MM Packaging: 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 1st 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 1st 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.”

Income statement
The Group’s consolidated sales increased by EUR 61.7 million or 5.8 % to EUR 1,122.1 million (1Q 2022: EUR 1,060.4 million). This increase results mainly acquisition-related from the division MM Packaging.

At EUR 61.6 million, operating profit was EUR 49.5 million below the comparable figure of the previous year (1Q 2022: EUR 111.1 million). This decline is primarily due to market- and rebuild-related downtimes in the MM Board & Paper division and restructuring expenses in the amount of EUR 15.5 million in the Packaging division. The Group’s operating margin was at 5.5 % (1Q 2022: 10.5 %).

Financial income amounted to EUR 1.3 million (1Q 2022: EUR 1.6 million). The increase in financial expenses from EUR -7.5 million to EUR -10.8 million is mainly due to higher interest expenses for Schuldscheindarlehen and financing of the accomplished acquisitions and organic growth projects. “Other financial result - net” changed from EUR -1.6 million to EUR -3.1 million, in particular owing to currency translation.

Profit before tax of EUR 49.0 million was EUR 54.6 million lower than the previous year’s value (1Q 2022: EUR 103.6 million). Income tax expense amounted to EUR 14.1 million (1Q 2022: EUR 24.1 million), resulting in an effective Group tax rate of 28.7 % (1Q 2022: 23.3 %).

Profit for the period decreased by EUR 44.6 million to EUR 34.9 million (1Q 2022: EUR 79.5 million).

Outlook
Demand for our cartonboard and paper products is noticeable restrained due to continued high customer inventory levels and the increasingly restraining effect of inflation on private consumption. Therefore, in addition to the planned capex-related machine downtimes, there will also be market-related downtimes in the MM Board & Paper division in the 2nd quarter. The development of price levels continues to be heterogeneous by product area. In addition, the weakening in private consumption is also reflected in several sales markets of MM Packaging. The increased investment activity to strengthen the competitiveness and growth ability of MM is being implemented according to plan, as well as the integration of last year’s acquisitions in the pharma packaging sector. Under the tightened market conditions, structural adjustment measures and cost optimizations will be pushed forward with both a short- and medium-term perspective in order to ensure a good long-term development. As already indicated, 2023 will be a transition year for MM Board & Paper and an integration year for MM Packaging with profitability below the trend line after being above in 2022.