M-real Corporation Interim report 1 January-31 March 2009



M-real Corporation Interim report 1 January-31 March 2009
22.4.2009 at 11.30 a.m.

M-real's operating result excluding non-recurring items for first
quarter of 2009 EUR -65 million

Result for the first quarter of 2009
* Sales EUR 623 million (Q1/2008: 859)
* Operating result excluding non-recurring items EUR -65 million
  (14). Operating result including non-recurring items EUR -118
  million (37)
* Result before taxes excluding non-recurring items EUR -62 million
  (-21). Result before taxes including non-recurring items EUR -115
  million (2)
* Result per share from continuing operations excluding non-recurring
  items EUR -0.18 (-0.06), and, including non-recurring items EUR
  -0.32 (0.00)

Events during the first quarter
* The renewed management and reporting structure including the
  Consumer Packaging, Office Papers and Other Papers business areas
  as well as the Market Pulp and Energy reporting segment was
  announced.
* Statutory negotiations concerning 1,500 people in mill operations
  in Finland were concluded.
* Statutory negotiations concerning 480 people were conducted at the
  Hallein mill in Austria. Paper production will be discontinued by
  the end of April. At Gohrsmühle, Germany, standard coated fine
  paper production will be discontinued during April while the
  production of speciality papers and uncoated fine paper reels and
  folio sheets will be expanded.
* A new EUR 80 million profit improvement programme and a separate
  programme of EUR 60 million to improve the cash flow were launched.
* M-real repurchased from the market its own EUR 400 million senior
  floating rate notes in the total par value of EUR 59.95 million.
  The loan matures in December 2010. A gain of approximately EUR 31
  million was booked from the repurchases."At the beginning of the year, the demand for our main products was
weak due to the global recession, and the continuing decline in the
price of pulp. We continued our major profit improvement programmes,
which will, concurrently with declining wood raw material and
chemical costs, ease the challenging situation. In the current
difficult operational environment, improving cash flow and securing
liquidity is most important."

Mikko Helander, CEO, M-real Corporation


                                2009   2008  2008    2008  2008  2008
KEY FIGURES                       Q1     Q4    Q3      Q2    Q1
Sales, EUR million               623    722   826     829   859 3,236
EBITDA, EUR million              -48    -18    49     127    96   254
  excl. non-recurring items,
EUR million                      -13      4    60      55    73   192
Operating result, EUR million   -118   -161    -8      71    37   -61
  excl. non-recurring items,
EUR million                      -65    -51     3      -1    14   -35
Result before taxes
  from continuing operations,
EUR
  million                       -115   -197   -45      36     2  -204
  excl. non-recurring items,
EUR million                      -62    -87   -34     -36   -21  -178
Result for the period
  from continuing operations,
EUR
  million                       -105   -163   -44      37     0  -170
  from discontinued
operations, EUR
  million                        -10    -62  -212     -45   -19  -338
  Total, EUR million            -115   -225  -256      -8   -19  -508
Result per share
  from continuing operations,
EUR                            -0.32  -0.50 -0.15    0.10  0.00 -0.55
  from discontinued
operations, EUR                -0.03  -0.19 -0.64   -0.14 -0.06 -1.03
  Total, EUR                   -0.35  -0.69 -0.79   -0.04 -0.06 -1.58
Result per share
  excl. non-recurring items,
EUR                            -0.18  -0.17 -0.13   -0.12 -0.06 -0.48
Return on equity, %            -32.0  -43.3 -10.1     7.9   0.0 -10.4
  excl. non-recurring items, % -17.6  -14.5  -8.3    -7.4  -4.8  -9.0
Return on capital employed, %  -13.4  -19.7  -0.5     8.9   5.7  -1.3
  excl. non-recurring items, %  -7.0   -6.2   1.0    -0.2   2.9  -0.5
Equity ratio at end of period,
%                               30.3   30.8  32.5    36.5  35.0  30.8
Gearing ratio at end of
period, %                        151    152   129     112   120   152
Net gearing ratio at end of
period, %                        101     90   114     100   100    90
Interest-bearing net
liabilities                    1,243  1,254 1,865   1,888 1,892 1,254
Gross investments, EUR million    16     39    38      30    21   128
Deliveries, 1,000 tonnes
  Paper businesses               321    394   438     448   481 1,761
  Consumer Packaging             274    303   348     351   342 1,345
Personnel at the end of period
  in continuing operations     6,314  6,546 6,679   7,035 6,866 6,546
  in discontinued operations                2,159   2,322 2,256


Map Merchant Group divested in 2007 and Graphic Papers business
divested in 2008 have been reported in Discontinued operations.

Result January-March compared with the previous quarter
M-real's sales totalled EUR 623 million (Q4/2008: 722). Comparable
sales were down 13.6%. Operating result was EUR -118 million (-161),
and operating result excluding non-recurring items was EUR -65
million (-51).

The non-recurring items recognised in operating result amounted to
EUR -53 million net, the most significant being:

*  EUR 28 million cost provisions and write-downs for the closure of
  the Hallein paper mill in Other Papers business area.
*  EUR 22 million cost provisions and write-downs related to the
  closure of Metsä-Botnia's Kaskinen mill. Of these, EUR 16 million
  was recognised in Consumer Packaging, and EUR 6 million in Market
  Pulp and Energy.
*  EUR 2 million cost for the streamlining of the salesnet in Other
  operations.

Non-recurring items in the previous quarter totalled EUR -110 million
net, the most significant being:

*  EUR 86 million impairment charges under IAS 36.
*  EUR 14 million cost provision for streamlining M-real's business
  structure to reflect the divestment of Graphics Papers business in
  Other operations.
*  EUR 10 million cost provision and write-down for the closure of
  the New Thames mill's cut-size operations in Office Papers.

Compared with the previous quarter, the operating result excluding
non-recurring items was weakened by the decrease in delivery volumes
due to a weakened demand situation, the lower pulp sales price, and
the decrease in values of product, wood and pulp inventories. The
result was improved by implemented price increases and cost savings.

In January-March, the total delivery volume of the paper businesses
was 321,000 tonnes (394,000). The deliveries by Consumer Packaging
amounted to 274,000 tonnes (303,000).

Financial income and expenses over the period totalled EUR +4 million
(-36). Foreign exchange gains and losses from accounts receivables,
accounts payable, financial income and expenses and the valuation of
currency hedging were EUR 0 million (+11). Net interest and other
financial income and expenses amounted to EUR 4 million (-47). Other
financial expenses include EUR 2 million of valuation gains on
interest rate derivatives (valuation loss: 3). Financial income
includes an approximately EUR 31 million gain from the repurchase of
EUR 400 million senior floating rate notes maturing in December 2010.

The cash flow from financial items during the period was positive. On
the year-end balance sheet, there was an unexceptionally high amount
of valuation gains which will had a cash impact.

In January-March, the result from continuing operations before taxes
was EUR -115 million (-197). The result from continuing operations
before taxes excluding non-recurring items totalled EUR -62 million
(-87). Income taxes, including the change in deferred tax
liabilities, were EUR +10 million (+34).

Earnings per share were EUR -0.35 (-0.69). Earnings per share from
continuing operations excluding non-recurring items were EUR -0.18
(-0.17). Return on equity was -32.0% (-43.3), and -17.6% (-14.5)
excluding non-recurring items. Return on capital employed was -13.4%
(-19.7); excluding non-recurring items -7.0% (-6.2).

Result for January-March compared with the corresponding period the
previous year
M-real's sales totalled EUR 623 million (Q1/2008: 859). Comparable
sales were down 27.5%. Operating result was EUR -118 million (+37),
and operating result excluding non-recurring items was EUR -65
million (+14).

In January-March, the non-recurring items amounted to EUR -53 million
net, the most significant being:

* EUR 28 million cost provisions and write-downs for the closure of
  the Hallein paper mill in Other Papers business area
* EUR 22 million cost provisions and write-downs related to the
  closure of Metsä-Botnia's Kaskinen mill
* EUR 2 million cost for the streamlining of the salesnet in Other
  operations.

The operating result excluding non-recurring items compared with the
previous quarter was weakened by the decrease in demand resulting in
lower delivery volumes and values of product, wood and pulp
inventories. The result was improved by the implemented price
increases and cost savings.

In January-March, the total delivery volume the paper businesses was
321,000 tonnes (481,000). Consumer Packaging's deliveries amounted to
274,000 tonnes (342,000).

Financial income and expenses in the review period totalled EUR +4
million (-35). Foreign exchange gains and losses from accounts
receivables, accounts payable, financial income and expenses and the
valuation of currency hedging were EUR 0 million (+2). Net interest
and other financial income and expenses amounted to EUR +4 million
(-37). Other financial expenses include EUR 2 million of valuation
gain on interest rate derivatives (valuation loss: 3). Financial
income includes approximately EUR 31 million gain from the repurchase
of EUR 400 million senior floating rate notes maturing in December
2010.

The cash flow of financial items in the review period was positive.
On the year-end balance sheet, there was an unexceptionally high
amount of valuation gains which will had a cash impact.

In the review period, the result from continuing operations before
taxes was EUR -115 million (2). The result from continuing operations
before taxes excluding non-recurring items totalled EUR -62 million
(-21). Income taxes, including the change in deferred tax
liabilities, came to EUR +10 million (-2).

Earnings per share were EUR -0.35 (-0.06). Excluding non-recurring
items, earnings per share from continuing operations were EUR -0.18
(-0.06). Return on equity was -32.0% (0.0), excluding non-recurring
items EUR -17.6 (-4.8). The return on capital employed was -13.4%
(+5.7); excluding non-recurring items, -7.0% (+2.9).

Personnel
The number of personnel in continuing operations was 6,314 on 31
March 2009 (31 December 2008: 6,546), of which 2,189 (2,258) worked
in Finland. In January-March 2009, M-real employed an average of
6,384 people (Q1/08: 9,087). M-real's number of personnel
incorporates 30% of Metsä-Botnia's personnel.

Investments
Gross investments in January-March totalled EUR 16 million (Q1/2008:
21), including a EUR 3 million share of Metsä-Botnia's investments
(13). Metsä-Botnia's investment share is based on M-real's 30%
ownership share.

Structural change
In February 2009, M-real launched a new profit improvement programme
with an annual target of EUR 80 million. The programme targets at
savings in the business areas and streamlining the support functions
to reflect the new company structure after the divestment of Graphic
Papers. The full annual effect of the programme will be visible from
2011. The majority of the profit improvement measures are expected to
be implemented in 2009, and the profit impact is estimated to be EUR
20-25 million in 2009. The related non-recurring costs booked during
2009 are expected to be about EUR 18 million. M-real is also
implementing a separate EUR 60 million programme to improve the 2009
cash flow including, e.g., the reduction of operating net working
capital and cuts in investments.

In 2008, M-real announced to be planning the discontinuation of the
standard coated fine paper production at the Hallein and Gohrsmühle
mills based on earlier examined strategic options. Both mills have
been loss-making for a long period of time. Statutory negotiations
were conducted at the Hallein mill, Austria, in January 2009,
resulting in 480 people being made redundant. Paper production will
be discontinued by the end of April. At the Gohrsmühle mill, Germany,
the standard coated fine paper production will be discontinued in
April. At Gohrsmühle, the production of speciality papers as well as
uncoated fine paper reels and folio sheets will be expanded. The
combined annual production capacity of standard coated fine paper at
the Hallein and Gohrsmüle mills is about 0.6 million tonnes. M-real
continues to explore various options for the Hallein pulp mill.

In Finland, statutory negotiations concerning 1,500 people at mill
operations were conducted to carry out temporary lay-offs. The
statutory negotiations were conducted from 30 January to 2 February,
2009 in different locations. The lay-offs will be implemented in
varying periods during the year. The maximum total lay-off period is
90 days.

The reorganisation of salesnet after the Graphic Papers divestment
was carried out during the first quarter, and the statutory
negotiations were concluded by the end of March. The statutory
negotiations were conducted from 30 January to 2 February, 2009 in
different locations. The statutory negotiations, conducted
simultaneously in 14 countries, concerned some 310 people in sales,
customer service and administration. Some 50 people were transferred
to M-real's other businesses and some 160 people were made redundant.
After the divestment of Graphic Papers, Sappi recruited some 100
people from M-real's salesnet.

The strategic review of the paper business continues.

Changes in top management
Matti Mörsky, SVP, Business Development, was appointed CFO. Mörsky
will start in his new position at a later announced date. The current
CFO, Seppo Parvi, will join another company at the latest in July
2009.

Financing
At end of March 2009, M-real's equity ratio was 30.3% (31 December
2008: 30.8), the gearing ratio 151% (2008: 152) and the net gearing
101 (90). Some of M-real's financing agreements set a 120% limit on
the company's net gearing ratio and a 30% limit on the equity ratio.
Calculated as defined in the loan agreements, the net gearing ratio
at the end of the year was approximately 81% (74) and the equity
ratio some 35% (36).

At the end March, interest-bearing net liabilities totalled EUR 1,243
million (1,254). Foreign-currency-denominated loans accounted for
15%; 94% were floating-rate and the rest were fixed-rate. At the end
of March, the average interest rate on loans was 6.7% and the average
maturity of long-term loans 2.8 years. The interest rate maturity of
loans was 3.8 months at the end of March. During the review period,
the interest rate maturity has varied between 3 and 4 months.

In January-March, cash flow from operations was EUR -20 million
(Q4/2008: 16). Working capital was down by EUR 50 million (down 26).

At end of review period, an average of 4.2 months of the net foreign
currency exposure was hedged. The level of hedging varied between 4
and 5 months during the period. Approximately 89% of
non-euro-denominated equity was hedged at the end of the review
period.

Liquidity continues to be at a good level. The approximately EUR 400
million cash settlement at the end of December from the Graphic
Papers divestment improved M-real's liquidity and financing position
considerably. Liquidity at the end of the period was EUR 1,195
million, of which EUR 894 million consisted of committed long-term
credit facilities and EUR 301 million of liquid assets and
investments. The company also had interest-bearing receivables worth
EUR 316 million. 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 some
EUR 550 million. At the beginning of 2009, refinancing negotiations
with banks have been initiated to secure future liquidity. If
necessary, the sale of the vendor loan note, received from Sappi in
relation to divestment of Graphic Papers in December 2008, will be
considered as part of liquidity management.

M-real repurchased from the market its own EUR 400 million senior
floating rate notes maturing in December 2010 in the total par value
of EUR 59.95 million. A gain of approximately EUR 31 million was
booked from the repurchases.

On 16 January 2009, Standard & Poor's downgraded M-real's B- rating
to CCC+. The outlook of the rating remains negative. Downgrade has an
annual impact of approximately EUR 2 million on M-real's current
annual financing costs.

On 13 February 2009, Moody's Investors Service downgraded M-real's B3
rating to Caa1. The outlook of the rating remains negative. Downgrade
has an annual impact of approximately EUR 2 million on M-real's
current annual financing costs.

Shares
In January-March 2009, the highest price of M-real's B share on the
NASDAQ OMX Helsinki Ltd was EUR 0.86, the lowest EUR 0.19, and the
average price EUR 0.42. At end of March, the price of the B share was
EUR 0.28.

The trading volume of B shares was EUR 63 million, or 52% of the
share capital. At the end of March, the market value of the A and B
shares totalled EUR 111 million.

At end of March, Metsäliitto Cooperative owned 38.6% of M-real
Corporation's shares, and the voting rights conferred by these shares
was 60.5%. International investors' holdings decreased to 16%.

On 5 February, Financier de l'Echiquier SA's holding in M-real
decreased to 4.8% of the share capital and 1.6% of the voting rights.

The company does not possess its own shares.

Consideration of the result for the financial year and dividend
The distributable funds of the parent company as of 31 December 2008
were EUR -303,901,093.04 of which the result for the financial year
is EUR -535,312,028.39. Thus, the company does not have distributable
funds. The Annual General Meeting decided that no dividend is paid
for the financial year ending on 31 December 2008.

Board of Directors and Auditors
The Annual General Meeting confirmed that the number of Board members
is nine (9). The Annual General Meeting elected as members of
M-real's Board of Directors Martti Asunta, M.Sc. (Forestry); Kari
Jordan, Honorary Counsellor; Erkki Karmila, LL.M.; Kai Korhonen,
M.Sc. (Technology); Liisa Leino, M.Edu.; Runar Lillandt, Counsellor
of Agriculture; Juha Niemelä, Honorary Counsellor; Antti Tanskanen,
Minister, and Erkki Varis, M.Sc. (Technology). The term of office of
the members of the Board of Directors expires at the end of the next
Annual General Meeting.

At its organising meeting the Board of Directors elected Kari Jordan
as its Chairman and Martti Asunta as its Vice Chairman. The Board
further resolved to organize the Board committees. The members of the
Audit Committee are Erkki Karmila (Chairman), Kai Korhonen, Antti
Tanskanen and Erkki Varis. The members of the combined Nomination and
Compensation Committee are Kari Jordan (Chairman), Martti Asunta,
Liisa Leino, Runar Lillandt and Juha Niemelä.

The Annual General Meeting elected as M-real's auditor Authorized
Public Accountants PricewaterhouseCoopers Oy. The term of office of
the auditor expires at the end of the next Annual General Meeting.

The Annual General Meeting instructed the Board of Directors to
investigate possibilities and the related terms to merge the
company's A- and B-series shares. The investigation results were
instructed to be presented to the next General Meeting.

Near-term outlook
During the coming months, demand and delivery volumes seem to remain
clearly weaker than during the corresponding period last year. Major
production curtailments will be continued.

The current level of product prices is defended by production
curtailments.

At present, it seems possible that the pulp cycle will turn in the
second half of 2009.

The profit improvement programmes implemented at M-real, concurrently
with declining wood raw material and chemical costs, will ease the
challenging profitability situation.

Due to the significant uncertainties in the general economy,
providing profit forecasts is exceptionally challenging at present.
As a result and for the time being, M-real will not provide forecasts
on the estimated result development when presenting the future
outlook.

Near-term business risks
The weakening of and the general uncertainty in the global economy
have also had a negative impact on the operating preconditions of the
European paper and paperboard industry, and there is a risk that the
recession in the global economy will deepen. There are uncertainties
related to the availability of corporate funding due to the general
financial market situation.

Production may be curtailed more than planned due to weak demand. The
risk of declining product prices exists.

The risk of the euro strengthening, which would have a negative
impact on operational preconditions of the industry, still exists.

During the first part of the year, cash flow has remained
satisfactory despite the clearly negative result. There is a risk of
weakening cash flow development if the global recession is prolonged.
M-real has significant assets that can, if needed, be divested in
order to ensure sufficient financing.

Because the forward-looking estimates and statements of these
financial statements are based on current plans and estimates, they
contain risks and other uncertain factors that may cause the results
to differ from the statements concerning them.

In the short term, M-real's result will be particularly affected by
the price of, and demand for, finished products, raw material costs,
the price of energy, and the exchange rate development of the euro.

More information about longer-term risk factors can be found on pages
37-38 of M-real's 2008 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 22 April, 2009 from 1 p.m. (EET). The
conference call and webcast for investors and analysts begins at 3
p.m. (EET).

BUSINESS AREAS AND MARKET DEVELOPMENT

                               2009  2008   2008   2008 2008  2008
Consumer Packaging               Q1    Q4     Q3     Q2   Q1
Sales, EUR million              226   248    274    274  266 1,061
EBITDA, EUR million              15    11     37     23   37   108
  excl. non-recurring items      19    11     37     23   38   109
Operating result, EUR million   -17   -13     17      3   17    24
  excl. non-recurring items      -1    -9     17      3   18    29
Return on capital employed,  % -8.8  -6.0    8.3    1.4  8.7   3.2
  excl. non-recurring items, % -0.4  -4.0    8.3    1.4  9.2   3.8
Deliveries, 1,000 tonnes        274   303    348    351  342 1,345
Production, 1,000 tonnes        292   293    347    335  361 1,336


Result for January-March compared with the previous quarter
The operating result excluding non-recurring items for the Consumer
Packaging business area improved from the previous quarter and was
EUR -1 million (Q4/2008: -9). The result was improved by the
increased average price resulting from achieved price increases last
year and low fixed costs. However, the result was negatively impacted
by reduced delivery volumes due to a weakened demand and by the lower
value of inventories mainly resulting from the decline in the market
price of pulp.

In addition, EUR 16 million cost provisions and write-downs related
to the closure of the Metsä-Botnia's Kaskinen mill were recognised in
the result.

The result for the previous quarter included non-recurring items of
EUR 4 million.

The deliveries of European folding boxboard producers were 7% lower
compared with the previous quarter. Consumer Packaging's folding
boxboard deliveries fell by 9%.

Result for January-March compared with the corresponding period the
previous year
The operating result excluding non-recurring items for the Consumer
Packaging weakened compared with the corresponding period last year
and totalled EUR -1 million (Q1/2008: 18). The most significant
factor weakening the result was declining demand. The result was
improved by achieved price increases, implemented cost savings
actions and the strengthened US dollar.

The result for the corresponding period the previous year included
non-recurring items of EUR 1 million.
The deliveries of European folding boxboard producers fell by 20%
compared with the corresponding period the previous year. Consumer
Packaging's folding boxboard deliveries fell by 20%.


                               2009  2008   2008   2008 2008  2008
Office Papers                    Q1    Q4     Q3     Q2   Q1
Sales, EUR million              147   174    203    204  223   804
EBITDA, EUR million              -2    -3     11     10   17    35
 excl. non-recurring items       -2    -1     11     10   17    37
Operating result, EUR million   -17   -38     -6     -7   -2   -53
 excl. non-recurring items      -17   -14     -6     -7   -2   -29
Return on capital employed, % -12.4 -25.6   -3.2   -3.2 -0.6  -7.4
 excl. non-recurring items, % -12.4  -9.2   -3.2   -3.2 -0.6  -3.8
Deliveries, 1,000 tonnes        203   237    270    274  300 1,081
Production, 1,000 tonnes        199   177    226    245  257   905


Result for January-March with the previous quarter
The operating result excluding non-recurring items for the Office
Papers business area weakened compared with the previous quarter and
was EUR -17 million (Q4/2008: -14). The result was weakened by the
declining demand and lower average selling price. The result was
improved by lower raw material costs. The result did not include
non-recurring items.

The operating result for the previous quarter included non-recurring
items of EUR -24 million net.

Total deliveries by European uncoated fine paper producers were down
by 6% compared with the previous quarter. The delivery volume of
Office Papers fell by 14%. The figure includes the effect of the
divestment of the New Thames mill.

Result for January-March compared with the corresponding period the
previous year
The operating result excluding non-recurring items for Office Papers
weakened compared to the corresponding period the previous year and
totalled EUR -17 million (Q1/2008: -2). The result was weakened by
the lower average selling price and the declining demand for
products. The result did not include non-recurring items.

The result for the corresponding period the previous year did not
include non-recurring items.

Total deliveries by European uncoated fine paper producers were down
by 18% compared with the corresponding period the previous year. The
delivery volume of Office Papers fell by 32 per cent.  The figure
includes the effect of the divestment of the New Thames mill.


                               2009  2008   2008   2008 2008  2008
Other Papers                     Q1    Q4     Q3     Q2   Q1
Sales, EUR million              117   147    153    158  164   622
EBITDA, EUR million             -33    -1      7      8   31    45
 excl. non-recurring items       -5     1      7      9    7    23
Operating result, EUR million   -40   -75     -3     -2   21   -59
 excl. non-recurring items      -12    -8     -3     -1   -3   -15
Return on capital employed, % -43.4 -63.5   -2.3   -1.2 18.1 -14.3
 excl. non-recurring items, % -12.5  -5.8   -2.3   -0.8 -2.6  -3.4
Deliveries, 1,000 tonnes        118   157    168    174  181   680
Production, 1,000 tonnes         99   160    170    186  190   705


Result for January-March compared with the previous quarter
The operating result excluding non-recurring items for the Other
Papers business area weakened compared to the previous quarter and
was EUR -12 million (Q4/2008: -8). The result was weakened by the
heavy decline in demand. The result was improved by the increase in
the average selling price.

Cost provision and write-downs of EUR 28 million were recognised in
the operating result as non-recurring items related to the closure of
Hallein paper mill.

The operating result for the previous quarter included EUR -67
million net of non-recurring items.

Total deliveries by European coated fine paper manufacturers fell by
17% compared with the previous quarter. The delivery volume of Office
Papers fell by 25 per cent.

Result for January-March compared with the corresponding period the
previous year
The operating result excluding non-recurring items for Other Papers
weakened compared with the corresponding period previous year and
totalled EUR -12 million (Q1/2008: -3). The result was weakened by
the heavy decline in the demand for products. The result was improved
by increased selling prices and implemented cost savings actions.

Cost provision and write-downs of EUR 28 million were recognised in
the operating result as non-recurring items related to the closure of
Hallein paper mill.

The result for the corresponding period the previous year included
non-recurring items of EUR 24 million.

Total deliveries by European coated fine paper producers fell by 28%
compared with the corresponding quarter the previous year. The
delivery volume of Office Papers fell by 35%.


                              2009  2008   2008   2008 2008  2008
Market Pulp and Energy          Q1    Q4     Q3     Q2   Q1
Sales, EUR million             134   150    172    160  162   644
EBITDA, EUR million             -4     8     23     96   21   148
 excl. non-recurring items      -3     8     23     22   21    73
Operating result, EUR million  -18    -2     12     86   10   106
 excl. non-recurring items     -12    -2     12     12   10    32
Return on capital employed, % -8.4  -1.3    5.1   37.3  4.7  12.6
 excl. non-recurring items, % -5.8  -1.3    5.1    4.8  4.7   3.6
Deliveries, 1,000 tonnes       287   264    291    279  281 1,115


Result for January-March compared with the previous quarter
The operating result excluding non-recurring items for the Market
Pulp and Energy reporting segment weakened compared with the previous
quarter and was EUR -12 million
(Q4/2008: -2). The result was weakened by the lower selling price of
pulp and the production curtailments at pulp mills due to low demand.
The result was improved by lower wood costs.

In addition, cost provisions and write-downs of EUR 6 million related
to the closure of the Metsä-Botnia's Kaskinen mill were recognised in
the result.

The result for the previous quarter did not include non-recurring
items.

Result for January-March compared with the corresponding period the
previous year
The operating result for the Market Pulp and Energy reporting segment
weakened compared with the corresponding period last year and
totalled EUR -12 million (Q1/2008: 10). The result was weakened by
the lower selling price of pulp and the production curtailments of
pulp mills due to low demand. The result was improved by lower wood
costs.

In addition, cost provisions and write-downs of EUR 6 million related
to the closure of the Metsä-Botnia's Kaskinen mill were recognised in
the result.

The result for the corresponding period the previous year did not
include non-recurring items.

The financial statements are unaudited.


Condensed consolidated statement of comprehensive income
                                      2009   2008 Change   2008  2008
 EUR million                            Q1     Q1                  Q4
Continuing operations
Sales                                  623    859   -236  3,236   722
Other operating income                  33     47    -14    182     9
Operating expenses                    -704   -810    106 -3,164  -749
Depreciation and impairment
losses                                 -70    -59    -11   -315  -143
Operating result                      -118     37   -155    -61  -161
  % of sales                         -18.9    4.3          -1.9 -22.3
Share of results in associated
companies                               -1      0     -1     -1     0
Exchange gains and losses                0      2     -2     13    11
Other net financial items                4    -37     41   -155   -47
Result before income tax              -115      2   -117   -204  -197
  % of sales                         -18.5    0.2          -6.3 -27.3
Income taxes                            10     -2     12     34    34
Result for the period from
continuing operations                 -105      0   -105   -170  -163
  % of sales                         -16.9      0          -5.3 -22.6
Discontinued operations
Result from discontinued
operations                             -10    -19      9   -338   -62
Result for the period                 -115    -19    -96   -508  -225

Other comprehensive income
Cash flow hedges                        -1     -4      3    -41   -29
Available for sale financial
assets                                 -63     70   -133     87    17
Currency translation differences         3     -5      8     11     5
Other items                              0             0      0     0
Income tax relating to components
of other
comprehensive income                    18    -18     36    -19    -4
Other comprehensive income, net
of tax                                 -43     43    -86     38   -11

Total comprehensive income for
the period                            -158     24   -182   -470  -236
Result attributable to
Shareholders of parent company        -116    -20    -96   -517  -225
Minority interest                        1      1      0      9     0
                                      -115    -19    -96   -508  -225

Total comprehensive income attributable to
Shareholders of parent company        -162     25   -187   -481  -237
Minority interest                        4     -1      5     11     1
                                      -158     24   -182   -470  -236
Earnings per share for result attributable
to shareholders of
parent company (EUR/share)
  from continuing operations         -0.32   0.00  -0.32  -0.55 -0.50
  from discontinued operations       -0.03  -0.06   0.03  -1.03 -0.19
Total                                -0.35  -0.06  -0.29  -1.58 -0.69



Condensed consolidated        31.3.         31.3.         31.12.
balance sheet EUR million      2009    %     2008    %      2008    %
Assets
Non-current assets
Goodwill                         51  1.2      172  3.2        51  1.1
Other intangible assets          61  1.5       74  1.4        51  1.1
Tangible assets               1,766 43.4    2,680 49.6     1,808 40.1
Biological assets                60  1.5       44  0.8        57  1.3
Investments in associated
companies                        61  1.6       64  1.3        63  1.4
Available for sale
investments                     380  9.3      396  7.3       440  9.8
Non-current financial
assets                          231  5.7       34  0.6       232  5.2
Deferred tax receivables          5  0.1        5  0.1         5  0.1
                              2,615 64.3    3,469 64.3     2,707 60.1
Current assets
Inventories                     465 11.4      651 12.0       505 11.2
Accounts receivables and
other receivables               689 16.9    1,087 20.1       743 16.5
Cash and cash equivalents       301  7.4      197  3.6       550 12.2
                              1,455 35.7    1,935 35.7     1,798 39.9

Total assets                  4,070  100    5,404  100     4,505  100

SHAREHOLDERS'
EQUITY AND LIABILITIES
Shareholders' equity
Equity attributable to
shareholders of parent
company                       1,667 28.7    1,835 34.0     1,329 29.5
Minority interest                61  1.5       52  1.0        57  1.3
                              1,228 30.2    1,887 35.0     1,386 30.8
Non-current liabilities
Deferred tax liabilities        202  5.0      306  5.5       232  5.1
Post-employment benefit
obligations                      91  2.2      141  2.6        98  2.2
Provisions                       97  2.4       61  1.1        99  2.2
Borrowings                    1,517 37.3    1,797 33.3     1,568 34.8
Other liabilities                16  0.4       36  0.7        18  0.4
                              1,923 47.3    2,341 43.2     2,015 44.7
Current liabilities
Current borrowings              343  8.4      464  8.6       538 11.9
Accounts payable and other
liabilities                     576 14.1      712 13.2       566 12.6
                                919 22.5    1,176 21.8     1,104 24.5
Total liabilities             2,842 69.8    3,517 65.0     3,119 69.2
Total shareholders' equity
and liabilities               4,070  100    5,404  100     4,505  100



Condensed consolidated cash flow statement
                                      2009 2008  2008  2008
EUR million                             Q1   Q1          Q4
Result for the period                 -114  -19  -508  -225
Total adjustments                       44   92   619   215
Change in working capital               50  -33     7    26
Cash flow arising from operations      -20   40   118    16
Net financial items                     16  -18  -193  -129
Income taxes paid                       -3  -13   -22    -2
Net cash flow arising from
operating activities                    -7    9   -97  -115

Investments in tangible and
intangible assets                      -16  -21  -128   -39
Divestments of assets and other          2   57   483   342
Net cash flow arising from
investing activities                   -14   36   355   303

Share issue, minority interest           0    2     2     0
Changes in long-term loans and
other financial items                 -229 -209   -71   226
Dividends paid                           0  -20   -20     0
Net cash flow arising from
financing activities                  -229 -227   -89   226
Changes in cash and
cash equivalents                      -250 -182   169   414

Cash and cash equivalents at
beginning of period                    550  380   380   133
Translation difference in cash and
cash equivalents                         1   -1     1     0
Changes in cash and cash equivalents  -250 -182   169   414
Assets held for sale                     0    0     0     3
Cash and cash equivalents
at end of period                       301  197   550   550


Statement of changes in shareholders' equity

                     Equity attributable to shareholders of parent company
                                             Fair
                             Share          value   Re-
                              pre-  Trans-    and tain-       Minor-
                              mium  lation  other    ed          ity
                       Share   ac- differ-    re- earn-       inter-
EUR million          capital count    ence serves  ings Total    est Total
Shareholders'equity,
1 January, 2008          558   667     -11    225   391 1,830     52 1,882
Dividends paid                                      -20   -20          -20
Metsä-Botnia
restructuring
in Uruguay                                                         1     1
Comprehensive income
for the period                          -4     48   -19    25     -1    24
Shareholders' equity
31 March, 2008           558   667     -15    273   352 1,835     52 1,887

Shareholders'
equity,
1 January, 2009          558   667      -9    259  -146 1,329     57 1,386

Comprehensive income
for the period                           1    -47  -116  -162      4  -158
Shareholders' equity
 31 March, 2008          558   667      -8    212  -262 1,167     61 1,228



                                         2009     2008     2008  2008
Key ratios                                 Q1       Q1             Q4
Sales, EUR million                        623      859    3 236   722
EBITDA, EUR million                       -48       96      254   -18
 excl. non-recurring items, EUR
million                                   -13       73      192     4
Operating result, EUR million            -118       37      -61  -161
  excl. non-recurring items, EUR
million                                   -65       14      -35   -51
Result from continuing operations
  before taxes, EUR million              -115        2     -204  -197
  excl. non-recurring items, EUR
million                                   -62      -21     -178   -87
Result for the period
  from continuing operations, EUR
million                                  -105        0     -170  -163
  from discontinued operations, EUR
million                                   -10      -19     -338   -62
Total, EUR million                       -115      -19     -508  -225
Earnings per share
  from continuing operations, EUR       -0.32     0.00    -0.55 -0.50
  from discontinued operations, EUR     -0.03    -0.06    -1.03 -0.19
Total, EUR                              -0.35    -0.06    -1.58 -0.69
Earnings per share, excl.
non-recurring items
from continuing operations, EUR         -0.18    -0.06    -0.48 -0.17
Return on equity, %                     -32.0      0.0    -10.4 -43.3
  excl. non-recurring items, %          -17.6     -4.8     -9.0 -14.5
Return on capital employed, %           -13.4      5.7     -1.3 -19.7
  excl. non-recurring items, %           -7.0      2.9     -0.5  -6.2
Equity ratio at end of period, %         30.3     35.0     30.8  30.8
Gearing at end of period, %               151      120      152   152
Net gearing at end of period, %           101      100       90    90
Shareholders' equity per share at
end of period, EUR                       3.56     5.59     4.05  4.05
Net interest-bearing liabilities
at end of period, EUR million           1,243    1,892    1,254 1,254
Gross capital expenditure, EUR
million                                    16       21      128    39
Deliveries, 1,000 tonnes
Paper business                            321      481    1 761   394
Consumer Packaging                        274      342    1 345   303
Personnel at end of period
  In continuing operations              6,314    6,866    6,546 6,546
  In discontinued operations                     2,256



Securities and guarantees          2009  2008  2008
EUR million                          Q1    Q1
For own liabilities                  57    59    61
On behalf of associated companies     1     1     1
On behalf of Group companies          5     4     5
On behalf of others                   5     3     2
Total                                68    67    69

Open derivative contracts          2009  2008  2008
EUR million                          Q1    Q1
Interest rate derivatives         1,271 1,735 1,286
Foreign exchange derivatives      2,541 3,112 2,805
Other derivatives                   289   150   185
Total                             4,101 4,997 4,276


The fair value of open derivative contracts calculated at market
value was EUR -37.1 million at the end of the review period (EUR 15.0
million 31 December 2008).

The gross amount of open contracts also includes closed contracts,
totalling EUR 1,836.0 million (31 December 2008: EUR 2,068.8
million).


Commitments related to fixed assets         2009      2008   2008
EUR million                                     Q1      Q1
Payments in less than a year                     0       5      0
Payments later                                   1       1      1

Changes in property,
plant and equipment                           2009    2008   2008
EUR million                                     Q1      Q1
Carrying value at beginning of period        1,808   2,820  2,820
Capital expenditure                             13      21    128
Decrease                                         0     -72   -670
Depreciation and impairment losses             -65     -56   -282
related to discontinued operations               0     -19   -149
Translation difference                          10     -14    -39
Carrying value at end of period              1,766   2,680  1,808

Depreciation and impairment losses related to discontinued
operations include write-downs and impairments
of Graphic Papers business.



Related-party transactions
Transactions with parent company 2009 2008 2008
and sister companies EUR million   Q1   Q1
Sales                               7   11   34
Other operating income              1    1    3
Purchases                          92  161  571
Interest income                     2    1    7
Interest expenses                   1    1    4
Non-current receivables             5   19    5
Current receivables                67   49   49
Non-current liabilities             0    0    0
Current liabilities                99   46  228

Transactions with associated     2009 2008 2008
companies                          Q1   Q1
Sales                               0    0    0
Purchases                           0    1    4
Non-current receivables             0    2    0
Current receivables                 7    8    7
Current liabilities                 2    3    2


Accounting policies
This unaudited interim report has been prepared in accordance with
accounting policies set out in International Accounting Standard 34
and in the M-real's Annual Report for 2008.

The Group has adopted the following standards: IAS 1 (revisited),
Presentation of Financial Statements. The revisited standard is aimed
at improving users' ability to analyse and compare the information
given in financial statements by separating changes in equity of an
entity arising from transactions with owners from other changes in
equity. The Group presents non-owner changes in equity in the
statement of comprehensive income.

IFRS 8, Operating Segments. The new standard replaces IAS 14. The new
standard requires a 'management approach', under which segment
information is presented on the same basis as that used for internal
reporting purposes.

The operating segments are the same as in 2008 according to IAS 14 or
Consumer Packaging, Office Papers, Other Papers and Market Pulp and
Energy.

The figures in the financial statement release are unaudited.

Calculation of key ratios


                           = (Result from continuing operations
Return on equity (%)         before tax - direct taxes) per
                             (Shareholders' equity (average))

                             (Result from continuing operations
                           = before tax + interest expenses,
Return on capital employed   net exchange gains/losses and other
(%)                          financial expenses) per
                             (Shareholders' equity + interest-bearing
                             borrowings (average))

Equity ratio (%)           = (Shareholders' equity) per
                             (Total assets - advance payments
                             received)

Gearing ratio (%)          = (Interest-bearing borrowings) per
                             (Shareholders' equity)

                             (Interest-bearing borrowings - liquid
                           = funds - interest-bearing receivables)
Net gearing ratio (%)        per
                             (Shareholders' 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
                             period)


Quarterly information

Sales and result
by segment,              2009  2008  2008  2008  2008  2007  2008
EUR million                Q1    Q4    Q3    Q2    Q1    Q4
Consumer Packaging        226   248   274   274   266   259 1 061
Office Papers             147   174   203   204   223   213   804
Other Papers              117   147   153   158   164   161   622
Market Pulp and Energy    134   150   172   160   162   147   644
Other operations           34    57    77    87   102   107   323
Internal sales            -35   -54   -53   -54   -58   -59  -218
Sales                     623   722   826   829   859   828 3 236

Consumer Packaging         15    11    37    23    37    26   108
Office Papers              -2    -3    11    10    17    26    35
Other Papers              -33    -1     7     8    31    -4    45
Market Pulp and Energy     -4     8    23    96    21    11   148
Other operations          -24   -33   -29   -10   -10     5   -82
EBITDA                    -48   -18    49   127    96    64   254
  % of sales             -7.7  -2.5   5.9  15.3  11.2   7.7   7.8

Consumer Packaging        -17   -13    17     3    17    -1    24
Office Papers             -17   -38    -6    -7    -2  -179   -53
Other Papers              -40   -75    -3    -2    21   -12   -59
Market Pulp and
Energy                    -18    -2    12    86    10     7   106
Other operations          -26   -33   -28    -9    -9    -3   -79
Operating result         -118  -161    -8    71    37  -188   -61
 % of sales             -18.9 -22.3  -1.0   8.6   4.3 -22.7  -1.9

Non-recurring items
EUR million
Consumer Packaging        -16    -4     0     0     0    -8    -5
Office Papers               0   -24     0     0     0  -183   -24
Other Papers              -28   -67     0    -1    24    -2   -44
Market Pulp and Energy     -6     0     0    74     0    -1    74
Other operations           -3   -14   -11    -1    -1    -3   -27
Non-recurring items in
operating result          -53  -110   -11    72    23  -197   -26

Consumer Packaging         19    11    37    23    38    27   109
Office Papers              -2    -1    11    10    17    23    37
Other Papers               -5     1     7     9     7    -1    23
Market Pulp and Energy     -3     8    23    22    21    12    73
Other operations          -22   -15   -18    -8   -10     6   -50
EBITDA, excl. non-
recurring items           -13     4    60    55    73    66   192
% of sales               -2.1   0.6   7.3   6.6   8.5   8.0   5.9

Operating result, excl.  2009  2008  2008  2008  2008  2007  2008
non-recurring items        Q1    Q4    Q3    Q2    Q1    Q4
Consumer Packaging         -1    -9    17     3    18     7    29
Office Papers             -17   -14    -6    -7    -2     4   -29
Other Papers              -12    -8    -3    -1    -3   -10   -15
Market Pulp and Energy    -12    -2    12    12    10     8    32
Other operations          -23   -18   -17    -8    -9     0   -52
Group                     -65   -51     3    -1    14     9   -35
% of sales              -10.4  -7.1   0.4  -0.1   1.6   1.1  -1.1

Return on capital
employed %
Consumer Packaging       -8.8  -6.0   8.3   1.4   8.7   0.1   3.2
Office Papers           -12.4 -25.6  -3.2  -3.2  -0.6 -79.9  -7.4
Other Papers            -43.4 -63.5  -2.3  -1.2  18.1 -11.4 -14.3
Market Pulp and Energy   -8.4  -1.3   5.1  37.3   4.7   3.5  12.6
Group                   -13.4 -19.7  -0.5   8.9   5.7 -22.4  -1.3

Capital employed
EUR million
Consumer Packaging        774   801   839   829   813   823   801
Office Papers             517   556   645   664   726   808   556
Other Papers              312   415   518   532   522   398   415
Market Pulp and Energy    876   899   929   921   912   752   899
Unallocated and
eliminations              609   822   -12   165   263   522   822
Group                   3,088 3,493 2,919 3,111 3,236 3,303 3,493


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                     2009   2008   2008
Average                         Q1     Q1
Consumer Packaging           1,527  1,655  1,664
Office Papers                1,462  1,704  1,561
Other Papers                 2,004  2,035  2,016
Metsä-Botnia                   533    552    569
Other continuing operations    858  1,068  1,039
Discontinued operations          0  2,251  2,238
Total                        6,384  9,265  9,087



Deliveries            2009   2008    2008    2008   2008   2007  2008
1,000 tonnes            Q1     Q4      Q3      Q2     Q1     Q4
Consumer Packaging     274    303     348     351    342    336 1,345
Office Papers          203    237     270     274    300    284 1,081
Other Papers           118    157     168     174    181    177   680
Paper business, total  321    394     438     448    481    461 1,761
Market Pulp            287    264     291     279    281    247 1,115

Production            2009   2008    2008    2008   2008   2007  2008
1,000 tonnes            Q1     Q4      Q3      Q2     Q1     Q4
Consumer Packaging     292    293     347     335    361    339 1,336
Office Papers          199    177     226     245    257    279   905
Other Papers            99    160     170     186    190    182   705
Paper business, total  298    337     396     431    447    461 1,610
Metsä-Botnia pulp 1)   231    235     270     233    252    225   990
M-real pulp            277    303     377     391    415    369 1,486

1) corresponds to M-real's ownership share of 30% in Metsä-Botnia

Attachments

M-real Interim report January-March 2009.pdf