Investor Site Visit Felixton Paper Mill 29 May 2019 2 OVERVIEW - PowerPoint PPT Presentation

Investor Site Visit Felixton Paper Mill 29 May 2019

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OVERVIEW The largest paper and plastics packaging and recycling company in Southern Africa Mpact Paper Plastics Primary product categories Primary product categories   Recovered paper collection and recycling PET bottle-to-bottle recycling   Packaging and industrial papers such as cartonboard and PET bottles and preforms, hot fill bottles, PET jars and closures containerboard  Large injection moulded containers  Corrugated packaging  Trays, fast food containers and clear plastic films  Paper bags, sacks and quick service restaurant (QSR) packaging CENTRES OF EXCELLENCE Human Resources, Safety, Health, Environment, Energy SHARED SERVICES Finance, IS&T, Stellenbosch R&D 3

OVERVIEW Leading market positions with scale to enable competitiveness on a Level 1* decentralised basis B-BBEE RECYCLING CENTRES 40 SITES 5 062 EMPLOYEES *Mpact Operations Pty (Ltd ) 4

OVERVIEW Mpact’s integrated business model is uniquely focused on closing the loop in plastic and paper packaging through recycling and beneficiation of recyclables 5

OVERVIEW Over R1.6 billion invested over past three years to Reduce, Reuse and Recycle  R800 million reduce  Enhanced quality and product offering Felixton Paper Mill rebuild Advanced lightweight containerboard  R800m  Increase capacity by 60,000 tonnes. recycle  Replacement of virgin bagasse fibre with additional 100,000 tons of recycled fibre  R350 million rPET recycling plant recycle  PET recycling operation which produces rPET plastic for food grade packaging. R350m New washing equipment (R35m) has been ordered and is expected to be commissioned early 2019.   R150 million New corrugator in PE reduce Increase in capacity to service the growing citrus volumes in the region.  R150m  Ability to run lighter and stronger reduce reuse  R140 million Plastics converting projects  New 5500T injection mould machine export jumbo bins; new integrated wheelie bin injection moulding recycle R155m  Recycling extrusion line for recovered crates and wheelie bins  2 new lightweight closure lines completed in 2017  R130 million Remade acquisition Complements Mpact Recycling to expand collections of paper and plastic nationally recycle  R130m  These initiatives are in support of the Mpact Polymers rPET operation and the Felixton paper mill upgrade. Strategic objectives are being met.  R50 million Liquid Packaging recycling plant recycle Additional source of recycled fibre to the Spring’s paper mill.  R50m  Post-consumer liquid packaging feedstock still sub-optimum 6

Paper Business

PAPER BUSINESS Paper Business Overview Divisions : Recycling (17) Cartonboard, : Paper Manufacturing (3) containerboard : Paper converting (corrugated and other) (13) Key products : Cartonboard : Containerboard : Retail ready packaging : Regular slotted cartons : POS packaging and displays : Die-cut solutions : Paper bags and sacks : Quick service restaurant packaging Key customers : Packaging converters (containerboard and cartonboard) Standard and customised cases, fruit and : Agricultural producers vegetable trays, retail ready packaging : FMCG companies : Quick service restaurants : Other consumer and industrial packaging companies External Revenue (2018) EBIT (2018) 74% 76%  Paper bags, sacks and Quick R8.3bn R694m service restaurant (QSR) packaging Leader in recovered paper collection, production of cartonboard, recycled containerboard and corrugated packaging 8

PAPER BUSINESS Paper Manufacturing Geographic footprint Customers Geographic sales Containerboard and  Export, 14% cartonboard packaging converters (internal and external) Johannesburg Springs Piet Retief Richards Bay Felixton Durban Domestic, 86% East London Cape Town Port Elizabeth Production capacity in kt Capacity 2019 Mill/Plant Main products (ktpa) Piet Retief Linerboard and semi-chemical fluting 125 200 – 215* Felixton Fully recycled linerboard and fluting Springs Cartonboard and specialities 145 Additionally, Mpact distributes all containerboard products of Mondi Group’s Richards Bay Mill, selling mainly into South Africa and selected markets in sub-Saharan Africa and Indian Ocean Islands *grammage dependent 9

Felixton Paper Mill

FELIXTON MILL 11

FELIXTON MILL History of the Felixton Paper Mill 1950 1960 1970 1980 1990 2000 2010 2020 1953 2007 1973 1979 Felixton Paper Mill was built A new paper The Mill was purchased by Mondi demerged as Ngoye Board Mills, machine was built, the Huletts Group from Anglo 2.2m wide machine 4.5m wide American 2005 Formation of Mondi 1984 Packaging South Africa (MPSA) with Shanduka as The Mill was purchased the black empowerment by Mondi shareholder 2011 MPSA demerged from Mondi and listed on the JSE as Mpact Mill with combination of bagasse and recycled fibre 12

FELIXTON MILL Investments through the years 1996 2000 2010 2020 2015 2017 1996 2008 2011 Bagasse Phase 1 Phase 2 Effluent Clarifier Paper Machine washing plant Khulisa 2.15 Khulisa 2.15 Rebuild R26m R 30m (Khulisa 1) |------- R 800m -------| R170m 1998 New headbox and cleaners R70m 2017 2013 Increased New fully 2004 2007 recycled fibre automated Bagasse belt storage facility Khulisa 1 RCF winder R 40m washer R40m R25m Plant R 80m 2005 Cationic starch cooker R 10m 13

FELIXTON MILL Project Khulisa 2.15 – R800m investment Transformation of the Felixton Paper Mill • Increased capacity by 60,000 tonnes to 215,000 tonnes. • Conversion from using bagasse fibre in our products to a fully recycled fibre product. • Improved product quality and cost competitiveness. Bagasse Fibre Recycled Fibre 14

FELIXTON MILL Strategic Project Considerations Cost competitiveness - Scale, energy efficiency and other variable costs. Domestic market - Products : high quality lightweight recycled fluting and liners. demands - Capacity : to meet growth requirements. Fibre availability - Uncertainty regarding bagasse availability and supply (green energy and drought). Environmental footprint - Improve water and energy usage, effluent quality and increased recycling. Latest technology - Reviewed by international industry experts and major international machine suppliers. 15

FELIXTON MILL Project benefits › Attractive return on capital. › Increased capacity by up to 60 000 tonnes: - to between 200 000 and 215 000 tonnes grammage mix dependent. › Enhanced paper strength properties (two-ply sheet and starch film size press). › Improved cost and energy benefits positioning the mill as a low-cost paper producer. › Provides light weight production capability in-line with international trends. › Environmental benefits include reduction in energy, water, COD and CO 2 . › Qualified for Section 12I tax incentive. › Automated warehouse - efficient storage, stock control and productivity. 16

FELIXTON MILL Recovered fibre pulping process Pulping Screening & Cleaning Fibre Preparation 17

FELIXTON MILL Paper making process Sheet Formation & Dewatering Starch Application & Drying Winding, Finishing & Storage 18

FELIXTON MILL 2015 PRE-REBUILD 19

FELIXTON MILL Automated Product Storage Warehouse Production / Warehouse Interface Roll data Set data Roll movement Shipping lists Roll data change Warehouse Management System Shipping lists Roll set information Inventory of storage Information of storage Transport orders and retrieval points Status of the system KPI (Input/Output) Crane Operator Roll Movement Management Interface System System 20

FELIXTON MILL Operational excellence in action Overall Equipment Efficiency • % Efficiency of Paper Machine Completed without injuries, on 100% time and within budget 90% 80% • 70% Project shut 46 days 60% 50% • Start-up July 2017 40% 30% • Focus on paper machine Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 availability and paper quality Material Efficiency (Quality) • Head count reduced from 230 to OEE Tend Time Efficiency (Availability) 200 permanent employees following closure of bagasse pulp Production Run Rates Per Product plant 110 Paper Machine Activity (Indexed) 100 90 80 70 60 50 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Design Product 1 Product 2 Product 3 21

FELIXTON MILL Project Khulisa Paper machine speeds achieved against design 22

FELIXTON MILL Energy benefits Total Energy Consumption 105 • Equipment selection process Total Energy Input per tonne of paper 100 considered energy efficiency produced (Indexed GJ/T) 95 • Exit from bagasse reduced electrical 90 and steam energy usage per unit 85 • Achieving 12I Tax Incentive Allowance 80 requirements of minimum 15% energy 75 reduction against baseline period 70 2012 2013 2014 2015 2016 2017 2018 2019 Electricity Consumption Carbon Reduction Electricity consumption per tonne of paper Total carbon dioxide emitted (Indexed 110 110 tonnes of carbon / tonne of paper 105 100 produced (Indexed kWh/T) 100 90 produced) 95 80 90 70 85 60 80 75 50 2012 2013 2014 2015 2016 2017 2018 2019 70 2012 2013 2014 2015 2016 2017 2018 2019 23