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2008-07-23 11:00:53 CEST 2008-07-23 11:01:34 CEST REGULATED INFORMATION M-real - Interim report (Q1 and Q3)M-real's operating result excluding non-recurring items EUR -18 million for the first half of the yearM-real Corporation Stock Exchange Release July 23, 2008 Result for the first six months of 2008 * Sales EUR 2,164 million (Q1-Q2/2007: 2,253) * Operating result excluding non-recurring items EUR -18 million (18). Operating result including non-recurring items EUR 75 million (81) * Result before taxes excluding non-recurring items EUR -93 million (-52). Result before taxes including non-recurring items EUR 0 million (11) Result for the second quarter of 2008 * Sales EUR 1,065 million (Q1/2008: 1,099) * Operating result excluding non-recurring items EUR -21 million (3). Operating result including non-recurring items EUR 51 million (24) * Result before taxes excluding non-recurring items EUR -56 million (-37). Result before taxes including non-recurring items EUR 16 million (-16) Events during the second quarter * As a part of the EUR 200 million divestment programme announced in February 2008, M-real sold 100,000 Pohjolan Voima B2 shares to Kymppivoima for EUR 80 million and fair valued its ownership in Pohjolan Voima. * M-real raised the target of the profit improvement programme announced in November 2007 from EUR 100 million to EUR 150 million per year."We have found new profit improvements mainly through simplifying business concepts, which made it possible to raise the target of the profit improvement programme in May. We will still launch new profit improvement actions later in the year to cover as much of the heavy cost inflation as possible. Our divestment programme is seeing good progress, and we believe in our possibility to exceed the EUR 200 million target by the end of the first quarter of 2009. There is a definite need to increase the prices for all paper and paperboard products, and we will do everything we can to achieve the necessary increases." Mikko Helander, CEO, M-real Corporation KEY FIGURES 2008 2008 2007 2008 2007 2007 Q2 Q1 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 1,065 1,099 1,096 2,164 2,253 4,440 EBITDA, EUR million 126 102 66 228 258 444 excl. non-recurring items, EUR million 54 81 77 135 177 366 Operating result, EUR million 51 24 -15 75 81 -120 excl. non-recurring items, EUR million -21 3 -2 -18 18 49 Result before taxes from continuing operations, EUR million 16 -16 -44 0 11 -273 excl. non-recurring items, EUR million -56 -37 -31 -93 -52 -104 Result for the period from continuing operations, EUR million 17 -18 -48 -1 4 -250 from discontinued operations, EUR million -25 -1 -1 -26 1 55 Total, EUR million -8 -19 -49 -27 5 -195 Result per share from continuing operations, EUR 0.05 -0.06 -0.15 -0.01 0.01 -0.76 from discontinued operations, EUR -0.08 0.00 0.00 -0.08 0.00 0.17 Total, EUR -0.03 -0.06 -0.15 -0.09 0.01 -0.59 Result per share excl. non-recurring items, EUR -0.18 -0.12 -0.12 -0.30 -0.22 -0.32 Return on equity, % -0.3 -3.8 -10.2 -0.1 -0.6 -12.5 excl. non-recurring items, % -3.0 -8.2 -2.2 -10.0 -7.7 -5.3 Return on capital employed, % 5.3 2.7 -1.1 4.0 4.1 -2.5 excl. non-recurring items, % -1.8 0.7 0.1 -0.5 1.3 1.4 Equity ratio at end of period, % 36.5 35.0 34.5 36.5 34.5 34.4 Gearing ratio at end of period, % 112 120 119 112 119 124 Net gearing ratio at end of period, % 100 100 107 100 107 99 Interest-bearing net liabilities 1,888 1,892 2,192 1,888 2,192 1,867 Gross investments, EUR million 30 21 62 51 112 259 Paper deliveries, 1,000 tonnes 911 986 965 1,897 1,994 3,949 Paperboard deliveries, 1,000 tonnes 309 298 313 607 615 1,203 Personnel at end of period 9,357 9,122 13,302 9,357 13,302 9,508 EBITDA = Earnings before interest, taxes, depreciation and amortization The table includes Pohjolan Voima shares at fair value, which was approximately EUR 380 million on 30 June, 2008. Result April-June compared with the previous quarter M-real's sales totalled EUR 1,065 million (Q1/08: 1,099). Comparable sales were down 3.1 per cent. The operating result was EUR 51 million (24), and the operating result excluding non-recurring items was EUR -21 million (3). A net total of EUR 72 million was recognised as non-recurring items in the operating result for April-June. The total consisted of the following items: * EUR 74 million in Other operations as realised fair value and gain from the sale of Pohjolan Voima shares * EUR 2 million cost provision in Other Operations related to the sales network restructuring programme. In addition to items recognised in the operating result, a EUR 25 million reduction of the gain on the sale of the Map Merchant Group in 2007 was booked for Discontinued operations. The finalisation of the transaction will have a EUR 9 million positive cash effect in the third quarter of 2008. The non-recurring items for the previous quarter totalled EUR 21 million net. The total consisted of the following items: * EUR 24 million positive effect on the result of the Graphic Papers business area related to the sale of the New Thames mill and the agreement of the pension liabilities of industrial operations in the UK, and other liabilities related to the closure of the Sittingbourne mill * EUR 2 million cost provision in the Graphic Papers business area to complete the closure of the Kangas paper machine 2 producing coated magazine paper * EUR 1 million cost provision in the Consumer Packaging business area to complete the closure of the Lielahti BCTMP mill. The result was weakened by lower delivery volume, annual maintenance shutdowns, the stronger euro compared with the US dollar and British pound, and the production curtailments at Metsä-Botnia's mills in Finland. Result improved due to higher delivery volumes at Metsä-Botnia's pulp mill in Uruguay, implemented cost saving actions and achieved price increases. The total paper delivery volume in April-June was 911,000 tonnes (986,000). Production was curtailed by 98,000 tonnes in line with demand (29,000). Paperboard deliveries amounted to 309,000 tonnes (298,000) and production curtailments were 17,000 tonnes (1,000). Financial income and expenses totalled EUR -34 million (-40). Foreign exchange gains and losses from accounts receivables, accounts payable, financial income and expenses and valuation of currency hedging were EUR -1 million (0). Net interest and other financial expenses amounted to EUR -33 million (-40). Other financial expenses include EUR 7 million of valuation gains on interest rate derivatives (valuation loss: 3). In April-June, the result from continuing operations before taxes was EUR 16 million (-16). The result from continuing operations before taxes, excluding non-recurring items, totalled EUR -56 million (-37). Income taxes, including the change in deferred tax liabilities, came to EUR 1 million (-2). Earnings per share were EUR -0.03 (-0.06). Excluding non-recurring items, earnings per share from continuing operations were EUR -0.18 (-0.12). Return on equity was -0.3 per cent (-3.8), excluding non-recurring items EUR -3.0 (-8.2). The return on capital employed was 5.3 per cent (2.7); excluding non-recurring items, -1.8 per cent (0.7). Result for January-June compared with the corresponding period last year M-real's sales totalled EUR 2,164 million (Q1-Q2/07: 2,253). Comparable sales were down 2.0 per cent. The operating result was EUR 75 million (81), and the operating result excluding non-recurring items was EUR -18 million (18). The net total of non-recurring items for January-June was EUR 93 million, the most significant being: * EUR 74 million in Other operations as realised fair value and gain from the sale of Pohjolan Voima shares. * EUR 24 million positive effect on the result of the Graphic Papers business area related to the sale of the New Thames mill and the agreement of the pension liabilities of industrial operations in the UK, and other liabilities related to the closure of the Sittingbourne mill. Non-recurring items in January-June 2007 totalled EUR 63 million, the most significant being: * EUR 135 million capital gain on the sale of Metsä-Botnia shares * EUR 14 million cost provision for completing the closure of the Sittingbourne mill * EUR 29 million cost provision for finalising the closure of the Wifsta mill * EUR 16 million impairment loss from the valuation of assets held for sale at the expected selling price in compliance with IFRS 5 * EUR 11 million cost provision and asset write-down related to the profit improvement programme of operations in Finland. Compared with the previous year, the operating result excluding non-recurring items was weakened by increased wood raw material and energy costs, the stronger euro compared with the US dollar and British pound, and the production curtailments at Metsä-Botnia's mills in Finland. The result was improved by implemented cost saving actions and price increases as well as the start up of the Metsä-Botnia's Uruguay pulp mill in November 2007. The total paper delivery volume was 1,897,000 tonnes in January-June (1,994,000). Production was curtailed by 127,000 tonnes (91,000) in line with demand. Paperboard deliveries amounted to 607,000 tonnes (615,000) and production curtailments were 18,000 tonnes (48,000). Financial income and expenses over the period totalled EUR -74 million (-69). Foreign exchange gains and losses from accounts receivables, accounts payable, financial income and expenses and the valuation of currency hedging were EUR -1 million (-3). Net interest and other financial expenses amounted to EUR -73 million (-66). Other financial expenses include EUR 4 million of valuation gains on interest rate derivatives (6). The result from continuing operations before taxes was EUR 0 million (11). The result from continuing operations before taxes, excluding non-recurring items, totalled EUR -93 million (-52). Income taxes, including the change in deferred tax liabilities, were EUR -1 million (-7). Earnings per share were EUR -0.09 (0.01). Earnings per share from continuing operations excluding non-recurring items were EUR -0.30 (-0.22). Return on equity was -0.1 per cent (-0.6), and -10.0 per cent (-7.7) excluding non-recurring items. Return on capital employed was 4.0 per cent (4.1); excluding non-recurring items -0.5 per cent (1.3). Personnel The number of personnel was 9,357 on 30 June 2008 (31 December 2007: 9,508), of which 3,639 worked in Finland (3,994). In January-June 2008, M-real employed an average of 9,260 people (Q1-Q2/07: 13,610). These numbers include 30 per cent of Metsä-Botnia's personnel. Investments Gross investments in January-June totalled EUR 51 million (Q1-Q2/07: 112), including a EUR 13 million share of Metsä-Botnia's investments (72). Metsä-Botnia's investment share is based on the 30 per cent share of ownership. Structural change M-real's profit improvement and complexity reduction programme launched in November 2007 has proceeded according to the targets. As part of the programme, the Lielahti BCTMP mill and coated magazine paper machine 2 of the Kangas mill were closed in early 2008. The Publishing and Commercial Printing business areas were combined under the Graphic Papers business area. At the same time, projects were launched to simplify the coated magazine paper business operations and to streamline the sales and marketing organisation. As part of the programme, M-real also announced its readiness to implement other actions, such as capacity cuts, should changes in the operating environment so require. In May 2008, the total annual profit improvement target was raised from the original EUR 100 million to EUR 150 million. The full impact on result will be achieved by the end of 2010. In February 2008, M-real published a target of a minimum of EUR 200 million from asset divestments, which should be achieved by the end of the first quarter of 2009. EUR 162 million has been currently realised within this divestment programme, including the sale of the New Thames mill and the 100,000 Pohjolan Voima B2 shares. The positive cash effect of the New Thames mill sale including the pension liabilities of the industrial operations in the UK was approximately EUR 82 million. A profit of approximately EUR 24 million was booked from the transaction. The positive cash effect from the sale of 100,000 Pohjolan Voima B2 shares was EUR 80 million and the non-recurring profit EUR 74 million. Other assets to be included in the divestment programme will be announced at a later date. As announced on 13 June 2008, the sale of the Reflex mill to Arjowiggins was cancelled. The European Commission granted a conditional approval for the sale, but the conditions made the transaction impossible to carry out in practice. Financing At the end of June, M-real's equity ratio was 36.5 per cent (31 December 2007: 34.4) and the net gearing ratio 100 per cent (99). Some of M-real's financing agreements set a 120 per cent limit on the company's net gearing ratio and a 30 per cent limit on the equity ratio. Calculated as defined in the loan agreements, the net gearing ratio at the end of June was approximately 86 per cent (86) and the equity ratio some 42 per cent (40). Interest-bearing net liabilities totalled EUR 1,888 million at the end of June (1,867). Foreign-currency-denominated loans accounted for 11 per cent, 93 per cent were floating-rate and the rest were fixed-rate. At the end of June, the average interest rate on loans was 7.5 per cent and the average maturity of long-term loans 3.2 years. The interest rate maturity of loans was 4.3 months at the end of June. During the period, the interest rate maturity has varied between 4 and 6 months. In January-June, cash flow from operations amounted to EUR 39 million (Q1-Q2/2007: 132). Working capital was up by EUR 60 million (18). At the end of the report period, an average of 5.5 months of the net foreign currency exposure was hedged. The level of hedging varied between 5 and 6 months during the period. Approximately 99 per cent of non-euro-denominated equity was hedged at the end of the review period. Liquidity is at a good level. Liquidity at the end of the period was EUR 926 million, of which EUR 853 million consisted of committed long-term credit facilities and EUR 73 million of liquid assets and investments. In addition, to meet its short-term financing needs, the company had at its disposal non-binding domestic and foreign commercial paper programmes and credit facilities amounting to about EUR 500 million. Shares In January-June, the highest price of M-real's B shares on the OMX Nordic Exchange Helsinki was EUR 3.28, the lowest EUR 1.27, and the average price EUR 2.08. At the end of June, the price of the B shares was EUR 1.33. The trading volume of B shares was EUR 600 million, or 100 per cent of the share capital. The market value of the A and B shares totalled EUR 454 million at the end of June. At the end of June Metsäliitto Cooperative owned 38.6 per cent of M-real Corporation's shares, and the voting rights conferred by these shares was 60.5 per cent. International investors' holdings decreased to 26 per cent. On 9 January 2008, Norges Bank's (Central Bank of Norway) holding in M-real increased to 5.3 per cent of the share capital and 1.7 per cent of the voting rights. On 2 May 2008, Hermes Focus Asset Management Europe Ltd's holding in M-real decreased to 4.9 per cent of the share capital and 2.3 per cent of the voting rights. The Annual General Meeting on 13 March 2008 resolved to delete from the company's Articles of Association the stipulation on the minimum and maximum share capital, the record date provisions of book-entry system and the section concerning the par value of company's share. Outlook Demand for M-real's paperboard and magazine paper products in the main markets is expected to remain good in the third quarter of 2008. In fine papers there are some signs of demand weakening. Actions to raise product prices continue in all business areas. The price increases for folding boxboard and coated magazine paper have been announced in the main markets, and contract prices are expected to increase towards the end of the year. Price increases are also actively sought for coated fine paper. For uncoated fine paper the need for price increases is also great. This year, M-real will not be able to fully cover the cost inflation with its profit improvement actions. New profit improvement programmes are being launched this year. Reduction of wood consumption will continue. As announced earlier, the annual consumption of wood by M-real and Metsä-Botnia will be reduced by approximately 10 per cent. Pulp sales to external customers will be reduced, so M-real has good possibilities to maintain normal paperboard and paper production levels. M-real's strategic review continues. The profit improvement and complexity reduction programme announced in November 2007 and the divestment programme announced in February 2008 are progressing according to targets. 2008 is a challenging year due to rising production costs, pulp production curtailments caused by shortage of wood, decrease in the sales volume of fine papers, the stronger euro and the postponement of price increases for coated fine paper. As stated in the release published on 10 July 2008, M-real's operating result for 2008, excluding non-recurring items, will be weaker than last year due to the factors mentioned above. However, the operating result for the third quarter of 2008 excluding non-recurring items is expected to show a seasonal increase compared with the second quarter. Near-term business risks If the uncertainty in the US economy continues for a longer period, it could spread worldwide and affect negatively the operational preconditions of European paper and paperboard industry. In M-real's main market areas in Europe the economy has not shown major signs of weakening so far. Demand for paperboards and coated magazine paper seems to continue relatively good. European demand for fine papers seems nonetheless to be quieting down to some extent. M-real aims at price increases on a wide front. However, the risk of not achieving all the targeted increases exists. The risk of the euro growing even stronger was realised during the first part of the year. Production input costs have also continued to increase. Yet additional curtailments to pulp production may be necessary, if the wood trade continues at a slow pace. The risk of curtailments in the paper and paperboard production also exists due to the challenges in wood raw material supply. In addition, the risk of the euro still continuing to grow stronger exists. Because the forward-looking estimates and statements of this financial statements release are based on current plans and estimates, they contain risks and other uncertain factors which may lead the results to differ from the statements concerning them. In the short term, M-real's result will be influenced in particular by the price of, and demand for, finished products, the availability and price of wood, other raw material costs, the price of energy, and the exchange rate of the US dollar. More information about longer-term risk factors can be found on pages 28-29 of M-real's 2007 Annual Report. M-REAL CORPORATION Further information: Seppo Parvi, CFO, tel. +358 10 465 4321 Juha Laine, Vice President, IR and Communications, tel. +358 10 465 4335 Further information on 23 July, 2008 from 1 pm (EET) BUSINESS AREAS AND MARKET DEVELOPMENT Consumer Packaging 2008 2008 2007 2007 2007 2008 2007 2007 Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 244 235 225 231 243 479 478 934 EBITDA, EUR million 24 36 24 45 28 60 67 136 excl. non-recurring items 24 37 25 45 33 61 72 142 Operating result, EUR million 5 18 0 27 8 23 29 56 excl. non-recurring items 5 19 8 27 15 24 36 71 Return on capital employed, % 2.9 9.6 0.1 15.3 4.1 6.3 7.6 7.5 excl. non-recurring items, % 2.9 10.1 4.3 15.3 7.9 6.6 9.4 9.5 Deliveries, 1,000 tonnes 309 298 291 297 313 607 615 1,203 Production, 1,000 tonnes 294 314 294 303 302 608 613 1,210 EBITDA = Earnings before interest, taxes, depreciation and amortization Result for April-June compared with the previous quarter The operating result for the Consumer Packaging business area, excluding non-recurring items, dropped from the previous quarter, amounting to EUR 5 million (Q1/08: 19). The result was weakened by heavy cost inflation, stronger euro compared with the US dollar and British pound, production curtailments at Metsä-Botnia's mills in Finland, as well as annual maintenance shutdowns and the decrease in product stock. The profitability was improved by implemented cost saving actions and achieved price increases. No non-recurring items were recognised in the second quarter. The operating result for the previous quarter included a non-recurring item of EUR -1 million. The deliveries of European folding boxboard producers decreased by 2 per cent compared with the previous quarter. Correspondingly, M-real's deliveries of folding boxboard were up 2 per cent. The average selling price remained unchanged. The delivery volume of linerboard was clearly higher than in the previous quarter. The euro-denominated selling price was on par with the previous quarter. Result for January-June compared with the corresponding period previous year The business area's operating result for January-June excluding non-recurring items totalled EUR 24 million (36). Profitability was hurt by the considerably higher wood and energy costs, the production curtailments at Metsä-Botnia's mills in Finland, as well as the weakened US dollar and British pound. The profitability was improved by implemented cost saving actions and achieved price increases. The deliveries of European folding boxboard producers decreased by 2 per cent compared with the corresponding period last year. M-real's folding boxboard deliveries were at last year's level. The average euro-denominated price for folding boxboard price was slightly higher than in the corresponding period last year, in spite of the weaker US dollar and British pound. The delivery volume for linerboard was slightly lower than in the corresponding period last year. The average euro-denominated price remained the same. The selling price for wallpaper base paper increased clearly from previous year. Graphic Papers 2008 2008 2007 2007 2007 2008 2007 2007 Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 530 560 569 574 548 1,090 1,125 2,268 EBITDA, EUR million 23 56 10 52 31 79 58 120 excl. non-recurring items 23 34 20 48 33 57 74 142 Operating result, EUR million -19 14 -71 16 -12 -5 -26 -81 excl. non-recurring items -19 -8 -22 8 -9 -27 -9 -23 Return on capital employed, % -3.6 2.9 -14.1 3.2 -2.1 -0.4 -2.3 -3.9 excl. non-recurring items, % -3.6 -1.5 -4.1 1.7 -1.6 -2.4 -0.7 -0.9 Deliveries, 1,000 tonnes 695 748 761 760 724 1,443 1,481 3,002 Production, 1,000 tonnes 685 755 736 752 735 1,440 1,474 2,962 EBITDA = Earnings before interest, taxes, depreciation and amortization Result for April-June compared with the previous quarter The second quarter operating result for the Graphic Papers business area, excluding non-recurring items, totalled EUR -19 million (Q1/08: EUR -8 million). No non-recurring items were recognised in the second quarter. The result was mainly weakened by the higher fixed costs caused by the midsummer and annual maintenance shutdowns, as well as the lower delivery volume and the stronger euro compared with the US dollar and British pound. Result improved due to higher delivery volumes at Metsä-Botnia's pulp mill in Uruguay, implemented cost saving actions and achieved increases for coated magazine paper. The operating result for the previous quarter included non-recurring items of net EUR 22 million. Compared with the previous quarter, total deliveries were down 9 per cent for European coated fine paper producers and 3 per cent for European coated magazine paper producers. Total deliveries for the Graphic Papers business area decreased 7 per cent from the previous quarter. Result for January-June compared with the corresponding period previous year The operating result for the Graphic Papers business area, excluding non-recurring items, totalled EUR -27 million (-9). Weakening factors included increased wood and energy costs, the stronger euro compared with the US dollar and British pound and the production curtailments at Metsä-Botnia's mills in Finland. Profitability was improved by the implemented cost saving actions and the start up of the Uruguay pulp mill in November 2007 and price increases for coated magazine paper. The Graphic Paper's operating result for the corresponding period in the previous year included non-recurring items of net EUR -17 million. Total deliveries by European coated fine paper producers were on par with the previous year. Deliveries by European coated magazine paper producers were up by 2 per cent compared with the previous year. Graphic Papers business area's total deliveries decreased by 3 per cent including the impacts of capacity closures. Office Papers 2008 2008 2007 2007 2007 2008 2007 2007 Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 165 181 171 167 183 346 385 723 EBITDA, EUR million 8 16 25 21 15 24 7 53 excl. non-recurring items 8 16 20 21 15 24 37 78 Operating result, EUR million -4 3 -173 7 1 -1 -21 -187 excl. non-recurring items -4 3 7 7 1 -1 9 23 Return on capital employed, % -2.4 3.1 - 114.8 4.9 0.6 0.5 -5.7 -29.6 excl. non-recurring items, % -2.4 3.1 5.3 4.9 0.6 0.5 2.7 4.2 Deliveries, 1,000 tonnes 215 238 219 215 241 453 513 947 Production, 1,000 tonnes 180 200 213 223 257 380 537 973 EBITDA = Earnings before interest, taxes, depreciation and amortization Result for April-June compared with the previous quarter The second quarter operating result for the Office Papers business area, excluding non-recurring items, totalled EUR -4 million (Q1/08: 3). No non-recurring items were recognised in the second quarter. The result was weakened by a decrease in the delivery volume and the heavy cost inflation. The result was improved by implemented cost saving actions. Total deliveries by European uncoated fine paper producers were down by 4 per cent. The Office Papers business area's delivery volumes decreased by 10 per cent. Result for January-June compared with the corresponding period previous year Office Papers business area's operating result excluding non-recurring items in January-June totalled EUR -1 million (9). Profitability was weakened by increased raw material costs, particularly the cost of wood. Profitability was improved by a rise in the average selling price and implemented cost saving actions. Total deliveries by European uncoated fine paper producers were down by 4 per cent. The Office Papers business area's delivery volumes decreased by 12 per cent. The figure includes the impact of the Wifsta mill closure. The financial statements are unaudited. Condensed consolidated income statement 2008 2007 Change 2007 2008 2008 Continuing operations, EUR million Q1-Q2 Q1-Q2 Q1 Q2 Sales 2,164 2,253 -89 4,440 1,099 1,065 Other operating income 176 181 -5 239 60 116 Operating expenses -2,112 -2,176 64 -4,235 -1,057 -1,055 Depreciation and impairment losses -153 -177 24 -564 -78 -75 Operating result 75 81 -6 -120 24 51 % of sales 3.5 3.6 -2.7 2.2 4.8 Share of results in associated companies -1 -1 0 -3 0 -1 Exchange gains and losses -1 -3 2 -3 0 -1 Other net financial items -73 -66 -7 -147 -40 -33 Result before taxes from continuing operations 0 11 -11 -273 -16 16 % of sales 0.0 0.5 -6.1 -1.5 1.5 Income taxes -1 -7 6 23 -2 1 Result for the period from continuing operations -1 4 -5 -250 -18 17 % of sales 0.0 0.2 -5.6 -1.6 1.6 Result from discontinued operations -26 1 -27 55 -1 -25 Result for the period -27 5 -32 -195 -19 -8 -1.2 0.2 -4.4 -1.7 -0.8 Attributable to Shareholders of parent company -31 5 -36 -194 -20 -11 Minority interest 4 0 4 -1 1 3 Earnings per share for result attributable to shareholders of parent company (EUR/share) from continuing operations -0.01 0.01 -0.02 -0.76 -0.06 0.05 from discontinued operations -0.08 0.00 -0.08 0.17 0.00 -0.08 Total -0.09 0.01 -0.10 -0.59 -0.06 -0.03 Taxes include taxes corresponding to the result for the period under review. Condensed consolidated balance sheet 30.6. 30.6. 31.12. EUR million 2008 % 2007 % 2007 % Assets Non-current assets Goodwill 172 3.3 376 6.3 172 3.1 Other intangible assets 71 1.4 50 0.9 38 0.7 Tangible assets 2,633 50.7 2,956 49.5 2,820 51.4 Biological assets 43 0.8 44 0.7 47 0.9 Shares in associated and other companies 449 8.6 355 5.9 390 7.1 Interest-bearing receivables 26 0.5 34 0.6 27 0.5 Deferred tax receivables 3 0.1 31 0.5 4 0.1 Other non-interest-bearing receivables 8 0.2 8 0.1 14 0.3 3,405 65.6 3,854 64.5 3,512 64.1 Current assets Inventories 653 12.6 679 11.4 619 11.3 Interest-bearing receivables 142 2.7 55 0.9 62 1.1 Non-interest-bearing receivables 925 17.7 1,179 19.8 908 16.6 Cash and cash equivalents 73 1.4 175 2.9 380 6.9 1,793 34.4 2,088 35.0 1,969 35.9 Assets classified as held for sale 0 0.0 32 0.5 0 0.0 Total assets 5,198 100 5,974 100 5,481 100 SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity Equity attributable to shareholders of parent company 1,836 35.3 2,006 33.6 1,830 33.4 Minority interest 56 1.1 52 0.9 52 0.9 1,892 36.4 2,058 34.5 1,882 34.3 Non-current liabilities Deferred tax liabilities 307 5.9 334 5.6 290 5.3 Post-employment benefit obligations 141 2.7 194 3.2 159 2.9 Provisions 45 0.9 81 1.4 72 1.3 Other non-interest-bearing liabilities 30 0.6 32 0.6 38 0.7 Interest-bearing liabilities 1,637 31.5 2,123 35.5 1,883 34.4 2,160 41.6 2,764 46.3 2,442 44.6 Current liabilities Non-interest-bearing liabilities 655 12.5 814 13.6 704 12.8 Interest-bearing liabilities 491 9.5 327 5.5 453 8.3 1,146 22.0 1,141 19.1 1,157 21.1 Liabilities relating to assets classified as held for sale 0 0.0 11 0.1 0 0.0 Total liabilities 3,306 63.6 3,916 65.5 3,599 65.7 Total shareholders' equity and liabilities 5,198 100 5,974 100 5,481 100 The table includes Pohjolan Voima shares at fair value, which was approximately EUR 380 million on 30 June, 2008. Condensed consolidated cash flow statement 2008 2007 2007 2008 EUR million Q1-Q2 Q1-Q2 Q2 Result for the period -27 4 -196 -8 Total adjustments 126 146 479 34 Change in working capital -60 -18 42 -27 Cash flow arising from operations 39 132 325 -1 Net financial items -54 -68 -160 -36 Income taxes paid -23 -21 -38 -10 Net cash flow arising from operating activities -38 43 127 -47 Investments in tangible and intangible assets -51 -112 -259 -30 Divestments of assets and other 138 275 628 81 Net cash flow arising from investing activities 87 163 369 51 Share issue, minority interest 2 2 6 0 Changes in long-term loans and other financial items -337 -197 -282 -128 Dividends paid -20 -20 -20 0 Net cash flow arising from financing activities -355 -215 -296 -128 Changes in cash and cash equivalents -306 -9 200 -124 Cash and cash equivalents at beginning of period 380 182 182 197 Translation difference in cash and cash equivalents -1 -1 -2 0 Changes in cash and cash equivalents -306 -9 200 -124 Assets held for sale, folding carton plants 0 2 0 0 Cash and cash equivalents at end of period 73 174 380 73 Statement of changes in shareholders' equity Fair value Trans- and Re- Mi- Share lation other tained nority Share pre- dif- re- earn- inter- EUR million capital mium ference serves ings est Total Shareholders' equity according to IFRS, 1 Jan. 2007 (as revised) 558 667 3 222 605 63 2,118 Translation differences -11 -1 -12 Net investment hedge 11 11 Available for sale investments recorded in equity -34 -34 transferred to income statement's other operating income -5 -5 Currency flow hedges, recorded in equity -22 -22 transferred to income statement's sales 11 11 Interest flow hedges recorded in equity 0 0 Commodity hedges recorded in equity 12 12 Transferred to income statement's purchases -5 -5 Tax on equity components -3 12 9 Net expenses recognised directly in equity -3 -31 -1 -35 Result for the period 5 5 Total recognised income and expenses for the period -3 -31 5 -1 -30 Related party transactions Changes in minority interest Sale of Metsä-Botnia shares (9%) -11 Metsä-Botnia restructuring in Uruguay 2 Total -9 -9 Dividends paid -20 -1 -21 Related party transactions -20 -11 -30 Shareholders' equity 30.6.2007, IFRS 558 667 0 191 590 52 2,058 Shareholders' equity according to IFRS 1 Jan. 2008 (as revised) 558 667 -11 225 391 52 1,882 Translation differences -9 -2 -11 Net investment hedge 9 9 Available for sale investments recorded in equity 95 95 transferred to income statement's other operating income -28 -28 Currency flow hedges recorded in equity 6 6 transferred to income statement's sales -8 -8 Interest flow hedges recorded in equity -1 -1 transferred income statement's financial items -1 -1 Commodity hedges recorded in equity 14 14 transferred income statement's purchases 2 2 Tax on equity components -2 -20 -22 Net expenses recognised directly in equity -2 59 -2 55 Loss for the period -31 4 -27 Total recognised income and expenses for the period -2 59 -31 2 28 Related party transactions Changes in minority interest Metsä-Botnia restructuring in Uruguay 2 2 2 Dividends paid -20 -20 Related party transactions -20 2 -18 Shareholders' equity 30.6.2008, IFRS 558 667 -13 284 340 56 1,892 Key ratios 2008 2007 2007 2008 Q1-Q2 Q1-Q2 Q2 Sales, EUR million 2,164 2,253 4,440 1,065 EBITDA, EUR million 228 258 444 126 excl. non-recurring items, EUR million 135 177 366 54 Operating result, EUR million 75 81 -120 51 excl. non-recurring items, EUR million -18 18 49 -21 Result from continuing operations before taxes, EUR million 0 11 -273 16 excl. non-recurring items, EUR million -93 -52 -104 -56 Result for the period from continuing operations, EUR million -1 4 -250 17 from discontinued operations, EUR million -26 1 55 -25 Total, EUR million -27 5 -195 -8 Earnings per share from continuing operations, EUR -0.01 0.01 -0.76 0.05 from discontinued operations, EUR -0.08 0.00 0.17 -0.08 Total, EUR -0.09 0.01 -0.59 -0.03 Earnings per share, excl. non-recurring items from continuing operations, EUR -0.30 -0.22 -0.32 -0.18 Return on equity, % -0.1 -0.6 -12.5 -0.3 excl. non-recurring items, % -10.0 -7.7 -5.3 -3.0 Return on capital employed, % 4.0 4.1 -2.5 5.3 excl. non-recurring items, % -0.5 1.3 1.4 -1.8 Equity ratio at end of period, % 36.5 34.5 34.4 36.5 Gearing at end of period, % 112 119 124 112 Net gearing at end of period, % 100 107 99 100 Shareholders' equity per share at end of period, EUR 5.60 6.11 5.58 5.60 Net interest-bearing liabilities at end of period, EUR million 1,888 2,192 1,867 1,888 Gross capital expenditure, EUR million 51 112 259 30 Paper deliveries, 1,000 tonnes 1,897 1,994 3,949 911 Board deliveries, 1,000 tonnes 607 615 1,203 309 Personnel at end of period 9,357 13,302 9,508 9,357 EBITDA = Earnings before interest, taxes, depreciation and amortization The table includes Pohjolan Voima shares at fair value, which was approximately EUR 380 million on 30 June, 2008. Securities and guarantees 2008 2007 2007 EUR million Q2 Q2 For own liabilities 58 56 61 On behalf of associated companies 1 1 1 On behalf of Group companies 5 5 4 On behalf of others 3 2 3 Total 67 64 69 Open derivative contracts 2008 2007 2007 EUR million Q2 Q2 Interest rate derivatives 1,815 2,373 1,954 Foreign exchange derivatives 3,326 3,563 3,809 Other derivatives 176 183 133 Total 5,317 6,119 5,896 The fair value of open derivative contracts calculated at market value was EUR 27.7 million at the end of the review period (EUR 14.7 million 31 December 2007 and EUR 5.9 million 30 June 2007). The gross amount of open contracts also includes closed contracts, totalling EUR 2,623.2 million (31 December 2007: EUR 2,713.9 million and 30 June 2007 EUR 2,308.6). Commitments related to fixed assets 2008 2007 2007 EUR million Q2 Q2 Payments in less than a year 5 48 22 Payments later 1 5 4 Changes in property, plant and equipment 2008 2007 2007 EUR million Q2 Q2 Carrying value at beginning of period 2,820 3,156 3,156 Capital expenditure 51 110 250 Decrease -73 -143 -186 Depreciation and impairment losses -145 -155 -346 Translation difference -20 -12 -54 Carrying value at end of period 2,633 2,956 2,820 Related-party transactions Transactions with parent company and sister companies 2008 2007 2007 EUR million Q2 Q2 Sales 16 19 34 Other operating income 2 136 138 Purchases 318 255 549 Interest income 3 1 3 Interest expenses 3 4 8 Non-current receivables 19 20 19 Current receivables 117 64 41 Non-current liabilities 0 1 1 Current liabilities 34 43 149 Transactions with associated companies 2008 2007 2007 Q2 Q2 Sales 0 0 0 Purchases 2 2 4 Non-current receivables 2 7 0 Current receivables 10 0 7 Current liabilities 2 3 3 Accounting policies The interim report was prepared in accordance with the IAS 34 standard Interim Financial Reporting and the accounting policies presented in M-real's Annual Report 2007. The figures in the financial statement release are unaudited. Taxes include taxes corresponding to the result for the period under review. Calculation of key ratios (Result from continuing operations Return on equity (%) = before tax - direct taxes) per (Total equity (average)) (Result from continuing operations before tax + interest expenses, net Return on capital exchange gains/losses and other employed (%) = financial expenses) per (Total assets - non-interest-bearing liabilities (average)) Equity ratio (%) = (Total equity) per (Total assets - advance payments received) Gearing ratio (%) = (Interest-bearing liabilities) per (Total equity) (Interest-bearing liabilities - liquid funds - interest-bearing receivables) Net gearing ratio (%) = per (Total equity) (Profit attributable to shareholders of Earnings per share = parent company) per (Adjusted number of shares (average)) Shareholders' equity per (Equity attributable to shareholders of share = parent company) per (Adjusted number of shares at end of review period) Quarterly information Sales and result by segment, 2008 2008 2007 2007 2007 2008 2007 EUR million Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Consumer 244 Packaging 235 225 231 243 479 478 Graphic Papers 530 560 569 574 548 1,090 1,125 Office Papers 165 181 171 167 183 346 385 Internal sales and other operations 126 123 120 130 122 249 265 Sales 1,065 1,099 1,085 1,102 1,096 2,164 2,253 Consumer 24 Packaging 36 24 45 28 60 67 Graphic Papers 23 56 10 52 31 79 58 Office Papers 8 16 25 21 15 24 7 Other operations 71 -6 11 -2 -8 65 126 EBITDA 126 102 70 116 66 228 258 % of sales 11.8 9.3 6.5 10.5 6.0 10.5 11.5 Consumer 5 Packaging 18 0 27 8 23 29 Graphic Papers -19 14 -71 16 -12 -5 -26 Office Papers -4 3 -173 7 1 -1 -21 Other operations 69 -11 -1 -7 -12 58 99 Operating result 51 24 -245 43 -15 75 81 % of sales 4.8 2.2 -22.6 3.9 -1.5 3.5 3.6 Share of results in associated companies -1 0 -3 1 -1 -1 -1 Exchange gains and losses -1 0 2 -2 2 -1 -3 Other net financial items -33 -40 -42 -39 -29 -73 -66 Result from continuing 16 operations before tax -16 -288 4 -44 0 11 Income taxes 1 -2 39 -9 -4 -1 -7 Result for the period from continuing 17 operations -18 -249 -5 -48 -1 4 Result for period from -25 discontinued operations -1 57 -3 -1 -26 1 Result for the -8 period -19 -192 -8 -49 -27 5 Minority 3 interest 1 0 1 0 4 0 Financial result attributable to shareholders of parent company -11 -20 -192 -7 -49 -31 5 Earnings per -0.03 share, EUR -0.06 -0.58 -0.02 -0.15 -0.09 0.01 Non-recurring items 2008 2008 2007 2007 2007 2008 2007 EUR million Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Consumer Packaging 0 -1 -8 0 -7 -1 -7 Graphic Papers 0 22 -49 7 -2 22 -16 Office Papers 0 0 -180 0 0 0 -30 Other operations 72 0 -2 0 -4 72 116 Non-recurring items in operating result 72 21 -239 7 -13 93 63 Non-recurring items in financial items 0 0 0 0 0 0 0 Non-recurring items total 72 21 -239 7 -13 93 63 Consumer Packaging 24 37 25 45 33 61 72 Graphic Papers 23 34 20 48 33 57 74 Office Papers 8 16 20 21 15 24 37 Other operations 1 -6 13 -3 -4 -7 -5 EBITDA, excl. non- recurring items 54 81 78 111 77 135 177 % of sales 5.1 7.4 7.2 10.1 7.0 6.2 7.9 Consumer Packaging 5 19 8 27 15 24 36 Graphic Papers -19 -8 -22 8 -9 -27 -9 Office Papers -4 3 7 7 1 -1 9 Other operations -3 -11 1 -6 -9 -14 -18 Operating result excl. non-recurring items -21 3 -6 36 -2 -18 18 % of sales -2.0 0.3 -0.6 3.3 -0.2 -0.8 0.8 Result before taxes, excl. non-recurring items -56 -37 -49 -3 -31 -93 -52 % of sales -5.3 -3.4 -4.5 -0.2 -2.8 -4.3 -2.3 Result per share, excl. non-recurring items, EUR -0.18 -0.12 -0.07 -0.04 -0.12 -0.30 -0.22 Return on equity, excl. non-recurring items, % -3.0 -8.2 -0.4 -0.9 -2.2 -10.0 -7.2 Return on capital employed, excl. non- recurring items, % -1.8 0.7 -0.3 3.5 0.1 -0.5 1.3 Return on capital employed 2008 2008 2007 2007 2007 2008 2007 % Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Consumer Packaging 2.9 9.6 0.1 15.3 4.1 6.3 7.6 Graphic Papers -3.6 2.9 -14.1 3.2 -2.1 -0.4 -2.3 Office Papers -2.4 3.1 -114.8 4.9 0.6 0.5 -5.7 Group 5.3 2.7 -23.1 4.1 -1.1 4.0 4.1 Capital employed 2008 2008 2007 2007 2007 2007 EUR million Q2 Q1 Q4 Q3 Q2 Q1 Consumer Packaging 778 781 731 742 741 777 Graphic Papers 2,120 1,998 1,907 2,046 2,042 2,077 Office Papers 422 475 518 681 665 669 Other equity 700 894 1,061 719 726 700 Group 4,020 4,148 4,218 4,188 4,174 4,223 The capital employed for a segment included its assets: goodwill, other intangible goods, tangible assets, biological assets, investments in associates, inventories, accounts receivables, prepayments and accrued income (excluding interest and taxes), less the segment's liabilities (accounts payable, advance payments, accruals and deferred income (excluding interest and taxes). Personnel 2008 2007 2007 Average Q1-Q2 Q1-Q2 Consumer Packaging 1,340 1,556 1,504 Graphic Papers 4,842 5,260 5,135 Office Papers 1,346 1,710 1,657 Other continuing operations 1,733 2,670 2,372 Discontinued operations - 2,414 2,007 Total 9,260 13,610 12,675 Deliveries 2008 2008 2007 2007 2007 2008 2007 1,000 tonnes Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Consumer Packaging 309 298 291 297 313 607 615 Graphic Papers 695 748 761 760 724 1,443 1,481 Office Papers 215 238 219 215 241 1,440 513 Paper segments, total 911 986 980 975 965 1,897 1,994 Production 2008 2008 2007 2007 2007 2008 2007 1,000 tonnes Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Consumer Packaging 294 314 294 303 302 608 613 Graphic Papers 685 755 736 752 735 1,440 1,474 Office Papers 180 200 213 223 257 380 537 Paper mills, total 865 955 949 975 992 1,820 2,011 Metsä-Botnia pulp 1) 233 252 235 203 200 485 403 M-real pulp 424 446 400 455 398 870 824 1) corresponds to M-real's share of 30 per cent in Metsä-Botnia |
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