For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
The company's results improved compared to the previous year, driven by the boarding paper division and strong performance in food and premium packaging.
The internal profit improvement program significantly contributed to the improved operating profit in the board and paper division.
Mayr-Melnhof Karton AG (WBO:MMK) has successfully managed its costs, with energy, wood, and paper for recycling costs remaining stable.
The company has taken proactive steps to address overcapacity issues by closing machines in Austria, Slovenia, and Poland.
The divestment of TANN Group is proceeding well and is expected to strengthen the company's balance sheet.
Negative Points
Pharma packaging profits were below last year's level due to smaller one-off effects and delayed rollout of weight reduction products.
Market demand remains soft, posing challenges for the company's growth.
Overcapacity in the European cardboard industry, particularly in virgin fiber board, remains a significant issue.
The company's gearing increased and cash decreased in the first quarter compared to the previous year.
Potential US tariffs could impact the company's plans to expand exports to the US, adding uncertainty to future growth.
Q: Peter, could you please share with us your reflections on the start of the year '25 for the MM group? A: Yes, I am pleased that results were nicely up compared to the start of last year, but still not at an acceptable level. The improvement was mainly driven by our boarding paper division. Also, food and premium packaging increased profits and showed, again, a strong performance. Pharma packaging came in somewhat below last year's level due to smaller one-off effects and delayed rollout of weight reduction products. Overall, market demand remains soft.
Q: What were the drivers of the significantly improved board and paper operating profit? A: Interestingly, the improvement of our results was to a large degree driven by our internal profit improvement program. This means we're the only marginal market tailoring for volumes and prices. Our main costs, energy, wood, and paper for recycling were broadly in line with last year, and personal costs were up in Europe in general. And I think that's very important because it proves that we can step by step improve our results by self-help even if we have no tailwind from the markets.
Q: Capacity development in the European cardboard industry has been a key topic of discussions for quite some time. How do you view this in the context of the current year? A: Yeah, the overcapacity issue has turned significantly more severe for virgin fiber board, whereas it had somewhat eased in recycling board. In the case of Virgin fiber board, we are now talking about roughly 1 million tons of excess capacity after net new capacity has been added in Finland. For a recycling board, the figure will be around 0.5 million tons after a mill closure in Spain. And we shouldn't forget, imports are rising. Therefore, further capacity reductions in Europe are an absolute necessity for both grades. However, we shouldn't be too optimistic because experience tells us to expect that these obvious capacity reductions take much longer than rational behavior would dictate. At MM board and paper, we have done our homework with machine closures in Austria, Slovenia, and Poland, and we have no longer any obvious case for consolidation. We enjoy a strong network of mills and excellent products. And our top priority continues to be to reduce costs in order to be the clear cost leader in every market.
Q: US tariffs have been very much on the agenda throughout the past weeks in how far is or could be the MM group affected? A: Now, unfortunately our board and paper exports to the US account for less than 1% of our total sales, so we are currently hardly directly affected. We are also operating six converting plants in the US in packaging -- in pharma packaging, which purchase locally and sell within the US. As such, we are also not impacted by the tariffs in packaging either. However, we do plan to expand our exports to the US. And if tariffs are imposed, we would have to slow down that plan. Additionally, it is expected that overcapacity in Virgin fiber board in Europe will continue to rise as Nordic producers are currently exporting significant volumes to the US which they may want to redirect back to Europe, obviously depending on the tariffs in the US. Fortunately, as for recycling, but what US tariffs are practically irrelevant because recycling board isn't in any significant way exported to the US.
Q: Covering shortly financials, your gearing was up and your cash down after three months compared to year '24. What is the reason behind and do you expect CapEx to continue also at around EUR55 million throughout the subsequent quarters? A: Yeah, we shouldn't overinterpret the quarterly numbers. End of '24, we probably overdid our work in capital management. And in Q1, we were not focused enough and we reduced our factoring. Also the share buyback cost us around EUR25 million. So the correct figure is somewhere in between the two numbers. With regards to your question on CapEx, we are sticking to our full year guidance of approximately EUR300 million.
Q: At the end of last year, you announced the divestment of TANN Group. How is this proceeding? A: It's proceeding well. We are on schedule to close the transaction in the first half of '25, and this will make our balance sheet even stronger.
Q: Looking ahead, how do you assess further progress this year? A: Given the current soft demand situation and the high levels of uncertainty, especially with regards to the US tariffs, we expect market conditions to remain challenging. And this is the basis for our management actions and management plans. Our top priority is to consistently strengthen MM's competitiveness by pursuing cost, technology, and innovation leadership. And our comprehensive efficiency and optimization programs are well on track and will provide MM with stability and support even in a difficult market environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
