2009-02-05 11:03:34 CET
2009-02-05 11:04:55 CET
REGULATED INFORMATION
M-real - Financial Statement Release
M-real's operating result excluding non-recurring items for 2008 EUR -35 million
M-real Corporation Stock Exchange Release 5 February 2009
Full year result for 2008
* Sales EUR 3,236 million (2007: 3,499)
* Operating result excluding non-recurring items EUR -35 million
(75). Operating result including non-recurring items EUR -61
million (-49)
* Result before taxes excluding non-recurring items EUR -178 million
(-67). Result before taxes including non-recurring items EUR -204
million (-191)
* Result per share from continuing operations excluding non-recurring
items EUR -0.48 (-0.17), and, including non-recurring items EUR
-0.55 (-0.51)
Result for October-December
* Sales EUR 722 million (Q3/2008: 826)
* Operating result excluding non-recurring items EUR -51 million (3).
Operating result including non-recurring items EUR -161 million
(-8)
* Result before taxes excluding non-recurring items EUR -87 million
(-34). Result before taxes including non-recurring items EUR -197
million (-45)
* Result per share from continuing operations excluding non-recurring
items EUR -0.17 (-0.13), and, including non-recurring items EUR
-0.50 (0.15)
Events during the fourth quarter
* The sale of Graphic Papers business to Sappi was closed at end of
December 2008
Events after the period
* The new management and reporting structure including the Consumer
Packaging, Office Papers and Other Papers business areas as well as
the Market Pulp and Energy reporting segment was announced.
* Statutory negotiations concerning 1,500 people in mill operations
in Finland began.
* Statutory negotiations concerning 480 people began at the Hallein
mill in Austria to discontinue paper production by the end of
April. At Gohrsmühle, Germany, standard fine paper production will
be discontinued during April while the production of speciality
papers and uncoated fine paper reels and folio sheets will be
expanded.
* The annual impairment testing resulted in the recognition of
impairment losses of EUR 86 million in the results for the final
quarter of 2008.
* A new EUR 80 million profit improvement programme and a separate
programme of EUR 60 million to boost the cash flow were launched."The Graphic Papers divestment to Sappi, which is the most
significant step in our strategic review so far, was closed at the
end of December. This deal considerably improved M-real's
profitability, financial position and outlook. The decline in demand
late last year exceeded typical seasonal fluctuation and thus
prompted us to launch statutory negotiations in January concerning
mill operations in Finland. Cost inflation has eased off and we
expect the impact of the new profit improvement programme together
with the earlier implemented measures to clearly exceed the 2009 cost
inflation. The main target for the year is to boost operative cash
flow."
Mikko Helander, CEO, M-real Corporation
KEY FIGURES 2008 2007 2008 2008 2008 2008
Q4 Q3 Q2 Q1
Sales, EUR million 3,236 3,499 722 826 829 859
EBITDA, EUR million 254 398 -18 49 127 96
excl. non-recurring items,
EUR million 192 313 4 60 55 73
Operating result, EUR
million -61 -49 -161 -8 71 37
excl. non-recurring items,
EUR million -35 75 -51 3 -1 14
Result before taxes
from continuing
operations, EUR
million -204 -191 -197 -45 36 2
excl. non-recurring items,EUR million -178 -67 -87 -34 -36 -21
Result for the period
from continuing
operations, EUR
million -170 -168 -163 -44 37 0
from discontinued
operations, EUR
million -338 -27 -62 -212 -45 -19
Total, EUR million -508 -195 -225 -256 -8 -19
Result per share
from continuing
operations, EUR -0.55 -0.51 -0.50 -0.15 0.10 0.00
from discontinued
operations, EUR -1.03 -0.08 -0.19 -0.64 -0.14 -0.06
Total, EUR -1.58 -0.59 -0.69 -0.79 -0.04 -0.06
Result per share excl.
non-recurring items, EUR -0.48 -0.17 -0.17 -0.13 -0.12 -0.06
Return on equity, % -10.4 -8.5 -43.3 -10.1 7.9 0.0
excl. non-recurring items,
% -9.0 -2.8 -14.5 -8.3 -7.4 -4.8
Return on capital employed,
% -1.3 -0.8 -19.7 -0.5 8.9 5.7
excl. non-recurring items,
% -0.5 2.8 -6.2 1.0 -0.2 2.9
Equity ratio at end of
period, % 30.8 34.4 30.8 32.5 36.5 35.0
Gearing ratio at end of
period, % 152 124 152 129 112 120
Net gearing ratio at end of
period, % 90 99 90 114 100 100
Interest-bearing net
liabilities 1,254 1,867 1,254 1,865 1,888 1,892
Gross investments, EUR
million 128 259 39 38 30 21
Deliveries, 1,000 tonnes
Paper businesses 1,761 1,911 394 438 448 481
Consumer Packaging 1,345 1,386 303 348 351 342
Personnel
In continuing operations 6,546 7,241 6,546 6,679 7,035 6,866
In discontinued operations 2,267 2,159 2,322 2,256
Dividend proposed
by the Board of Directors
EUR/share 0.00 0.06
Map Merchant Group divested in 2007 and Graphic Papers business
divested in 2008 have been reported in Discontinued operations.
Result for 2008 compared to 2007
M-real's sales totalled EUR 3,236 million (2007: 3,499). Comparable
sales were down 5.9%. The operating result was EUR -61 million (-49),
and the operating result excluding non-recurring items was EUR -35
million (75).
The non-recurring items recognised in the operating result amounted
to EUR -26 million net, the most significant being:
* EUR 86 million impairment charges under IAS 36, of which EUR 66
million were allocated to Other Papers, EUR 16 million to Office
Papers and EUR 4 million to Consumer Packaging. Of these, EUR 20
million was recognised in goodwill.
* EUR 74 million recognised as realised fair value and capital
gains from the sale of Pohjolan Voima shares in the Market Pulp and
Energy segment.
* EUR 23 million positive effect in the Other Papers related to the
sale of the New Thames mill and being freed from the pension
liabilities of industrial operations in the UK, and other
liabilities related to the closure of the Sittingbourne mill, as
well as the removal of other responsibilities related to the
closure of the Sittingbourne mill.
* EUR 14 million cost provision for streamlining M-real's business
structure to reflect the divestment of Graphics Papers business in
Other operations.
* EUR 13 million cost for the Pont Sainte Maxence (PSM) mill
divested in June 2006 for a guarantee issued to the mill's energy
supplier and for the write-down of receivables from PSM in Other
operations.
* EUR 10 million cost provision and write-down for the closure of
New Thames mill's cut-size operations in Office Papers.
Non-recurring items in 2007 totalled EUR -124 million, the most
significant being:
* EUR 182 million net impairment loss, consisting of an impairment
loss of EUR 185 million from the goodwill of Office Papers, and a
EUR 3 million reversal of an impairment loss from the fixed assets
of the Kyro paper mill in Consumer Packaging.
* EUR 135 million capital gain on the sale of Metsä-Botnia's shares
in Other operations.
* EUR 16 million cost provision for finalising the closure of the
Wifsta mill in Office Papers.
* EUR 16 million impairment loss due to the valuation of assets
held for sale at the expected selling price in compliance with IFRS
5 in Other operations.
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 against the US dollar and British
pound, and the considerable decrease in the demand in late 2008. The
result was improved by implemented cost saving actions and price
increases as well as the start up of the Metsä-Botnia Uruguay pulp
mill in November 2007.
The total delivery volume of paper businesses in 2008 was 1,761,000
tonnes (2007: 1,911,000). Production was curtailed by 201,000 tonnes
(100,000) in line with demand. The deliveries by Consumer Packaging
amounted to 1,345,000 tonnes (1,386,000) and production curtailments
were 73,000 tonnes (66,000).
Financial income and expenses over the period totalled EUR -142
million (-139). Foreign exchange gains and losses from accounts
receivables, accounts payable, financial income and expenses and the
valuation of currency hedging were EUR 13 million (1). Net interest
and other financial expenses amounted to EUR -155 million (-140).
Other financial expenses include EUR 0 million of valuation gains on
interest rate derivatives (valuation gains: 6).
In the review year, the result from continuing operations before
taxes was EUR -204 million
(-191). The result from continuing operations before taxes, excluding
non-recurring items, totalled EUR -178 million (-67). Income taxes,
including the change in deferred tax liabilities, were EUR 34 million
(23).
Earnings per share were EUR -1.58 (-0.59). Earnings per share from
continuing operations excluding non-recurring items were EUR -0.48
(-0.17). Return on equity was -10.4% (-8.5), and -9.0% (-2.8)
excluding non-recurring items. Return on capital employed was -1.3%
(-0.8); excluding non-recurring items -0.5% (2.8).
Result for October-December compared with the previous quarter
M-real's sales totalled EUR 722 million (Q3/2008: 826). Comparable
sales were down 12.6%. The operating result was EUR -161 million
(-8), and the operating result excluding non-recurring items was EUR
-51 million (3).
A net total of EUR -110 million was recognised as non-recurring items
in the operating result for October-December. The total consisted of
the following items:
* EUR 86 million impairment charges under IAS 36.
* EUR 14 million cost provision for the streamlining M-real's
business structure to reflect the divestment of Graphics Papers
business in Other operations.
* EUR 10 million cost provision and write-down for the closure of
New Thames mill's cut-size operations in Office Papers.
The non-recurring items for the previous quarter totalled EUR -11
million net, consisting of the following items:
* EUR 13 million cost for the Pont Sainte Maxence (PSM) mill
divested in June 2006 for a guarantee issued to the mill's energy
supplier and for the write-down of receivables from PSM in Other
operations.
* EUR 2 million gain from the sale of land property of the
previously closed mills in Other operations.
The operating result compared with the previous quarter was weakened
by the more than typical seasonal decrease in demand and production
curtailments at Metsä-Botnia's mills. The result was improved by the
implemented price increases.
The total delivery volume the paper businesses in October-December
was 394,000 tonnes (438,000). Production was curtailed by 75,000
tonnes in line with demand (63,000). Consumer Packaging's deliveries
amounted to 303,000 tonnes (348,000) and production curtailments were
48,000 tonnes (7,000).
Financial income and expenses in the review period totalled EUR -36
million (-37). Foreign exchange gains and losses from accounts
receivables, accounts payable, financial income and expenses and the
valuation of currency hedging were EUR 11 million (1). Net interest
and other financial expenses amounted to EUR -47 million (-38). Other
financial expenses include EUR -3 million of valuation loss on
interest rate derivatives (valuation loss: -2).
In October-December, the result from continuing operations before
taxes was EUR -87 million (-34). The result from continuing
operations before taxes, excluding non-recurring items, totalled EUR
-197 million (-45). Income taxes, including the change in deferred
tax liabilities, came to EUR 34 million (1).
Earnings per share were EUR -0.69 (-0.79). Excluding non-recurring
items, earnings per share from continuing operations were EUR -0.17
(-0.13). Return on equity was -43.3% (-10.1), excluding non-recurring
items EUR -14.5 (-8.3). The return on capital employed was -19.7%
(-0.5); excluding non-recurring items, -6.2% (1.0).
Personnel
The number of personnel in continuing operations was 6,546 on 31
December 2008 (31 December 2007: 7,241), of which 2,258 (2,474)
worked in Finland. M-real's number of personnel incorporates 30% of
Metsä-Botnia's personnel.
Investments
Gross investments in 2008 totalled EUR 128 million (2007: 259),
including a EUR 29 million share of Metsä-Botnia's investments (122).
Metsä-Botnia's investment share is based on M-real's 30% share of
ownership.
Structural change
M-real's profit improvement and complexity reduction programme,
launched in November 2007, was implemented according to the targets.
As part of the programme, the Lielahti BCTMP mill and coated magazine
PM2 of the Kangas 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 concept and to streamline
the sales and marketing organisation. The total annual profit
improvement target excluding the divested Graphic Papers business was
EUR 105 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. The target was clearly exceeded after
the closing of the sale of Graphic Papers business, and the value of
the divestments amounted to over EUR 900 million in 2008. In
addition, the programme included the sale of the New Thames mill and
the 100,000 Pohjolan Voima's 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
effect on result EUR 74 million.
As announced in 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.
In December 2008, M-real's sale of Graphic Papers business to the
South African Sappi Limited was closed. The total value of the
divestment was EUR 750 million. The transaction consideration
consisted of EUR 480 million in cash and assumed debt, a EUR 220
million vendor loan note from Sappi to M-real and EUR 50 million of
newly issued shares in Sappi. M-real's net debt decreased by about
EUR 630 million at the closing of the transaction. The sale comprised
the Kirkniemi and Kangas mills in Finland, the Stockstadt mill in
Germany and the Biberist mill in Switzerland, with a total capacity
of 1.9 million tonnes. As part of the transaction, M-real and Sappi
entered also into a long-term agreement on the supply of pulp and
BCTMP and other smaller services and supplies. Of the Graphic Papers
Business Area's units, the paper mills in Hallein, Gohrsmühle, Reflex
and Äänekoski, as well as the Husum mill's paper machine 8 remained
in M-real's ownership. The Äänekoski paper mill and Husum mill's PM8
continue production for Sappi under a long-term contract.
In September 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.
In January 2009 at the Hallein mill, Austria, statutory negotiations
concerning 480 people were began to plan the discontinuation of the
paper production by the end of April. At Gohrsmühle mill, Germany,
the standard coated fine paper production will be discontinued during
April and its effects are being reviewed. At Gohrsmühle, it has
already been decided that the production of speciality papers as well
as uncoated fine paper reels and folio sheets will be expanded. The
combined annual production capacity of standard coated fine paper at
Hallein and Gohrsmüle mills is about 0.6 million tonnes. M-real
continues to explore various options for the Hallein pulp mill.
The strategic review of the paper business continues.
Financing
At year-end of 2008, M-real's equity ratio was 30.8% (31 December
2007: 34.4) and the gearing ratio 152% (2007: 124) and the net
gearing being 90 (99). Some of M-real's financing agreements set a
120% limit on the company's net gearing ratio and a 30% limit on the
equity ratio. Calculated as defined in the loan agreements, the net
gearing ratio at the end of the year was approximately 74% (86) and
the equity ratio some 36% (40).
Interest-bearing net liabilities totalled EUR 1,254 million at the
end the year (1,867). Foreign-currency-denominated loans accounted
for 12%, 95% were floating-rate and the rest were fixed-rate. At the
end of 2008, the average interest rate on loans was 7.0% and the
average maturity of long-term loans 2.9 years. The interest rate
maturity of loans was 3.4 months at the end of the year. During the
year, the interest rate maturity has varied between 3 and 6 months.
Cash flow from operations amounted to EUR 118 million (Q1-Q4/2007:
325). Working capital was down by EUR 7 million (down 42).
At year-end, an average of 4.6 months of the net foreign currency
exposure was hedged. The level of hedging varied between 4 and 6
months during the period. Approximately 88% of non-euro-denominated
equity was hedged at the end of the review period.
Liquidity is at a good level. The approximately EUR 400 million cash
settlement in December from the divestment to Sappi boosted M-real's
liquidity and financing position considerably. Liquidity at the end
of the period was EUR 1,454 million, of which EUR 904 million
consisted of committed long-term credit facilities and EUR 550
million of liquid assets and investments. The company had also
interest-bearing receivables worth EUR 303 million. In addition, to
meet its short-term financing needs, the company had at its disposal
non-binding domestic and foreign commercial paper programmes and
credit facilities amounting to some EUR 550 million.
Shares
In 2008, the highest price of M-real's B shares on the NASDAQ OMX
Helsinki Ltd was EUR 3.28, the lowest EUR 0.67, and the average price
EUR 1.59. At year-end, the price of the B share was EUR 0.69.
The trading volume of B shares was EUR 1,004 million, or 217% of the
share capital. The market value of the A and B shares totalled EUR
232 million at the year-end.
At year-end, Metsäliitto Cooperative owned 38.6% of M-real
Corporation's shares, and the voting rights conferred by these shares
was 60.5%. International investors' holdings were 25%.
On 9 January, Norges Bank's (Central Bank of Norway) holding in
M-real increased to 5.3% of the share capital and 1.7% of the voting
rights.
On 2 May, Hermes Focus Asset Management Europe Ltd's holding in
M-real decreased to 4.9% of the share capital and 2.3% of the voting
rights.
On 29 September, Financier de l'Echiquier SA's holding in M-real
increased to 5.1% of the share capital and 1.6% of the voting rights.
The Annual General Meeting on 13 March 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.
The company does not possess its own shares.
Consideration of the result for the financial year and dividend
The distributable funds of the parent company as of 31 December 2008
were EUR -303,901,093.04 of which the result for the financial year
is EUR -535,312,028.39. In its meeting on 5 February, the Board of
Directors decided to propose to the Annual General Meeting, to be
held on 12 March 2008 that no dividend is paid for the financial year
2008. For 2007, paid dividend per share was EUR 0.06, in total EUR
19.7 million.
The Annual General Meeting in March elected as members of M-real's
Board of Directors Heikki Asunmaa, Counsellor of Forest Economy;
Martti Asunta, M. Sc. (Forestry); Kari Jordan, President and CEO of
Metsäliitto Group; Erkki Karmila, LL.M.; Kai Korhonen, M. Sc.
(Technology); Runar Lillandt, Counsellor of Agriculture; Juha
Niemelä, Honorary Counsellor; and Antti Tanskanen, Minister. The term
of office of the members of the Board of Directors expires at the end
of the next Annual General Meeting. At its organising meeting
following the Annual General Meeting, the Board of Directors elected
Kari Jordan as its Chairman and Martti Asunta as its Vice Chairman.
The Annual General Meeting elected as M-real's auditor Authorized
Public Accountants PricewaterhouseCoopers Oy. The term of office of
the auditor expires at the end of the next Annual General Meeting.
Events after the review period
The new management and reporting structure including the Consumer
Packaging, Office Papers and Other Papers business areas as well as
the Market Pulp and Energy reporting segment was announced.
Statutory negotiations concerning 1,500 people at mill operations in
Finland began.
Statutory negotiations concerning 480 people began at the Hallein
mill, Austria, to plan the discontinuation of paper production by the
end of April. At Gohrsmühle, Germany, standard fine paper production
will be discontinued during April while the production of uncoated
fine paper reels and folio sheets will be expanded.
Standard & Poor's downgraded M-real's B- rating to CCC+. The outlook
of the rating remains negative. Downgrade has an annual impact of
approximately EUR 2 million on annual financing costs.
On 5 January 2008, M-real launched a new profit improvement programme
with an annual target of EUR 80 million. The programme targets at
savings in the business areas and streamlining the support functions
to reflect the new company structure after the divestment of Graphic
Papers. The full annual effect of the programme will be visible from
2011. The majority of the profit improvement measures are expected to
be implemented in 2009, and the profit impact is estimated to be EUR
20-25 million in 2009. The related non-recurring costs booked during
2009 are expected to be about EUR 18 million. At the same time,
M-real will also implement a separate EUR 60 million programme to
boost the 2009 cash flow including e.g. reduction of operating net
working capital and cuts in investments.
Outlook
The demand for M-real's main products in Europe is expected to
improve during the first quarter compared with the exceptionally low
demand in late last year. The demand appears, however, to remain at a
lower level compared with the beginning of last year. The general
uncertainty of the economy poses challenges to the short-term
forecasting.
The price increases for folding boxboard in late 2008 are visible in
the average prices during the early part of this year. Folding
boxboard prices are targeted to be increased later this year when
market situation so enables. Despite the weakening demand for coated
papers, the prices are targeted to be increased. For uncoated fine
papers the need for price increases is great, however, due to the
market situation their implementation is deferred to a later date. In
the short term the aim is to maintain the current price level of
uncoated fine papers.
Cost inflation is expected to ease considerably during 2009.
Currently, it seems that the impact of the new profit improvement
programme together with the earlier implemented measures will clearly
exceed the 2009 cost inflation.
With the above factors taken in account, M-real's operating result
for first quarter of 2009, excluding non-recurring items, is expected
to improve seasonally from the fourth quarter of 2008 but to remain
clearly negative.
Near-term business risks
The financial market crisis has brought down consumer demand and
investment activity. The uncertainty of the global economy has also
negatively affected the operational preconditions of the European
paper and paperboard industry; in addition, the risk of a prolonged
slow-down of the global economy exists. Production may have to be
curtailed more than planned as a result from the weakened demand.
The risk of the Euro strengthening further still exists although
compared to the US dollar the trend seems to have reversed.
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 5 February, 2009 from 12:30 p.m. (EET). The
conference call and webcast for investors and analysts begins at 3
p.m. (EET).
M-real's annual report, including financial statements, report of the
Board of Directors and auditor's report, will be available at
company's website www.m-real.com at the latest on 5 March, 2009.
BUSINESS AREAS AND MARKET DEVELOPMENT
Consumer Packaging 2008 2007 2008 2008 2008 2008 2007
Q4 Q3 Q2 Q1 Q4
Sales, EUR million 1,061 1,069 248 274 274 266 259
EBITDA, EUR million 108 150 11 37 23 37 26
excl. non-recurring items 109 156 11 37 23 38 27
Operating result, EUR million 24 61 -13 17 3 17 -1
excl. non-recurring items 29 77 -9 17 3 18 7
Return on capital employed, % 3.2 7.8 -6.0 8.3 1.4 8.7 0.1
excl. non-recurring items, % 3.8 9.7 -4.0 8.3 1.4 9.2 3.8
Deliveries, 1,000 tonnes 1,345 1,386 303 348 351 342 336
Production, 1,000 tonnes 1,336 1,398 293 347 335 361 339
Year 2008 compared to 2007
Consumer Packaging business area's operating result, excluding
non-recurring items, amounted to EUR 29 million (2007: 77). The
result was weakened by severe cost inflation, production curtailments
at Metsä-Botnia's mills in Finland as well as the stronger euro
against the US dollar and British pound. At the same time, the
profitability was improved by implemented cost saving actions and
achieved price increases.
A cost provision of EUR 1 million was booked for finalising the
closure of Lielahti BCTMP mill, and a EUR 4 million in impairment
charge under IAS 36.
The result for the previous year included non-recurring items of EUR
-16 million.
The deliveries of European folding boxboard producers decreased by 4%
compared with the previous year. Correspondingly, M-real's deliveries
of folding boxboard were at the same level as in 2007. The average
selling price compared to the previous year was higher despite the
weakened US dollar and the British pound.
The delivery volume of linerboard decreased from the previous year.
The selling price for wallpaper base paper increased clearly from
previous year.
Result for October-December compared with the previous quarter
The Consumer packaging business area's operating result excluding
non-recurring items decreased compared with the third quarter and was
EUR -9 million (Q3/2008: 17). The result was weakened by production
curtailments at Metsä-Botnia's mills in Finland and more than
seasonally decreased demand for products.
EUR -4 million was booked as a non-recurring item for the fourth
quarter result relating to the impairment charge under IAS 36.
The result for the previous quarter did not include any non-recurring
items.
The deliveries of European folding boxboard producers decreased by 8%
compared with the previous quarter. M-real's folding boxboard
deliveries decreased by 13%. The achieved price increases and the
strengthened US dollar improved the average selling price.
The delivery volume for linerboard was lower than in the previous
quarter. The implemented price increases and the strengthened US
dollar improved the euro-denominated selling price.
Office Papers 2008 2007 2008 2008 2008 2008 2007
Q4 Q3 Q2 Q1 Q4
Sales, EUR million 804 888 174 203 204 223 213
EBITDA, EUR million 35 66 -3 11 10 17 26
excl. non-recurring items 37 93 -1 11 10 17 23
Operating result, EUR million -53 -196 -38 -6 -7 -2 -179
excl. non-recurring items -29 17 -14 -6 -7 -2 4
Return on capital employed, % -7.4 -21.0 -25.6 -3.2 -3.2 -0.6 -79.9
excl. non-recurring items, % -3.8 2.2 -9.2 -3.2 -3.2 -0.6 2.3
Deliveries, 1,000 tonnes 1,081 1,194 237 270 274 300 284
Production, 1,000 tonnes 905 1,219 177 226 245 257 279
Year 2008 compared to 2007
The 2008 operating result for the Office Papers business area,
excluding non-recurring items, was EUR -29 million (2007: EUR 17).
The result was weakened by the increased raw material costs,
especially of wood raw material and the decrease in demand for
products.
The non-recurring items recognised in the operating result were EUR
-24 million net:
* EUR 16 million impairment charges under IAS 36.
* EUR 10 million cost provision and write-down for the closure of
New Thames mill's cut-size operations.
* EUR 2 million reduction of cost provision related to the profit
improvement programme announced in 2007.
The result for the previous year included non-recurring items for EUR
-213 million net.
The total deliveries by European uncoated fine paper producers
decreased by 4%. Deliveries by Office Papers decreased by 9%. The
figure includes the effect of the closure of the Wifsta mill.
Result for October-December compared with the previous quarter
The operating result for the Office Papers business area, excluding
non-recurring items, decreased compared to third quarter and totalled
EUR -14 million (Q3/2008: -6). The main factors were the decrease in
the average selling price mainly resulting from the weakened British
pound and the more than seasonally decreased demand for products.
The non-recurring items recognised in the operating result in the
fourth quarter were EUR -24 million net:
* EUR 16 million impairment charges under IAS 36.
* EUR 10 million cost provision and write-down for the closure of
New Thames mill's cut-size operations.
* EUR 2 million reduction of cost provision related to the profit
improvement programme announced in 2007.
The result for the previous quarter did not include any non-recurring
items.
Total deliveries by European uncoated fine paper producers decreased
by 2%. The Office Papers total deliveries decreased by 12%.
Other Papers 2008 2007 2008 2008 2008 2008 2007
Q4 Q3 Q2 Q1 Q4
Sales, EUR million 622 657 147 153 158 164 161
EBITDA, EUR million 45 1 -1 7 8 31 -4
excl. non-recurring items 23 11 1 7 9 7 -1
Operating result, EUR million -59 -36 -75 -3 -2 21 -12
excl. non-recurring items -15 -30 -8 -3 -1 -3 -10
Return on capital employed, % -14.3 -9.1 -63.5 -2.3 -1.2 18.1 -11.4
excl. non-recurring items, % -3.4 -7.2 -5.8 -2.3 -0.8 -2.6 -9.1
Deliveries, 1,000 tonnes 680 718 157 168 174 181 177
Production, 1,000 tonnes 705 743 160 170 186 190 182
Year 2008 compared to 2007
The 2008 operating result for Other Papers, excluding non-recurring
items, was EUR -15 million (2007: -30). The result was improved by
the implemented cost saving actions, the start up of Metsä-Botnia's
Uruguay mill in November 2007 and price increases in coated fine
paper. The result was decreased by the increased wood raw material
and energy costs, the strengthened euro compared to the US dollar and
the British pound as well as the curtailments at the pulp mills.
The non-recurring items recognised in the operating result in the
fourth quarter were EUR -44 million net:
* EUR 66 million impairment loss under IAS 36 related to Hallein.
* EUR 23 million positive effect related to the sale of the New
Thames mill and being freed from the pension liabilities of
industrial operations in the UK, as well as the removal of other
responsibilities related to the closure of the Sittingbourne mill.
* EUR 1 million of write-downs of other fixed assets.
The result for the previous year included non-recurring items of EUR
-6 million net.
Total deliveries by European coated fine paper producers decreased by
3% compared with the previous year. Other Papers total deliveries
decreased by 5%.
Result for October-December compared with the previous quarter
Other Papers business area's operating result weakened compared to
the third quarter and was EUR -8 million (Q3/2008: -3). The result
was weakened by the more than seasonally decreased demand as well as
the production curtailments at Metsä-Botnia's mills. The result was
improved by the increased selling prices and the strengthened US
dollar compared to euro.
The non-recurring items recognised in the operating result in the
fourth quarter were:
* EUR 66 million impairment loss under IAS 36 related to Hallein.
* EUR 1 million of write-downs of other fixed assets.
There were no non-recurring items in the previous quarter.
Total deliveries by European coated fine paper producers decreased
from the previous quarter by 9%. Other Papers total deliveries
decreased by 7% compared with the previous quarter.
Market Pulp and Energy 2008 2007 2008 2008 2008 2008 2007
Q4 Q3 Q2 Q1 Q4
Sales, EUR million 644 596 150 172 160 162 147
EBITDA, EUR million 148 54 8 23 96 21 11
excl. non-recurring items 73 55 8 23 22 21 12
Operating result, EUR million 106 25 -2 12 86 10 7
excl. non-recurring items 32 26 -2 12 12 10 8
Return on capital employed, % 12.6 3.1 -1.3 5.1 37.3 4.7 3.5
excl. non-recurring items, % 3.6 3.2 -1.3 5.1 4.8 4.7 4.1
Deliveries, 1,000 tonnes 1,115 997 264 291 279 281 247
The 2008 operating result of the Market Pulp and Energy reporting
segment, excluding non-recurring items, was EUR 31 million (2007:
26). Profitability was improved by the start-up of Metsä-Botnia's
Uruguay mill in November 2007 and weakened by increased wood raw
material costs and production curtailments at Metsä-Botnia's mills.
EUR 74 million, recognised as realised fair value and capital gains
from the sale of Pohjolan Voima shares, was transferred from Other
operations to the Market Pulp and Energy segment.
The result for the previous year included non-recurring items of EUR
-1 million.
Result for October-December compared with the previous quarter
The result for the Market Pulp and Energy segment compared to the
third quarter was weakened and was EUR -2 million (Q3/08: 12). The
result was weakened mainly by the more than normal seasonal decrease
in demand for pulp and the lower selling price of pulp.
The result was improved by lower wood raw material costs. The result
did not include any non-recurring items.
There were no non-recurring items in the previous quarter.
The financial statements are unaudited.
Condensed consolidated
income statement 2008 2007 Change 2008 2008
Continuing operations, EUR
million Q4 Q3
Sales 3,236 3,499 -263 722 826
Other operating income 182 195 -13 9 24
Operating expenses -3,164 -3,296 132 -749 -801
Depreciation and impairment
losses -315 -447 132 -143 -57
Operating result -61 -49 -12 -161 -8
% of sales -1.9 -1.4 -22.3 -1.0
Share of results in associated
companies -1 -3 2 0 0
Exchange gains and losses 13 1 12 11 1
Other net financial items -155 -140 -15 -47 -38
Result before taxes from
continuing operations -204 -191 -13 -197 -45
% of sales -6.3 -5.5 -27.3 -5.4
Income taxes 34 23 11 34 0.1
Result for the period
from continuing operations -170 -168 -2 -163 -44
% of sales -5.3 -4.8 -4.6 -22.6 -5.4
Result from discontinued
operations -338 -27 -311 -62 -212
Result for the period -508 -195 -313 -225 -256
% of sales -15.7 -5.6 -31.2 -31.0
Attributable to
Shareholders of parent company -517 -194 -323 -225 -261
Minority interest 9 -1 10 0 5
Earnings per share for result
attributable to shareholders of
parent company (EUR/share)
from continuing operations -0.55 -0.51 -0.04 -0.50 -0.15
from discontinued operations -1.03 -0.08 -0.95 -0.19 -0.64
Total -1.58 -0.59 -0.99 -0.69 -0.79
Taxes include taxes corresponding to the result for the period under
review.
Condensed consolidated 31.12. 31.12.
balance sheet 2008 % 2007 %
EUR million
Assets
Non-current assets
Goodwill 51 1.1 172 3.1
Other intangible assets 51 1.1 38 0.7
Tangible assets 1,808 40.1 2,820 51.4
Biological assets 57 1.3 47 0.9
Investments in associated companies 63 1.5 64 1.2
Available for sale investments 440 9.8 343 6.2
Non-current financial assets 232 5.1 9 0.2
Deferred tax receivables 5 0.1 4 0.1
2,707 60.1 3,512 64.1
Current assets
Inventories 505 11.2 619 11.3
Accounts receivables and other
receivables 743 16.5 970 17.7
Cash and cash equivalents 550 12.2 380 6.9
1,798 39.9 1,969 35.9
Total assets 4,505 100 5,481 100
SHAREHOLDERS'
EQUITY AND LIABILITIES
Shareholders' equity
Equity attributable to
shareholders of parent company 1,329 29.5 1,830 33.4
Minority interest 57 1.3 52 0.9
1,386 30.8 1,882 34.3
Non-current liabilities
Deferred tax liabilities 232 5.1 290 5.3
Post-employment benefit obligations 98 2.2 159 2.9
Provisions 99 2.2 72 1.3
Borrowings 1,568 34.8 1,883 34.4
Other liabilities 18 0.4 38 0.7
2,015 44.7 2,442 44.6
Current liabilities
Current borrowings 538 12.6 453 8.3
Accounts payable and other liabilities 566 11.9 704 12.8
1,104 24.5 1,157 21.1
Total liabilities 3 119 69.2 3,599 65.7
Total shareholders'
equity and liabilities 4,505 100 5,481 100
Condensed consolidated cash flow statement
2008 2007 2008 2008
EUR million Q4 Q3
Result for the period -508 -196 -225 -256
Total adjustments 619 479 215 278
Change in working capital 7 42 26 41
Cash flow arising from operations 118 325 16 63
Net financial items -193 -160 -129 -10
Income taxes paid -22 -38 -2 3
Net cash flow arising from
operating activities -97 127 -115 56
Investments in tangible and
intangible assets -128 -259 -39 -38
Divestments of assets and other 507 628 366 3
Net cash flow arising from
investing activities 379 369 327 -35
Share issue, minority interest 2 6 0 0
Changes in long-term loans and
other financial items -95 -282 202 40
Dividends paid -20 -20 0 0
Net cash flow arising from
financing activities -113 -296 202 40
Changes in cash and
cash equivalents 169 200 414 61
Cash and cash equivalents at
beginning of period 380 182 133 73
Translation difference in cash and
cash equivalents 1 -2 0 2
Changes in cash and cash equivalents 169 200 414 61
Assets held for sale 0 0 3 -3
Cash and cash equivalents
at end of period 550 380 550 133
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 -34 -3 -37
Net investment
hedge 28 28
Available for
sale
investments 8 8
recorded in
equity -22 -22
transferred to
income
statement's
other
operating
income
Currency flow
hedges,
recorded in
equity
transferred to
income
statement's
sales
Interest flow
hedges
recorded in
equity
Commodity
hedges
recorded in
equity 9 9
Transferred to
income
statement's
purchases 9 9
Tax on equity
components -8 -1 -9
Net expenses
recognised
directly in
equity -14 3 -3 -14
Result for the
period -194 -1 -195
Total
recognised
income
and expenses
for the period -14 3 -194 -4 -209
Related party
transactions
Changes in
minority
interest
Sale of
Metsä-Botnia
shares (9%) -11
Metsä-Botnia
restructuring
in Uruguay 5
Total -6 -6
Dividends paid -20 -1 -21
Related party
transactions -20 -7 -27
Shareholders'
equity
31 Dec. 2007,
IFRS 558 667 -11 225 391 52 1,882
Shareholders'
equity
according to
IFRS 1 Jan.
2008 (as
revised) 558 667 -11 225 391 52 1,882
Translation
differences -17 2 -15
Net investment
hedge 26 26
Available for
sale
investments
recorded in
equity 115 115
transferred to
income
statement's
other
operating
income -28 -28
Currency flow
hedges
recorded in
equity -21 -21
transferred to
income
statement's
sales 3 3
Interest flow
hedges
recorded in
equity -4 -4
transferred
income
statement's -1
financial items -1
Commodity
hedges
recorded in
equity -17 -17
transferred
income
statement's
purchases -1 -1
Tax on equity
components -7 -12 -19
Net expenses
recognised
directly in
equity 2 34 2 38
Result for the
period -517 9 -508
Total
recognised
income
and expenses
for the period 2 34 -517 11 -470
Related party
transactions
Changes in
minority
interest
Metsä-Botnia
restructuring
in Uruguay -6
-6 -6
Dividends paid -20 0 -20
Related party
transactions -20 -6 -26
Shareholders'
equity
31 Dec. 2008,
IFRS 558 667 -9 259 -146 57 1,386
Key ratios 2008 2007 2008 2008
Q4 Q3
Sales, EUR million 3,236 3,499 722 826
EBITDA, EUR million 254 398 -18 49
excl. non-recurring items, EUR
million 192 313 4 60
Operating result, EUR million -61 -49 -161 -8
excl. non-recurring items, EUR
million -35 75 -51 3
Result from continuing operations
before taxes, EUR million -204 -191 -197 -45
excl. non-recurring items, EUR
million -178 -67 -87 -34
Result for the period
from continuing operations, EUR
million -170 -168 -163 -44
from discontinued operations, EUR
million -338 -27 -62 -212
Total, EUR million -508 -195 -225 -256
Earnings per share
from continuing operations, EUR -0.55 -0.51 -0.50 -0.15
from discontinued operations, EUR -1.03 -0.08 -0.19 -0.64
Total, EUR -1.58 -0.59 -0.69 -0.79
Earnings per share, excl.
non-recurring items
from continuing operations, EUR -0.48 -0.17 -0.17 -0.13
Return on equity, % -10.4 -8.5 -43.3 -10.1
excl. non-recurring items, % -9.0 -2.8 -14.5 -8.3
Return on capital employed, % -1.3 -0.8 -19.7 -0.5
excl. non-recurring items, % -0.5 2.8 -6.2 1.0
Equity ratio at end of period, % 30.8 34.4 30.8 32.5
Gearing at end of period, % 152 124 152 129
Net gearing at end of period, % 90 99 90 114
Shareholders' equity per share at
end of period, EUR 4.05 5.58 4.05 4.77
Net interest-bearing liabilities
at end of period, EUR million 1,254 1,867 1,254 1,865
Gross capital expenditure, EUR
million 128 259 39 38
Deliveries, 1,000 tonnes
Paper business 1,761 1,911 394 438
Consumer Packaging 1,345 1,386 303 348
Personnel at end of period 6,546 9,508 6,546 8,838
In continuing operations 6,546 7,241 6,546 6,679
In discontinued operations 2,267 2,159
Securities and guarantees 2008 2007
EUR million
For own liabilities 61 61
On behalf of associated companies 1 1
On behalf of Group companies 5 4
On behalf of others 2 3
Total 69 69
Open derivative contracts 2008 2007
EUR million
Interest rate derivatives 1,286 1,954
Foreign exchange derivatives 2,805 3,809
Other derivatives 185 133
Total 4,276 5,896
The fair value of open derivative contracts calculated at market
value was EUR 15.0 million at the end of the review period (EUR 14.7
million 31 December 2007).
The gross amount of open contracts also includes closed contracts,
totalling EUR 2,068.8 million (31 December 2007: EUR 2,713.9
million).
Commitments related to fixed assets
EUR million 2008 2007
Payments in less than a year 0 22
Payments later 1 4
Changes in property,
plant and equipment
EUR million 2008 2007
Carrying value at beginning of year 2,820 3,156
Capital expenditure 128 250
Decrease -670 -186
Depreciation and impairment losses -282 -228
Depreciation and impairment losses -149 -118
related to discontinued operations
Translation difference -39 -54
Carrying value at year-end 1,808 2,820
Depreciation and impairment losses related to discontinued
operations include Graphic Papers business and in 2007 also
Map Merchant business.
Related-party transactions
Transactions with parent company
and sister companies EUR million
2008 2007
Sales 34 34
Other operating income 3 138
Purchases 571 549
Interest income 7 3
Interest expenses 4 8
Non-current receivables 5 19
Current receivables 49 41
Non-current liabilities 0 1
Current liabilities 228 149
Transactions with associated companies 2008 2007
Sales 0 0
Purchases 4 4
Non-current receivables 0 0
Current receivables 7 7
Current liabilities 2 3
Accounting policies
The financial statements were 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 before
Return on equity (%) tax - direct taxes) per
(Total equity (average)) (Result from continuing operations before
= tax + interest expenses, net exchange
Return on capital gains/losses and other financial expenses)
employed (%) per
(Total assets of continuing operations -
non-interest-bearing liabilities of
continuing operations (average))
Equity ratio (%) = (Total equity) per
(Total assets - advance payments received)
Gearing ratio (%) = (Interest-bearing liabilities) per
(Total equity)
= (Interest-bearing liabilities - liquid
Net gearing ratio (%) funds - interest-bearing receivables) 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 2008 2008 2008 2008 2007 2007
EUR million Q4 Q3 Q2 Q1 Q4 Q3
Consumer Packaging 1,061 1,069 248 274 274 266 259 267
Office Papers 804 888 174 203 204 223 213 213
Other Papers 622 657 147 153 158 164 161 162
Market Pulp and
Energy 644 596 150 172 160 162 147 157
Internal sales and
other operations 105 289 3 24 33 44 48 71
Sales 3,236 3,499 722 826 829 859 828 870
Consumer Packaging 108 150 11 37 23 37 26 51
Office Papers 35 66 -3 11 10 17 26 26
Other Papers 45 1 -1 7 8 31 -4 8
Market Pulp and
Energy 148 54 8 23 96 21 11 17
Other operations -82 127 -33 -29 -10 -10 5 -3
EBITDA 254 398 -18 49 127 96 64 99
% of sales 7.8 11.4 -2.5 5.9 15.3 11.2 7.7 11.4
Consumer Packaging 24 61 -13 17 3 17 -1 31
Office Papers -53 -196 -38 -6 -7 -2 -179 9
Other Papers -59 -36 -75 -3 -2 21 -12 1
Market Pulp and
Energy 106 25 -2 12 86 10 7 9
Other operations -79 97 -33 -28 -9 -9 -3 -6
Operating result -61 -49 -161 -8 71 37 -188 44
% of sales -1.9 -1.4 -22.3 -1.0 8.6 4.3 -22.7 5.1
Non-recurring items
EUR million
Consumer Packaging -5 -16 -4 0 0 0 -8 0
Office Papers -24 -213 -24 0 0 0 -183 0
Other Papers -44 -6 -67 0 -1 24 -2 8
Market Pulp and
Energy 74 -1 0 0 74 0 -1 0
Other operations -27 113 -14 -11 -1 -1 -3 -1
Non-recurring items
in
operating result -26 -124 -110 -11 72 23 -197 7
Consumer Packaging 109 156 11 37 23 38 27 51
Office Papers 37 93 -1 11 10 17 23 26
Other Papers 23 11 1 7 9 7 -1 3
Market Pulp and
Energy 73 55 8 23 22 21 12 17
Other operations -50 -2 -15 -18 -8 -10 6 -3
EBITDA, excl. non-
recurring items 192 313 4 60 55 73 66 94
% of sales 5.9 8.9 0.6 7.3 6.6 8.5 8.0 10.8
Consumer Packaging 29 77 -9 17 3 18 7 31
Office Papers -29 17 -14 -6 -7 -2 4 9
Other Papers -15 -30 -8 -3 -1 -3 -10 -7
Market Pulp and
Energy 32 26 -2 12 12 10 8 9
Other operations -52 -16 -18 -17 -8 -9 0 -5
Operating result,
excl.
non-recurring items -35 75 -51 3 -1 14 9 37
% of sales -1.1 2.1 -7.1 0.4 -0.1 1.6 1.1 4.3
Return on capital
employed % 2008 2007 2008 2008 2008 2008 2007 2007
Q4 Q3 Q2 Q1 Q4 Q3
Consumer Packaging 3.2 7.8 -6.0 8.3 1.4 8.7 0.1 15.1
Office Papers -7.4 -21.0 -25.6 -3.2 -3.2 -0.6 -79.9 3.8
Other Papers -14.3 -9.1 -63.5 -2.3 -1.2 18.1 -11.4 1.7
Market Pulp and
Energy 12.6 3.1 -1.3 5.1 37.3 4.7 3.5 5.2
Group -1.3 -0.8 -19.7 -0.5 8.9 5.7 -22.4 5.9
Capital employed 2008 2007 2008 2008 2008 2008 2007 2007
EUR million Q4 Q3 Q2 Q1 Q4 Q3
Consumer Packaging 801 823 801 839 829 813 823 843
Office Papers 556 808 556 645 664 726 808 977
Other Papers 415 398 415 518 532 522 398 398
Market Pulp and
Energy 899 752 899 929 921 912 752 642
Unallocated and
eliminations 822 522 822 -12 165 263 522 346
Group 3,493 3,303 3,493 2,919 3,111 3,236 3,303 3,206
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
Average
Consumer Packaging 1,664 1,902
Office Papers 1,561 1,931
Other Papers 2,016 2,160
Market Pulp and Energy 569 550Other continuing operations 1,039 1,724
Discontinued operations 2,238 4,408
Total 9,087 12,675
Deliveries 2008 2007 2008 2008 2008 2008 2007 2007
1,000 tonnes Q4 Q3 Q2 Q1 Q4 Q3
Consumer
Packaging 1,345 1,386 303 348 351 342 336 346
Office Papers 1,081 1,194 237 270 274 300 284 283
Other Papers 680 718 157 168 174 181 177 176
Paper business,
total 1,761 1,911 394 438 448 481 461 458
Market Pulp 1,115 997 264 291 279 281 247 261
Production 2008 2007 2008 2008 2008 2008 2007 2007
1,000 tonnes Q4 Q3 Q2 Q1 Q4 Q3
Consumer
Packaging 1,336 1,398 293 347 335 361 339 352
Office Papers 905 1219 177 226 245 257 279 293
Other Papers 705 743 160 170 186 190 182 177
Paper business,
total 1,610 1 962 337 396 431 447 461 470
Metsä-Botnia pulp
1) 990 785 235 270 233 252 225 191
M-real pulp 1,486 1 536 303 377 391 415 369 417
1) corresponds to M-real's share of 30% in Metsä-Botnia
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