MM Karton: Europe’s largest carton producer

by | Apr 8, 2020 | Forestry and Paper

  • Order books are strong, for now: All of their assets are operating and the expect this to continue. They are seeing good demand from consumer staples and pharma. April was full, end of May/June could be different.
  • Changing of the guard: With Peter Oswald the CEO from 1 April, it is too soon to see how he will impact company strategy. Focus will remain on growth and improving profitability.   
  • Their Cartonboard is biased towards recycled fibre-based (80%): This reduces the impact of pulp price volatility and requires less capital vs. pulp integration.   
  • View on the Chinese wastepaper ban: Europe has been a net exporter for a while, and recycling rates likely to improve further (corrugated and newspaper key drivers). With COVID, recycling has reduced materially. However, MM Karton still feels comfortable with supply visibility, but could see some cost inflation.
  • They do not expect major new Cartonboard supply: Market remains concentrated in Europe. Key players include:
    MM Karton, Metsa Board, Stora Enso, and Holmen. MM Karton has 30% RCM market share in Europe.  
  • MM Karton have packaged their growth with a combination of M&A and focus on tech: Cost leadership supported by focus on technology. It is in their genetics to get the best out of a machine. The last 8-10 years has seen them focus on more specialisation. This specialisation has been on the back of small refurbs
    (lasting 7-10 days) as opposed to larger brownfield expansions.
  • Capital allocation remains focussed (FY 19A ROCE: 15.4%): Dividend payout of 40% remains intact. M&A remains packaging focussed. Tann acquisition adds 15% capacity within 1st month of integration.  Deal flow has been limited due to quantum of cheap capital available. They buy to use, not a big history of restructuring. If the right deal came along, up to USD 1bn could be considered.
  • Liquidity is not a problem for MM Karton. Gearing remains well controlled, especially in the current environment with net debt/EBITDA of only 0.5x. EUR 400m of liquidity is available currently.

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