2009-02-05 11:05:59 CET
2009-02-05 11:16:37 CET
REGULATED INFORMATION
Metsäliitto Osuuskunta - Financial Statement Release
Metsäliitto Group's result for 2008
Metsäliitto 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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