MM Group Results for the 1st Half-Year 2024

Peter Oswald, MM CEO, comments: “The MM Group succeeded in improving its adjusted EBITDA and adjusted operating profit in the 2nd quarter compared to both the previous two quarters as well as last year’s 2nd quarter. The consistent execution of the profit & cash protection programme led to a significant increase in cash flow from operating activities and free cash flow. At the same time, the Group’s financial leverage remained largely constant.

In the Board & Paper division, we saw an improvement in market demand following the reduction of high inventories in the supply chain. Also, our improved products after the machine rebuilts were well received by our customers. This led to a significant increase in sales volumes of around 18 %. Despite selective price increases in the 2nd quarter, average prices were still substantially below last year, resulting in lower sales. At the same time, some costs like paper for recycling and personnel costs rose again in the 2nd quarter. Due to the comprehensive cost protection programme, Board & Paper managed to turn the adjusted operating profit again back into positive territory in the 2nd quarter after four quarters of operational losses.

Packaging, which has shown a consistently solid performance overall, will from now on be reported as two divisions to increase transparency: MM Food & Premium Packaging and MM Pharma & Healthcare Packaging, since pharma packaging pursues a different business model and is perceived as highly specialised within the packaging industry. Also, it comprises leaflets and labels on top of folding cartons.”

“Due to the ongoing weak economy in the main market of Europe and persistent restrained consumer spending on daily consumer goods, we expect only a slow development in the end markets and continued underutilisation in the cartonboard industry. In the 3rd quarter, annual maintenance downtime at our pulp mills in Kwidzyn and Kotkamills will affect Board & Paper results while we assume continuity for both of the packaging divisions.”, underlines Oswald.

Income statement
At EUR 2,043.9 million, the Group’s consolidated sales were below the previous year's figure (1st half of 2023: EUR 2,181.4 million), mainly due to lower selling prices.

Adjusted operating profit decreased by EUR 36.4 million from EUR 127.0 million to EUR 90.6 million. This decrease is primarily due to lower average prices in the Board & Paper division. The Group’s adjusted operating margin was 4.4 % (1st half of 2023: 5.8 %).

Financial income amounted to EUR 13.3 million (1st half of 2023: EUR 3.7 million). The increase in financial expenses from EUR -24.7 million to EUR -42.7 million resulted in particular from higher interest rates for variable-interest financing. “Other financial result - net” changed from EUR -5.9 million to EUR -10.0 million, mainly owing to currency translations.

Profit before tax totalled EUR 51.2 million after EUR 77.2 million in the previous year. Income tax expense amounted to EUR 13.8 million (1st half of 2023: EUR 13.9 million), resulting in an effective Group tax rate of 27.1 % (1st half of 2023: 17.9 %).

Profit for the period decreased accordingly from EUR 63.3 million to EUR 37.4 million.

Sustainability Development
The carbon footprint of the MM Group was down by considerable 23 % in the 1st half-year (1st half of 2024: 569,294 tCO2e; 1st half of 2023: 737,926 tCO2e).

Development in the 2nd quarter
In the 2nd quarter, the MM Group was able to improve results compared to the previous quarter and exceeded the previous year's figure.

After four quarters, the MM Board & Paper division could achieve again a positive adjusted operating profit with improvements in price and volume. The MM Food & Premium Packaging division recorded continuity at a good level, while the momentum at MM Pharma & Healthcare weakened slightly due to a full supply chain.

Consolidated sales of EUR 1,018.9 million were somewhat below the 1st quarter of 2024 (EUR 1,025.0 million) as well as the previous year’s level (Q2 2023: EUR 1,059.3 million).

The Group’s adjusted operating profit increased to EUR 51.0 million, exceeding both the previous quarter’s and the previous year’s figure (Q1 2024: EUR 39.6 million; Q2 2023: EUR 48.3 million). The adjusted operating margin came in at 5.0 % (Q1 2024: 3.9 %; Q2 2023: 4.6 %). Adjusted EBITDA reached EUR 107.2 million (Q1 2024: EUR 94.5 million; Q2 2023: EUR 103.7 million). Profit for the period amounted to EUR 26.5 million (Q1 2024: EUR 10.9 million; Q2 2023: EUR 28.4 million).

The adjusted operating margin of the MM Board & Paper division increased to 0.4 % (Q1 2024: -2.7 %; Q2 2023: -2.0 %) due to the positive development of sales and production volumes despite lower average prices. Capacity utilisation was significantly higher than in the 2nd quarter of the previous year, which was characterised by significant market- and rebuild-related machine downtime.

MM Food & Premium Packaging managed to maintain a solid adjusted operating margin of 10.2 % (Q1 2024: 9.5 %; Q2 2023: 11.4 %), primarily through productivity increases.

The operating margin of MM Pharma & Healthcare Packaging was 4.6 % (Q1 2024: 7.3 %; Q2 2023: 4.9 %), due to more subdued demand resulting from a reduction of inventories in the supply chain of the pharma industry.

Outlook
Given the persistently overall weak economy and continuing restraint consumer spending we anticipate that the current low market activity will persist in the coming months. We will continue to pursue selective price increases. In the 3rd quarter, annual maintenance downtime at our pulp mills in Kwidzyn and Kotkamills will affect Board & Paper results while we assume continuity for the packaging divisions.

MM stays focused on enhancing earnings and cash generation by continuing its profit & cash protection programme. The majority of savings are expected to materialise in 2025. Capital expenditures will remain significantly lower than in previous years, as the major projects have already been successfully completed. Our strategy and capital allocation we will continue to focus on expanding in growing, innovative and sustainable market segments, but we will prioritise improving margins before pursuing further non-organic growth.