Mayr-Melnhof Company News - Cessation of cartonboard production at Hirschwang site

- Cartonboard production at Hirschwang to be discountinued and relocated to other sites
- Capacity at Hirschwang was about 5% of the segment
- Restructuring charges of some EUR 25 mn to be digested, the bulk non-cash effective
- Folding carton production at Hirschwang to be expanded
- We assume this step to be return accretive as of next year and thus view the news as slightly positive

Mayr-Melnhof announced the discontinuation of the cartonboard production at the Hirschwang site (Province of Lower Austria). We remind that alongside the 2Q results the group stressed the likelihood that in 2H adjustments to the industrial footprint could be made, necessitating restructuring costs. The folding carton production will remain and is likely to be expanded. Overall, we assume this step to be return accretive as of next year.

Cessation of cartonboard production at Hirschwang: According to company information the cartonboard machine at Hirschwanng has an annual capacity of some 85k tonnes, equivalent to ~5% of the segments capacity. Hence, we assume revenues of roughly EUR 50-55 mn per annum. Given the age (constructed in 1952) and lacking economies of scale compared to state-of-art machines we assume profitability considerably below average. This would have entailed considerable investment needs which stood against a continuation of production. Production should be discontinued by November.

Restructuring charges of some EUR 25 mn: Mayr-Melnhof will have to digest one-off costs of up to EUR 25 mn in 3Q. About 2/3 will come in the form of impairments and the remainder will be cash effective (talks on a social plan for 150 employees have already commenced).

Production of folding carton to be expanded: The folding carton production at Hirschwang (under the name Neupack, mainly offset-printed folding cartons with a high degree of finishing as well as packaging made of laminated corrugated board) will remain and the group mulls plan for an expansion. This could command investments in the low double digit mn range.