Welcome, ladies and gentlemen, to this audio webcast interview on the Group's interim results for the first quarter of 2024. I have the pleasure to have with me the company's CEO, Peter Oswald, for some first-hand information. Peter, could you please share with us your initial reflections on the beginning of the year 2024?
Yeah, most importantly, our packaging business has maintained a strong and solid level, even though spending on consumer staples remains subdued. This was achieved by operational improvements and market share gains, which were driven by several innovations and consistently excellent service. If we look at Board & Paper, the reduction of inventory in the supply chain has been completed so that the volume of Board & paper has significantly recovered. However, prices of carton board remained too low in Q1 in light of the consistent increase in costs such as paper for recycling, wood, pulp, and personnel.
Could you update us on the reasons behind the still gloomy market picture?
Yeah, I think inflation and a weak economy have led to a shift in consumer behavior, resulting in reduced consumption of food and other daily, fast-moving consumer goods products. In some areas, consumers have turned to budget products, which may use more plastics. And additionally, the market has experienced increased competition due to a surplus of supply since the cutoff from the Russian market. Nonetheless, I'm confident that MM is well positioned. Due to our recent significant investments, our product qualities have improved, and our costs have been reduced. And so MM is the only European paper and packaging company which has received the AAA rating from the CDP in 2024, and therefore several consumer companies are giving us a larger share of their wallet.
You pointed out the pivotal role of sales prices. Could you elaborate further on this?
Now, as we've reached a low point in average prices in board and paper over the last few quarters, and at the same time production costs are increasing, sales price increases are necessary and inevitable. For several board and paper products, we have achieved price increases and have implemented them from April on, so they will be effective in Q2. But further price increases are necessary, and we will execute them by July.
In addition to prices, you have highlighted the cash and profit protection program as a major focus for the ongoing business this year. Can you provide more information on the highlights of this program and the expected savings?
Yeah, importantly, the program impacts both segments of our group, so both in board and paper and packaging. It simply aims to implement business excellence. It focuses on cost savings across various areas such as materials, personnel, operational expenses, logistics, etc. Additionally, we aim to reduce working capital and CAPEX.
The pharma packaging business has been identified as a major priority for the packaging division. How do you view the development in this area from your present perspective?
Yeah, unfortunately, we exceeded our targets last year in 2023, and the planned improvements in results and transformation continue to progress. Significant improvement has been made in strengthening our sales and commercial operations and reducing production costs. As a result, our results for the first quarter are once again above last year's and our targets. Overall, pharma packaging is a specialized business that offers stability and promising potential for and so we are very keen to continue its development.
Looking ahead to the second quarter and mid-year, how do you assess further progress this year?
We have to be very realistic. Given overcapacities, profitability in the overall carton board and uncoated fine paper industry will stay at unsatisfactory levels until capacities are further reduced. We at MM have closed down three low-competitive machines over the last years, which has strengthened our overall cost position and adapted our capacities to lower demand. MM Board and Paper is in a strong position given cost-advantaged assets, operational excellence, leadership in sustainability, and best-in-class products. On top, our packaging division will support our resilience.
Peter, thank you very much for this interview.