Mayr Melnhof Karton : Report for the first three quarters of 2021

1-3Q21

REPORT FOR THE FIRST THREE QUARTERS OF 2021 MAYR-MELNHOF KARTON AG

• Strategic acquisitions Kwidzyn and Kotkamills closed in 3rd quarter
• Result impacted by one-off effects from transformation MM Board & Paper
• Lag in passing on massive input cost inflation weighs temporarily on margin
• Necessary price increases are implemented
• Ongoing high order backlog in both divisions
• Intensified capex program in efficiency and growth on track

MM GROUP

Group Key Indicators

		1st - 3rd Quarter
		Jan. 1 - Sep. 30,		Jan. 1 - Sep. 30,	+/-
(consolidated, in millions of EUR)		2021	2020
Consolidated sales		2,107.1		1,903.5			+ 10.7 %
EBITDA		283.0		307.1			- 7.8 %
Operating profit	177.2		169.3			+ 4.7 %
Operating margin (%)	8.4 %		8.9 %			- 48 bp
Profit before tax	162.4	160.6		+ 1.1 %
Income tax expense		(34.0)		(44.3)
Profit for the period	128.4		116.3			+ 10.4 %
Net profit margin (%)	6.1 %		6.1 %
Earnings per share (in EUR)	6.37	5.78		+ 10.2 %
Cash flow from operating activities		165.8		223.7			- 25.9 %
Capital expenditures (CAPEX)		181.9		105.9			+ 71.8 %
Depreciation and amortization1)		105.8	137.8		- 23.2 %

1. including impairment of property, plant and equipment and intangible assets

Balance sheet date

Sep. 30, 2021		Dec. 31, 2020

Total equity (in millions of EUR)

Total assets (in millions of EUR)

Equity ratio (%)

Net debt (-) (in millions of EUR)

Employees

1,606.9

3,904.3

41.2 %

• 1,056.8
  12,506

1,547.1

2,399.6

64.5 %

• 122.2
  9,938

2	MAYR-MELNHOF KARTON AG, 1 - 3Q/2021

MM GROUP

Group Report

DEAR SHAREHOLDERS,

Your Company has structurally strengthened its competitiveness and created an attractive platform for further growth in sustainable and innovative fiber-based packaging solutions with the closing of the acquisitions of the cartonboard and paper mills Kwidzyn in Poland and Kotkamills in Finland in the 3rd quarter of 2021. With the acquisitions in the virgin fiber sector, MM has not only consolidated its position as the leading cartonboard and folding carton producer in Europe, but also acquired two new core products, kraft papers and uncoated fine papers. As part of the transformation, the two smaller cartonboard mills, Baiersbronn and Eerbeek, were sold. Furthermore, production at a packaging site in Germany was discontinued at the end of September for restructuring measures. As expected, the income statement for the 3rd quarter therefore includes various one-off effects.

In the current business of the first three quarters of 2021, sustained strong demand for cartonboard packaging and papers and thus high capacity utilization in both divisions was offset by an increase in raw material and energy costs, unprecedented in its sharpness. The price increases implemented in the first nine months have not yet been able to compensate the continuing rise in costs. Therefore, where possi- ble, a new cartonboard price increase was fixed for the 4th quarter and a further price step for all car- tonboard grades was announced as of the beginning of 2022.

The increase of 4.7 % in the Group's operating profit for the first three quarters of 2021 mainly results from one-off effects in MM Board & Paper, while MM Packaging recorded a rather robust ongoing development.

The objective for the coming months is to compensate for the continuing rise in raw material and energy costs by further price adjustments and structural cost reductions in order to catch up again in margins.

INCOME STATEMENT

The Group's consolidated sales increased basically acquisition-related by 10.7 % or EUR 203.6 million to EUR 2,107.1 million (1-3Q 2020: EUR 1,903.5 million).

At EUR 177.2 million, the operating profit was 4.7 % above the previous year's value (1-3Q 2020: EUR 169.3 million). The first three quarters include one-off expenses in the amount of EUR 58.0 million: From the initial consolidation of the mills Kwidzyn and Kotkamills EUR 31.9 million, which are mainly attributable to ancillary acquisition costs including transaction taxes as well as capitalization of order backlogs and the inventory valuation; and in the division MM Packaging EUR 26.1 million restructuring costs. This is offset by preliminary one-off income from the sale of the Eerbeek and Baiersbronn mills in the amount of EUR 50.1 million. The Group's operating margin was therefore at 8.4 % (1-3Q 2020: 8.9 %).

MAYR-MELNHOF KARTON AG, 1 - 3Q/2021

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MM GROUP

Financial income totaled EUR 1.9 million (1-3Q 2020: EUR 1.0 million). The increase in financial expenses from EUR -5.4 million to EUR -16.8 million resulted primarily from the issuance of Schuldschein loans and Namensschuldverschreibungen to finance the acquisitions and organic growth projects. "Other financial result - net" changed from EUR -4.2 million to EUR 0.1 million, in particular owing to currency translation.

At EUR 162.4 million, profit before tax was slightly above the previous year (1-3Q 2020: EUR 160.6 million).

Income tax expense totaled EUR 34.0 million (1-3Q 2020: EUR 44.3 million), resulting in an effective

Group tax rate of 20.9 % (1-3Q 2020: 27.6 %). The reduction compared to the previous year is primarily due to tax-free income from company disposals.

Accordingly, profit for the period increased from EUR 116.3 million to EUR 128.4 million and earnings per share from EUR 5.78 to EUR 6.37.

ASSETS, CAPITAL, AND LIQUID FUNDS

As of September 30, 2021, the Group's total assets amounted to EUR 3,904.3 million, EUR 1,504.7 million higher than the comparable figure as of December 31, 2020 (EUR 2,399.6 million). This growth mainly results from the initial consolidation of the new acquisitions. Total Group equity rose profit-related from EUR 1,547.1 million to EUR 1,606.9 million.

It should be noted that the purchase price allocation from the acquisitions had not yet been completed as of the publication date of this report and that the figures are therefore preliminary. Further consolidation details are planned for subsequent reporting at year-end.

Financial liabilities are largely of a long-term nature and went up from EUR 268.4 million at the end of the previous year to EUR 1,414.9 million as of September 30, 2021. This increase results in particular from the issuance of Schuldschein loans and Namensschuldverschreibungen in the amount of EUR 1,125.0 million. With total cash of the Group of EUR 358.0 million (December 31, 2020: EUR 146.2 million), net debt thus rose to EUR 1,056.8 million (December 31, 2020: EUR 122.2 million). With an equity ratio of 41.2 % (December 31, 2020: 64.5 %), the MM Group remains solidly financed.

Non-current assets increased from EUR 1,397.9 million to EUR 2,380.5 million, primarily due to acquisi- tions. Similarly, current assets also recorded a rise compared to the end of 2020 from EUR 1,001.7 million to EUR 1,523.8 million.

4	MAYR-MELNHOF KARTON AG, 1 - 3Q/2021

MM GROUP

CASH FLOW DEVELOPMENT

Cash flow from operating activities amounted to EUR 165.8 million, compared with EUR 223.7 million in the first three quarters of the previous year. This difference results in particular from a lower cash-effective result.

Cash flow from investing activities amounted to EUR -806.0 million after EUR -99.4 million. This change is mainly attributable to the payment of the preliminary purchase prices for the acquisition of the mills Kwidzyn and Kotkamills in the amount of around EUR 872.0 million, which were offset by proceeds from the sale of the Eerbeek and Baiersbronn mills in the preliminary amount of around EUR 151.8 million. Payments for the acquisition of property, plant and equipment and intangible assets amounted to EUR 185.9 million after EUR 107.7 million. Investments in both divisions focused on technological modernization and expansion.

Cash flow from financing activities changed from EUR -126.7 million to EUR 851.3 million, primarily as a result of the issuance of Schuldschein loans and Namensschuldverschreibungen in the 1st and 3rd quarter of 2021.

DEVELOPMENT IN THE 3RD QUARTER

In addition to the structural changes at MM Board & Paper, the development in the 3rd quarter of 2021 was characterized by strongly increasing input costs, which could only be partially compensated by higher sales prices. At EUR 817.5 million, consolidated sales were acquisition-related above the figure of the previous quarter (EUR 648.3 million) and the previous year's level (3Q 2020: EUR 637.0 million).

The Group's operating profit reached EUR 85.1 million after EUR 30.9 million in the 2nd quarter of 2021 and EUR 46.8 million in the 3rd quarter of the previous year. The preliminary income from the sale of the Eerbeek and Baiersbronn mills in the amount of EUR 50.1 million was offset by one-off expenses from the acquisition of the mills Kwidzyn and Kotkamills in the amount of EUR 31.9 million. The Group's operating margin was thus 10.4 % (2Q 2021: 4.8 %; 3Q 2020: 7.3 %). Profit for the period totaled EUR 66.2 million (2Q 2021: EUR 18.3 million; 3Q 2020: EUR 31.4 million).

Capacity utilization of the division MM Board & Paper at 95 % in the 3rd quarter was lower than in the previous quarter (2Q 2021: 99 %; 3Q 2020: 95 %), mainly owing to the planned annual maintenance shutdowns at Kwidzyn and Kotkamills. Due to one-off income, the division's operating margin increased to 9.5 % (2Q 2021: 4.6 %; 3Q 2020: 3.5 %).

1. Packaging's operating margin of 10.4 % was in line with the figure for the 1st quarter of 2021 and thus also above the figure for the 2nd quarter of 2021 of 4.5 %, which was impacted by restructuring expenses, as well as the previous year's level (3Q 2020: 9.3 %).

MAYR-MELNHOF KARTON AG, 1 - 3Q/2021

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