"The MM Group recorded a decline in both Group sales and adjusted operating profit in the 1st quarter of 2024 compared to the previous year's value, due to the earnings performance in the Board & Paper division." – Peter Oswald, CEO, MM Group.
April 24, 2024 - Mayr-Melnhof Karton AG (MM Group) CEO Peter Oswald said pressure on margins continued during the first quarter of 2024 due to input costs and "hardly any growth" in end-markets.
"The MM Group recorded a decline in both Group sales and adjusted operating profit in the 1st quarter of 2024 compared to the previous year's value, due to the earnings performance in the Board & Paper division," Oswald said.
"The destocking in the supply chain has been largely completed, leading to a significant recovery of volumes sold in Board & Paper.
"However, pressure on margins continued as expected, as price increases will only compensate for the recent rise in production costs from the 2nd quarter onwards. In contrast, the Packaging division recorded a slight increase in results compared to the previous year, even though the margin was below the strong level of the 3rd and 4th quarter of 2023.
"Against this background, the profit & cash protection program, which has already been successfully implemented, and the measures to intensify market penetration will be systematically continued in 2024.
"As consumer spending on everyday goods remains subdued, the end markets continue to record hardly any growth. In particular, the development of sales prices will remain decisive for the earnings situation in 2024," Oswald pointed out.
At EUR 1,025.0 million, the Group's consolidated sales were below the previous year's figure (1Q 2023: EUR 1,122.1 million), primarily due to price-related declines in both divisions.
Adjusted operating profit decreased by EUR 39.1 million from EUR 78.7 million to EUR 39.6 million. This decrease is primarily due to the recent increase in production costs in the Board & Paper division, which are to be offset by higher sales prices from the 2nd quarter onwards. The Group's adjusted operating margin was therefore 3.9% (1Q 2023: 7.0%).
Financial income amounted to EUR 6.6 million (1Q 2023: EUR 1.3 million). The increase in financial expenses from EUR -10.8 million to EUR -21.4 million resulted in particular from higher interest rates for variable-interest loans. "Other financial result - net" changed from EUR -3.1 million to EUR -6.8 million, mainly owing to currency translations.
Profit before tax thus totaled EUR 18.0 million after EUR 49.0 million in the previous year. Income tax expense amounted to EUR 7.1 million (1Q 2023: EUR 14.1 million), resulting in an effective Group tax rate of 39.6% (1Q 2023: 28.7%).
Thus, profit for the period decreased from EUR 34.9 million to EUR 10.9 million.
Despite significant volume increases compared to the previous year in the Board & Paper division, there are still hardly any signs of growth on the consumer goods end markets. Under these conditions, MM is focusing on margin-conscious market share gains and a consistent continuation of the profit & cash protection program, which has been successfully implemented to date. The upward trend in production costs is to be compensated by an ongoing improvement in sales prices. This development in particular will remain decisive for the profit situation in 2024.
MM Board & Paper
The MM Board & Paper division achieved a significant volume increase in the 1st quarter, following extensive market- and rebuild-related downtime in the previous year. Sales volume increased by 19.2% from 473,000 tonnes to 564,000 tonnes, while production volume rose by 18.0% to 576,000 tonnes (1Q 2023: 488,000 tonnes). Market share gains were also achieved selectively as part of a sales excellence program. The division's average order backlog amounted to 182,000 tonnes in the first three months, compared to 143,000 tonnes in the same period of the previous year.
Both recovered paper and pulp prices have recently been experiencing an upward trend on the procurement markets, thus sales prices will be increased from the 2nd quarter onwards.
At EUR 483.5 million, sales were price-related 7.2% below the comparable figure (1Q 2023: EUR 521.2 million) despite significantly higher volumes. The adjusted operating profit amounted to EUR -13.3 million (1Q 2023: EUR 27.7 million), the adjusted operating margin to -2.7% (1Q 2023: 5.3 %).
MM Packaging
The overall conditions in the folding carton business continued to be characterized by weak consumption in many end markets for everyday consumer goods in the 1st quarter of 2024. However, by serving a broad range of industries and through its global positioning, MM Packaging was able to maintain a balance and deliver stable results. Due to increasing competitive and margin pressure, the implementation of the profit & cash protection program and selective structural adjustments have high priority alongside the generation of new business.
At EUR 592.6 million, sales were price- and volume-related 9.8% lower than the previous year's figure of EUR 656.7 million. The adjusted operating profit increased by 4.1% from EUR 51.0 million to EUR 52.9 million, primarily due to successful cost saving measures. The adjusted operating margin was therefore 8.9% (1Q 2023: 7.8%).
Volume produced at 1,032 million m2 came in 5.7 % below the previous year's figure (1Q 2023: 1,094 million m2).
MM Group is a leading global producer of cartonboard and folding cartons with an attractive offer in kraft papers and uncoated fine papers for various end applications. MM promotes sustainable development through innovative, recyclable packaging and paper products.
SOURCE: Mayr-Melnhof Karton AG (MM Group)
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