• Dividends resume: As with Smurfit Kappa, MNP resumed dividends in line with its stated dividend policy (2-3x underlying EPS). Last dates to trade cum-dividend are 18 August (JSE) and 19 August (LSE). FY 19A and H1 20A DPS yield 3%.
  • Strong Corrugated performance (36% of EBITDA), with volumes well head of peers: Containerboard volumes increased by 5.7% y/y (+1.1% q/q), while corrugated volumes did not seem to be impacted by industrial exposure compared to peers, as MNP’s box volumes increased by 4.8% y/y (“support from CEE” but we note that the contribution from Emerging Europe at a Group level was stable y/y at 22%). SKG’s Europe corrugated volumes were flat y/y, with an EBITDA margin of 17.5% vs. MNP’s 27.6%. MNP believes that that high end of the containerboard cost curve is under pressure and that the economics of any new proposed conversions are questionable.
  • China appears it could now be filling its containerboard gap: MNP noted increased containerboard sales to China (“waited long time for this to come through”), with China imports up 1.5mt y/y. This is on the back of the wastepaper import ban that China has gradually been implementing. The last round of RCP imports licences in China is expected to be issued by October this year, with no PfR imports allowed in 2021. YTD, only 5.75mt has been approved (down 40-45% y/y).
  • Impressive performance from UFP business (22% of EBITDA), supported by market share gains (Slide 18: MNP H1 20A Presentation): Across graphic grades, UWF has held up the best. Encouragingly, MNP’s volumes were only down 8.3% y/y, compared to its closest peer Navigator (-17% y/y). MNP’s EBITDA margin remains ahead of Navigator at 21.2% (-660bps y/y; -130bps h/h) and ROCE of 17.7% (Navigator: 7.2%).
  • Cost structure well managed in tough times: Biggest tailwind came from lower input costs (materials, energy and consumables), which were 11% lower y/y, followed my maintenance (-13% y/y or -EUR 22m). Encouragingly, personnel costs (largest cost) were flat y/y (headcount -1.2% y/y).
  • MNP’s balance sheet remains one of the strongest amongst peers: Net debt/EBITDA robust at 1.4x (debt cov: <3.5x) with liquidity of EUR 1.4bn. Working capital was well managed at 15.5% (FY guidance: 12-14%) of revenue (H1 19A: 15.0%), also pointing to production volumes across the group fairly representing underlying sales volumes, in our view.
  • CapEx guidance for FY 21e upgraded: With FY 20e planned CapEx pushed down further to EUR 600-650mn for the year, FY 21e likely to be similar; however, with flexibility to be reduced if needs be. With EUR 336mn spent in H1, we can expect EUR 264-314mn in H2.
  • Cautious outlook for H2: We caution that across most grades, pricing pressure is likely to persist into H2. Encouragingly, demand for UWF is expected to improve from lows seen in Q2 and MNP does not expect a ST recovery to pre-COVID levels. H2 will be impacted by headwinds from: Lower FV forestry gain; a stronger EUR (1% chg. = EUR 3-3.5mn EBIT impact) and with planned maintenance shuts mainly taking place in H2 (delta of EUR 80m: EUR 0.13/share after tax). MNP have guided for an EUR 100m EBIT impact in FY 20e from planned maintenance (H1 20A: EUR 10m and  H2 20e: EUR 90m). Looking forward, MNP are excited around the potential for paper bags as substitution takes place away from plastic.

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