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2009-02-05 11:05:59 CET 2009-02-05 11:16:37 CET REGULATED INFORMATION Metsäliitto Osuuskunta - Financial Statement ReleaseMetsäliitto Group's result for 2008Metsäliitto Group Stock Exchange Release 5 February 2009 Metsäliitto Group's operating result excluding non-recurring items was EUR 45 million Result for 2008 - Sales of EUR 6,434 million (EUR 6,797 million). - Operating result excluding non-recurring items was EUR 45 million (EUR 301 million). Operating result including non-recurring items was EUR 2 million (EUR 44 million). - Result before tax and excluding non-recurring items was EUR -192 million (EUR 90 million). Result for October-December - Sales of EUR 1,453 million (EUR 1,630 million). - Operating result excluding non-recurring items was EUR -75 million (EUR 42 million). Operating result after non-recurring items was EUR -206 million (EUR -154 million). - Result before tax and excluding non-recurring items was EUR -148 million (EUR -15 million). Fourth-quarter events - The divestment of M-real's Graphic Papers business to Sappi Limited took place on 31 December 2008. The value of the transaction was EUR 750 million. - Metsäliitto Wood Products Industry announced that it would adjust sawn timber production volumes due to the weakened market situation, and close down the Soinlahti and Teuva sawmills. As a result of the statutory labour negotiations, which commenced in December, a decision was made in January 2009 to discontinue operations at the Kyröskoski sawmill until further notice. - Metsä-Botnia launched statutory labour negotiations to stop production at the Kaskinen pulp mill or to close it down. The negotiations ended in January 2009. No financial prerequisites to continue the mill's operations were found, and production at the mill will end during the first quarter of 2009."The fourth quarter of 2008 was very significant for Metsäliitto Group. With the divestment of M-real's Graphic Papers business at year-end, a considerable part of the Group's structural change has been implemented. The strategic review concerning our fine paper businesses continues. We are also continuing the further development of our solid business core and selected focus areas in order to ensure sustainable operations in the long term." Kari Jordan, President & CEO, Metsäliitto Group Metsäliitto Group Income statement 2008 2007 2008 2007 2006 (Continuing operations) 1-12 1-12 Q4 Q4 1-12 Sales 6 434 6 797 1 453 1 630 7 392 Other operating income 239 92 23 26 129 Operating expenses -6 189 -6 256 -1 487 -1 520 -6 937 Depreciation and impairment -482 -589 -195 -290 -507 losses Operating result 2 44 -206 -154 77 Share of results in associates 6 12 -5 7 6 Net exchange gains / losses 19 5 18 8 9 Other financial income & -260 -221 -84 -65 -186 expenses Result before tax -233 -160 -277 -204 -94 Income tax 60 -24 66 35 -35 Result from continuing operations -173 -184 -211 -169 -129 Metsäliitto Group Profitability 2008 2007 2008 2007 2006 (Continuing operations) 1-12 1-12 Q4 Q4 1-12 Operating result, EUR mill. 2 44 -206 -154 77 - " -, excluding non-recurring 45 301 -75 42 233 items Return on capital employed, % 0.5 1.4 -16.1 -11.2 2.0 - " -, excluding non-recurring 1.3 6.4 -6.1 4.2 5.0 items Return on equity, % -8.4 -7.5 -43.6 -28.2 -4.8 - " -, excluding non-recurring -6.4 2.7 -17.0 3.4 1.0 items Financial position 2008 2007 2008 2007 2006 31.12. 31.12. 30.9. 30.9. 31.12. Equity ratio, % 26.0 28.8 27.5 29.2 29.5 Net gearing ratio, % 149 142 162 147 137 Interest-bearing net liabilities, 2 666 3 271 3 373 3 633 3 524 EUR mill. Business areas Sales and Operating Wood Board Tissue result Wood Products Pulp *) and and 1-12/2008 Supply Industry Industry Paper Cooking (EUR mill.) Industry Papers Sales 1 734 1 162 1 591 3 236 930 Other operating income 20 7 30 182 23 Operating expenses -1 719 -1 187 -1 274 -3 164 -855 Depreciation & -5 -56 -138 -315 -56 impairment losses Operating result 30 -74 209 -61 42 Non-recurring items -2 21 - 26 1 Operating result excl. non-recurring items 28 -53 209 -35 43 *) Represents 100%. The Metsäliitto Group consolidates 53% of the Pulp Industry. The figures are unaudited METSÄLIITTO GROUP FINANCIAL STATEMENTS 2008 Sales and result Metsäliitto Group's sales for 2008 were EUR 6,434 million (6,797). The sales decline is due to the weakening market situation and the stoppages and production curtailments it has caused. Wood Supply's sales remained at the level of the year before, despite the fact that delivery volumes clearly decreased. Relatively, Metsäliitto Wood Products Industry's result was weakened the most by the generally difficult market situation, as its sales decreased by almost 20 per cent year on year. The largest losses concerned Solid Wood. In Board and Paper Industry and Pulp Industry the weakening demand had a particularly extensive impact during the fourth quarter. Tissue and Cooking Paper continued its good profit development and both successfully increased its sales and improved its profitability year on year. Due to the divestment of the Graphic Papers Business Area, the figures for the comparison years have been adjusted in accordance with IFRS regulations. As a result of the divestment, Metsäliitto Group's sales in 2007 decreased by EUR 872 million, and in 2006 by EUR 858 million. Metsäliitto Group's operating result excluding non-recurring items was EUR 45 million (301). Net non-recurring items totalled EUR -43 million (-257), of which EUR 23 million (-59) were recognised during the first quarter of the year, EUR 72 million (-8) during the second quarter of the year and EUR -8 million (5) during the third quarter of the year. During the fourth quarter, non-recurring items totalled EUR -130 million (-195). In the first quarter, the sale of mill operations in the UK and pension liability arrangements generated a profit of EUR 24 million. In the second quarter, M-real sold a total of 100,000 Pohjolan Voima Oy B2 shares to Kymppivoima Oy for EUR 80 million, for which a sales gain and fair value of EUR 74 million was realised. The most significant non-recurring item in the third quarter was the EUR 13 million cost provision relating to the guarantee to the mill's energy supplier on behalf of the Pont Sainte Maxence (PSM) mill, sold in June 2006, and the write-down of receivables from PSM. In the fourth quarter, Metsäliitto Wood Products Industry carried out solid wood related depreciation and cost provisions totalling EUR 21 million. In addition, M-real registered a total of EUR 86 million of losses caused by impairment testing, and a total of EUR 24 million of cost provisions and write-downs. The operating result for 2008 including non-recurring items was EUR 2 million (44). The Group's net financial expenses were 3.6 per cent of sales (3.0). Financial income was EUR 17 million (17), shares in associate companies were EUR 6 million (12) and financial expenses were EUR 277 million (238). Net exchange gains and losses recognised in financial items were EUR 19 million (5). During the year, against the euro, the US dollar weakened by an average of 7.3 per cent, the Swedish krona by 3.9 per cent and the British pound by 16.3 per cent. At year-end, the exchange rate of the US dollar against the euro was 5.5 per cent stronger than at the beginning of the year, whereas the Swedish krona was 15.1 per cent weaker and the British pound was as much as 29.9 per cent weaker. The result before tax was EUR -233 million (-160) and taxes, including changes in deferred tax liability, were EUR 60 million (-24). The result for continuing operations was EUR -173 million (-184), the result for discontinued operations was EUR -338 million (-27) and the result for the financial period was EUR -511 million (-211). The parent company shareholders' share of the result was EUR -214 million (-9) and the minority share was EUR -297 million (-202). The Group's return on capital employed for continuing operations was 0.5 per cent (1.4) and the return on equity was -8.4 per cent (-7.5). Excluding non-recurring items, the return on capital employed was 1.3 per cent (6.4) and the return on equity was -6.4 per cent (2.7). Balance sheet and financing Metsäliitto Group's total liquidity at year-end was EUR 1.8 billion (1.6). Of this, EUR 0.6 billion (0.4) was in terms of liquid assets and investments, and EUR 1.2 billion (1.2) was in binding credit facility agreements not included in the balance sheet. In addition, the Group can satisfy short-term financial needs with non-binding commercial paper schemes in Finland and abroad, as well as credit lines amounting to approximately EUR 0.6 billion. In December, the Group's equity ratio was 26.0 per cent and net gearing was 149 per cent (28.8 % and 142%). Interest-bearing net liabilities stood at 2,666 million (3,271). The equity ratio of the parent company, Metsäliitto Cooperative, was 54.6 per cent at year-end and the net gearing ratio was 45 per cent (55.0% and 37%, respectively). Metsäliitto Cooperative's members' capital decreased by EUR 3.6 million net from January to December. The actual members' capital grew by EUR 3.4 million, the additional members' capital A decreased by EUR 4.8 million, and the additional members' capital B decreased by EUR 2.2 million. At year-end, Metsäliitto Cooperative had 129,267 members (131,032). In September, Metsä Tissue signed a syndicated credit limit agreement of EUR 238 million. Its purpose is to refinance the current syndicated loan falling due in June 2009. On 2 September 2008, Forest Oriental S.A., Metsä-Botnia's subsidiary in Uruguay which specialises in eucalyptus cultivation, received the approval of the Central Bank of Uruguay regarding registration of its program to issue a Corporate Bond for a nominal value of USD 100 million. The arranger issued the first series under the program with a nominal value of USD 35 million on 18 September 2008. Personnel The Group employed an average of 17,538 people (19,195) in 2008. At the end of December, the number of personnel totalled 16,729 (17,838). The parent company, Metsäliitto Cooperative, employed 3,217 people (3,165) at the end of the year. As of 1 December 2008, Ole Salvén, Group Executive Vice President, Woods Products Industry, was appointed Deputy to the CEO of Metsäliitto Cooperative, and Juha Mäntylä, Forest Director of Metsäliitto Group, was appointed Group Executive Vice President, Metsäliitto Wood Supply. Ilkka Hämälä assumed the position of President and CEO of Metsä-Botnia on 1 September 2008. Discontinued operations The divestment of the Graphic Papers business was confirmed on 31 December 2008. In accordance with IFRS regulations, the result of the divested business is shown on the line "Result from discontinued operations" in the income statement after the result of Metsäliitto Group's continuing operations. The income statements of comparison years have been adjusted accordingly. Investments, acquisitions and divestments Metsäliitto Group's capital expenditure and corporate acquisitions totalled EUR 272 million (493). The figure includes the share of Metsä-Botnia's total investments corresponding to Metsäliitto's holding, EUR 52 million (217). Investments in fixed assets Operations at the new plywood upgrading mill in Suolahti built by Metsäliitto Wood Products began in the first half of the year. The modernisation investment of Metsä-Botnia's Äänekoski mill's chlorine dioxide plant was introduced in the autumn. The investment reduces AOX (Adsorbable Organic Halogens) emission levels. Furthermore, the entire automation system of the Äänekoski mill was modernised. In May, a second converting line was introduced at Metsä Tissue's Naro Fominsk distribution and converting unit in Russia. The line manufactures products under the Lambi, Mola and Katrin brands. In Krapkovice, Poland, Metsä Tissue started on the new hand towel rewinder production. Acquisitions and divestments In January, Metsäliitto Wood Products Industry strengthened its Building Solutions business by acquiring iLevel's European engineering wood operations from the Weyerhaeuser. The deal included the sales, distribution and technical support for iLevel's engineering wood products in Europe, and offers Wood Products Industry good conditions to expand and develop its operations in the UK, France and Germany in particular. In February, M-real divested its New Thames paper mill in UK to DS Smith Plc. In September, M-real announced the sale of its Graphic Papers business to the South African company Sappi Limited. The divestment was completed on 31 December 2008. M-real's structural change in 2008 The profit improvement and business concept simplification programme M-real announced in November 2007 was implemented according to plan. As part of the programme, M-real shut down its BCTMP plant in Lielahti and paper machine 2 producing coated magazine paper at the Kangas mill. M-real's Publishing and Commercial Printing business areas were combined into the Graphic Papers business area, and a project to simplify the coated magazine paper operations and to lighten the sales and marketing organisation was initiated at the same time. The combined annual profit improvement objective of the programme, excluding the divested Graphic Papers business, totals EUR 105 million. The full effect on earnings will be reached by the end of 2010. In February 2008, M-real announced an additional goal of reaching at least EUR 200 million from asset sales by the end of the first quarter of 2009. The goal was clearly exceeded when the Graphic Papers business was sold, and the value of the divestments amounted to over EUR 900 million in 2008. The programme also included the divestment of the New Thames mill and 100,000 Pohjolan Voima B2 shares. Taking into account the pension commitments regarding the mill operations in the UK, the positive effect on cash flow by the divestment of the New Thames mill totalled approximately EUR 82 million, and a gain on sale of approximately EUR 24 million was booked for the deal. The positive effect on cash flow by the divestment of the Pohjolan Voima shares was EUR 80 million, and the non-recurring effect on earnings totalled EUR 74 million. The divestment of M-real's Graphic Papers business to Sappi Limited took effect in December 2008. The value of the transaction was EUR 750 million. The sales price consisted of EUR 480 million in cash and assumed debt, EUR 220 million in an interest-bearing vendor load note (four years at maximum) from Sappi to M-real and EUR 50 million of newly issued shares in Sappi. The sale comprised the Kirkniemi and Kangas mills in Finland, the Stockstadt mill in Germany and the Biberist mill in Switzerland. The paper mills in Hallein, Gohrsmühle, Reflex and Äänekoski, as well as the Husum paper mill's paper machine 8, remained in M-real's ownership. After the closing of the transaction, Äänekoski and Husum will continue production for Sappi under a long-term contract. As part of the transaction, M-real and Sappi have also entered into a long-term agreement on the supply of pulp and BCTMP to Sappi, and other smaller services and supplies. Business areas Wood Supply Wood Supply sales in 2008 were EUR 1,734 million (1,735) and operating profit amounted to EUR 30 million (38). The operating result includes approximately EUR 2 million (3) in non-recurring income. Wood Supply Finland accounted for EUR 1,188 million (1,196) of the sales and EUR 25 million (27) of the operating result. The main reason for the operating result decline year on year was that the delivery volumes remained clearly below the level of 2007. Metsäliitto supplied approximately 33 million cubic metres (36) of wood to its customers in 2008. Deliveries of wood, including in wood chips, to mills in Finland totalled 24.6 million cubic metres (27.9). Majority of it was acquired in Finland, mainly from members of Metsäliitto Cooperative. Wood imports amounted to 3.9 million cubic metres (3.6). Metsäliitto procured a total of 3.2 million cubic metres (2.8) of wood raw material from Russia. In Finland, the wood trade was slow from the beginning of the year, due to which Metsäliitto Wood Supply failed to meet its quantity objectives. In the year under review, Metsäliitto purchased a total of 13 million cubic metres of wood (18) from Finnish private forests. Forest energy supply was impacted by the fact that final felling was less frequent than usual. In Finland, there was a shortage of pulpwood at the beginning of the year. Procurement was boosted by the Summer Logging 2008 campaign, which considerably increased the amount of summer thinning year on year. Tax relief proposed by the Finnish government briefly allowed the wood trade to pick up in the summer and early autumn. In the latter part of the year, both the sawmill and the pulp industries reduced wood use due to production curtailments. During the entire year under review, pulpwood prices remained quite stable, but started a decline in the latter part of the year. Log prices decreased at the beginning of the year, became stable for a while and started a clear decline in the latter part of the year. The organisation of Finnish Wood Supply was renewed with the aim of simplifying operational steering and of improving the services for owner-members. In connection with M-real's Graphic Papers business arrangements, Metsäliitto signed a long-term contract with Sappi Limited on wood delivery to the Kirkniemi mill. Wood procurement in Russia prepared for the enactment of the timber customs duties. Wood Supply's corporate structure was streamlined, and wood procurement was curtailed. Wood supply for Metsä-Botnia's Svir Timber could be secured throughout the year despite the quite confused state of the Russian timber market, particularly in the latter part of the year. In the Baltic countries, timber sales from private forests was at a low level, whereas the trading of timber sourced from government-owned forests was almost normal. The poor weather conditions reduced harvesting volumes. The high prices for pulpwood dropped rapidly during the year. For its customers in the Baltic countries and for its own production plants, Metsäliitto procured a total of 2.6 million cubic metres of timber (2.5). In Central Europe and Sweden, the timber market was stable. The pulpwood shortage at the beginning of the year became an oversupply in the latter part of the year as a result of the production curtailments in the forest industry. All in all, a total of 5.7 million cubic metres of timber was procured (5.4). Wood Products Industry Wood Products Industry's sales totalled EUR 1,162 million (1,399), and the operating result excluding non-recurring items was EUR -53 million (87). Non-recurring items totalled EUR -21 million, and they were mainly related to cost provisions and write-downs at the Soinlahti, Teuva and Renko mills. Throughout the entire year, the market environment of sawn timber products was extremely difficult, and starting in the autumn, the demand dropped more and more sharply. Moreover, the overcapacity in the European sawn timber market led to extremely intensive price competition. Metsäliitto Wood Products Industry's other business lines, where the proportion of upgrading and services is higher, achieved a positive result, but their profitability also weakened in the latter part of the year due to the market situation. Solid Wood adjusted its operations according to the weakened demand by curtailing its production volumes by 20 per cent. Decisions were made to entirely close the Iisalmi-based Soinlahti sawmill at the end of 2008, and the Teuva sawmill, located in southern Osthrobothnia, in January 2009. Starting in the autumn, the production of plywood, Kerto products, I beams and glulam had to be curtailed as well. The economic downturn showed as a considerable decline in new residential construction, and, to some extent, in building renovation. However, the decline was not as rapid in products intended for renovation and interior design. To raise the degree of sawn timber processing, the Kaskinen mill deployed a new surface treatment line for the production of façade and exterior cladding products. In addition, yard and gardening products were further developed, and the Finnforest Kesto Plus product range was introduced. The plywood business increased efficiency particularly by automating birch plywood production. The new plywood upgrading mill in Suolahti manufactures even more comprehensive and tailored products for the transportation and concrete mould industries, for example. The Building Solutions business was reinforced in January as a result of the purchase of the US-based Weyerhauser's European iLevel business. The deal included the sales, distribution and technical support for engineering wood products in Europe. The main reference in project expertise in 2008 was the delivery and installation of birch plywood lining to the 700-metre-long waiting hall of the 2E terminal of the Charles de Gaulle airport in Paris. The project strengthens the position of Metsäliitto Wood Products Industry as the leading provider of advanced wooden structures in Europe. The range of the Upgrading and Distribution range was expanded to cover entirely ready products. The market position in France was reinforced by developing the distribution and delivery centre that was purchased in 2007. In the UK-based Boston unit, one of the largest processing lines in the field was installed, enabling flexible production and packaging of planed sawn timber products. Wood Products Industry's investments during the year totalled EUR 36 million (32). Pulp Pulp Industry's sales stood at EUR 1,591 million (1,371), and operating result was EUR 209 million (186). Sales and result for the year under review were supported by the high price of pulp at the beginning of the year, and the US dollar which strengthened during the latter part of the year. The most significant factors weakening the result include the continuously high price of the wood raw material and the rapid decline in pulp prices and demand occurring in the latter part of the year. In November and December, production volumes were curtailed at all Metsä-Botnia mills. At the beginning of the year, approximately 3 million metric tons of new hardwood pulp capacity was introduced to the pulp market. At year-end, almost two million metric tons of old pulp capacity was closed down in Canada and the Nordic countries due to poor timber availability and profitability. The impact of the pulp capacity shut down in the last quarter of 2008 and at the beginning of 2009 will not show until the latter part of 2009 after the producers' oversupply situation has ended. The price for pulp decreased rapidly during the fourth quarter of the year under review. At the end of December, the price for softwood pulp was USD 638, and USD 580 for hardwood pulp, whereas the corresponding prices at the end of September were USD 850 and USD 800. On average, the foreign currency-denominated market prices for softwood pulp were 5 per cent higher and the prices for hardwood pulp were 10 per cent higher than in 2007. Conversely, the US dollar dropped approximately 7 per cent, so euro-denominated prices were at the level of the year 2007. The overall production volume of Metsä-Botnia in 2008 was 3,298,000 metric tons (2,616,000). The first year of operation of the Uruguay mill was a great success. The mill achieved an annual production of 935,000 metric tons and met its tight quality and environmental objectives. However, the production volume of Finnish mills decreased by 6 per cent year on year, totalling 2,363,000 metric tons (2,517,000). During the year, the mills lost some of their price competitiveness due to the fact that their timber prices increase more quickly than those of foreign competitors and that the euro strengthened. In November, the Kaskinen mill started statutory labour negotiations concerning a temporary discontinuance of operations, or closing down the mill. In January 2009, a decision was made to close down the mill during the first quarter of 2009. Metsä-Botnia's investments in fixed assets totalled EUR 99 million (409). The most significant investments in Finland were the renewal of the automation system at the Äänekoski mill, pulp washing at the Kemi mill, and the reduction of emissions into the air at the Rauma mill. M-real's result includes 30 per cent of Pulp Industry's operating result. In total, 53 per cent of the figures for the Pulp Industry are consolidated into Metsäliitto Group's financial statements. Board and Paper Board and Paper Industry's sales totalled EUR 3,236 million (3,499) for the continuing operations, and operating result excluding non-recurring items was EUR -35 million (75). The result was weakened by the increased wood raw material and energy costs, the stronger euro against the US dollar and the British pound, and the rapid decline in the demand for products in the latter part of the year. The result was improved by the implemented cost savings measures and price increases, and the launch of the pulp mill in Uruguay in November 2007. Net non-recurring items totalled EUR -26 million (-124) in January-December. In the first quarter of the year, M-real booked EUR 24 million as income. The income was related to the release of British pension liabilities as a result of the divestment of the New Thames mill operations, and from some other liabilities related to the shut-down of the Sittingbourne mill. Different cost provisions totalling EUR 1 million were booked as expenses. During the second quarter, M-real booked the EUR 74 million gain on the sale of Pohjolan Voima shares as income, and booked a EUR 2 million cost provision dealing with the sales network efficiency enhancement programme as an expense. The non-recurring items recognised in the operating result in July-September totalled EUR -11 million. They consisted of a EUR 13 million cost provision concerning the guarantee to the mill's energy supplier on behalf of the Pont Sainte Maxence (PSM) mill, sold in June 2006, the write-down of corresponding receivables from PSM and a EUR 2 million gain on the sale of land of mills sold at an earlier date. In the fourth quarter of the year, M-real booked EUR 66 million in impairment loss for the Other Papers Business Area, EUR 16 million for Office Papers and EUR 4 million for Consumer Packaging. In addition, EUR 14 million were booked as cost provisions for boosting the structure as a result of the Sappi transaction, and EUR 10 million for closing down the New Thames sheeting line. The operating result including non-recurring items was EUR -61 million (-49). Net interest and other financial expenses totalled EUR 155 million (141), income from associates was EUR -1 million (-3) and net exchange gains and losses booked as financial items were EUR 13 million (1). The result for continuing operations before taxes was EUR -204 million (-192), earnings per share were EUR -0.55 (-0.51) and the return on capital employed was -1.3 per cent (-0.8). Excluding non-recurring items, the result before taxes was EUR -178 million (-68), earnings per share were EUR -0.48 (-0.17) and the return on capital employed was -0.5 per cent (2.8). At the end of December, M-real's equity ratio was 30.8 per cent and net gearing was 90 per cent (31 December 2007: 34.4% and 99%, respectively). In some of M-real's borrowing arrangements, a limit of 120 per cent has been set for net gearing and a limit of 30 per cent for the equity ratio. At the end of the year, net gearing calculated in the manner defined in the borrowing agreements was approximately 74 per cent (95) and the equity ratio about 36 per cent (36). Tissue and Cooking Paper Sales of Metsä Tissue, which produces tissue and cooking papers, stood at EUR 930 million (861), and its operating result was EUR 42 million (35). Sales increased by 8 per cent year on year. Growth was promoted by an increase in sales volumes (3%), increasing selling prices and changes in sales structure (5%). The sales of Metsä Tissue's own brands increased by 12 per cent in comparison with the previous year. The steady development in Metsä Tissue's own brands and private label products contributed to the improvement in the result. The operating result includes approximately EUR 1 million in non-recurring expenses. The non-recurring items are caused by the closure of the Bork warehouse in Germany, and insurance indemnities concerning a warehouse fire in Zilina, Slovakia. Regarding profitability, currency rate progress was unfavourable. However, negative effects caused by higher raw material/energy/transportation costs were successfully mitigated by making operations more effective and by increasing sales prices. Business development in Russia developed as intended, and in May, local converting was launched in Naro Fominsk, located near Moscow. The new converting unit manufactures Katrin bulk consumer products and Lambi and Mola consumer products. A roller towel line was transferred from the Swedish-based Mariestad mill to the Krapkowice mill in Poland, where production was launched during the summer. The Mariestad and Mänttä mills also carried out investments which improved product quality and production line efficiency. A 36,000-square-metre warehouse building was completed in Düren, Germany, close to the company's Kreuzau mill, and opened in December. Earlier in the autumn, the warehouse in Bork, Germany, was closed and sold. The reforms will make the delivery chain more effective, and customer service will improve. The ready-made product warehouse of the Slovakia-based Zilina mill burned down in March. Despite extensive damage, the impact on customers was minimised. New warehouse facilities will be completed during the first quarter of 2009. In September, a new Serla cleaning paper was introduced to the Finnish market. The Serla toilet papers and tissues, and the look of the Serla and Mola brands, were renewed as well. In the large-scale consumer business, the Saga brand was integrated into the Katrin brand. Metsä Tissue's investments during the year totalled EUR 33 million (25). The company will continue to invest in product development and its own brands. Events after the review period At the beginning of the year, M-real announced a new management and reporting structure which includes the Consumer Packaging, Office Papers and Other Papers Business Areas and the Market Pulp and Energy reporting segment. At the beginning of January, M-real announced that it would start statutory labour negotiations concerning Finnish mill operations. The negotiations cover approximately 1,500 employees. In January, statutory labour negotiations were also launched at M-real's Hallein mill in Austria. The negotiations concern about 480 employees, and the objective is to close down paper production by the end of April 2009. The strategic review for the Hallein pulp mill is in progress. The production of standard coated fine paper at M-real's Gohrsmühle mill in Germany will end in April, and related effects are being assessed. On the other hand, the mill will increase the production of specialty papers and uncoated fine paper rolls and folio sheets. On 14 January, Metsä-Botnia announced the closure of the Kaskinen pulp mill during the first quarter of 2009. The closure will cause non-recurring costs totalling approximately EUR 75 million, of which EUR 20 million has an impact on cash flow. In January, Metsä-Botnia carried out statutory labour negotiations which also dealt with significant production curtailments at other Finnish mills during this year. At the first stage, the mills' production volumes will be continuously curtailed in order to reach a balance, and, if the market and stock situation so requires, production curtailment stoppages will be planned separately for each mill from now on. In January, Metsäliitto Wood Products Industry announced that it would supply wooden structures for the Ideapark Commercial City, opened in 2011 in Kiiminki. With a floor area of over 100,000 square metres, the construction project, due to start in May 2009, will produce one of the biggest commercial buildings in Finland. On 27 January, Metsäliitto Wood Products Industry announced that it would suspend operations at the Kyröskoski sawmill until further notice due to heavily reduced demand and unprofitable sawmilling. If the overall prerequisites for profitable sawmilling return, the operations of the Kyröskoski sawmill should resume after the summer - potentially with limited capacity. Today, 5 February, M-real initiated 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 Sappi deal. The full impact on earnings will be reached from 2011. It is expected that the majority of the profit improvement measures regarding continuing business operations will be completed during the ongoing year. For 2009, the expected effect on earnings is approximately EUR 20-25 million. Non-recurring expenses related to the programme to be booked during 2009 are expected to be approximately EUR 18 million. At the same time, a separate programme was also launched with the aim of a EUR 60 million improvement in cash flow for 2009. The programme's measures include net working capital reduction and investment rationalisation. Risks and uncertainties Since the forward-looking statements in this report are based on current plans, estimates and projections, they involve risks and uncertainties that may cause actual results to materially differ from those expressed in such forward-looking statements. The risks related to the Group's business have been explained more extensively in Metsäliitto Group's annual report. Outlook In 2009, Metsäliitto will increasingly centralise its wood procurement in Finland. The purchasing objective for private forests will be at the level of standard years, however, corresponding to the development of the production volumes of sawn timber and pulp. For timber trade, it is significant that the 50 per cent tax incentive provided by the Finnish State is valid during 2009. In 2010 the tax incentive is 25 per cent. The wood products market situation continues to be difficult. Metsäliitto Wood Products Industry focuses its basic production and directs it better to upgrading, as well as develops its business more competitive according to the needs of the selected customer segments. Overcapacity in the sawn timber market continues, in particular for structural timber. The Solid Wood Business Line focuses on increasing the grade of processing. The demand for birch plywood continues to be weak. However, the Plywood Business Line continues to develop even more advanced solutions for its customers. The Building Solutions Business Line focuses on developing increasingly competitive products and systems that meet the continually tightening environmental and energy requirements. Although the demand for the wooden consumer products in the near future will be weak, the Upgrading and Distribution Business Line continues to develop its products and services within interior and exterior living in the main markets. Due to the low capacity utilisation rates of paper mills, the pulp industry's outlook is weak. In fact, capacity has to be adjusted to meet demand, by carrying out substantial production curtailment. Cutting down the pulp production volumes at the Finnish mills will considerably reduce the need for the use of imported wood and will thus decrease the average wood cost. The board price increases implemented by Board and Paper Industry at the end of last year will show in the early part of this year in the average prices for board. 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. It is estimated that M-real's first-quarter operating result excluding non-recurring items is expected to improve seasonally from the fourth quarter of 2008 but to remain clearly negative. The financial situation is not expected to have a considerable impact on the demand for tissue and cooking paper. However, it is expected that growth will slow down. The demand for large-scale consumer products may weaken due to the decrease in travel and services purchasing. On the other hand, the same trend may increase the demand for consumer products. Metsäliitto Group's operating result excluding non-recurring items in the first quarter of 2009 is expected to be higher than in the previous quarter, but to remain weaker than in the first quarter last year. Due to the uncertain general financial situation, Metsäliitto will not provide an assessment for the entire year at this point. Proposal for interest on members' capital Metsäliitto Cooperative's Board of Directors has decided to propose to the Supervisory Board that, for 2008, interest of 5.5 per cent (6.5) be paid for the statutory capital invested by its members. Interest of 5.0 per cent (5.5) is proposed for additional members' capital A, and interest of 4.5 per cent (4.0) for additional members' capital B. The proposal of the Board of Directors will be dealt with in March by Metsäliitto Cooperative's Supervisory Board, which, in turn, will make a proposal on the interest on members' capital to the Representative Council meeting in April. Espoo, 5 February 2009 Metsäliitto Group Board of Directors For further information: Ilkka Pitkänen, Group CFO, Metsäliitto Group, tel. +358 10 465 4260 Anne-Mari Achrén, Group CCO, Metsäliitto Group, tel. +358 10 465 4541 Unaudited METSÄLIITTO GROUP Income statement 2008 2007 2008 2007 2006 (EUR mill.) 1-12 1-12 Change Q4 Q4 1-12 Sales 6 434 6 797 -363 1 453 1 630 7 392 Other operating income 239 92 147 23 26 129 Materials and services -4 373 -4 453 80 -1 011 -1 099 -4 797 Employee costs -893 -974 81 -225 -244 -1 165 Other operating expenses -923 -829 -94 -251 -177 -975 Depreciation and -482 -589 107 -195 -290 -507 impairment losses Operating profit 2 44 -42 -206 -154 77 Share of results in 6 12 -6 -5 7 6 associates Net exchange gains / 19 5 14 18 8 9 losses Other financial income & -260 -221 -39 -84 -65 -186 expenses Result before tax -233 -160 -73 -277 -204 -94 Income taxes 60 -24 84 66 35 -35 Result from continuing -173 -184 11 -211 -169 -129 operations Result from discontinued -338 -27 -311 -62 -4 -130 operations Net result for the period -511 -211 -300 -273 -173 -259Attributable to: Owners of parent company -214 -9 -205 -140 -59 -25 Minority interest -297 -202 -95 -133 -114 -234 -511 -211 -300 -273 -173 -259 Unaudited Balance sheet 2008 2007 2006 31.12. 31.12. 31.12. ASSETS Non-current assets Goodwill 176 319 519 Other intangible assets 88 70 98 Tangible assets 2 958 4 021 4 197 Biological assets 103 83 71 Shares in associated and other companies 632 506 491 Interest-bearing receivables 228 32 52 Deferred tax receivables 61 46 77 Other non-interest-bearing receivables 6 12 13 4 252 5 090 5 519 Current assets Inventories 943 1 132 1 095 Interest-bearing receivables 32 27 145 Non-interest-bearing receivables 1 053 1 358 1 617 Cash and cash equivalents 619 428 246 2 647 2 945 3 103 Assets classified as held for sale - - 103 TOTAL 6 899 8 035 8 725 MEMBERS' FUNDS AND LIABILITIES Members' funds 1 104 1 328 1 377 Minority interest 682 978 1 194 Total members' funds 1 786 2 306 2 571 Non-current liabilities Deferred tax liabilities 328 404 459 Retirement benefit obligations 131 195 238 Provisions 110 83 91 Other non-interest-bearing liabilities 26 50 56 Interest-bearing liabilities 2 854 3 011 3 455 3 449 3 742 4 298 Current liabilities Non-interest-bearing liabilities 974 1 240 1 314 Interest-bearing liabilities 690 747 512 1 664 1 987 1 826 Liabilities classified as held for sale - - 30 Total liabilities 5 113 5 729 6 155 TOTAL 6 899 8 035 8 725 Change in members' Mem- Share Tran-slation Fair Retai- Mino- Total funds bers' pre- differ- value ned rity EUR mill. capi- mium ences and ear- inte- tal acc- other nings rest ount reser- ves Adjusted members' 577 30 6 136 628 1 194 2 571 funds January 1, 2007 Currency flow hedges recorded in 3 5 8 equity transferred to -9 -14 -22 sales Interest flow hedges recorded in 0 0 0 equity transferred to 0 financial items Commodity hedges recorded in 6 6 12 equity transferred to 3 6 9 purchases Assets classified as held for sale recognised to 8 0 8 fair value transferred to 0 financial items Translation -26 -19 -45 differences Net investment 17 16 33 hedges Other items -4 -1 -5 Tax on equity -4 -3 -5 -13 components Recognised 0 0 -13 8 -4 -5 -14 directly in equity Result for the -9 -202 -211 period Total 0 0 -13 8 -13 -207 -225 Dividends paid -29 -13 -42 Increase in -2 -2 members' capital, other changes Change in share 0 premium account Change in 3 -3 0 revaluation reserve Transfer from 0 unrestricted to restricted equity Business 4 4 arrangements Total -2 0 0 3 -32 -9 -40 Adjusted members' 574 30 -7 148 583 978 2 306 funds Dec. 31, 2007 Change in members' Mem- Share Tran-slation Fair Retai- Mino- Total funds bers' pre- differ- value ned rity EUR mill. capi- mium ences and ear- inte- tal acc- other nings rest ount reser- ves Adjusted members' 574 30 -7 148 583 978 2 306 funds January 1, 2008 Currency flow hedges recorded in -9 -13 -23 equity transferred to 1 2 3 sales Interest flow hedges recorded in -3 -2 -5 equity transferred to 0 -1 -1 financial items Commodity hedges recorded in -16 -14 -29 equity transferred to 0 0 0 purchases Assets classified as held for sale recognised to 54 71 125 fair value transferred to -11 -17 -28 financial items Translation -5 -3 -8 differences Net investment 10 11 21 hedges Other items -1 0 -1 Tax on equity -2 -4 -10 -16 components Recognised 0 0 3 12 -1 25 39 directly in equity Result for the -213 -297 -511 period Total 0 0 3 12 -214 -272 -472 Dividends paid -35 -13 -48 Increase in 11 11 members' capital, other changes Change in share 0 premium account Change in 0 revaluation reserve Transfer from 6 -6 0 unrestricted to restricted equity Business -10 -10 arrangements Total 11 0 0 6 -41 -24 -48 Members' funds 585 30 -5 165 329 682 1 786 Dec. 31, 2008 Unaudited Cash flow statement 2008 2007 (EUR mill.) 1-12 1-12 Cash flow from operations Result for the period -511 -211 Adjustments total 832 857 Change in working capital 88 -34 Cash flow generated from operations 410 612 Net financial items -239 -265 Income taxes paid -58 -78 Net cash flow from operations 113 270 Cash flow from investments Acquisitions -4 -46 Purchases of assets -268 -447 Sold assets and others 511 447 Net cash flow from investments 239 -45 Cash flow from financing Increase in equity -1 29 Change in long-term loans and other financial items -101 -19 Dividends paid -55 -51 Net cash flow from financing -157 -41 Change in cash and cash equivalents 195 184 Cash at beginning of period 428 246 Translation difference -4 -3 Change in cash and cash equivalents 195 184 Cash in assets classified as held for sale 0 0 Cash at end of period 619 428 Unaudited BUSINESS SEGMENTS Consumer Packaging I-IV/08 I-IV/07 QIV/08 QIV/07 Sales 1 061 1 069 248 259 EBITDA 153 185 15 33 Depreciation & impairment losses -102 -101 -29 -30 Operating result 51 84 -14 3 Paper I-IV/08 I-IV/07 QIV/08 QIV/07 Sales 1 426 1 545 321 375 EBITDA 89 74 -3 23 Depreciation & impairment losses -196 -301 -111 -214 Operating result -107 -227 -114 -191 Wood Products I-IV/08 I-IV/07 QIV/08 QIV/07 Sales 1 162 1 399 239 321 EBITDA -18 134 -30 12 Depreciation & impairment losses -56 -47 -25 -13 Operating result -74 87 -55 -1 EBITDA = Result before depreciation and impairment losses Others I-IV/08 I-IV/07 QIV/08 QIV/07 Operating result 132 100 -23 34 of which Wood Supply 30 38 4 7 Tissue and Cooking Papers 42 35 10 13 Market Pulp and Energy 122 41 -3 9 Others and Group eliminations -62 -14 -34 5 M-real includes 30 per cent of the Pulp Industry's (Metsä-Botnia) operating profit and Metsäliitto a further 23 per cent in the segments Consumer Packaging, Papers and Market Pulp and Energy. Production 1 000 units I-IV/08 I-IV/07 QIV/08 QIV/07 Paper, t 1 611 1 962 337 461 Paperboard, t 1 336 1 398 293 339 Sawn goods, m3 1 498 1 837 333 404 Processed timber, m3 494 580 96 111 Engineered Wood -products, m3 723 849 115 197 Pulp & CTMP, t (M-real) 1 486 1 536 303 369 Pulp, t (Metsä-Botnia) 3 298 2 616 781 593 Sawn goods, m3 (Metsä-Botnia) 171 188 55 32 Unaudited Quarterly data 2008 2008 2008 2008 2007 2007 2007 2007 (EUR mill.) QIV QIII QII QI QIV QIII QII QI Sales Consumer Packaging 248 274 274 266 258 267 275 268 Papers 321 356 362 387 374 374 380 417 Wood Products 239 279 329 315 321 339 385 354 Others & internal 645 686 711 742 677 717 668 722 sales Group sales 1 453 1 595 1 676 1 710 1 630 1 698 1 708 1 761 Operating result Consumer Packaging -14 30 8 27 3 39 12 31 Papers -114 -7 -7 21 -190 11 -6 -42 Wood Products -55 -16 -1 -2 -1 19 41 27 Others -23 12 105 38 34 23 28 15 Group operating -206 19 105 84 -154 92 75 31 profit - % of sales -14.2 1.2 6.3 4.9 -9.4 5.5 4.4 1.7 Share of results in associates -5 7 2 2 7 2 1 2 Net exchange gains / 18 1 -2 2 8 1 0 -4 losses Other fin. income & -84 -63 -51 -62 -65 -58 -43 -55 expenses Result before tax -277 -36 54 26 -204 38 33 -27 Income taxes 66 3 -1 -7 35 -16 -25 -18 Result from -211 -33 53 19 -169 22 8 -45 continuing operations Result from discontinued -62 -212 -45 -19 -4 -5 -13 -4 operations Net result for the -273 -245 8 0 -173 17 -5 -49 period Unaudited Change in tangible assets I-IV/08 I-IV/07 Book value at beginning of period 4 021 4 197 Company acquisitions 4 22 Increase 255 430 Decrease -686 -72 Assets classified as held for sale - - Depreciation and impairment charges -438 -362 - " - , discontinued operations -149 -118 Translation differences and other changes -49 -76 Book value at end of period 2 958 4 021 Depreciation and impairment charges of discontinued operations include for the comparison periods also the depreciations of the MAP Merchant Group. Commitments QIV/08 QIV/07 On own behalf (incl. leasing liabilities) 318 347 On behalf of associated companies 3 3 On behalf of others 4 4 Total 325 355 Commitments related to fixed assets QIV/08 QIV/07 Payments due under 1 year 0 38 Payments due in subsequent years 1 7 Open derivative contracts QIV/08 QIV/07 Interest rate derivatives 1 158 1 693 Currency derivatives 2 346 3 268 Other derivatives 232 160 Total 3 735 5 121 The market value of open derivative contracts at the end of the review period was EUR 33 million (12/07: EUR 29 million). Open derivative contracts also include closed contracts to a total amount of EUR 787 million (12/07: EUR 793 million). Accounting policies The Financial Statements Bulletin was prepared in accordance with the IAS 34 standard Interim Financial Reporting and the accounting policies presented in Metsäliitto Group's Annual Report. Taxes include taxes corresponding to the result for the period under review. |
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