Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adjusted operating profit in Q2 increased compared to last year and the previous two quarters, marking a return to positive territory for the board and paper division.
- First half year operating cash flow and free cash flow were significantly up, indicating strong financial management.
- Sales volume in the board and paper division increased by around 18% due to improved products and reduced high inventories in the supply chain.
- MM food and premium packaging achieved a strong operating margin of roughly 10% in the first half of the year, despite economic challenges.
- The company has significantly modernized its mills and upgraded its packaging businesses, enhancing product quality and competitiveness.
Negative Points
- First half year results were lower than the previous year due to lower average sport and paper prices.
- Average prices in the board and paper division were still substantially below last year, despite selective price increases.
- Market demand in the pharma and healthcare packaging division was restrained due to inventory reductions in the supply chain.
- The company exited some unprofitable businesses, leading to a slight decrease in sales in the pharma and healthcare division.
- Q3 results for the board and paper division are expected to be negatively impacted by annual maintenance downtime at pulp mills in Poland and Finland.
Q & A Highlights
Q: Can you elaborate on the factors that contributed to the positive operating profit in the board and paper division in Q2?
A: Peter Oswald, CEO, explained that the positive operating profit was primarily due to the successful execution of the profit and cash protection program. This was complemented by an improvement in market demand as high inventories in the supply chain were reduced. Additionally, the improved products following machine rebuilds were well received by customers, leading to an 18% increase in sales volume.
Q: How did the packaging divisions perform, and what changes have been made in reporting?
A: The company has decided to report two separate divisions: MM food and premium packaging, and MM pharma and healthcare packaging. This change enhances transparency. MM food and premium packaging achieved a strong operating margin of around 10% despite economic challenges. In contrast, MM pharma and healthcare saw restrained market demand due to inventory reductions in the pharma industry, but adjusted operating profit and margin improved due to cost reduction programs and a shift to more value-added business.
Q: What is the outlook for the pharma and healthcare packaging business?
A: Peter Oswald highlighted significant progress in the pharma and healthcare business, which has more than doubled its EBITDA since acquisition. The company is now a market leader in Europe and the US, particularly in GLP-1 analogs for weight reduction, providing an excellent growth outlook. The focus will remain on organic growth and participating in further industry consolidation.
Q: How has the company's sustainability efforts impacted its operations?
A: The company has made sustainability a top priority, optimizing its carbon and water footprint and replacing plastic packaging. This commitment is reflected in their EcoVadis ratings, placing them in the top 15% of evaluated companies. Notably, the CO2 footprint was reduced by 23% in the first half of the year compared to the previous year.
Q: What are the expectations for Q3, and how will maintenance downtime affect results?
A: For Q3, the company anticipates continued restrained consumer spending. The board and paper division's results will be negatively impacted by the annual maintenance downtime at pulp mills in Poland and Finland. The focus will remain on cost reductions, cash generation, and selective growth opportunities in innovative and sustainable market segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
