonboard Converters – European folding carton sector still has a clearly lower level of consolidation – The five largest manufactures represent slightly more than one third of the market – The structure is mainly medium-sized companies … like in Italy

•

FMCG´s – Have already a high level of consolidation

•

Retailer – Represent the highest consolidation in the supply chain MAYR-MELNHOF KARTON. Best in Business.

Globally acting suppliers need to • • • • • • •

Have a competitive size Have sufficient production capacity Be flexible, innovative and proactive Be financially strong Have pan-european (global) network Have Innovations network Understand Enduser´s needs

MAYR-MELNHOF KARTON. Best in Business.

1990

40 - 45 % 10%

1986

High-quality products Middle market segment Low-budget products

40 - 45 %

36 % 30 %

35 %

34 %

1981

34 %

1973

31 %

49 % 24 %

27 %

49 % 23 %

28 %

Polarizations of Markets

2010 MAYR-MELNHOF KARTON. Best in Business.

Outlook 2008

MAYR-MELNHOF KARTON. Best in Business.

Cartonboard Business Outlook 2008 • Globally only little Cartonboard Growth expected • High variable cost on Cartonboard will remain: – Fibres – Energy – Chemicals

• Fierce competition – Increasing pressure from South America and Asia

• Currency Impact – Exchange Rate Euro/US $:

1,60 is already reality

MAYR-MELNHOF KARTON. Best in Business.

Conclusion • Market conditions are changing more quickly • Global financial crises / total economic impact impossible to predict yet • Cost and market leadership … decisive for success: – Essentials to survive in the global market competition

• Global market consolidation will continue

It will become tough, but … we are prepared for it MAYR-MELNHOF KARTON. Best in Business.

GRAZIE!

MAYR-MELNHOF KARTON. Best in Business.