M-real Corporation Stock Exchange Release July 23, 2008
Result for the first six months of 2008
* Sales EUR 2,164 million (Q1-Q2/2007: 2,253)
* Operating result excluding non-recurring items EUR -18 million
(18). Operating result including non-recurring items EUR 75 million
(81)
* Result before taxes excluding non-recurring items EUR -93 million
(-52). Result before taxes including non-recurring items EUR 0
million (11)
Result for the second quarter of 2008
* Sales EUR 1,065 million (Q1/2008: 1,099)
* Operating result excluding non-recurring items EUR -21 million (3).
Operating result including non-recurring items EUR 51 million (24)
* Result before taxes excluding non-recurring items EUR -56 million
(-37). Result before taxes including non-recurring items EUR 16
million (-16)
Events during the second quarter
* As a part of the EUR 200 million divestment programme announced in
February 2008, M-real sold 100,000 Pohjolan Voima B2 shares to
Kymppivoima for EUR 80 million and fair valued its ownership in
Pohjolan Voima.
* M-real raised the target of the profit improvement programme
announced in November 2007 from EUR 100 million to EUR 150 million
per year."We have found new profit improvements mainly through simplifying
business concepts, which made it possible to raise the target of the
profit improvement programme in May. We will still launch new profit
improvement actions later in the year to cover as much of the heavy
cost inflation as possible. Our divestment programme is seeing good
progress, and we believe in our possibility to exceed the EUR 200
million target by the end of the first quarter of 2009. There is a
definite need to increase the prices for all paper and paperboard
products, and we will do everything we can to achieve the necessary
increases."
Mikko Helander, CEO, M-real Corporation
KEY FIGURES
2008 2008 2007 2008 2007 2007
Q2 Q1 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 1,065 1,099 1,096 2,164 2,253 4,440
EBITDA, EUR million 126 102 66 228 258 444
excl. non-recurring
items, EUR million 54 81 77 135 177 366
Operating result, EUR
million 51 24 -15 75 81 -120
excl. non-recurring
items, EUR million -21 3 -2 -18 18 49
Result before taxes
from continuing
operations, EUR million 16 -16 -44 0 11 -273
excl. non-recurring
items, EUR million -56 -37 -31 -93 -52 -104
Result for the period
from continuing
operations, EUR million 17 -18 -48 -1 4 -250
from discontinued
operations, EUR million -25 -1 -1 -26 1 55
Total, EUR million -8 -19 -49 -27 5 -195
Result per share
from continuing
operations, EUR 0.05 -0.06 -0.15 -0.01 0.01 -0.76
from discontinued
operations, EUR -0.08 0.00 0.00 -0.08 0.00 0.17
Total, EUR -0.03 -0.06 -0.15 -0.09 0.01 -0.59
Result per share excl.
non-recurring items, EUR -0.18 -0.12 -0.12 -0.30 -0.22 -0.32
Return on equity, % -0.3 -3.8 -10.2 -0.1 -0.6 -12.5
excl. non-recurring
items, % -3.0 -8.2 -2.2 -10.0 -7.7 -5.3
Return on capital employed,
% 5.3 2.7 -1.1 4.0 4.1 -2.5
excl. non-recurring
items, % -1.8 0.7 0.1 -0.5 1.3 1.4
Equity ratio at end of
period, % 36.5 35.0 34.5 36.5 34.5 34.4
Gearing ratio at end of
period, % 112 120 119 112 119 124
Net gearing ratio at end of
period, % 100 100 107 100 107 99
Interest-bearing net
liabilities 1,888 1,892 2,192 1,888 2,192 1,867
Gross investments, EUR
million 30 21 62 51 112 259
Paper deliveries, 1,000
tonnes 911 986 965 1,897 1,994 3,949
Paperboard deliveries,
1,000 tonnes 309 298 313 607 615 1,203
Personnel at end of period 9,357 9,122 13,302 9,357 13,302 9,508
EBITDA = Earnings before interest, taxes, depreciation and
amortization
The table includes Pohjolan Voima shares at fair value, which was
approximately EUR 380 million on 30 June, 2008.
Result April-June compared with the previous quarter
M-real's sales totalled EUR 1,065 million (Q1/08: 1,099). Comparable
sales were down 3.1 per cent. The operating result was EUR 51 million
(24), and the operating result excluding non-recurring items was EUR
-21 million (3). A net total of EUR 72 million was recognised as
non-recurring items in the operating result for April-June. The total
consisted of the following items:
* EUR 74 million in Other operations as realised fair value and gain
from the sale of Pohjolan Voima shares
* EUR 2 million cost provision in Other Operations related to the
sales network restructuring programme.
In addition to items recognised in the operating result, a EUR 25
million reduction of the gain on the sale of the Map Merchant Group
in 2007 was booked for Discontinued operations. The finalisation of
the transaction will have a EUR 9 million positive cash effect in the
third quarter of 2008.
The non-recurring items for the previous quarter totalled EUR 21
million net. The total consisted of the following items:
* EUR 24 million positive effect on the result of the Graphic Papers
business area related to the sale of the New Thames mill and the
agreement of the pension liabilities of industrial operations in
the UK, and other liabilities related to the closure of the
Sittingbourne mill
* EUR 2 million cost provision in the Graphic Papers business area to
complete the closure of the Kangas paper machine 2 producing coated
magazine paper
* EUR 1 million cost provision in the Consumer Packaging business
area to complete the closure of the Lielahti BCTMP mill.
The result was weakened by lower delivery volume, annual maintenance
shutdowns, the stronger euro compared with the US dollar and British
pound, and the production curtailments at Metsä-Botnia's mills in
Finland. Result improved due to higher delivery volumes at
Metsä-Botnia's pulp mill in Uruguay, implemented cost saving actions
and achieved price increases.
The total paper delivery volume in April-June was 911,000 tonnes
(986,000). Production was curtailed by 98,000 tonnes in line with
demand (29,000). Paperboard deliveries amounted to 309,000 tonnes
(298,000) and production curtailments were 17,000 tonnes (1,000).
Financial income and expenses totalled EUR -34 million (-40). Foreign
exchange gains and losses from accounts receivables, accounts
payable, financial income and expenses and valuation of currency
hedging were EUR -1 million (0). Net interest and other financial
expenses amounted to EUR -33 million (-40). Other financial expenses
include EUR 7 million of valuation gains on interest rate derivatives
(valuation loss: 3).
In April-June, the result from continuing operations before taxes was
EUR 16 million (-16). The result from continuing operations before
taxes, excluding non-recurring items, totalled EUR -56 million (-37).
Income taxes, including the change in deferred tax liabilities, came
to EUR 1 million (-2).
Earnings per share were EUR -0.03 (-0.06). Excluding non-recurring
items, earnings per share from continuing operations were EUR -0.18
(-0.12). Return on equity was -0.3 per cent (-3.8), excluding
non-recurring items EUR -3.0 (-8.2). The return on capital employed
was 5.3 per cent (2.7); excluding non-recurring items, -1.8 per cent
(0.7).
Result for January-June compared with the corresponding period last
year
M-real's sales totalled EUR 2,164 million (Q1-Q2/07: 2,253).
Comparable sales were down 2.0 per cent. The operating result was EUR
75 million (81), and the operating result excluding non-recurring
items was EUR -18 million (18).
The net total of non-recurring items for January-June was EUR 93
million, the most significant being:
* EUR 74 million in Other operations as realised fair value and gain
from the sale of Pohjolan Voima shares.
* EUR 24 million positive effect on the result of the Graphic Papers
business area related to the sale of the New Thames mill and the
agreement of the pension liabilities of industrial operations in
the UK, and other liabilities related to the closure of the
Sittingbourne mill.
Non-recurring items in January-June 2007 totalled EUR 63 million, the
most significant being:
* EUR 135 million capital gain on the sale of Metsä-Botnia shares
* EUR 14 million cost provision for completing the closure of the
Sittingbourne mill
* EUR 29 million cost provision for finalising the closure of the
Wifsta mill
* EUR 16 million impairment loss from the valuation of assets held
for sale at the expected selling price in compliance with IFRS 5
* EUR 11 million cost provision and asset write-down related to the
profit improvement programme of operations in Finland.
Compared with the previous year, the operating result excluding
non-recurring items was weakened by increased wood raw material and
energy costs, the stronger euro compared with the US dollar and
British pound, and the production curtailments at Metsä-Botnia's
mills in Finland. The result was improved by implemented cost saving
actions and price increases as well as the start up of the
Metsä-Botnia's Uruguay pulp mill in November 2007.
The total paper delivery volume was 1,897,000 tonnes in January-June
(1,994,000). Production was curtailed by 127,000 tonnes (91,000) in
line with demand. Paperboard deliveries amounted to 607,000 tonnes
(615,000) and production curtailments were 18,000 tonnes (48,000).
Financial income and expenses over the period totalled EUR -74
million (-69). Foreign exchange gains and losses from accounts
receivables, accounts payable, financial income and expenses and the
valuation of currency hedging were EUR -1 million (-3). Net interest
and other financial expenses amounted to EUR -73 million (-66). Other
financial expenses include EUR 4 million of valuation gains on
interest rate derivatives (6).
The result from continuing operations before taxes was EUR 0 million
(11). The result from continuing operations before taxes, excluding
non-recurring items, totalled EUR -93 million (-52). Income taxes,
including the change in deferred tax liabilities, were EUR -1 million
(-7).
Earnings per share were EUR -0.09 (0.01). Earnings per share from
continuing operations excluding non-recurring items were EUR -0.30
(-0.22). Return on equity was -0.1 per cent (-0.6), and -10.0 per
cent (-7.7) excluding non-recurring items. Return on capital employed
was 4.0 per cent (4.1); excluding non-recurring items -0.5 per cent
(1.3).
Personnel
The number of personnel was 9,357 on 30 June 2008 (31 December 2007:
9,508), of which 3,639 worked in Finland (3,994). In January-June
2008, M-real employed an average of 9,260 people (Q1-Q2/07: 13,610).
These numbers include 30 per cent of Metsä-Botnia's personnel.
Investments
Gross investments in January-June totalled EUR 51 million (Q1-Q2/07:
112), including a EUR 13 million share of Metsä-Botnia's investments
(72). Metsä-Botnia's investment share is based on the 30 per cent
share of ownership.
Structural change
M-real's profit improvement and complexity reduction programme
launched in November 2007 has proceeded according to the targets. As
part of the programme, the Lielahti BCTMP mill and coated magazine
paper machine 2 of the Kangas mill were closed in early 2008. The
Publishing and Commercial Printing business areas were combined under
the Graphic Papers business area. At the same time, projects were
launched to simplify the coated magazine paper business operations
and to streamline the sales and marketing organisation. As part of
the programme, M-real also announced its readiness to implement other
actions, such as capacity cuts, should changes in the operating
environment so require. In May 2008, the total annual profit
improvement target was raised from the original EUR 100 million to
EUR 150 million. The full impact on result will be achieved by the
end of 2010.
In February 2008, M-real published a target of a minimum of
EUR 200 million from asset divestments, which should be achieved by
the end of the first quarter of 2009. EUR 162 million has been
currently realised within this divestment programme, including the
sale of the New Thames mill and the 100,000 Pohjolan Voima B2 shares.
The positive cash effect of the New Thames mill sale including the
pension liabilities of the industrial operations in the UK was
approximately EUR 82 million. A profit of approximately
EUR 24 million was booked from the transaction. The positive cash
effect from the sale of 100,000 Pohjolan Voima B2 shares was
EUR 80 million and the non-recurring profit EUR 74 million. Other
assets to be included in the divestment programme will be announced
at a later date.
As announced on 13 June 2008, the sale of the Reflex mill to
Arjowiggins was cancelled. The European Commission granted a
conditional approval for the sale, but the conditions made the
transaction impossible to carry out in practice.
Financing
At the end of June, M-real's equity ratio was 36.5 per cent (31
December 2007: 34.4) and the net gearing ratio 100 per cent (99).
Some of M-real's financing agreements set a 120 per cent limit on the
company's net gearing ratio and a 30 per cent limit on the equity
ratio. Calculated as defined in the loan agreements, the net gearing
ratio at the end of June was approximately 86 per cent (86) and the
equity ratio some 42 per cent (40).
Interest-bearing net liabilities totalled EUR 1,888 million at the
end of June (1,867). Foreign-currency-denominated loans accounted for
11 per cent, 93 per cent were floating-rate and the rest were
fixed-rate. At the end of June, the average interest rate on loans
was 7.5 per cent and the average maturity of long-term loans 3.2
years. The interest rate maturity of loans was 4.3 months at the end
of June. During the period, the interest rate maturity has varied
between 4 and 6 months.
In January-June, cash flow from operations amounted to EUR 39 million
(Q1-Q2/2007: 132). Working capital was up by EUR 60 million (18).
At the end of the report period, an average of 5.5 months of the net
foreign currency exposure was hedged. The level of hedging varied
between 5 and 6 months during the period. Approximately 99 per cent
of non-euro-denominated equity was hedged at the end of the review
period.
Liquidity is at a good level. Liquidity at the end of the period was
EUR 926 million, of which EUR 853 million consisted of committed
long-term credit facilities and EUR 73 million of liquid assets and
investments. In addition, to meet its short-term financing needs, the
company had at its disposal non-binding domestic and foreign
commercial paper programmes and credit facilities amounting to about
EUR 500 million.
Shares
In January-June, the highest price of M-real's B shares on the OMX
Nordic Exchange Helsinki was EUR 3.28, the lowest EUR 1.27, and the
average price EUR 2.08. At the end of June, the price of the B shares
was EUR 1.33.
The trading volume of B shares was EUR 600 million, or 100 per cent
of the share capital. The market value of the A and B shares totalled
EUR 454 million at the end of June.
At the end of June Metsäliitto Cooperative owned 38.6 per cent of
M-real Corporation's shares, and the voting rights conferred by these
shares was 60.5 per cent. International investors' holdings decreased
to 26 per cent.
On 9 January 2008, Norges Bank's (Central Bank of Norway) holding in
M-real increased to 5.3 per cent of the share capital and 1.7 per
cent of the voting rights.
On 2 May 2008, Hermes Focus Asset Management Europe Ltd's holding in
M-real decreased to 4.9 per cent of the share capital and 2.3 per
cent of the voting rights.
The Annual General Meeting on 13 March 2008 resolved to delete from
the company's Articles of Association the stipulation on the minimum
and maximum share capital, the record date provisions of book-entry
system and the section concerning the par value of company's share.
Outlook
Demand for M-real's paperboard and magazine paper products in the
main markets is expected to remain good in the third quarter of 2008.
In fine papers there are some signs of demand weakening.
Actions to raise product prices continue in all business areas. The
price increases for folding boxboard and coated magazine paper have
been announced in the main markets, and contract prices are expected
to increase towards the end of the year. Price increases are also
actively sought for coated fine paper. For uncoated fine paper the
need for price increases is also great.
This year, M-real will not be able to fully cover the cost inflation
with its profit improvement actions. New profit improvement
programmes are being launched this year.
Reduction of wood consumption will continue. As announced earlier,
the annual consumption of wood by M-real and Metsä-Botnia will be
reduced by approximately 10 per cent. Pulp sales to external
customers will be reduced, so M-real has good possibilities to
maintain normal paperboard and paper production levels.
M-real's strategic review continues. The profit improvement and
complexity reduction programme announced in November 2007 and the
divestment programme announced in February 2008 are progressing
according to targets.
2008 is a challenging year due to rising production costs, pulp
production curtailments caused by shortage of wood, decrease in the
sales volume of fine papers, the stronger euro and the postponement
of price increases for coated fine paper. As stated in the release
published on 10 July 2008, M-real's operating result for 2008,
excluding non-recurring items, will be weaker than last year due to
the factors mentioned above. However, the operating result for the
third quarter of 2008 excluding non-recurring items is expected to
show a seasonal increase compared with the second quarter.
Near-term business risks
If the uncertainty in the US economy continues for a longer period,
it could spread worldwide and affect negatively the operational
preconditions of European paper and paperboard industry. In M-real's
main market areas in Europe the economy has not shown major signs of
weakening so far. Demand for paperboards and coated magazine paper
seems to continue relatively good. European demand for fine papers
seems nonetheless to be quieting down to some extent. M-real aims at
price increases on a wide front. However, the risk of not achieving
all the targeted increases exists.
The risk of the euro growing even stronger was realised during the
first part of the year. Production input costs have also continued to
increase. Yet additional curtailments to pulp production may be
necessary, if the wood trade continues at a slow pace. The risk of
curtailments in the paper and paperboard production also exists due
to the challenges in wood raw material supply. In addition, the risk
of the euro still continuing to grow stronger exists.
Because the forward-looking estimates and statements of this
financial statements release are based on current plans and
estimates, they contain risks and other uncertain factors which may
lead the results to differ from the statements concerning them. In
the short term, M-real's result will be influenced in particular by
the price of, and demand for, finished products, the availability and
price of wood, other raw material costs, the price of energy, and the
exchange rate of the US dollar. More information about longer-term
risk factors can be found on pages 28-29 of M-real's 2007 Annual
Report.
M-REAL CORPORATION
Further information:
Seppo Parvi, CFO, tel. +358 10 465 4321
Juha Laine, Vice President, IR and Communications, tel. +358 10 465
4335
Further information on 23 July, 2008 from 1 pm (EET)
BUSINESS AREAS AND MARKET DEVELOPMENT
Consumer Packaging 2008 2008 2007 2007 2007 2008 2007 2007
Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 244 235 225 231 243 479 478 934
EBITDA, EUR million 24 36 24 45 28 60 67 136
excl. non-recurring
items 24 37 25 45 33 61 72 142
Operating result, EUR
million 5 18 0 27 8 23 29 56
excl. non-recurring
items 5 19 8 27 15 24 36 71
Return on capital
employed,
% 2.9 9.6 0.1 15.3 4.1 6.3 7.6 7.5
excl. non-recurring
items, % 2.9 10.1 4.3 15.3 7.9 6.6 9.4 9.5
Deliveries, 1,000 tonnes 309 298 291 297 313 607 615 1,203
Production, 1,000 tonnes 294 314 294 303 302 608 613 1,210
EBITDA = Earnings before interest, taxes, depreciation and
amortization
Result for April-June compared with the previous quarter
The operating result for the Consumer Packaging business area,
excluding non-recurring items, dropped from the previous quarter,
amounting to EUR 5 million (Q1/08: 19). The result was weakened by
heavy cost inflation, stronger euro compared with the US dollar and
British pound, production curtailments at Metsä-Botnia's mills in
Finland, as well as annual maintenance shutdowns and the decrease in
product stock. The profitability was improved by implemented cost
saving actions and achieved price increases. No non-recurring items
were recognised in the second quarter.
The operating result for the previous quarter included a
non-recurring item of EUR -1 million.
The deliveries of European folding boxboard producers decreased by 2
per cent compared with the previous quarter. Correspondingly,
M-real's deliveries of folding boxboard were up 2 per cent. The
average selling price remained unchanged.
The delivery volume of linerboard was clearly higher than in the
previous quarter. The euro-denominated selling price was on par with
the previous quarter.
Result for January-June compared with the corresponding period
previous year
The business area's operating result for January-June excluding
non-recurring items totalled EUR 24 million (36). Profitability was
hurt by the considerably higher wood and energy costs, the production
curtailments at Metsä-Botnia's mills in Finland, as well as the
weakened US dollar and British pound. The profitability was improved
by implemented cost saving actions and achieved price increases.
The deliveries of European folding boxboard producers decreased by 2
per cent compared with the corresponding period last year. M-real's
folding boxboard deliveries were at last year's level. The average
euro-denominated price for folding boxboard price was slightly higher
than in the corresponding period last year, in spite of the weaker US
dollar and British pound.
The delivery volume for linerboard was slightly lower than in the
corresponding period last year. The average euro-denominated price
remained the same. The selling price for wallpaper base paper
increased clearly from previous year.
Graphic Papers 2008 2008 2007 2007 2007 2008 2007 2007
Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 530 560 569 574 548 1,090 1,125 2,268
EBITDA, EUR million 23 56 10 52 31 79 58 120
excl.
non-recurring items 23 34 20 48 33 57 74 142
Operating result,
EUR million -19 14 -71 16 -12 -5 -26 -81
excl.
non-recurring items -19 -8 -22 8 -9 -27 -9 -23
Return on capital
employed, % -3.6 2.9 -14.1 3.2 -2.1 -0.4 -2.3 -3.9
excl.
non-recurring
items, % -3.6 -1.5 -4.1 1.7 -1.6 -2.4 -0.7 -0.9
Deliveries, 1,000
tonnes 695 748 761 760 724 1,443 1,481 3,002
Production, 1,000
tonnes 685 755 736 752 735 1,440 1,474 2,962
EBITDA = Earnings before interest, taxes, depreciation and
amortization
Result for April-June compared with the previous quarter
The second quarter operating result for the Graphic Papers business
area, excluding non-recurring items, totalled EUR -19 million (Q1/08:
EUR -8 million). No non-recurring items were recognised in the second
quarter. The result was mainly weakened by the higher fixed costs
caused by the midsummer and annual maintenance shutdowns, as well as
the lower delivery volume and the stronger euro compared with the US
dollar and British pound. Result improved due to higher delivery
volumes at Metsä-Botnia's pulp mill in Uruguay, implemented cost
saving actions and achieved increases for coated magazine paper.
The operating result for the previous quarter included non-recurring
items of net EUR 22 million.
Compared with the previous quarter, total deliveries were down 9 per
cent for European coated fine paper producers and 3 per cent for
European coated magazine paper producers. Total deliveries for the
Graphic Papers business area decreased 7 per cent from the previous
quarter.
Result for January-June compared with the corresponding period
previous year
The operating result for the Graphic Papers business area, excluding
non-recurring items, totalled EUR -27 million (-9). Weakening factors
included increased wood and energy costs, the stronger euro compared
with the US dollar and British pound and the production curtailments
at Metsä-Botnia's mills in Finland. Profitability was improved by the
implemented cost saving actions and the start up of the Uruguay pulp
mill in November 2007 and price increases for coated magazine paper.
The Graphic Paper's operating result for the corresponding period in
the previous year included non-recurring items of net EUR -17
million.
Total deliveries by European coated fine paper producers were on par
with the previous year. Deliveries by European coated magazine paper
producers were up by 2 per cent compared with the previous year.
Graphic Papers business area's total deliveries decreased by 3 per
cent including the impacts of capacity closures.
Office Papers 2008 2008 2007 2007 2007 2008 2007 2007
Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 165 181 171 167 183 346 385 723
EBITDA, EUR million 8 16 25 21 15 24 7 53
excl. non-recurring
items 8 16 20 21 15 24 37 78
Operating result, EUR
million -4 3 -173 7 1 -1 -21 -187
excl. non-recurring
items -4 3 7 7 1 -1 9 23
Return on capital
employed, % -2.4 3.1 - 114.8 4.9 0.6 0.5 -5.7 -29.6
excl. non-recurring
items, % -2.4 3.1 5.3 4.9 0.6 0.5 2.7 4.2
Deliveries, 1,000
tonnes 215 238 219 215 241 453 513 947
Production, 1,000
tonnes 180 200 213 223 257 380 537 973
EBITDA = Earnings before interest, taxes, depreciation and
amortization
Result for April-June compared with the previous quarter
The second quarter operating result for the Office Papers business
area, excluding non-recurring items, totalled EUR -4 million (Q1/08:
3). No non-recurring items were recognised in the second quarter. The
result was weakened by a decrease in the delivery volume and the
heavy cost inflation. The result was improved by implemented cost
saving actions.
Total deliveries by European uncoated fine paper producers were down
by 4 per cent. The Office Papers business area's delivery volumes
decreased by 10 per cent.
Result for January-June compared with the corresponding period
previous year
Office Papers business area's operating result excluding
non-recurring items in January-June totalled EUR -1 million (9).
Profitability was weakened by increased raw material costs,
particularly the cost of wood. Profitability was improved by a rise
in the average selling price and implemented cost saving actions.
Total deliveries by European uncoated fine paper producers were down
by 4 per cent. The Office Papers business area's delivery volumes
decreased by 12 per cent. The figure includes the impact of the
Wifsta mill closure.
The financial statements are unaudited.
Condensed consolidated
income statement 2008 2007 Change 2007 2008 2008
Continuing operations,
EUR million Q1-Q2 Q1-Q2 Q1 Q2
Sales 2,164 2,253 -89 4,440 1,099 1,065
Other operating income 176 181 -5 239 60 116
Operating expenses -2,112 -2,176 64 -4,235 -1,057 -1,055
Depreciation and
impairment
losses -153 -177 24 -564 -78 -75
Operating result 75 81 -6 -120 24 51
% of sales 3.5 3.6 -2.7 2.2 4.8
Share of results in
associated
companies -1 -1 0 -3 0 -1
Exchange gains and
losses -1 -3 2 -3 0 -1
Other net financial
items -73 -66 -7 -147 -40 -33
Result before taxes
from
continuing operations 0 11 -11 -273 -16 16
% of sales 0.0 0.5 -6.1 -1.5 1.5
Income taxes -1 -7 6 23 -2 1
Result for the period
from continuing
operations -1 4 -5 -250 -18 17
% of sales 0.0 0.2 -5.6 -1.6 1.6
Result from
discontinued operations -26 1 -27 55 -1 -25
Result for the period -27 5 -32 -195 -19 -8
-1.2 0.2 -4.4 -1.7 -0.8
Attributable to
Shareholders of parent
company -31 5 -36 -194 -20 -11
Minority interest 4 0 4 -1 1 3
Earnings per share for
result
attributable to
shareholders of
parent company
(EUR/share)
from continuing
operations -0.01 0.01 -0.02 -0.76 -0.06 0.05
from discontinued
operations -0.08 0.00 -0.08 0.17 0.00 -0.08
Total -0.09 0.01 -0.10 -0.59 -0.06 -0.03
Taxes include taxes corresponding to the result for the period under
review.
Condensed consolidated
balance sheet
30.6. 30.6. 31.12.
EUR million 2008 % 2007 % 2007 %
Assets
Non-current assets
Goodwill 172 3.3 376 6.3 172 3.1
Other intangible assets 71 1.4 50 0.9 38 0.7
Tangible assets 2,633 50.7 2,956 49.5 2,820 51.4
Biological assets 43 0.8 44 0.7 47 0.9
Shares in associated
and other companies 449 8.6 355 5.9 390 7.1
Interest-bearing
receivables 26 0.5 34 0.6 27 0.5
Deferred tax receivables 3 0.1 31 0.5 4 0.1
Other non-interest-bearing
receivables 8 0.2 8 0.1 14 0.3
3,405 65.6 3,854 64.5 3,512 64.1
Current assets
Inventories 653 12.6 679 11.4 619 11.3
Interest-bearing
receivables 142 2.7 55 0.9 62 1.1
Non-interest-bearing
receivables 925 17.7 1,179 19.8 908 16.6
Cash and cash equivalents 73 1.4 175 2.9 380 6.9
1,793 34.4 2,088 35.0 1,969 35.9
Assets classified as held
for sale 0 0.0 32 0.5 0 0.0
Total assets 5,198 100 5,974 100 5,481 100
SHAREHOLDERS'
EQUITY AND LIABILITIES
Shareholders' equity
Equity attributable to
shareholders of parent
company 1,836 35.3 2,006 33.6 1,830 33.4
Minority interest 56 1.1 52 0.9 52 0.9
1,892 36.4 2,058 34.5 1,882 34.3
Non-current liabilities
Deferred tax liabilities 307 5.9 334 5.6 290 5.3
Post-employment benefit
obligations 141 2.7 194 3.2 159 2.9
Provisions 45 0.9 81 1.4 72 1.3
Other non-interest-bearing
liabilities 30 0.6 32 0.6 38 0.7
Interest-bearing
liabilities 1,637 31.5 2,123 35.5 1,883 34.4
2,160 41.6 2,764 46.3 2,442 44.6
Current liabilities
Non-interest-bearing
liabilities 655 12.5 814 13.6 704 12.8
Interest-bearing
liabilities 491 9.5 327 5.5 453 8.3
1,146 22.0 1,141 19.1 1,157 21.1
Liabilities relating to
assets
classified as held for sale 0 0.0 11 0.1 0 0.0
Total liabilities 3,306 63.6 3,916 65.5 3,599 65.7
Total shareholders'
equity and liabilities 5,198 100 5,974 100 5,481 100
The table includes Pohjolan Voima shares at fair value, which was
approximately EUR 380 million on 30 June, 2008.
Condensed consolidated
cash flow statement
2008 2007 2007 2008
EUR million Q1-Q2 Q1-Q2 Q2
Result for the period -27 4 -196 -8
Total adjustments 126 146 479 34
Change in working capital -60 -18 42 -27
Cash flow arising from operations 39 132 325 -1
Net financial items -54 -68 -160 -36
Income taxes paid -23 -21 -38 -10
Net cash flow arising from
operating activities -38 43 127 -47
Investments in tangible and
intangible assets -51 -112 -259 -30
Divestments of assets and other 138 275 628 81
Net cash flow arising from
investing activities 87 163 369 51
Share issue, minority interest 2 2 6 0
Changes in long-term loans and
other financial items -337 -197 -282 -128
Dividends paid -20 -20 -20 0
Net cash flow arising from
financing activities -355 -215 -296 -128
Changes in cash and
cash equivalents -306 -9 200 -124
Cash and cash equivalents at
beginning of period 380 182 182 197
Translation difference in cash and
cash equivalents -1 -1 -2 0
Changes in cash and cash equivalents -306 -9 200 -124
Assets held for sale, folding carton plants 0 2 0 0
Cash and cash equivalents
at end of period 73 174 380 73
Statement of changes in shareholders' equity
Fair
value
Trans- and Re- Mi-
Share lation other tained nority
Share pre- dif- re- earn- inter-
EUR million capital mium ference serves ings est Total
Shareholders'
equity
according to
IFRS,
1 Jan. 2007 (as
revised) 558 667 3 222 605 63 2,118
Translation
differences -11 -1 -12
Net investment
hedge 11 11
Available for
sale
investments
recorded in
equity -34 -34
transferred to
incomestatement's
other
operating
income -5 -5
Currency flow
hedges,
recorded in
equity -22 -22
transferred to
income
statement's
sales 11 11
Interest flow
hedges
recorded in
equity 0 0
Commodity
hedges
recorded in
equity 12 12
Transferred to
income
statement's
purchases -5 -5
Tax on equity
components -3 12 9
Net expenses
recognised
directly in
equity -3 -31 -1 -35
Result for the
period 5 5
Total
recognised
income
and expenses
for the period -3 -31 5 -1 -30
Related party
transactions
Changes in
minority
interest
Sale of
Metsä-Botnia
shares (9%) -11
Metsä-Botnia
restructuring
in Uruguay 2
Total -9 -9
Dividends paid -20 -1 -21
Related party
transactions -20 -11 -30
Shareholders'
equity
30.6.2007, IFRS 558 667 0 191 590 52 2,058
Shareholders'
equity
according to
IFRS 1 Jan.
2008 (as
revised) 558 667 -11 225 391 52 1,882
Translation
differences -9 -2 -11
Net investment
hedge 9 9
Available for
sale
investments
recorded in
equity 95 95
transferred to
income
statement's
other
operating
income -28 -28
Currency flow
hedges
recorded in
equity 6 6
transferred to
income
statement's
sales -8 -8
Interest flow
hedges
recorded in
equity -1 -1
transferred
income
statement's
financial items -1 -1
Commodity
hedges
recorded in
equity 14 14
transferred
income
statement's
purchases 2 2
Tax on equity
components -2 -20 -22
Net expenses
recognised
directly in
equity -2 59 -2 55
Loss for the
period -31 4 -27
Total
recognised
income
and expenses
for the period -2 59 -31 2 28
Related party
transactions
Changes in
minority
interest
Metsä-Botnia
restructuring
in Uruguay 2
2 2
Dividends paid -20 -20
Related party
transactions -20 2 -18
Shareholders'
equity
30.6.2008, IFRS 558 667 -13 284 340 56 1,892
Key ratios 2008 2007 2007 2008
Q1-Q2 Q1-Q2 Q2
Sales, EUR million 2,164 2,253 4,440 1,065
EBITDA, EUR million 228 258 444 126
excl. non-recurring items, EUR
million 135 177 366 54
Operating result, EUR million 75 81 -120 51
excl. non-recurring items, EUR
million -18 18 49 -21
Result from continuing operations
before taxes, EUR million 0 11 -273 16
excl. non-recurring items, EUR
million -93 -52 -104 -56
Result for the period
from continuing operations, EUR
million -1 4 -250 17
from discontinued operations,
EUR million -26 1 55 -25
Total, EUR million -27 5 -195 -8
Earnings per share
from continuing operations, EUR -0.01 0.01 -0.76 0.05
from discontinued operations,
EUR -0.08 0.00 0.17 -0.08
Total, EUR -0.09 0.01 -0.59 -0.03
Earnings per share, excl.
non-recurring items
from continuing operations, EUR -0.30 -0.22 -0.32 -0.18
Return on equity, % -0.1 -0.6 -12.5 -0.3
excl. non-recurring items, % -10.0 -7.7 -5.3 -3.0
Return on capital employed, % 4.0 4.1 -2.5 5.3
excl. non-recurring items, % -0.5 1.3 1.4 -1.8
Equity ratio at end of period, % 36.5 34.5 34.4 36.5
Gearing at end of period, % 112 119 124 112
Net gearing at end of period, % 100 107 99 100
Shareholders' equity per share at
end of period, EUR 5.60 6.11 5.58 5.60
Net interest-bearing liabilities
at end of period, EUR million 1,888 2,192 1,867 1,888
Gross capital expenditure, EUR
million 51 112 259 30
Paper deliveries, 1,000 tonnes 1,897 1,994 3,949 911
Board deliveries, 1,000 tonnes 607 615 1,203 309
Personnel at end of period 9,357 13,302 9,508 9,357
EBITDA = Earnings before interest, taxes, depreciation and
amortization
The table includes Pohjolan Voima shares at fair value, which was
approximately EUR 380 million on 30 June, 2008.
Securities and guarantees 2008 2007 2007
EUR million Q2 Q2
For own liabilities 58 56 61
On behalf of associated companies 1 1 1
On behalf of Group companies 5 5 4
On behalf of others 3 2 3
Total 67 64 69
Open derivative contracts 2008 2007 2007
EUR million Q2 Q2
Interest rate derivatives 1,815 2,373 1,954
Foreign exchange derivatives 3,326 3,563 3,809
Other derivatives 176 183 133
Total 5,317 6,119 5,896
The fair value of open derivative contracts calculated at market
value was EUR 27.7 million at the end of the review period (EUR 14.7
million 31 December 2007 and EUR 5.9 million 30 June 2007).
The gross amount of open contracts also includes closed contracts,
totalling EUR 2,623.2 million (31 December 2007: EUR 2,713.9 million
and 30 June 2007 EUR 2,308.6).
Commitments related to fixed
assets 2008 2007 2007
EUR million Q2 Q2
Payments in less than a year 5 48 22
Payments later 1 5 4
Changes in property,
plant and equipment 2008 2007 2007
EUR million Q2 Q2
Carrying value at beginning of
period 2,820 3,156 3,156
Capital expenditure 51 110 250
Decrease -73 -143 -186
Depreciation and impairment
losses -145 -155 -346
Translation difference -20 -12 -54
Carrying value at end of period 2,633 2,956 2,820
Related-party transactions
Transactions with parent company
and sister companies 2008 2007 2007
EUR million Q2 Q2
Sales 16 19 34
Other operating income 2 136 138
Purchases 318 255 549
Interest income 3 1 3
Interest expenses 3 4 8
Non-current receivables 19 20 19
Current receivables 117 64 41
Non-current liabilities 0 1 1
Current liabilities 34 43 149
Transactions with associated
companies 2008 2007 2007
Q2 Q2
Sales 0 0 0
Purchases 2 2 4
Non-current receivables 2 7 0
Current receivables 10 0 7
Current liabilities 2 3 3
Accounting policies
The interim report was prepared in accordance with the IAS 34
standard Interim Financial Reporting and the accounting policies
presented in M-real's Annual Report 2007.
The figures in the financial statement release are unaudited.
Taxes include taxes corresponding to the result for the period under
review.
Calculation of key ratios
(Result from continuing operations
Return on equity (%) = before tax - direct taxes) per
(Total equity (average)) (Result from continuing operations
before tax + interest expenses, net
Return on capital exchange gains/losses and other
employed (%) = financial expenses) per
(Total assets - non-interest-bearing
liabilities (average))
Equity ratio (%) = (Total equity) per
(Total assets - advance payments
received)
Gearing ratio (%) = (Interest-bearing liabilities) per
(Total equity)
(Interest-bearing liabilities - liquid
funds - interest-bearing receivables)
Net gearing ratio (%) = per
(Total equity)
(Profit attributable to shareholders of
Earnings per share = parent company) per
(Adjusted number of shares (average))
Shareholders' equity per (Equity attributable to shareholders of
share = parent company) per
(Adjusted number of shares at end of
review period)
Quarterly information
Sales and result
by segment, 2008 2008 2007 2007 2007 2008 2007
EUR million Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Consumer 244
Packaging 235 225 231 243 479 478
Graphic Papers 530 560 569 574 548 1,090 1,125
Office Papers 165 181 171 167 183 346 385
Internal sales
and
other operations 126 123 120 130 122 249 265
Sales 1,065 1,099 1,085 1,102 1,096 2,164 2,253
Consumer 24
Packaging 36 24 45 28 60 67
Graphic Papers 23 56 10 52 31 79 58
Office Papers 8 16 25 21 15 24 7
Other operations 71 -6 11 -2 -8 65 126
EBITDA 126 102 70 116 66 228 258
% of sales 11.8 9.3 6.5 10.5 6.0 10.5 11.5
Consumer 5
Packaging 18 0 27 8 23 29
Graphic Papers -19 14 -71 16 -12 -5 -26
Office Papers -4 3 -173 7 1 -1 -21
Other operations 69 -11 -1 -7 -12 58 99
Operating result 51 24 -245 43 -15 75 81
% of sales 4.8 2.2 -22.6 3.9 -1.5 3.5 3.6
Share of results
in
associated
companies -1 0 -3 1 -1 -1 -1
Exchange gains
and
losses -1 0 2 -2 2 -1 -3
Other net
financial items -33 -40 -42 -39 -29 -73 -66
Result from
continuing 16
operations
before tax -16 -288 4 -44 0 11
Income taxes 1 -2 39 -9 -4 -1 -7
Result for the
period
from continuing 17
operations -18 -249 -5 -48 -1 4
Result for
period from -25
discontinued
operations -1 57 -3 -1 -26 1
Result for the -8
period -19 -192 -8 -49 -27 5
Minority 3
interest 1 0 1 0 4 0
Financial result
attributable to
shareholders of
parent company -11 -20 -192 -7 -49 -31 5
Earnings per -0.03
share, EUR -0.06 -0.58 -0.02 -0.15 -0.09 0.01
Non-recurring
items 2008 2008 2007 2007 2007 2008 2007
EUR million Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Consumer
Packaging 0 -1 -8 0 -7 -1 -7
Graphic Papers 0 22 -49 7 -2 22 -16
Office Papers 0 0 -180 0 0 0 -30
Other operations 72 0 -2 0 -4 72 116
Non-recurring
items in
operating result 72 21 -239 7 -13 93 63
Non-recurring
items in
financial items 0 0 0 0 0 0 0
Non-recurring
items
total 72 21 -239 7 -13 93 63
Consumer
Packaging 24 37 25 45 33 61 72
Graphic Papers 23 34 20 48 33 57 74
Office Papers 8 16 20 21 15 24 37
Other operations 1 -6 13 -3 -4 -7 -5
EBITDA, excl.
non-
recurring items 54 81 78 111 77 135 177
% of sales 5.1 7.4 7.2 10.1 7.0 6.2 7.9
Consumer
Packaging 5 19 8 27 15 24 36
Graphic Papers -19 -8 -22 8 -9 -27 -9
Office Papers -4 3 7 7 1 -1 9
Other operations -3 -11 1 -6 -9 -14 -18
Operating result
excl.
non-recurring
items -21 3 -6 36 -2 -18 18
% of sales -2.0 0.3 -0.6 3.3 -0.2 -0.8 0.8
Result before
taxes,
excl.
non-recurring
items -56 -37 -49 -3 -31 -93 -52
% of sales -5.3 -3.4 -4.5 -0.2 -2.8 -4.3 -2.3
Result per
share, excl.
non-recurring
items,
EUR -0.18 -0.12 -0.07 -0.04 -0.12 -0.30 -0.22
Return on
equity, excl.
non-recurring
items, % -3.0 -8.2 -0.4 -0.9 -2.2 -10.0 -7.2
Return on
capital
employed, excl.
non-
recurring items,
% -1.8 0.7 -0.3 3.5 0.1 -0.5 1.3
Return on
capital
employed 2008 2008 2007 2007 2007 2008 2007
% Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Consumer
Packaging 2.9 9.6 0.1 15.3 4.1 6.3 7.6
Graphic Papers -3.6 2.9 -14.1 3.2 -2.1 -0.4 -2.3
Office Papers -2.4 3.1 -114.8 4.9 0.6 0.5 -5.7
Group 5.3 2.7 -23.1 4.1 -1.1 4.0 4.1
Capital employed 2008 2008 2007 2007 2007 2007
EUR million Q2 Q1 Q4 Q3 Q2 Q1
Consumer
Packaging 778 781 731 742 741 777
Graphic Papers 2,120 1,998 1,907 2,046 2,042 2,077
Office Papers 422 475 518 681 665 669
Other equity 700 894 1,061 719 726 700
Group 4,020 4,148 4,218 4,188 4,174 4,223
The capital employed for a segment included its assets: goodwill,
other intangible goods, tangible assets, biological assets,
investments in associates, inventories, accounts receivables,
prepayments and accrued income (excluding interest and taxes), less
the segment's liabilities (accounts payable, advance payments,
accruals and deferred income (excluding interest and taxes).
Personnel 2008 2007 2007
Average Q1-Q2 Q1-Q2
Consumer Packaging 1,340 1,556 1,504
Graphic Papers 4,842 5,260 5,135
Office Papers 1,346 1,710 1,657
Other continuing operations 1,733 2,670 2,372
Discontinued operations - 2,414 2,007
Total 9,260 13,610 12,675
Deliveries 2008 2008 2007 2007 2007 2008 2007
1,000 tonnes Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Consumer
Packaging 309 298 291 297 313 607 615
Graphic Papers 695 748 761 760 724 1,443 1,481
Office Papers 215 238 219 215 241 1,440 513
Paper segments,
total 911 986 980 975 965 1,897 1,994
Production 2008 2008 2007 2007 2007 2008 2007
1,000 tonnes Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Consumer
Packaging 294 314 294 303 302 608 613
Graphic Papers 685 755 736 752 735 1,440 1,474
Office Papers 180 200 213 223 257 380 537
Paper mills,
total 865 955 949 975 992 1,820 2,011
Metsä-Botnia pulp
1) 233 252 235 203 200 485 403
M-real pulp 424 446 400 455 398 870 824
1) corresponds to M-real's share of 30 per cent in Metsä-Botnia
M-real's operating result excluding non-recurring items EUR -18 million for the first half of the year
| Source: Metsä Board Oyj
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