2009-07-23 11:00:00 CEST
2009-07-23 11:01:11 CEST
REGULATED INFORMATION
M-real - Interim report (Q1 and Q3)
M-real Corporation Interim report 1 January-30 June 2009
M-real Corporation Interim report 1 January-30 June 2009
23.7.2009 at 12:00
M-real's operating result for the first half of the year excluding
non-recurring items was EUR -135 million
Result for the first half of 2009
* Sales were EUR 1,208 million (Q1-Q2/2008: 1,688).
* The operating result excluding non-recurring items amounted to EUR
-135 million (13). The operating result including non-recurring
items was EUR -191 million (108).
* The result before taxes excluding non-recurring items totalled EUR
-145 million (-57). The result before taxes including non-recurring
items totalled EUR -212 million (38).
* Earnings per share from continuing operations excluding
non-recurring items were EUR -0.42 (-0.18) and including
non-recurring items EUR -0.61 (0.10)
Result for the second quarter of 2009
* Sales were EUR 585 million (Q1/2009: 623).
* The operating result excluding non-recurring items amounted to EUR
-70 million (-65). The operating result including non-recurring
items was EUR -73 million (-118).
* The result before taxes excluding non-recurring items totalled EUR
-83 million (-62). The result before taxes including non-recurring
items totalled EUR -97 million (-115).
* Earnings per share from continuing operations excluding
non-recurring items were EUR -0.24 (-0.18) and including
non-recurring items EUR -0.29 (-0.32)
Events during the second quarter
* The revised organisational structure was published. The Other
Papers business area was renamed Speciality Papers
* Matti Mörsky started as M-real's CFO
* The Hallein paper mill was closed down and the production of
standard coated fine paper was discontinued at the Gohrsmühle mill
Events after the period
* On 15 July 2009, M-real's associated company Oy Metsä-Botnia Ab and
its owners, M-real Corporation, Metsäliitto Cooperative and
UPM-Kymmene Corporation, signed a letter of intent regarding the
divestment of the pulp mill and forests located in Fray Bentos,
Uruguay, to UPM"Despite the weak demand environment, we have been able to defend
paper and board prices. Pulp prices have been rising now for almost
four months, and we believe that the positive development will
continue. We are particularly pleased to say that despite the poor
financial performance, we have succeeded in keeping our operating
cash flow neutral mainly by lowering operating net working capital."
Mikko Helander, CEO, M-real Corporation
KEY FIGURES 2009 2009 2008 2009 2008 2008
Q2 Q1 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 585 623 829 1,208 1,688 3,236
EBITDA, EUR million -23 -48 127 -71 223 254
excl. non-recurring items, EUR
million -20 -13 55 -33 128 192
Operating result, EUR million -73 -118 71 -191 108 -61
excl. non-recurring items, EUR
million -70 -65 -1 -135 13 -35
Result before taxes
from continuing operations, EUR
million -97 -115 36 -212 38 -204
excl. non-recurring items, EUR
million -83 -62 -36 -145 -57 -178
Result for the period
from continuing operations, EUR
million -93 -105 37 -198 37 -170
from discontinued operations,
EUR million -2 -10 -45 -12 -64 -338
Total, EUR million -95 -115 -8 -210 -27 -508
Result per share
from continuing operations,
EUR -0.29 -0.32 0.10 -0.61 0.10 -0.55
from discontinued operations,
EUR -0.01 -0.03 -0.14 -0.04 -0.20 -1.03
Total, EUR -0.30 -0.35 -0.04 -0.65 -0.10 -1.58
Result per share
excl. non-recurring items,
EUR -0.24 -0.18 -0.12 -0.42 -0.18 -0.48
Return on equity, % -32.1 -32.0 7.9 -31.9 4.0 -10.4
excl. non-recurring items, % -27.2 -17.6 -7.4 -22.0 -6.1 -9.0
Return on capital employed, % -10.2 -13.4 8.9 -11.5 7.3 -1.3
excl. non-recurring items, % -8.3 -7.0 -0.2 -7.3 1.4 -0.5
Equity ratio at end of period,
% 29.4 30.3 36.5 29.4 36.5 30.8
Gearing ratio at end of period,
% 168 151 112 168 112 152
Net gearing ratio at end of
period, % 116 101 100 116 100 90
Interest-bearing net liabilities,
EUR million 1,276 1,243 1,888 1,276 1,888 1,254
Gross investments, EUR million 16 16 30 32 51 128
Deliveries, 1 000 tonnes
Paper businesses 269 321 448 590 929 1,761
Consumer Packaging 296 274 351 570 693 1,345
Personnel at the end of period
in continuing operations 6,080 6,314 7,035 6,080 7,035 6,546
in discontinued operations 2,322 2,322
EBITDA = Earnings before interest, taxes, depreciation
and impairment charges
Map Merchant divested in 2007 and the Graphic Papers divested in 2008
are reported under discontinued operations.
Result for April-June compared with the previous quarter
M-real's sales totalled EUR 585 million (Q1/2009): 623). Comparable
sales were down 6.2 per cent. The operating result was EUR -73
million (-118), and the operating result excluding non-recurring
items was EUR -70 million (-65).
Non-recurring items in the operating result for January-June totalled
EUR -3 million net consisting of the following:
* EUR 1 million cost provision in the Consumer Packaging business
area related to personnel cuts.
* EUR 1 million cost provision in the Speciality Papers business
area connected to the closure of the Hallein paper mill.
* EUR 1 million cost under Other operations related to the
streamlining of the sales network.
The non-recurring items for the previous quarter totalled EUR -53
million net. The key items were:
* EUR 28 million cost provision and write-downs of in the
Speciality Papers business area connected to the closure of the
Hallein paper mill.
* EUR 22 million cost provisions and write-downs of associated
with the closure of the Metsä-Botnia Kaskinen mill. This total
consists of EUR 16 million related to the Consumer Packaging
business area and EUR 6 million to the Market Pulp and Energy
segment.
* EUR 2 million cost under Other operations related to the
streamlining of the sales network.
Compared to the previous period, the operating result excluding
non-recurring items was weakened by low pulp sales prices, a decrease
in the price of uncoated fine paper and cost associated with the
discontinuation of the coated fine paper production. The result was
boosted by the implemented cost savings.
The total paper business delivery volume was 269,000 tonnes for
April-June (321,000). Deliveries by the Consumer Packaging business
area totalled 296,000 tonnes (274,000).
Financing income and expenses totalled EUR -12 million (+4). Foreign
exchange gains and losses from accounts receivable, accounts payable,
financial income and expenses and the valuation of currency hedging
were EUR 2 million (0). Net interest and other financing income and
expenses were EUR -14 million (4). Other financial expenses include
EUR 7 million of valuation gains on interest rate hedges (valuation
gain: 2). The financing income of the previous quarter includes a
profit of about EUR 31 million from repurchases of M-real's EUR 400
million bond due in December 2010.
The result from continuing operations in April-June before taxes was
EUR -97 million (-115). The result includes a non-recurring item of
EUR -11 million from the Sunila pulp mill divested by Myllykoski
Paper in the line "share of results in associated companies". The
result from continuing operations before taxes and non-recurring
items was EUR -83 million (-62). Income taxes, including the change
in deferred tax liabilities, came to EUR +4 million (+10).
Earnings per share were EUR -0.30 (-0.35). Earnings per share from
continuing operations excluding non-recurring items were EUR -0.24
(-0.18). The return on equity was -32.1 per cent (-32.0); excluding
non-recurring items, -27.2 per cent (-17.6). Return on capital
employed was -10.2 per cent (-13.4); excluding non-recurring items
-8.3 per cent (-7.0).
Result for January-June compared with the corresponding period last
year
M-real's sales totalled EUR 1,208 million (1,688). Comparable sales
were down 24.9 per cent. Operating result was EUR -191 million
(+108), and the operating result excluding non-recurring items was
EUR -135 million (+13).
Non-recurring items in the operating result for January-June totalled
EUR -56 million net, including the following key items:
* EUR 29 million cost provisions and write-downs of in the
Speciality Papers business area connected to the closure of the
Hallein paper mill.
* EUR 22 million cost provisions and write-downs of associated with
the closure of the Metsä-Botnia Kaskinen mill. This total consists
of EUR 16 million related to Consumer Packaging business area and
EUR 6 million to Market Pulp and Energy segment.
* EUR 3 million cost under Other operations related to the
streamlining of the sales network.
The non-recurring items of the corresponding period in the previous
year were EUR 95 million net.
Compared to the corresponding period last year, the operating result
excluding non-recurring items was weakened by the reduced delivery
volumes caused by weakened demand and the reduced value of product,
wood and pulp inventories. The result was improved by the implementedprice increases and cost savings.
The total paper business delivery volume was 590,000 tonnes for
January-June (930,000). Consumer Packaging deliveries totalled
570,000 tonnes (693,000).
Financial income and expenses over the period totalled EUR -8 million
(-69). Foreign exchange gains and losses from accounts receivable,
accounts payable, financial income and expenses and the valuation of
currency hedging were EUR 2 million (1). Net interest and other
financing income and expenses stood at EUR -10 million (-70). Other
financial expenses include EUR 9 million of valuation gains on
interest rate derivatives (valuation gain: 4). The financing income
of the review period includes a profit of about EUR 31 million from
repurchases of M-real's EUR 400 million bond due in December 2010.
The result from continuing operations over the review period before
taxes was EUR -212 million (38). The result includes a non-recurring
item of EUR -11 million from the Sunila pulp mill divested by
Myllykoski Paper in the line "share of results in associated
companies". The result from continuing operations before taxes and
excluding non-recurring items was EUR -145 million (-57). Income
taxes, including the change in deferred tax liabilities, came to EUR
+14 million (-1).
Earnings per share were EUR -0.65 (-0.10). Earnings per share from
continuing operations excluding non-recurring items were EUR -0.42
(-0.18). The return on equity was -31.9 per cent (4.0); excluding
non-recurring items -22.0 per cent (-6.1). Return on capital employed
was -11.5 per cent (+7.3); excluding non-recurring items -7.3 per
cent (1.4).
Personnel
On 30 June 2009, the company had 6,080 employees (31 March 2009:
6,314), of which 2,318 (2,189) worked in Finland. In January-June
2009, M-real employed an average of 6,252 people (2008: 9,087). The
numbers include 30 per cent of Metsä-Botnia's personnel.
Investments
Gross investments in January-June totalled EUR 32 million
(Q1-Q2/2008: 51). Investments include a EUR 6 million share of
Metsä-Botnia's capital expenditure (13). Metsä-Botnia's investment
share is based on M-real's 30 per cent ownership.
Structural change
In February 2009, M-real launched a new profit improvement programme
with an annual target of EUR 80 million. The improvement actions
target at savings in the business areas and streamlining the support
functions to reflect the new company structure and size 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 launched also 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. At Hallein, paper
production was discontinued at the end of April 2009. At the
Gohrsmühle mill, the standard coated fine paper production was
discontinued in April. At Gohrsmühle, the production of speciality
papers as well as uncoated fine paper reels and folio sheets has been
expanded. M-real continues to explore various options for the Hallein
pulp mill.
The organisation of M-real was revised following the closure of the
Hallein paper mill and the discontinuation of standard coated fine
paper production at the Gohrsmühle mill. The Other Papers business
area was renamed Speciality Papers. The new structure took effect on
17 June 2009.
The strategic review of M-real's paper business continues.
Management changes
Matti Mörsky started as M-real's CFO on 4 May 2009.
On 17 June 2009, Heikki Husso was appointed Head of the Speciality
Papers business area, and Soili Hietanen was appointed Head of Market
Pulp and Energy segment. Hietanen is also responsible for contract
manufacturing between M-real and Sappi.
Financing
At the end of June 2009, M-real's equity ratio was 29.4 per cent (31
December 2008: 30.8) and the gearing ratio 168 per cent (152). Net
gearing ratio was 116 (90). Some of M-real's loan 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 91 per cent (74) and the equity ratio some 34 per cent
(36).
The change in the fair value of investments available for sale was
approximately EUR -120 million in the first half of the year based
mainly on the decrease in the value of the Pohjolan Voima shares.
At the end of June, net interest-bearing liabilities totalled EUR
1,276 million (1,254). Foreign-currency-denominated loans accounted
for 14 per cent; 90 per cent were floating-rate and the rest were
fixed-rate. At the end of June, the average interest rate on loans
was 5.2 per cent and the average maturity of long-term loans 2.9
years. The interest rate maturity was 5.4 months at the end of June.
During the period the interest rate maturity has varied between 2 and
6 months.
In January-June, cash flow from operations amounted to EUR -36
million (Q1/2009: -20). Working capital was down by EUR 74 million
(down 50).
At the end of the period, an average of 4.1 months of net foreign
currency exposure was hedged. The degree of hedging varied between 4
and 5 months during the period; approximately 99 per cent of the
non-euro-denominated equity was hedged at the end of the period.
Liquidity continues at a good level. At the end of the review period,
liquidity was EUR 1,039 million, of which EUR 778 million consisted
of committed credit facilities, and EUR 261 million of liquid assets
and investments. The amount of committed credit facilities include
the undrawn EUR 450 million share of the EUR 500 million syndicated
revolving credit facility due in December 2009. In addition, the
Group had other interest-bearing receivables totalling EUR 310
million. To meet its short-term financing needs, the Group also had
at its disposal uncommitted domestic and foreign commercial paper
programmes and credit facilities amounting to about EUR 570 million.
In the second quarter, M-real drew a EUR 60 million pension premium
(TyEL) loan. After this draw down, M-real still has a total of about
EUR 260 million of undrawn pension premium (TyEL) loans.
In the first quarter, M-real repurchased its own bonds (EUR 400
million bond due in December 2010) with a nominal value of EUR 59.95
million. A gain of approximately EUR 31 million from the purchases
was recorded in the first quarter result.
M-real's liquidity is ensured and the company is in negotiations to
secure long-term financing.
Standard & Poor's downgraded M-real's credit rating from B- to CCC+
on 16 January 2009. The outlook of the rating remains negative. The
downgrade has an about EUR 2 million impact on current annual
financing costs.
On 13 February 2009, Moody's Investors Service downgraded M-real's B3
credit rating to Caa1. The outlook of the rating remains negative.
The downgrade has an about EUR 2 million impact on current annual
financing costs.
Shares
In January-June 2009, the highest price for M-real's B share on the
NASDAQ OMX Helsinki was EUR 0.92, the lowest EUR 0.19, and the
average price EUR 0.50. At the end of June, the price of the B share
was EUR 0.53.
The trading volume of B shares was EUR 149 million, 104 per cent of
the share capital. The market value of the A and B shares totalled
EUR 212 million at the end of June.
At the end of June, Metsäliitto Cooperative owned 38.6 per cent of
the shares and held 60.5 per cent of the voting rights conferred by
these shares. International investors' holdings decreased to 15 per
cent.
On 5 February 2009, Financier de l'Echiquier SA's holding in M-real
decreased to 4.8 per cent of the share capital and 1.6 per cent of
the voting rights.
The company does not hold any of its own shares.
Events after the period
On 15 July 2009, M-real Corporation's associated company Oy
Metsä-Botnia Ab and its owners, M-real Corporation, Metsäliitto Group
and UPM-Kymmene Oyj, signed a letter of intent regarding the
divestment of the pulp mill and forests located in Fray Bentos,
Uruguay, to UPM.
Once the transaction is closed, M-real's net debt will decrease by
around EUR 550 million, also taking into account the change of
Metsä-Botnia's consolidation method in M-real's consolidated
financial accounts. Cash proceeds to be received by M-real is around
EUR 300 million. M-real will use the proceeds for debt repayments.
The arrangement will not have a significant impact on M-real's
equity.
After the closing of the transaction, M-real will change the
consolidation method of Metsä-Botnia in its consolidated financial
accounts and process its ownership in Metsä-Botnia as an associated
company according to IAS 28. As a result of the transaction and the
change in the consolidation method, approximately EUR 250 million of
consolidated net debt will leave M-real Group. The closing of the
transaction and the change in the consolidation method of
Metsä-Botnia are estimated to decrease M-real's annual sales by
around EUR 250 million and to slightly improve the result before
taxes compared to the first quarter 2009.
The closing of the transaction is subject to approvals by the
respective parties' Board of Directors, the execution of final
agreements, conclusion of negotiations with financing parties and
approval of the competition authorities. The transaction is estimated
to be closed during the last quarter of 2009. After the closing of
the transaction M-real owns 30% of Metsä-Botnia, Metsäliitto
Cooperative 53% and UPM 17%.
M-real's Board of Directors has processed and approved the letter of
intent acting without those of its members who are dependent on
Metsäliitto Cooperative. At the request of M-real's Board of
Directors Handelsbanken Capital Markets has issued a Fairness
Opinion, according to which the transaction is financially fair from
the point of view of M-real's shareholders. Castrén & Snellman Oy,
Attorneys-at-law, provides legal advice in the transaction.
Near-term outlook
The demand for folding boxboard improved steadily in the second
quarter, and the operating rates are approaching normal levels. A
process to increase prices of folding boxboard has been started in
the UK. Price increases are under consideration to be implemented
also in the other markets in Europe.
Over the past few weeks, order inflows for uncoated fine paper have
improved, and at the moment it appears that the price decline is
bottoming out.
The demand for coated papers has remained weak. After the
discontinuation of standard coated fine paper production at Hallein
and Gohrsmühle, the strategic importance of coated papers is no
longer significant to M-real.
Following the discontinuation of the standard coated fine paper
production, the expansion of uncoated fine paper and speciality paper
production has progressed according to plan. The demand for
speciality papers still remains somewhat under the normal level, but
the producers have managed to keep the price level fairly stable.
Pulp prices have been rising for almost four months, but the euro
prices still remain clearly under the price level seen at the end of
2008. The prices appear to continue their moderate rise primarily
based on production curtailments. With economic recovery and growing
demand for pulp, pulp prices are expected to rise more rapidly.
M-real's internal profit improvement programmes, concurrently with
declining wood raw material and chemical costs, will ease the
challenging profitability situation. Performance in 2009 will be
negatively affected by significant extraordinary operating costs
related to adapting operations to a smaller scale and more profitable
entity.
Despite some recent signs of improvement, M-real's operating result
for 2009, excluding non-recurring items, will be clearly weaker than
last year's result, due to the company's weak performance in the
first part of the year.
Near-term business risks
The weakening of and general uncertainty in the global economy have
also had a negative impact on the operating conditions of the
European paper and board industry. Despite some signs of improvement,
there is still the risk that the slowdown of the global economy and
the resulting weak demand for paper and board will be prolonged. A
prolonged period of weak demand increases the risk of weakening cash
flow.
Due to the overall situation of the financial market, the
availability of corporate financing remains constrained. M-real owns
significant assets that can be liquidated when needed in order to
ensure sufficient financing.
Weak demand may lead to production curtailments that are larger than
planned. There is also the risk that product prices may fall.
There is a risk of a strengthening euro, particularly in relation to
the US dollar and the British pound, which would have a negative
impact on operating conditions in the paper and board industry.
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:
Matti Mörsky, CFO, tel. +358 10 465 4913
Juha Laine, Vice President, Investor Relations and Communications,
tel. +358 10 465 4335
More information available starting from 1 pm on 23 July 2009.
A telephone conference for investors and analysts starts at 3 pm.
BUSINESS AREAS AND MARKET TRENDS
2009 2009 2008 2008 2008 2009 2008 2008
Consumer Packaging Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 237 226 248 274 274 463 540 1,061
EBITDA, EUR million 24 15 11 37 23 39 60 108
excl. non-recurring
items 25 19 11 37 23 44 61 109
Operating result, EUR
million 4 -17 -13 17 3 -13 20 24
excl. non-recurring
items 5 -1 -9 17 3 4 21 29
Return on capital
employed, % 2.1 -8.8 -6.0 8.3 1.4 -3.4 5.0 3.2
excl. non-recurring
items, % 2.5 -0.4 -4.0 8.3 1.4 1.0 5.3 3.8
Deliveries, 1,000
tonnes 296 274 303 348 351 570 693 1,345
Production, 1,000
tonnes 275 292 293 347 335 567 696 1,336
Personnel at the end
of period 1,690 1,535 1,541 1,576 1,825 1,690 1,825 1,541
Result for April-June 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 5 million (Q1/2009: -1). The result was improved by the increase
in delivery volumes. The result was weakened by falling average
selling prices caused mainly by the weakening of the US dollar.
The result includes a non-recurring item consisting of a EUR -1
million cost provision in the Consumer Packaging business area
related to personnel reductions. The result for the previous quarter
included non-recurring items of EUR -16 million in cost provisions,
and write-downs related to the closure of the Metsä-Botnia Kaskinen
mill.
The deliveries of European folding boxboard producers were 2 per cent
higher compared with the previous quarter. Consumer Packaging's
deliveries of folding boxboard were up by 9 per cent.
Result for January-June compared with the corresponding period last
year
The operating result excluding non-recurring items for the Consumer
Packaging business area weakened compared to the corresponding period
last year and totalled EUR 4 million (21). The most significant
factor weakening the result was the general decline in demand. Price
increases, the implementation of cost-saving measures and the
strengthening of the US dollar improved the result.
The result includes EUR -17 million non-recurring items. The result
for the corresponding period last year included non-recurring items
of EUR -1 million.
The deliveries of European folding boxboard producers fell by 19 per
cent compared with the corresponding period last year. Consumer
Packaging's deliveries of folding boxboard were down by 17 per cent.
2009 2009 2008 2008 2008 2009 2008 2008
Office Papers Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 131 147 174 203 204 278 427 804
EBITDA, EUR million -3 -2 -3 11 10 -5 27 35
excl. non-recurring
items -3 -2 -1 11 10 -5 27 37
Operating result, EUR
million -18 -17 -38 -6 -7 -35 -9 -53
excl. non-recurring
items -18 -17 -14 -6 -7 -35 -9 -29
Return on capital
employed, % -13.7 -12.4 -25.6 -3.2 -3.2 -12.9 -1.8 -7.4
excl. non-recurring
items, % -13.7 -12.4 -9.2 -3.2 -3.2 -12.9 -1.8 -3.8
Deliveries, 1,000
tonnes 190 203 237 270 274 393 574 1,081
Production, 1,000
tonnes 202 199 177 226 245 401 502 905
Personnel at the end
of period 1,428 1,454 1,495 1,518 1,504 1,428 1,504 1,495
Result for April-June compared 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 -18 million (Q1/2009: -17). The result was weakened by the
lower average selling prices. The result was improved by lower
production costs. The result does not include non-recurring items.
The result for the previous quarter did not include non-recurring
items.
Total deliveries by European uncoated fine paper producers were down
by 3 per cent compared to the previous quarter. The delivery volume
of Office Papers fell by 6 per cent.
Result for January-June compared with the corresponding period last
year
The operating result excluding non-recurring items for Office Papers
weakened compared to the corresponding period last year and totalled
EUR -35 million (-9). The result was weakened by the lower average
selling prices and the reduced demand for products. The result was
improved by lower raw material costs and implemented cost savings
measures. The result did not include non-recurring items.
The result for the corresponding period last year did not include
non-recurring items.
Total deliveries by European uncoated fine paper producers fell by 17
per cent compared to the corresponding period last year. The delivery
volume of Office Papers fell by 32 per cent. This figure includes the
impact of the divestment of the New Thames mill.
2009 2009 2008 2008 2008 2009 2008 2008
Speciality Papers Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 82 117 147 153 158 199 322 622
EBITDA, EUR million -17 -33 -1 7 8 -50 39 45
excl. non-recurring
items -16 -5 1 7 9 -21 15 23
Operating result, EUR
million -23 -40 -75 -3 -2 -63 19 -59
excl. non-recurring
items -22 -12 -8 -3 -1 -34 -4 -15
Return on capital
employed, % -32.2 -43.4 -63.5 -2.3 -1.2 -37.6 8.3 -14.3
excl. non-recurring
items, % -30.4 -12.5 -5.8 -2.3 -0.8 -19.8 -1.7 -3.4
Deliveries, 1,000
tonnes 80 118 157 168 174 198 355 680
Production, 1,000
tonnes 74 99 160 170 186 173 376 705
Personnel at the end
of period 1,742 1,971 1,965 2,009 2,026 1,742 2,026 1,965
Result for April-June compared with the previous quarter
The operating result excluding non-recurring items for the Speciality
Papers business area weakened compared to the previous quarter and
was EUR -22 million (Q1/2009: -12). The result was weakened by the
costs associated with discontinuation of the standard coated fine
paper production.
The result includes a non-recurring item of EUR -1 million connected
to the closure of the Hallein paper mill.
The result for the previous quarter included non-recurring items of
EUR -28 million connected to the closure of the Hallein paper mill.
Total deliveries by European coated fine paper producers fell by 5
per cent compared to the previous quarter. The delivery volume of
Speciality Papers fell by 32 per cent; this figure includes the
discontinuation of the standard coated fine paper production.
Result for January-June compared with the corresponding period last
year
The operating result excluding non-recurring items for Speciality
Papers weakened compared to the corresponding period last year and
totalled EUR -34 million (-4). The result was weakened by the heavy
decline in the demand for products and the cost associated with
discontinuation of coated fine paper production. The result was
improved by higher selling prices and implemented cost savings
measures.
The result includes total EUR -29 million in non-recurring items.
The result for the corresponding period last year included
non-recurring items of EUR 23 million.
Total deliveries by European coated fine paper producers fell by 26
per cent compared to the corresponding period last year. The delivery
volume of Speciality Papers fell by 44 per cent; this figure includes
the discontinuation of the standard coated fine paper production.
2009 2009 2008 2008 2008 2009 2008 2008
Market Pulp and Energy
Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Sales, EUR million 116 134 150 172 160 250 322 644
EBITDA, EUR million -10 -4 8 23 96 -14 117 148
excl. non-recurring
items -10 -3 8 23 22 -13 43 73
Operating result, EUR
million -19 -18 -2 12 86 -37 96 106
excl. non-recurring
items -19 -12 -2 12 12 -31 22 32
Return on capital
employed, % -9.2 -8.4 -1.3 5.1 37.3 -8.8 22.8 12.6
excl. non-recurring
items, % -9.2 -5.8 -1.3 5.1 4.8 -7.5 5.0 3.6
Deliveries, 1,000
tonnes 327 287 264 291 279 614 559 1,115
Result for April-June 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 -19 million (Q1/2009: -12). The result was
weakened by lower pulp selling prices due to weakened US dollar.
Lower wood costs improved the result.
The result did not include non-recurring items.
The result for the previous quarter included EUR -6 million in
non-recurring items.
Result for January-June compared with the corresponding period last
year
The operating result excluding non-recurring items for the Market
Pulp and Energy reporting segment weakened compared to the
corresponding period last year and totalled EUR -31 million (22). 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
associated with the closure of the Metsä-Botnia Kaskinen mill were
recognised as non-recurring items in the result.
The result for the corresponding period last year included EUR 74
million non-recurring items.
Condensed consolidated statement of comprehensive
income
2009 2008 2008 2009 2009
EUR million Q1-Q2 Q1-Q2 Change Q1 Q2
Continuing operations
Sales 1,208 1,688 -480 3,236 623 585
Other operating income 61 148 -87 182 33 28
Operating expenses -1,340 -1,613 273 -3,164 -704 -636
Depreciation and impairment
losses -120 -115 -5 -315 -70 -50
Operating result -191 108 -299 -61 -118 -73
% of sales -15.8 6.4 -1.9 -18.9 -12.5
Share of results in
associated companies -13 -1 -12 -1 -1 -12
Net exchange gains and
losses 2 1 1 13 0 2
Other net financial items -10 -70 60 -155 4 -14
Result before income tax -212 38 -250 -204 -115 -97
% of sales -17.5 2.3 -6.3 -18.5 -16.6
Income taxes 14 -1 15 34 10 4
Result for the period from
continuing
operations -198 37 -235 -170 -105 -93
% of sales -16.4 2.2 -5.3 -16.9 -15.9
Discontinued operations
Result from discontinued
operations -12 -64 52 -338 -10 -2
Result for the period -210 -27 -183 -508 -115 -95
Other comprehensive income
Cash flow hedges 12 12 0 -41 -1 13
Available for sale financial
assets -120 67 -187 87 -63 -57
Translation differences 3 -2 5 11 3 0
Income tax relating to
components of
other comprehensive income 28 -22 50 -19 18 10
Other comprehensive income,
net of tax -77 55 -132 38 -43 -34
Total comprehensive income
for the period -287 28 -315 -470 -158 -129
Result for the period
attributable to
Shareholders of parent
company -212 -31 -181 -517 -116 -96
Minority interest 2 4 -2 9 1 1
-210 -27 -183 -508 -115 -95
Total comprehensive income for the
period
attributable to
Shareholders of parent
company -289 26 -315 -481 -162 -127
Minority interest 2 2 0 11 4 -2
-287 28 -315 -470 -158 -129
Earnings per share for result
attributable to
shareholders of parent company
(EUR/share)
from continuing
operations -0.61 0.10 -0.71 -0.55 -0.32 -0.29
from discontinued
operations -0.04 -0.20 0.16 -1.03 -0.03 -0.01
Total -0.65 -0.10 -0.55 -1.58 -0.35 -0.30
The change in the fair value of investments available for sale is
based mainly on the decrease in the value of the Pohjolan Voima
shares. The change in the fair value of the Pohjolan Voima shares
relates mainly to the decrease of the 12 month moving average value
of Nord Pool electricity futures used in the valuation.
Condensed consolidated balance sheet
30.6. 30.6. 31.12.
EUR million 2009 % 2008 % 2008 %
ASSETS
Non-current assets
Goodwill 51 1.4 172 3.3 51 1.1
Other intangible assets 47 1.3 71 1.4 51 1.1
Tangible assets 1,468 39.1 2,633 50.7 1,808 40.1
Biological assets 2 0.1 43 0.8 57 1.3
Investments in associated
companies 49 1.3 62 1.2 63 1.4
Available for sale investments 304 8.1 387 7.4 440 9.8
Non-current financial assets 229 6.1 33 0.6 232 5.2
Deferred tax receivables 5 0.1 3 0.1 5 0.1
2,155 57.5 3,404 65.5 2,707 60.1
Current assets
Inventories 373 9.9 653 12.6 505 11.2
Accounts receivables and other
receivables 575 15.3 1,068 20.5 743 16.5
Cash and cash equivalents 247 6.6 73 1.4 550 12.2
1,195 31.8 1,794 34.5 1,798 39.9
Assets classified as held for
sale 402 10.7
Total assets 3,752 100.0 5,198 100.0 4,505 100.0
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Equity attributable
to shareholders of parent
company 1,040 27.7 1,836 35.3 1,329 29.5
Minority interest 59 1.6 56 1.1 57 1.3
Total equity 1,099 29.3 1,892 36.4 1,386 30.8
Non-current liabilities
Deferred tax liabilities 184 4.9 307 5.9 232 5.1
Post-employment benefit
obligations 92 2.4 141 2.7 98 2.2
Provisions 81 2.2 45 0.9 99 2.2
Borrowings 1,394 37.2 1,637 31.5 1,568 34.8
Other liabilities 15 0.4 30 0.6 18 0.4
1,766 47.1 2,160 41.6 2,015 44.7
Current liabilities
Current borrowings 337 9.0 491 12.6 538 11.9
Accounts payable and other
liabilities 414 11.0 655 9.4 566 12.6
751 20.0 1,146 22.0 1,104 24.5
Liabilities classified as held
for sale 136 3.6
Total liabilities 2,653 70.7 3,306 63.6 3,119 69.2
Total shareholders'
equity
and liabilities 3,752 100.0 5,198 100.0 4,505 100.0
Condensed consolidated cash flow statement
2009 2008 2008 2009
EUR million Q1-Q2 Q1-Q2 Q2
Result for the period -211 -27 -508 -97
Total adjustments 101 126 619 57
Change in working capital 74 -60 7 24
Cash flow arising from
operations -36 39 118 -16
Net financial items -1 -54 -193 -17
Income taxes paid 10 -23 -22 13
Net cash flow arising from
operating activities -27 -38 -97 -20
Investments in intangible and
tangible assets -32 -51 -128 -16
Divestments of assets and other 5 138 483 3
Net cash flow arising from
investing activities -27 87 355 -13
Share issue, minority interest 0 2 2 0
Changes in non-current loans and in
other financial items -235 -337 -71 -6
Dividends paid 0 -20 -20 0
Net cash flow arising from
financing activities -235 -355 -89 -6
Changes in cash and
cash equivalents -289 -306 169 -39
Cash and cash equivalents at beginning
of period 550 380 380 301
Translation difference in cash and cash
equivalents 0 -1 1 -1
Changes in cash and cash equivalents -289 -306 169 -39
Assets held for sale -14 0 0 -14
Cash and cash equivalents at end
of period 247 73 550 247
Statement of changes in shareholders' equity
Equity attributable to shareholders of parent
company
Fair
Trans- value
Share lation and
Share premium diffe- other Retained Minority
EUR million capital account rences reserves earnings Total interest 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 2 2
Comprehensive
income
for the
period -2 59 -31 26 2 28
Shareholders'equity,
30 June 2008 558 667 -13 284 340 1,836 56 1,892
Shareholders'
equity,
1 January
2009 558 667 -9 259 -146 1,329 57 1,386
Comprehensive
income
for the
period 4 -81 -212 -289 2 -287
Shareholders'
equity,
30 June 2009 558 667 -5 178 -358 1,040 59 1,099
Key ratios 2009 2008 2008 2009
Q1-Q2 Q1-Q2 Q2
Sales, EUR million 1,208 1,688 3,236 585
EBITDA, EUR million -71 223 254 -23
excl. non-recurring items, EUR million -33 128 192 -20
Operating result, EUR million -191 108 -61 -73
excl. non-recurring items, EUR million -135 13 -35 -70
Result from continuing operations
before taxes, EUR million -212 38 -204 -97
excl. non-recurring items, Eur million -145 -57 -178 -83
Result for the period
from continuing operations, EUR million -198 37 -170 -93
from discontinued operations, EUR million -12 -64 -338 -2
Total, EUR million -210 -27 -508 -95
Earnings per share
from continuing operations, EUR -0.61 0.10 -0.55 -0.29
from discontinued operations, EUR -0.04 -0.20 -1.03 -0.01
Total, EUR -0.65 -0.10 -1.58 -0.30
Earnings per share, excl. non-recurring
items, EUR -0.42 -0.18 -0.48 -0.24
Return on equity, % -31.9 4.0 -10.4 -32.1
excl. non-recurring items, % -22.0 -6.1 -9.0 -27.2
Return on capital employed, % -11.5 7.3 -1.3 -10.2
excl. non-recurring items, % -7.3 1.4 -0.5 -8.3
Equity ratio at end of period, % 29.4 36.5 30.8 29.4
Gearing ratio at end of period, % 168 112 152 168
Net gearing ratio at end of period, % 116 100 90 116
Shareholders' equity per share at end of
period, EUR 3.17 5.60 4.05 3.17
Interest-bearing net liabilities, EUR million 1,276 1,888 1,254 1,276
Gross capital expenditure, EUR million 32 51 128 16
Deliveries, 1 000 tonnes
Paper business 590 929 1,761 269
Consumer Packaging 570 693 1,345 296
Personnel at the end of period
in continuing operations 6,080 7,035 6,546 6,080
in discontinued operations 2,322
EBITDA = Earnings before interest, taxes, depreciation
and impairment charges
Securities and guarantees 2009 2008 2008
EUR million Q2 Q2
For own liabilities 130 58 61
On behalf of associated companies 1 1 1
On behalf of Group companies 5 5 5
On behalf others 4 3 2
Total 140 67 69
Open derivative contracts 2009 2008 2008
EUR million Q2 Q2
Interest rate derivatives 1,334 1,815 1,286
Currency derivatives 3,166 3,326 2,805
Other derivatives 290 176 185
Total 4,790 5,317 4,276
The fair value of open derivative contracts calculated at market
value at the end of the review period
was EUR -14.6 million (EUR 15.0 million 31 December 2008 and EUR 27.7
million 30 June 2008).
Also include other closed contracts to a total amount of
EUR 2,611.2 million
(EUR 2,068.8 million 31 December 2008 and EUR 2,623.2 million
June 30 2008 ).
Commitments related to fixed assets 2009 2008 2008
EUR million Q2 Q2
Payments due in following 12 months 4 5 0
Payments due later 2 1 1
Changes in property, plant and equipment 2009 2008 2008
EUR million Q2 Q2
Carrying value at beginning of period 1,808 2,820 2,820
Capital expenditure 29 51 128
Decreases -1 -73 -670
Assets classified as held for sale -253 0 0
Depreciation and impairment charges -112 -107 -282
related to discontinued operations 0 -38 -149
Translation difference -3 -20 -39
Carrying value at end of period 1,468 2,633 1,808
Depreciation and impairment losses related to discontinued operations
include Graphic Papers business.
Related-party transaction
Transaction and balances with parent and sister
companies 2009 2008 2008
EUR million Q2 Q2
Sales 15 16 34
Other operating income 2 2 3
Purchases 163 318 571
Interest income 2 3 7
Interest expences 1 3 4
Non-current receivables 5 19 5
Current receivables 60 117 49
Non-current liabilities 0 0 0
Current liabilities 203 34 228
Transaction with associated companies 2009 2008 2008
EUR million Q2 Q2
Sales 0 0 0
Purchases 2 2 4
Non-current receivables 1 2 0
Current receivables 7 10 7
Current liabilities 1 2 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, Speciality Papers and Market
Pulp and Energy.
The figures in the financial statement are
unaudited.
Calculation of key ratios
(Result from continuing
operations before tax - direct
Return on equity (%) = 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)
(Interest-bearing borrowings)
Gearing ratio (%) = per
(Shareholders' equity)
(Interest-bearing borrowings -
liquid funds - interest-bearing
Net gearing ratio (%) = receivables) per
(Shareholders' equity)
(Profit attributable to
shareholders of parent company)
Earnings per share = per
(Adjusted number of shares
(average))
(Equity attributable to
Shareholders'equity per shareholders of parent company)
share = per
(Adjusted number of shares at
the end of period)
Sales and result
by segment 2009 2009 2008 2008 2008 2009 2008 2008
EUR million Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Consumer Packaging
237 226 248 274 274 463 540 1 061
Office Papers 131 147 174 203 204 278 427 804
Speciality Papers 82 117 147 153 158 199 322 622
Market Pulp and
Energy 116 134 150 172 160 250 322 644
Other operations 40 34 57 77 87 74 189 323
Internal sales -21 -35 -54 -53 -54 -56 -112 -218
Sales 585 623 722 826 829 1 208 1 688 3 236
Consumer Packaging
24 15 11 37 23 39 60 108
Office Papers -3 -2 -3 11 10 -5 27 35
Speciality Papers
-17 -33 -1 7 8 -50 39 45
Market Pulp and
Energy -10 -4 8 23 96 -14 117 148
Other operations -17 -24 -33 -29 -10 -41 -20 -82
EBITDA -23 -48 -18 49 127 -71 223 254
% of sales -3,9 -7,7 -2,5 5,9 15,3 -5,9 13,2 7,8
Consumer Packaging
4 -17 -13 17 3 -13 20 24
Office Papers -18 -17 -38 -6 -7 -35 -9 -53
Speciality Papers -23 -40 -75 -3 -2 -63 19 -59
Market Pulp and
Energy -19 -18 -2 12 86 -37 96 106
Other operations -17 -26 -33 -28 -9 -43 -18 -79
Operating result -73 -118 -161 -8 71 -191 108 -61
% of sales -12,5 -18,9 -22,3 -1,0 8,6 -15,8 6,4 -1,9
Non-recurring
items
Consumer Packaging
-1 -16 -4 0 0 -17 -1 -5
Office Papers 0 0 -24 0 0 0 0 -24
Speciality Papers -1 -28 -67 0 -1 -29 23 -44
Market Pulp and
Energy 0 -6 0 0 74 -6 74 74
Other operations -1 -3 -14 -11 -1 -4 -1 -27
Non-recurring
items in operating
result -3 -53 -110 -11 72 -56 95 -26
Consumer Packaging
25 19 11 37 23 44 61 109
Office Papers -3 -2 -1 11 10 -5 27 37
Speciality Papers -16 -5 1 7 9 -21 15 23
Market Pulp and
Energy -10 -3 8 23 22 -13 43 73
Other operations -16 -22 -15 -18 -8 -38 -18 -50
EBITDA, excl.
non-recurring
items -20 -13 4 60 55 -33 128 192
% of sales -3,4 -2,1 0,6 7,3 6,6 -2,7 7,6 5,9
Consumer Packaging
5 -1 -9 17 3 4 21 29
Office Papers -18 -17 -14 -6 -7 -35 -9 -29
Speciality Papers -22 -12 -8 -3 -1 -34 -4 -15
Market Pulp and
Energy -19 -12 -2 12 12 -31 22 32
Other operations -16 -23 -18 -17 -8 -39 -17 -52
Operating result,
excl.
non-recurring
items -70 -65 -51 3 -1 -135 13 -35
% of sales -12,0 -10,4 -7,1 0,4 -0,1 -11,2 0,8 -1,1
Return on capital
employed %
Consumer Packaging
2,1 -8,8 -6,0 8,3 1,4 -3,4 5,0 3,2
Office Papers -13,7 -12,4 -25,6 -3,2 -3,2 -12,9 -1,8 -7,4
Speciality Papers -32,2 -43,4 -63,5 -2,3 -1,2 -37,6 8,3 -14,3
Market Pulp and
Energy -9,2 -8,4 -1,3 5,1 37,3 -8,8 22,8 12,6
Group -10,2 -13,4 -19,7 -0,5 8,9 -11,5 7,3 -1,3
Capital employed
EUR million
Consumer Packaging
771 774 801 839 829 771 829 801
Office Papers 501 517 556 645 664 501 664 556
Speciality Papers 241 312 415 518 532 241 532 415
Market Pulp and
Energy 822 876 899 929 921 822 921 899
Unallocated and
eliminations 611 609 822 -12 165 611 165 822
Group 2 946 3 088 3 493 2 919 3 111 2 946 3 111 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).
Deliveries 2009 2009 2008 2008 2008 2009 2008 2008
1,000 tonnes Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2
Consumer Packaging 296 274 303 348 351 570 693 1,345
Office Papers 190 203 237 270 274 393 574 1,081
Speciality Papers 80 118 157 168 174 198 355 680
Paper business,
total 269 321 394 438 448 590 929 1,761
Market Pulp 327 287 264 291 279 614 559 1,115
Production
1,000 tonnes
Consumer Packaging 275 292 293 347 335 567 696 1,336
Office Papers 202 199 177 226 245 401 502 905
Speciality Papers 74 99 160 170 186 173 376 705
Paper business,
total 276 298 337 396 431 574 878 1,610
Metsä-Botnia pulp 1) 210 231 235 270 233 441 485 990
M-real pulp 264 277 303 377 391 541 806 1,486
1) corresponds to M-real's ownership share of 30% in Metsä-Botnia
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