2008-04-23 11:02:13 CEST
2008-04-23 11:02:59 CEST
REGULATED INFORMATION
M-real - Quarterly report
M-real's operating profit excluding non-recurring items for the first quarter EUR 3 million
M-real Corporation Stock Exchange Release 23.4.2008
Result for the first quarter of 2008
* Sales were EUR 1,099 million (Q4/2007: 1,085).
* Operating profit excluding non-recurring items was EUR 3 million
(-6). Operating profit including non-recurring items was EUR 24
million (-245).
* Result before taxes, excluding non-recurring items, was EUR -37
million (-49). Result before taxes including non-recurring items,
was EUR -16 million (-288).
Events during the first quarter
* M-real divested as part of its EUR 200 million divestment
programme announced in February, its office paper mill located in
the UK to DS Smith Plc. In relation to the sale, a separate
agreement was made on the UK industrial operation's pension
liabilities. The combined positive result effect was
approximately EUR 24 million and correspondingly the cash flow
effect approximately EUR 82 million.
* M-real closed Kangas paper machine 2 in February and Lielahti
BCTMP mill in March. The closures were carried out ahead of the
original schedule."Simplifying M-real's business concepts has started well. Our
magazine paper customers have welcomed the new concepts, and our
plans have also been moving ahead in other business areas. The
situation regarding wood raw material continues to be challenging and
the pulp production has been curtailed at the Metsä-Botnia's mills in
Finland. The use of wood raw material is planned to be curtailed for
the time being by 2 million cubic metres per annum which affects the
pulp production at M-real's and Metsä-Botnia's mills in Finland and
in Sweden. Despite the planned curtailments in pulp production,
M-real's possibilities to maintain normal paperboard and paper
production are good. Due to increased wood raw material costs the
overall cost inflation can not be fully covered with our own profit
improvement measures in 2008. New profit improvement programmes will
be launched this year. The strength of the euro against the US dollar
and the British pound has offset part of the earlier achieved
paperboard and paper price increases in local currencies. Actions to
increase paperboard and paper prices continue actively."
Mikko Helander, CEO, M-real Corporation
Key figures
2008 2007 2007 2007 2007 2007
Q1 Q4 Q3 Q2 Q1
Sales, MEUR 1,099 1,085 1,102 1,096 1,157 4,440
EBITDA, MEUR 102 70 116 66 193 444
excl. non-recurring 81 78 111 366
items, MEUR 77 101
Operating profit, MEUR 24 -245 43 -15 97 -120
excl. non-recurring 3 -6 36 49
items, MEUR -2 21
Result before taxes
from continuing -16 -288 4 -273
operations, MEUR -44 55
excl. non-recurring -37 -49 -3 -104
items, MEUR -31 -21
Result for the period
from continuing -18
operations, MEUR -249 -5 -48 52 -250
from discontinued -1
operations, MEUR 57 -3 -1 2 55
Total, MEUR -19 -192 -8 -49 54 -195
Result per share
from continuing -0.06 -0.75 -0.02 -0.76
operations, EUR -0.15 0.16
from discontinued 0.00
operations, EUR 0.17 0.00 0.00 0.00 0.17
Total, EUR -0.06 -0.58 -0.02 -0.15 0.16 -0.59
Result per share excl.
non-recurring items,
EUR -0.12 -0.07 -0.04 -0.12 -0.09 -0.32
Return on equity, % -4.4 -53.0 -2.3 -11.2 9.9 -14.0
excl. non-recurring -9.4 -0.4 -0.9 -5.9
items, % -2.4 -7.3
Return on capital 2.9 -24.4 4.4 -2.6
employed, % -1.1 9.7
excl. non-recurring 0.8 -0.3 3.7 1.4
items, % 0.2 2.5
Equity ratio at end of 32.2 32.1 32.7 32.1
period, % 32.8 32.9
Gearing ratio at end of 117 112 117 112
period, % 117 114
Interest-bearing net 1,892 1,867 2,187 1,867
liabilities 2,192 2,189
Gross investments, MEUR 21 81 66 62 50 259
Paper deliveries, 1,000 986 980 975 3,949
tonnes 965 1,029
Paperboard deliveries, 298 291 297 1,203
1,000 tonnes 313 302
Personnel at end of 9,122 9,508 9,508
period 12,449 13,302 14,509
EBITDA = Earnings before interest, taxes, depreciation and
amortization
Result January-March compared with the previous quarter
M-real's sales totalled EUR 1,099 million (Q4/07: 1,085). Comparable
sales increased by 2 per cent. The operating result was EUR 24
million (-245) and the operating result excluding non-recurring items
stood at EUR 3 million (-6). The net non-recurring items in the
operating result for January-March totalled EUR 21 and were:
* EUR 24 million positive effect on the result for the Graphic
Papers business area for the sale of New Thames mill and the
agreement of pension liabilities from UK industrial operations
and other liabilities related to the closure of the Sittingbourne
mill.
* EUR 2 million cost provision in the Graphic Papers business area
for the completion of the closure of the Kangas paper machine 2
for coated magazine paper.
* EUR 1 million cost provision in the Consumer Packaging business
area for the completion of the closure of the Lielahti BCTMP
mill.
In the previous quarter, the operating profit included non-recurring
items of net EUR -239 million of which the most significant ones
were:
* Net impairment loss of EUR 182 million which includes a EUR 185
million write-down of goodwill in the Office Papers business area
and a EUR 3 million reversal of an impairment loss on the fixed
assets of the Kyro paper mill in the Consumer Packaging business
area
* EUR 13 million reduction in cost provision for the closure of the
Wifsta mill in Office Papers business area
* EUR 68 million cost provision and write-down in the business
areas; Consumer Packaging (11), Graphic Papers (49) and Office
Papers (8).
In addition to the items recognised in the operating profit in the
previous quarter, an estimated capital gain of EUR 76 million was
recognised as a non-recurring item from discontinued operations from
the sale of Map Merchant. The exact sales price will be determined
later. Depending on the final amendment calculation, the exact sales
price may, at maximum, be lowered by EUR 30 million. Lowering of the
sales price, if realised, would have a negative effect on the result
for the discontinued operations in 2008. Finalising the transaction
will, anyhow, have a positive effect on M-real's cash flow in 2008.
The operating result excluding non-recurring items was improved
compared with the previous quarter due to an increase in production
volume of Metsä-Botnia's Uruguay pulp mill. The increased energy
costs, the strength of the euro against the US dollar and the British
pound and the production curtailments implemented at the Metsä-Botnia
mills in Finland had a negative effect on the operating profit. The
result from other operations was weakened by several factors, the
most significant being the results from hedging related to energy and
currency.
The paper delivery volume in January-March totalled 986,000 tonnes
(980,000). Production was curtailed by 29,000 tonnes in line with
demand (50,000). Paperboard deliveries amounted to 298,000 tonnes
(291,000) and production curtailments to 1,000 tonnes (18,000).
Financing income and expenses totalled EUR -40 million (-40). Foreign
exchange gains and losses from accounts receivable, accounts payable,
financial income and expenses and the valuation of currency hedging
were EUR 0 million (2). Net interest and other financing expenses
stood at EUR -40 million (-42). Other financing expenses include a
loss of EUR 3 million (3) from the valuation of interest rate
hedging.
In January-March, the result from continuing operations before taxes
was EUR -16 million (-288). The result from continuing operations
before taxes, excluding non-recurring items, totalled EUR -37 million
(-49). The effect of income taxes, including the change in deferred
tax liabilities, was EUR -2 million (39).
Earnings per share were EUR -0.06 (-0.58). Excluding non-recurring
items, earnings per share from continuing operations were EUR -0.12
(-0.07). Return on equity was -4.4 per cent (-53.0), and -9.4 per
cent (-0.4) excluding non-recurring items. The return on capital
employed was 2.9 per cent (-24.4), and 0.8 per cent (-0.3) excluding
non-recurring items.
Result for January-March compared with the corresponding period
previous year
M-real's sales were EUR 1,099 million (Q1/07: 1,157). Comparable
sales decreased by 3 per cent. The operating profit was EUR 24
million (97) and the operating profit excluding non-recurring items
was EUR 3 million (21).
Net non-recurring items recognised in operating profit were EUR 76
million. The non-recurring income totalled EUR 135 million and the
non-recurring costs stood at EUR 59 million of which the most
significant items were:
* Capital gain of EUR 135 million on the sale of Metsä-Botnia's
shares to Metsäliitto Cooperative
* EUR 14 million cost provision for the closure of the
Sittingbourne mill and EUR 29 million for the closure of the
Wifsta mill
* Impairment loss of EUR 16 million due to the valuation of assets
held for sale at the expected selling price in compliance with
IFRS 5.
The operating result excluding non-recurring items compared with the
corresponding period was negatively affected by the increased wood
raw material and energy costs, the strength of the euro against the
US dollar and the British pound as well as the production
curtailments at the Metsä-Botnia mills in Finland. The implemented
profit improvement actions and price increases as well as the
start-up of Metsä-Botnia's Uruguay mill in November 2007 improved the
result.
The paper delivery volume in January-March totalled 986,000 tonnes
(1,029,000). Production was curtailed by 29,000 tonnes in line with
demand (41,000). Paperboard deliveries amounted to 298,000 tonnes
(302,000) and production curtailments to 1,000 tonnes (17,000).
Financing income and expenses in the review period totalled EUR -40
million (-42). Foreign exchange gains and losses from accounts
receivable, accounts payable, financial income and expenses and the
valuation of currency hedging were EUR 0 million (-5). Net interest
and other financing expenses stood at EUR -40 million (-37). Other
financing expenses include a loss from the valuation of interest rate
hedging of EUR 3 million (1).
The result from continuing operations before taxes was EUR -16
million (55). The result from continuing operations before taxes,
excluding non-recurring items, totalled EUR -37 million (-21). Income
taxes, including the change in deferred tax liabilities, were EUR -2
million (-3).
Earnings per share were EUR -0.06 (0.16). Excluding non-recurring
items, earnings per share from continuing operations were EUR -0.12
(-0.09). Return on equity was -4.4 per cent (9.9), and -9.4 per cent
(-7.3) excluding non-recurring items. The return on capital employed
was 2.9 per cent (9.7), and 0.8 per cent (2.5) excluding
non-recurring items.
Personnel
On 31 March, 2008 the company had 9,122 employees (31 December 2007:
9,508), of which 3,333 (3,994) worked in Finland. On average, in
January-March 2008, M-real had 9,265 employees (Q1/07: 13,664). The
personnel figures include 30 per cent of Metsä-Botnia's personnel.
Investments
Gross capital expenditure in January-March totalled EUR 21 million
(Q1/07: 50). This includes a EUR 7 million share of Metsä-Botnia's
capital expenditure (35), based on M-real's ownership, which amounted
to 30 per cent.
Structural change
M-real's profit improvement and business concept simplification
programme launched in November 2007 has proceeded according to the
targets. As part of the programme, the Lielahti BCTMP mill and Kangas
mill's coated magazine paper machine 2 were closed. The Publishing
and Commercial Printing business areas were combined under the
Graphic Papers business area. At the same time, projects were
launched to streamline the coated magazine paper business operations
and the sales and marketing organisation. As part of the programme,
M-real announced it is also prepared to take other measures, such as
capacity cuts, if required by changes in the business environment.
The aggregate annual profit improvement target of the programme is
EUR 100 million by the end of 2009.
In February 2008, M-real announced an additional target of EUR 200
million from asset divestments, which should be achieved by the end
of the first quarter of 2009. The target of EUR 200 million includes
the sale of the New Thames mill in February. This transaction had a
positive cash flow effect of EUR 82 million together with the
arrangement on the pension liabilities of the UK industrial
operations and a profit of approximately EUR 24 million was booked.
Following this, M-real has no significant unfunded pension
liabilities in the UK. Other asset items belonging to the divestment
programme will be published later.
Financing
At the end of March, M-real's equity ratio stood at 32.2 per cent
(31.12.2007: 32.1), and gearing at 117 per cent (112). In some of
M-real's financing arrangements, a limit of 120 per cent has been set
for gearing and a limit of 30 per cent for the equity ratio. At the
end of March, gearing calculated in the manner defined in the
financing agreements was approximately 98 per cent (95) and the
equity ratio about 36 per cent (36).
Interest-bearing net debt stood at EUR 1,892 million at the end of
March (1,867). Foreign-currency-denominated loans accounted for 10
per cent of long-term loans. Of these, 90 per cent were variable rate
loans, and the rest were fixed-rate loans. At the end of March, the
average interest rate on loans was 7.3 per cent and the average
maturity of long-term loans was 3.3 years. At the end of March, the
interest rate maturity of the loans was 4 months. During the period,
the interest rate maturity has varied between 4 and 6 months.
Cash flow from operating activities amounted to EUR 40 million in
January-March (Q4/07: 97). Working capital increased by EUR 33
million (decreased EUR 74 million).
At the end of the review period, an average of 5 months of net
foreign exchange exposure was hedged. The level of hedging has varied
between 5 and 6 months during the period. Approximately 98 per cent
of non-euro-denominated equity was hedged at the end of the review
period.
Liquidity is at a good level. At the end of the period under review,
liquidity was EUR 1,053 million, of which EUR 856 million consisted
of committed long-term credit facilities and EUR 197 million of
liquid assets and investments. To meet its short-term financing
needs, the company also had at its disposal uncommitted domestic and
foreign commercial paper programmes and credit facilities amounting
to about EUR 500 million.
Shares
In January-March, the highest price of M-real's B share on the OMX
Nordic Stock Exchange Helsinki was EUR 3.28, the lowest price EUR
1.66, and the average price EUR 2.24. At the end of March, the price
of the B share was EUR 2.12.
The trading volume of the B share was EUR 357 million, or 59 per cent
of the shares. The market value of the A and B shares totalled EUR
710 million at the end of March. At the end of the review period,
Metsäliitto Cooperative owned 38.6 per cent of the shares, and the
voting rights conferred by these shares was 60.5 per cent. The
foreign shareholders' share of the shares fell to 31.5 per cent.
On 15 January, 2008 M-real was informed that the shareholding of
Norges Bank (Central Bank of Norway) in the company had on 9
January9, 2008 increased to 5.3 percent of the share capital and to
1.7 percent of the voting rights.
The Annual General Meeting on 13 March 2008 resolved to delete from
the company's Articles of Association the stipulation on the minimum
and maximum share capital, the record date provisions of the
book-entry system and the section concerning the par value of
company's share.
Dividend
The Annual General Meeting decided that a dividend of EUR 0.06 per
share, approximately EUR 19.7 million in total is to be paid for the
financial year ending on 31 December 2007. The dividend was paid on
27 March 2008.
Board of Directors and Auditors
The Annual General Meeting elected the following persons to M-real's
Board of Directors: Mr Heikki Asunmaa, Counsellor of Forest Economy;
Mr Martti Asunta, M.Sc. (Forestry); Mr Kari Jordan, President and CEO
of Metsäliitto Group; Mr Erkki Karmila, LL.M.; Mr Kai Korhonen, M.Sc.
(Eng.); Mr Runar Lillandt, Counsellor of Agriculture; Mr Juha
Niemelä, Honorary Counsellor; and Mr Antti Tanskanen, Minister. The
term of office of board members continues until the end of the next
Annual General Meeting. At its organising meeting, the Board of
Directors elected Mr Kari Jordan as Chairman and Mr Martti Asunta as
Vice Chairman.
The Annual General Meeting decided to change the maximum number of
board members from eight to ten.
PricewaterhouseCoopers Oy, a firm of authorised public accountants,
was elected as
M-real's auditor, and Mr Göran Lindell, APA, as principal auditor.
The term of office of auditors continues until the end of the next
Annual General Meeting.
Near-term outlook
Demand for M-real's paperboard and paper products is expected to be
reasonably good in the second quarter of 2008 but will experience
slight seasonal weakening. Thus, the average operating rates of the
M-real machines are expected to decrease slightly.
Measures to raise product prices continue in all business areas. In
the second quarter, price increases for the paperboard spot
deliveries are being sought primarily in the UK and in markets
outside Europe. Another objective is to increase the spot prices of
coated magazine paper, thus creating the preconditions for the
increase of contract prices in the latter half of the year. Closed
capacities will support positive uncoated fine paper price
development during the rest of the year, with increases being sought
already in the second quarter. The most challenging situation is for
coated fine paper, as excess capacity and the strong euro is making
the situation more difficult.
M-real's objective is to cover the cost increases as much as possible
with own profit improvement actions. Due to the increased wood raw
material costs, the cost inflation can not be fully covered with its
own profit improvement actions in 2008. New profit improvement
programmes will be launched this year. The exceptionally mild winter
in Northern Europe and the increases in export duties on wood from
Russia have created difficulties in wood supply, and the price of
wood has remained high. For the time being, the use of wood raw
material is planned to be curtailed per annum by 2 million cubic
metres, which affects production at M-real's and Metsä-Botnia's pulp
mills in Finland and in Sweden. Despite the planned pulp production
curtailments, M-real's possibilities to maintain normal paperboard
and paper production are good.
The start-up of Metsä-Botnia's pulp mill in Uruguay in November 2007
was successful. The pulp from the Uruguay mill will significantly
improve M-real's profitability this year. M-real's share of the
output of the Uruguay mill will be used at M-real's own fine paper
mills in Central Europe.
M-real's strategic review continues. The profit improvement and
business concept simplification programme launched in November 2007
as the fourth phase of the strategy review is progressing according
to plan, as is the divestment programme launched in February 2008.
The operating profit, excluding non-recurring items, for the second
quarter of 2008 is forecast to remain approximately at the same level
as in the second quarter of 2007.
Near-term business risks
If the uncertainty in the US economy continues for a longer period,
it could spread worldwide and affect the operational preconditions of
European paper and paperboard industry. As yet, no significant
reduction in the demand for paper and paperboard has been observed in
M-real's main markets in Europe. The risk of the euro becoming even
stronger was realised during the first part of the year. Production
input costs have also continued to increase. The risk of a need to
implement more than currently planned production curtailments due to
challenging wood supply situation, as well as the risk of the euro
strengthening further, exists.
The eventual sales price of Map Merchant will be determined later.
Depending on the final adjustment calculation, the exact sales price
may, at maximum, be lowered by EUR 30 million. Lowering the sales
price, if realised, would have a negative effect on the result for
the discontinued operations in 2008. Finalising the transaction will,
anyhow, have a positive effect on M-real's cash flow in 2008.
Because the forward-looking estimates and statements of this
financial statements release are based on current plans and
estimates, they contain risks and other uncertain factors which may
lead the results to differ from the statements concerning them. In
the short term, M-real's result will be influenced in particular by
the price of, and demand for, finished products, the availability and
price of wood, other raw material costs, the price of energy, and the
exchange rate of the US dollar. More information about longer-term
risk factors can be found on pages 28-29 of M-real's 2007 Annual
Report.
M-REAL CORPORATION
Further information:
Seppo Parvi, CFO, tel. +358 10 465 4321
Juha Laine, Vice President, IR and Communications, tel. +358 10 465
4335
Further information on April 23, 2008 from 1 pm (EET).
Consumer Packaging
+-------------------------------------------------------------------+
| | | | | | | |
| | 2008 | 2007 | 2007 | 2007 | 2007 | 2007 |
|------------------+-------+-------+------+-------+-------+---------|
| | Q1 | Q4 | Q3 | Q2 | Q1 | |
|------------------+-------+-------+------+-------+-------+---------|
| Sales, MEUR | 235 | 225 | 231 | 243 | 235 | 934 |
|------------------+-------+-------+------+-------+-------+---------|
| EBITDA, MEUR | 36 | 24 | 45 | 28 | 39 | 136 |
|------------------+-------+-------+------+-------+-------+---------|
| excl. | 37 | | | | | |
| non-recurring | | | | | | |
| items | | 25 | 45 | 33 | 39 | 142 |
|------------------+-------+-------+------+-------+-------+---------|
| Operating | 18 | | | | | |
| profit, MEUR | | 0 | 27 | 8 | 21 | 56 |
|------------------+-------+-------+------+-------+-------+---------|
| excl. | 19 | | | | | |
| non-recurring | | | | | | |
| items | | 8 | 27 | 15 | 21 | 71 |
|------------------+-------+-------+------+-------+-------+---------|
| Return on | | | | | | |
| capital | | | | | | |
| employed, % | 9.6 | 0.1 | 15.3 | 4.1 | 10.9 | 7.5 |
|------------------+-------+-------+------+-------+-------+---------|
| excl. | | | | | | |
| non-recurring | | | | | | |
| items, % | 10.1 | 4.3 | 15.3 | 7.9 | 10.9 | 9.5 |
|------------------+-------+-------+------+-------+-------+---------|
| Deliveries, | 298 | | | | | |
| 1,000 t | | 291 | 297 | 313 | 302 | 1,203 |
|------------------+-------+-------+------+-------+-------+---------|
| Production, | | | | | | |
| 1,000 t | 314 | 294 | 303 | 302 | 311 | 1,210 |
|-------------------------------------------------------------------|
| EBITDA = Earnings before interest, taxes, depreciation and |
| amortization |
+-------------------------------------------------------------------+
Result for January-March compared to the previous quarter
The operating profit of the Consumer Packaging business area
excluding non-recurring items of the Consumer Packaging business area
improved and stood at EUR 19 million (Q4/07: 8). The profit
improvement resulted from higher average sales price and increased
delivery volumes while the production curtailments at the
Metsä-Botnia mills in Finland had a negative impact.
A non-recurring item of EUR 1 million was recognised in the operating
profit for completion of the closure of the Lielahti BCTMP mill.
In the previous quarter, non-recurring items of EUR -8 million were
recognised in the operating profit.
Deliveries by Western European folding boxboard producers increased
by 4 per cent, and M-real's deliveries by 10 per cent compared to the
previous quarter.
The delivery volume of linerboard was at a lower level compared to
the previous quarter. The average euro-denominated price increased
slightly. The sales prices of wallpaper base paper have increased
clearly.
Result for January-March compared with the corresponding period
previous year
Consumer Packaging's operating profit excluding non-recurring items
stood at EUR 19 million (Q1/07: 21). The result was weakened by
clearly increased wood raw material costs, the weakened US dollar and
British pound as well as production curtailments at the Metsä-Botnia
mills in Finland. The average euro-denominated price of folding
boxboard was at a higher lever despite the weakened US dollar and
British pound.
Deliveries by Western European folding boxboard producers decreased
by 2 per cent compared with the corresponding period previous year.
M-real's folding boxboard deliveries increased by 2 per cent.
The delivery volume of linerboard was lower than in the corresponding
period previous year. The sales prices of wallpaper base paper
increased clearly from previous year.
Graphic Papers
+-------------------------------------------------------------------+
| | | | | | | |
| | 2008 | 2007 | 2007 | 2007 | 2007 | 2007 |
|--------------------+------+-------+-------+-------+-------+-------|
| | Q1 | Q4 | Q3 | Q2 | Q1 | |
|--------------------+------+-------+-------+-------+-------+-------|
| Sales, MEUR | 560 | 569 | 574 | 548 | 577 | 2,268 |
|--------------------+------+-------+-------+-------+-------+-------|
| EBITDA, MEUR | 56 | 10 | 52 | 31 | 27 | 120 |
|--------------------+------+-------+-------+-------+-------+-------|
| excl. | | | | | | |
| non-recurring | | | | | | |
| items | 34 | 20 | 48 | 33 | 41 | 142 |
|--------------------+------+-------+-------+-------+-------+-------|
| Operating profit, | | | | | | |
| MEUR | 14 | -71 | 16 | -12 | -14 | -81 |
|--------------------+------+-------+-------+-------+-------+-------|
| excl. | | | | | | |
| non-recurring | | | | | | |
| items | -8 | -22 | 8 | -9 | 0 | -23 |
|--------------------+------+-------+-------+-------+-------+-------|
| Return on capital | | | | | | |
| employed, % | 2.9 | -14.1 | 3.2 | -2.1 | -2.5 | -3.9 |
|--------------------+------+-------+-------+-------+-------+-------|
| excl. | | | | | | |
| non-recurring | | | | | | |
| items, % | -1.5 | -4.1 | 1.7 | -1.6 | 0.2 | -0.9 |
|--------------------+------+-------+-------+-------+-------+-------|
| Deliveries, 1,000 | | | | | | |
| t | 748 | 761 | 760 | 724 | 757 | 3,002 |
|--------------------+------+-------+-------+-------+-------+-------|
| Production, 1,000 | | | | | | |
| t | 755 | 736 | 752 | 735 | 739 | 2,962 |
|-------------------------------------------------------------------|
| EBITDA = Earnings before interest, taxes, depreciation and |
| amortization |
+-------------------------------------------------------------------+
Result for January-March compared with the previous quarter
In the first quarter, the operating profit of the Graphic business
area, excluding non-recurring items was EUR -8 million (Q4/07: -22).
The operating profit was improved by the substantially increased
production volume of Metsä-Botnia's Uruguay pulp mill and the
increased price of magazine paper. The increase in energy costs and
as well as strengthened euro against the US dollar and British pound
and production curtailments at the Metsä-Botnia mills in Finland had
a negative effect on the profitability.
Net non-recurring items of EUR 22 million were recognised in
operating profit for the first quarter:
* A positive effect of EUR 24 million on the result for the sale of
New Thames mill and the agreement of pension liabilities from UK
industrial operations and other liabilities related to the
closure of the Sittingbourne mill.
* EUR 2 million cost provision for the completion of the closure of
the Kangas mill's paper machine 2, which produced coated magazine
paper.
In the operating profit for the previous quarter net non-recurring
items of EUR -49 million were recognised, comprising of EUR 10
million in cost provision connected to profit improvement programmes
and EUR 39 million in write-downs of fixed assets.
Total deliveries by European producers of coated fine paper increased
by 2 per cent from the previous quarter, and total deliveries by
European producers of coated magazine paper decreased by 12 per cent.
Total deliveries of M-real's Graphic Papers business area decreased
by 2 per cent and included the impacts of capacity closures.
Result for January-March compared with the corresponding period
previous year
Graphic Papers business area's operating profit excluding
non-recurring items was EUR -8 million (Q1/07: 0). Profitability was
weakened by increased wood raw material costs, the strengthened euro
against US dollar and British pound as well as production
curtailments at the Metsä-Botnia mills in Finland. Profitability was
improved by the implemented profit improvement actions and the
start-up of Uruguay pulp mill in November 2007.
A non-recurring item of EUR 14 million was recognised in the
operating profit in the corresponding period previous year for
completion of the closure of the Sittingbourne mill.
Total deliveries by European producers of coated fine paper decreased
by 1 per cent and total deliveries by European producers of coated
magazine paper remained at the same level. Total deliveries of
M-real's Graphic Papers business area decreased by 1 per cent and
included the impacts of capacity closures.
Office Papers
+-------------------------------------------------------------------+
| | | | | | | |
| | 2008 | 2007 | 2007 | 2007 | 2007 | 2007 |
|------------------+-------+--------+-------+-------+-------+-------|
| | Q1 | Q4 | Q3 | Q2 | Q1 | |
|------------------+-------+--------+-------+-------+-------+-------|
| Sales, MEUR | 181 | 171 | 167 | 183 | 202 | 723 |
|------------------+-------+--------+-------+-------+-------+-------|
| EBITDA, MEUR | 16 | 25 | 21 | 15 | -8 | 53 |
|------------------+-------+--------+-------+-------+-------+-------|
| excl. | | | | | | |
| non-recurring | | | | | | |
| items | 16 | 20 | 21 | 15 | 22 | 78 |
|------------------+-------+--------+-------+-------+-------+-------|
| Operating | | | | | | |
| profit, MEUR | 3 | -173 | 7 | 1 | -22 | -187 |
|------------------+-------+--------+-------+-------+-------+-------|
| excl. | | | | | | |
| non-recurring | | | | | | |
| items | 3 | 7 | 7 | 1 | 8 | 23 |
|------------------+-------+--------+-------+-------+-------+-------|
| Return on | | | | | | |
| capital | | | | | | |
| employed, % | 3.1 | -114.8 | 4.9 | 0.6 | -12.0 | -29.6 |
|------------------+-------+--------+-------+-------+-------+-------|
| excl. | | | | | | |
| non-recurring | | | | | | |
| items, % | 3,1 | 5,3 | 4,9 | 0,6 | 5,0 | 4,2 |
|------------------+-------+--------+-------+-------+-------+-------|
| Deliveries, | | | | | | |
| 1,000 t | 238 | 219 | 215 | 241 | 272 | 947 |
|------------------+-------+--------+-------+-------+-------+-------|
| Production, | | | | | | |
| 1,000 t | 200 | 213 | 223 | 257 | 280 | 973 |
|-------------------------------------------------------------------|
| EBITDA = Earnings before interest, taxes, depreciation and |
| amortization |
+-------------------------------------------------------------------+
Result for January-March compared with the previous quarter
In the first quarter the operating profit excluding non-recurring
items of the Office Paper business area was EUR 3 million (Q4/07: 7).
The operating profit was weakened by the declined average sales price
mainly due to exchange rate changes as well as higher production
costs. The operating profit did not include non-recurring items.
In the previous quarter, net non-recurring items of EUR -180 million
were recognised in operating profit of which EUR 185 million was in
impairment losses, EUR 8 million in cost provisions connected to
profit improvement programmes and EUR 13 million reduction in cost
provision for the closure of the Wifsta mill.
Total deliveries by European producers of uncoated fine paper were up
9 per cent, and deliveries of the Office Papers business area
increased by 9 per cent.
Result for January-March compared with the corresponding period
previous year
The business area's operating profit excluding non-recurring items
was EUR 3 million in the fourth quarter (Q1/07: 8). The operating
profit did not include non-recurring items. Profitability was
weakened by increased costs, especially wood raw material costs. The
increase in average sales price increased profitability.
A non-recurring cost provision of EUR 29 million was recognised in
the operating profit in the corresponding period previous year for
the closure of the Wifsta mill.
Total deliveries by European producers of uncoated fine paper
decreased by 6 per cent. The delivery volume of the Office Papers
business area decreased by 13 per cent and included the effect of
closure of Wifsta mill.
The financial statements are unaudited.
Condensed consolidated
income statement
Continuing operations, MEUR 2008 2007 Change 2007 2007
Q1 Q1 Q4
Sales 1,099 1,157 -58 4,440 1,085
Other operating income 60 155 -95 239 27
Operating expenses -1,057 -1,119 62 -4,235 -1,042
Depreciation and impairment
losses -78 -96 18 -564 -315
Operating profit 24 97 -73 -120 -245
% of sales 2.2 8.4 -2.7 -22.6
Share of results in associated
companies 0 0 0 -3 -3
Exchange gains and losses 0 -5 5 -3 2
Other net financial items -40 -37 -3 -147 -42
Result before taxes from
continuing
operations -16 55 -71 -273 -288
% of sales -1.5 4.8 -6.1 -26.5
Income taxes -2 -3 1 23 39
Result for the period
from continuing operations -18 52 -70 -250 -249
% of sales -1.6 4.5 -5.6 -22.9
Result from discontinued
operations -1 2 -3 55 57
Result for the period -19 54 -73 -195 -192
-1.7 4.7 -4.4 -17,7
Attributable to
Shareholders of
parent company -20 54 -74 -194 -192
Minority interest 1 0 1 -1 0
Earnings per share
for result
attributable to
shareholders of
parent company
(EUR/share)
from continuing
operations -0.06 0.16 -0.22 -0.76 -0.75
from discontinued
operations 0.00 0.00 0.00 0.17 0.17
Total -0.06 0.16 -0.22 -0.59 -0.58
Taxes include taxes corresponding to the result for the period under
review.
Condensed consolidated balance sheet
31.3. 31.3. 31.12.
2008 % 2007 % 2007 %
MEUR
Assets
Non-current assets
Goodwill 172 3.4 375 6.4 172 3.3
Other intangible assets 74 1.5 61 1.1 38 0.7
Tangible assets 2,680 53.1 2,991 51.4 2,820 54.3
Biological assets 44 0.9 41 0.7 47 0.9
Shares in associated
and other companies 103 2.0 107 1.8 103 2.0
Interest-bearing
receivables 26 0.5 34 0.6 27 0.5
Deferred tax receivables 5 0.1 31 0.5 4 0.1
Other non-interest-bearing
receivables 8 0.2 19 0.3 14 0.3
3,112 61.7 3,659 62.8 3,225 62.1
Current assets
Inventories 651 12.9 666 11.4 619 11.9
Interest bearing
receivables 145 2.9 93 1.6 62 1.2
Non-interest-bearing
receivables 942 18.6 1 181 20.3 908 17.5
Cash and cash equivalents 197 3.9 137 2.4 380 7.3
1,935 38.3 2,077 35.7 1,969 37.9
Assets classified as held
for sale 86 1.5
Total assets 5,047 100 5,822 100 5,194 100
SHAREHOLDERS'
EQUITY AND LIABILITIES
Shareholders' equity
Equity attributable to
shareholders of parent
company 1,571 31.1 1,864 32.0 1,618 31.2
Minority interest 52 1.0 52 0.9 52 1.0
1,623 32.1 1,916 32.9 1,670 32.2
Non-current liabilities
Deferred tax liabilities 213 4.2 267 4.6 215 4.1
Post-employment benefit
obligations 141 2.8 205 3.5 159 3.1
Provisions 61 1.2 99 1.7 72 1.4
Other non-interest-bearing
liabilities 37 0.8 31 0.6 38 0.7
Interest-bearing
liabilities 1,797 35.6 2,144 36.8 1,883 36.3
2,249 44.6 2,746 47.2 2,367 45.6
Current liabilities
Non-interest-bearing
liabilities 712 14.0 825 14.2 704 13.5
Interest-bearing
liabilities 463 9.3 304 5.2 453 8.7
1,175 23.3 1,129 19.4 1,157 22.2
Liabilities relating to
assets
classified as held for sale 31 0.5
Total liabilities 3,424 67.9 3,906 67.1 3,524 67.8
Total shareholders'
equity and liabilities 5, 047 100 5,822 100 5,194 100
Condensed consolidated cash flow statement
MEUR 2008 2007 2007 2007
Q1 Q1 Q4
Result for the period -19 54 -196 -193
Total adjustments 92 37 479 216
Change in working capital -33 -27 42 74
Cash flow arising from operations 40 64 325 97
Net financial items -18 -27 -160 -72
Income taxes paid -13 -4 -38 -6
Net cash flow arising from
operating activities 9 33 127 19
Investments in tangible and
intangible assets -21 -50 -259 -81
Divestments of assets and other 57 240 628 396
Net cash flow arising from
investing activities 36 190 369 315
Share issue, minority interest 2 1 6 3
Changes in long-term loans and
other financial items -209 -247 -282 -84
Dividends paid -20 -20 -20 0
Net cash flow arising from
financing activities -227 -266 -296 -81
Changes in cash and
cash equivalents -182 -43 200 253
Cash and cash equivalents at
beginning of period 380 182 182 128
Translation difference in cash and
cash equivalents -1 -1 -2 -1
Changes in cash and cash equivalents -182 -43 200 253
Assets held for sale, folding carton plants 0 -1 0 0
Cash and cash equivalents
at end of period 197 137 380 380
Statement of changes in shareholders' equity
Fair
value
Trans- and Re- Mi-
Share lation other tained nority
Share pre- dif- re- earn- inter-
MEUR capital mium ference serves ings est Total
Shareholders'
equity
1.1.2007,
IFRS 558 667 3 10 605 63 1,906
Translation
differences -13 -13
Net
investment
hedge 12 12
Currency flow
hedges,
recorded in
equity -16 -16
transferred
to income
statement's
sales 6 6
Interest flow
hedges
recorded in
equity
Commodity
hedges
recorded in
equity
Transferred
to income
statement's
purchases -2 -2
Tax on equity
components -3 3 0
Net expenses
recognised
directly in
equity -4 -9 -13
Result for
the period 54 54
Total
recognised
income
and expenses
for the
period -4 -9 54 41
Related party
transactions
Changes in
minority
interest
Sale of
Metsä-Botnia
shares (9%) -11
Metsä-Botnia
restructuring
in Uruguay 1
Total -10 -10
Dividends
paid -20 -1 -21
Related party
transactions -20 -11 -31
Shareholders'
equity
31.3.2007,
IFRS 558 667 -1 1 639 52 1,916
Shareholders'
equity
1.1.2008, IFRS 558 667 -11 13 391 52 1,670
Translation
differences -9 -2 -11
Net investment
hedge 6 6
Currency flow
hedges,
recorded in equity 7 7
transferred to
income statement's
sales -4 -4
Interest flow
hedges
recorded in equity -1 -1
transferred
income
statement's
financial items -1 -1
Commodity hedges
recorded in
equity -6 -6
transferred
income
statement's
purchases 1 1
Tax on equity
components -1 1 0
Net expenses
recognised
directly in equity -4 -3 -2 -9
Loss for the
period -20 1 -19
Total recognised
income
and expenses for
the period -4 -3 -20 -1 -28
Related party
transactions
Changes in
minority interest
Metsä-Botnia
restructuring in
Uruguay 1
1 1
Dividends paid -20 -20
Related party
transactions -20 1 -19
Shareholders'
equity
31.3.2008, IFRS 558 667 -15 10 351 52 1,623
Key ratios 2008 2007 2007 2007
Q1 Q1 Q4
Sales, MEUR 1,099 1,157 4,440 1,085
EBITDA, MEUR 102 193 444 70
excl. non-recurring items, MEUR 81 101 366 78
Operating profit, MEUR 24 97 -120 -245
excl. non-recurring items, MEUR 3 21 49 -6Result from continuing operations
before taxes, MEUR -16 55 -273 -288
excl. non-recurring items, MEUR -37 -21 -104 -49
Result for the period
from continuing operations, MEUR -18 52 -250 -249
from discontinued operations, MEUR -1 2 55 57
Total, MEUR -19 54 -195 -192
Earnings per share
from discontinuing operations, EUR -0.06 0.16 -0.76 -0.75
from discontinued operations, EUR 0.00 0.00 0.17 0.17
Total, EUR -0.06 0.16 -0.59 -0.58
Earnings per share, excl. non-recurring
items
from continuing operations, EUR -0.12 -0.09 -0.32 -0.07
Return on equity, % -4.4 9.9 -14.0 -53.0
excl. non-recurring items, % -9.4 -7.3 -5.9 -0.4
Return on capital employed, % 2.9 9.7 -2.6 -24.4
excl. non-recurring items, % 0.8 2.5 1.4 -0.3
Equity ratio at end of period, % 32.2 32.9 32.1 32.1
Gearing at end of period, % 117 114 112 112
Shareholders' equity per share at end of
period, EUR 4.79 5.68 4.93 4.93
Net interest-bearing liabilities
at end of period, MEUR 1,892 2,189 1,867 1,867
Gross capital expenditure, MEUR 21 50 259 81
Paper deliveries, 1,000 t 986 1,029 3,949 980
Board deliveries, 1,000 t 298 291 1,203 291
Personnel at end of period 9,122 14,509 9,508 9,508
EBITDA = Earnings before interest, taxes, depreciation and
amortization
Securities and guarantees, MEUR 2008 2007 2007
Q1 Q1
For own liabilities 59 60 61
On behalf of associated companies 1 1 1
On behalf of Group companies 4 5 4
On behalf of others 3 3 3
Total 67 69 69
Open derivative contracts, MEUR 2008 2007 2007
Q1 Q1
Interest rate derivatives 1,735 2,810 1,954
Foreign exchange derivatives 3,112 3,795 3,809
Other derivatives 150 167 133
Total 4,997 6,772 5,896
The fair value of open derivative contracts calculated at market
value was EUR 4.3 million at the end of the review year (EUR 14.7
million 31 December 2007).
The gross amount of open contracts also includes closed contracts,
totalling EUR 2,326.8 million (31 December 2007: EUR 2,713.9
million).
Commitments related to fixed
assets,
MEUR 2008 2007 2007
Q1 Q1
Payments in less than a year 5 103 22
Payments later 1 10 4
Changes in property,
plant and equipment, MEUR 2008 2007 2007
Q1 Q1
Carrying value at beginning of
period 2,820 3,156 3,156
Capital expenditure 21 49 250
Decrease -72 -114 -186
Depreciation and impairment
losses -75 -77 -346
Translation difference -14 -23 -54
Carrying value at end of period 2,680 2,991 2,820
Related-party transactions, MEUR 2008 2007 2007
Transactions with parent company
and sister companies Q1 Q1
Sales 11 8 34
Other operating income 1 135 138
Purchases 161 121 549
Interest income 1 1 3
Interest expenses 1 2 8
Non-current receivables 19 21 19
Current receivables 49 63 41
Non-current liabilities 0 1 1
Current liabilities 46 38 149
Transactions
with associated companies
Sales 0 0 0
Purchases 1 1 4
Non-current receivables 2 7 0
Current receivables 8 0 7
Current liabilities 3 1 3
Accounting policies
The interim report was prepared in accordance with the IAS 34
standard Interim Financial Reporting and the accounting policies
presented in M-real's Annual Report 2007.
The figures in the financial statement release are unaudited.
Taxes include taxes corresponding to the result for the period under
review.
Calculation of key ratios
(Profit from continuing operations
Return on equity (%) = before tax - direct taxes) per
(Total equity (average))
(Profit from continuing operations
before tax + interest expenses, net
Return on capital exchange gains/losses and other
employed (%) = financial expenses) per
(Total assets - non-interest-bearing
liabilities (average))
Equity ratio (%) = (Total equity) per
(Total assets - advance payments
received)
(Interest-bearing liabilities - liquid
funds - interest-bearing receivables)
Gearing ratio (%) = per
(Total equity)
(Profit attributable to shareholders of
Earnings per share = parent company) per
(Adjusted number of shares (average))
Shareholders' equity per (Equity attributable to shareholders of
share = parent company) per
(Adjusted number of shares at end of
review period)
Quarterly information
Sales and result
by segment, 2008 2007 2007 2007 2007 2007
MEUR Q1 Q4 Q3 Q2 Q1
Consumer Packaging 235 225 231 243 235 934
Graphic Papers 560 569 574 548 577 2,268
Office Papers 181 171 167 183 202 723
Internal sales and
other operations 123 120 130 122 143 515
Sales 1,099 1,085 1,102 1,096 1,157 4,440
Consumer Packaging 36 24 45 28 39 136
Graphic Papers 56 10 52 31 27 120
Office Papers 16 25 21 15 -8 53
Other operations -6 11 -2 -8 135 135
EBITDA 102 70 116 66 193 444
% of sales 9.3 6.5 10.5 6.0 16.7 10.0
Consumer Packaging 18 0 27 8 21 56
Graphic Papers 14 -71 16 -12 -14 -81
Office Papers 3 -173 7 1 -22 -187
Other operations -11 -1 -7 -12 112 92
Operating profit 24 -245 43 -15 97 -120
% of sales 2.2 -22.6 3.9 -1.5 8.4 -2.7
Share of results in
associated companies 0 -3 1 -1 0 -3
Exchange gains and
losses 0 2 -2 2 -5 -3
Other net financial -40
items -42 -39 -29 -37 -147
Result from continuing
operations before tax -16 -288 4 -44 55 -273
Income taxes -2 39 -9 -4 -3 23
Result for the period
from continuing
operations -18 -249 -5 -48 52 -250
Result for period from
discontinued operations -1 57 -3 -1 2 55
Result for the period -19 -192 -8 -49 54 -195
Minority interest -1 0 1 0 0 1
Financial result
attributable to
shareholders of
parent company -20 -192 -7 -49 54 -194
Earnings per share, EUR -0.06 -0.58 -0.02 -0.15 0.16 -0.59
Non-recurring items, 2008 2007 2007 2007 2007 2007
MEUR Q1 Q4 Q3 Q2 Q1
Consumer Packaging -1 -8 0 -7 0 -15
Graphic Papers 22 -49 7 -2 -14 -58
Office Papers 0 -180 0 0 -30 -210
Other operations 0 -2 0 -4 120 114
Non-recurring items in
operating result 21 -239 7 -13 76 -169
Non-recurring items in
financial items 0 0 0 0 0 0
Non-recurring items
total 21 -239 7 -13 76 -169
Consumer Packaging 37 25 45 33 39 142
Graphic Papers 34 20 48 33 41 142
Office Papers 16 20 21 15 22 78
Other operations -6 13 -3 -4 -1 4
EBITDA, excl. non-
recurring items 81 78 111 77 101 366
% of sales 7.4 7.2 10.1 7.0 8.7 8.2
Consumer Packaging 19 8 27 15 21 71
Graphic Papers -8 -22 8 -9 0 -23
Office Papers 3 7 7 1 8 23
Other operations -11 1 -6 -9 -8 -22
Operating profit excl.
non-recurring items 3 -6 36 -2 21 49
% of sales 0.3 -0.6 3.3 -0.2 1.8 1.1
Result before taxes,
excl. non-recurring
items -37 -49 -3 -31 -21 -104
% of sales -3.4 -4.5 -0.2 -2.8 -1.8 -2.3
Result per share,
excl.
non-recurring items,
EUR -0.12 -0.07 -0.04 -0.12 -0.09 -0.32
Return on equity,
excl.
non-recurring items, % -9.4 -0.4 -0.9 -2.4 -7.3 -5.9
Return on capital
employed, excl. non-
recurring items, % 0.8 -0.3 3.7 0.2 2.5 1.4
Return on capital
employed, 2008 2007 2007 2007 2007 2007
% Q1 Q4 Q3 Q2 Q1
Consumer Packaging 9.6 0.1 15.3 4.1 10.9 7.5
Graphic Papers 2.9 -14.1 3.2 -2.1 -2.5 -3.9
Office Papers 3.1 -114.8 4.9 0.6 -12.0 -29.6
Continuing operations
total 2.9 -24.4 4.4 -1.1 9.7 -2.6
Capital employed, 2008 2007 2007 2007 2007 2007
MEUR Q1 Q4 Q3 Q2 Q1
Consumer Packaging 781 731 742 741 777 731
Graphic Papers 2,025 1,907 2,046 2,042 2,077 1,907
Office Papers 475 518 681 665 669 518
Other equity 603 866 469 543 519 866
Continuing operations
total 3,884 4,022 3,938 3,991 4,043 4,022
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, average | 2008 | 2007 | 2007 |
|-----------------------------+-------+--------+--------|
| | Q1 | Q1 | |
|-----------------------------+-------+--------+--------|
| Consumer Packaging | 1,292 | 1,513 | 1,504 |
|-----------------------------+-------+--------+--------|
| Graphic Papers | 4,814 | 5,290 | 5,135 |
|-----------------------------+-------+--------+--------|
| Office Papers | 1,441 | 1,694 | 1,657 |
|-----------------------------+-------+--------+--------|
| Other continuing operations | 1,718 | 2,748 | 2,372 |
|-----------------------------+-------+--------+--------|
| Discontinued operations | | 2,419 | 2,007 |
|-----------------------------+-------+--------+--------|
| Total | 9,265 | 13,664 | 12,675 |
+-------------------------------------------------------+
2008 2007 2007 2007 2007 2007
Deliveries, 1,000 t Q1 Q4 Q3 Q2 Q1
Consumer Packaging 298 291 297 313 302 1,203
Graphic Papers 748 761 760 724 757 3,002
Office Papers 238 219 215 241 272 947
Paper segments,
total 986 980 975 965 1,029 3,949
+-------------------------------------------------------------------+
| | | | | | | |
| | 2008 | 2007 | 2007 | 2007 | 2007 | 2007 |
|----------------+--------+------+------+---------+---------+-------|
| Production, | | | | | | |
| 1,000 t | Q1 | Q4 | Q3 | Q2 | Q1 | |
|----------------+--------+------+------+---------+---------+-------|
| Consumer | | | | | | |
| Packaging | 314 | 294 | 303 | 302 | 311 | 1,210 |
|----------------+--------+------+------+---------+---------+-------|
| Graphic Papers | 755 | 736 | 752 | 735 | 739 | 2,962 |
|----------------+--------+------+------+---------+---------+-------|
| Office Papers | 200 | 213 | 223 | 257 | 280 | 973 |
|----------------+--------+------+------+---------+---------+-------|
| Paper mills, | | | | | | |
| total | 955 | 949 | 975 | 992 | 1,019 | 3,935 |
|----------------+--------+------+------+---------+---------+-------|
| Metsä-Botnia | | | | | | |
| pulp 1) | 252 | 235 | 203 | 200 | 203 | 841 |
|----------------+--------+------+------+---------+---------+-------|
| M-real pulp | 446 | 400 | 455 | 398 | 426 | 1,679 |
+-------------------------------------------------------------------+
1) corresponds to M-real's share of 30 per cent in Metsä-Botnia
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