• FY 20A underlying EBITDA down 18% y/y to EUR 1,353mn: Corrugated and Flexible Packaging performed well despite a low pricing environment. UFP had a tough year as expected, while Engineered Materials remains a drag on Group ROCE. Impact on EBITDA from planned shuts was EUR 100mn (FY 21e: EUR 140mn). Proposed FY 20A DPS of GBp 60/share up 5% y/y, with an implied cover of 2.2x.
  • Corrugated Packaging (37% of FY 20A EBITDA): Margin compression of 138bps was similar to Smurfit Kappa (-120bps in Europe), while MNP’s corrugated volumes shot the lights out (FY 20A: +7% and H2 20A: +9% vs. SKG: 2% and 3%, respectively), with strong volume growth across central and Eastern Europe. Containerboard markets remain tight, as incoming supply is being met by strong demand (MNP are fully booked). Corrugators are finding it “extremely hard” to source containerboard. The Olmuksan deal is expected to be finalised in H2 21e (EUR 66mn). This deal increases MNP’s short testliner position (FY 20A: -0.1mt), but the Group remains net long containerboard. MNP has increased guidance for OCC consumption from 1.3mt to 1.5mtp in FY 21e. Spot OCC implies a EUR 115mn (EUR 0.19/share after tax) headwind in FY 21e.  
  • Flexible Packaging (38% of FY 20A EBITDA): Robust bags growth of 5% y/y meant the margin only slipped by 60bps y/y to 19.5%. MNP believes they have outperformed the market due to an increased focus on security of supply (large network and local supply key). Nordic Paper’s FY 20A Kraft paper EBITDA margin was 16.5% (down 1,070 bps) and volumes were down 2% to 200kt. BillerudKorsnäs Paper segment (Sack and kraft paper) EBITDA margin was down 210bps to 13.7%, while volumes were up y/y. MNP appear bullish as they are tapping into two mega-trends: E-commerce (10-15% of their volumes) and sustainability by displacing plastic wrap. MNP did however caution that pricing remains sticky and proposed price increases (mid-single digits) would not immediately benefit their busines. MNP’s kraft paper and bags contracts are 33% fixed; 33% semi-annual and 33% annual (would have missed an increase for FY 21e).
  • Uncoated Fine Paper (19% of FY 20A EBITDA, down from 26% in FY 19A): FY volumes declined by 8% y/y, performing better than the Navigator Paper Company (-12%); however, on an EBITDA margin basis, MNP underperformed (-740 bps vs. –145bps). With demand now stable (but still below pre-pandemic levels), a margin recovery is mainly dependent on the success of implementing price increases. MNP confirmed it has also announced UWF price increases effective 1 March. This is driven by cost push as c.33% of European supply is non-integrated and improving demand. MNP is guiding for the FY 21e FV forestry gain to be in line with FY 20A (EUR 27mn). MNP’s net long pulp position will reduce by 100kt to 350kt in FY 21e.
  • Engineered Materials (6% of FY 20A EBITDA): Volume trend decline picked up in H2, down 13% (FY 20A: -10%). MNP continues to adjust the segment’s footprint and seemed upbeat around the roll out of 100% biodegradable wet wipes.
  • Cost inflation to partly offset the benefits of new projects and improved pricing: MNP expects resin pressure to persist for the next few quarters (impacting Consumer Flexibles and Engineered Materials). OCC prices are likely to remain elevated and energy and transport costs likely to see inflationary increases.
  • Balance sheet remains robust:  In a tough year and despite CapEx of EUR 630mn (FY 21e: EUR 600-700mn), MNP reduced net debt by EUR 416mn (-19%), with net debt/EBITDA of 1.3x. This was supported by a stellar performance in working capital management (H2 20A inflow of EUR 258mn vs. EUR 139mn in H2 19A).     

Download Report