MM Group CEO Says Demand Improved in 2Q 2024, but Pricing Remains Sluggish
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MM Group CEO Peter Oswald said market demand in the second quarter of 2024 has started to improve, but average prices remained substantially below those of 2023.
"The MM Group succeeded in improving its adjusted EBITDA and adjusted operating profit in the 2nd quarter compared to both the previous two quarters as well as last year's 2nd quarter," Oswald said. "The consistent execution of the profit & cash protection program led to a significant increase in cash flow from operating activities and free cash flow. At the same time, the Group's financial leverage remained largely constant.
"In the Board & Paper division, we saw an improvement in market demand following the reduction of high inventories in the supply chain. Also, our improved products after the machine rebuilds were well received by our customers. This led to a significant increase in sales volumes of around 18 %.
"Despite selective price increases in the 2nd quarter, average prices were still substantially below last year, resulting in lower sales. At the same time, some costs like paper for recycling and personnel costs rose again in the 2nd quarter. Due to the comprehensive cost protection program, Board & Paper managed to turn the adjusted operating profit again back into positive territory in the 2nd quarter after four quarters of operational losses.
"Packaging, which has shown a consistently solid performance overall, will from now on be reported as two divisions to increase transparency: MM Food & Premium Packaging and MM Pharma & Healthcare Packaging, since pharma packaging pursues a different business model and is perceived as highly specialized within the packaging industry. Also, it comprises leaflets and labels on top of folding cartons.
"Due to the ongoing weak economy in the main market of Europe and persistent restrained consumer spending on daily consumer goods, we expect only a slow development in the end markets and continued underutilization in the cartonboard industry. In the 3rd quarter, annual maintenance downtime at our pulp mills in Kwidzyn and Kotkamills will affect Board & Paper results while we assume continuity for both of the packaging divisions," Oswald explained.
OUTLOOK
Given the persistently overall weak economy and continuing restraint consumer spending we anticipate that the current low market activity will persist in the coming months. We will continue to pursue selective price increases. In the 3rd quarter, annual maintenance downtime at our pulp mills in Kwidzyn and Kotkamills will affect Board & Paper results while we assume continuity for the packaging divisions.
MM stays focused on enhancing earnings and cash generation by continuing its profit & cash protection program. The majority of savings are expected to materialize in 2025. Capital expenditures will remain significantly lower than in previous years, as the major projects have already been successfully completed. Our strategy and capital allocation we will continue to focus on expanding in growing, innovative and sustainable market segments, but we will prioritize improving margins before pursuing further non-organic growth.
