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2009-07-23 11:00:00 CEST 2009-07-23 11:01:11 CEST REGULATED INFORMATION M-real - Interim report (Q1 and Q3)M-real Corporation Interim report 1 January-30 June 2009M-real Corporation Interim report 1 January-30 June 2009 23.7.2009 at 12:00 M-real's operating result for the first half of the year excluding non-recurring items was EUR -135 million Result for the first half of 2009 * Sales were EUR 1,208 million (Q1-Q2/2008: 1,688). * The operating result excluding non-recurring items amounted to EUR -135 million (13). The operating result including non-recurring items was EUR -191 million (108). * The result before taxes excluding non-recurring items totalled EUR -145 million (-57). The result before taxes including non-recurring items totalled EUR -212 million (38). * Earnings per share from continuing operations excluding non-recurring items were EUR -0.42 (-0.18) and including non-recurring items EUR -0.61 (0.10) Result for the second quarter of 2009 * Sales were EUR 585 million (Q1/2009: 623). * The operating result excluding non-recurring items amounted to EUR -70 million (-65). The operating result including non-recurring items was EUR -73 million (-118). * The result before taxes excluding non-recurring items totalled EUR -83 million (-62). The result before taxes including non-recurring items totalled EUR -97 million (-115). * Earnings per share from continuing operations excluding non-recurring items were EUR -0.24 (-0.18) and including non-recurring items EUR -0.29 (-0.32) Events during the second quarter * The revised organisational structure was published. The Other Papers business area was renamed Speciality Papers * Matti Mörsky started as M-real's CFO * The Hallein paper mill was closed down and the production of standard coated fine paper was discontinued at the Gohrsmühle mill Events after the period * On 15 July 2009, M-real's associated company Oy Metsä-Botnia Ab and its owners, M-real Corporation, Metsäliitto Cooperative and UPM-Kymmene Corporation, signed a letter of intent regarding the divestment of the pulp mill and forests located in Fray Bentos, Uruguay, to UPM"Despite the weak demand environment, we have been able to defend paper and board prices. Pulp prices have been rising now for almost four months, and we believe that the positive development will continue. We are particularly pleased to say that despite the poor financial performance, we have succeeded in keeping our operating cash flow neutral mainly by lowering operating net working capital." Mikko Helander, CEO, M-real Corporation KEY FIGURES 2009 2009 2008 2009 2008 2008 Q2 Q1 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 585 623 829 1,208 1,688 3,236 EBITDA, EUR million -23 -48 127 -71 223 254 excl. non-recurring items, EUR million -20 -13 55 -33 128 192 Operating result, EUR million -73 -118 71 -191 108 -61 excl. non-recurring items, EUR million -70 -65 -1 -135 13 -35 Result before taxes from continuing operations, EUR million -97 -115 36 -212 38 -204 excl. non-recurring items, EUR million -83 -62 -36 -145 -57 -178 Result for the period from continuing operations, EUR million -93 -105 37 -198 37 -170 from discontinued operations, EUR million -2 -10 -45 -12 -64 -338 Total, EUR million -95 -115 -8 -210 -27 -508 Result per share from continuing operations, EUR -0.29 -0.32 0.10 -0.61 0.10 -0.55 from discontinued operations, EUR -0.01 -0.03 -0.14 -0.04 -0.20 -1.03 Total, EUR -0.30 -0.35 -0.04 -0.65 -0.10 -1.58 Result per share excl. non-recurring items, EUR -0.24 -0.18 -0.12 -0.42 -0.18 -0.48 Return on equity, % -32.1 -32.0 7.9 -31.9 4.0 -10.4 excl. non-recurring items, % -27.2 -17.6 -7.4 -22.0 -6.1 -9.0 Return on capital employed, % -10.2 -13.4 8.9 -11.5 7.3 -1.3 excl. non-recurring items, % -8.3 -7.0 -0.2 -7.3 1.4 -0.5 Equity ratio at end of period, % 29.4 30.3 36.5 29.4 36.5 30.8 Gearing ratio at end of period, % 168 151 112 168 112 152 Net gearing ratio at end of period, % 116 101 100 116 100 90 Interest-bearing net liabilities, EUR million 1,276 1,243 1,888 1,276 1,888 1,254 Gross investments, EUR million 16 16 30 32 51 128 Deliveries, 1 000 tonnes Paper businesses 269 321 448 590 929 1,761 Consumer Packaging 296 274 351 570 693 1,345 Personnel at the end of period in continuing operations 6,080 6,314 7,035 6,080 7,035 6,546 in discontinued operations 2,322 2,322 EBITDA = Earnings before interest, taxes, depreciation and impairment charges Map Merchant divested in 2007 and the Graphic Papers divested in 2008 are reported under discontinued operations. Result for April-June compared with the previous quarter M-real's sales totalled EUR 585 million (Q1/2009): 623). Comparable sales were down 6.2 per cent. The operating result was EUR -73 million (-118), and the operating result excluding non-recurring items was EUR -70 million (-65). Non-recurring items in the operating result for January-June totalled EUR -3 million net consisting of the following: * EUR 1 million cost provision in the Consumer Packaging business area related to personnel cuts. * EUR 1 million cost provision in the Speciality Papers business area connected to the closure of the Hallein paper mill. * EUR 1 million cost under Other operations related to the streamlining of the sales network. The non-recurring items for the previous quarter totalled EUR -53 million net. The key items were: * EUR 28 million cost provision and write-downs of in the Speciality Papers business area connected to the closure of the Hallein paper mill. * EUR 22 million cost provisions and write-downs of associated with the closure of the Metsä-Botnia Kaskinen mill. This total consists of EUR 16 million related to the Consumer Packaging business area and EUR 6 million to the Market Pulp and Energy segment. * EUR 2 million cost under Other operations related to the streamlining of the sales network. Compared to the previous period, the operating result excluding non-recurring items was weakened by low pulp sales prices, a decrease in the price of uncoated fine paper and cost associated with the discontinuation of the coated fine paper production. The result was boosted by the implemented cost savings. The total paper business delivery volume was 269,000 tonnes for April-June (321,000). Deliveries by the Consumer Packaging business area totalled 296,000 tonnes (274,000). Financing income and expenses totalled EUR -12 million (+4). Foreign exchange gains and losses from accounts receivable, accounts payable, financial income and expenses and the valuation of currency hedging were EUR 2 million (0). Net interest and other financing income and expenses were EUR -14 million (4). Other financial expenses include EUR 7 million of valuation gains on interest rate hedges (valuation gain: 2). The financing income of the previous quarter includes a profit of about EUR 31 million from repurchases of M-real's EUR 400 million bond due in December 2010. The result from continuing operations in April-June before taxes was EUR -97 million (-115). The result includes a non-recurring item of EUR -11 million from the Sunila pulp mill divested by Myllykoski Paper in the line "share of results in associated companies". The result from continuing operations before taxes and non-recurring items was EUR -83 million (-62). Income taxes, including the change in deferred tax liabilities, came to EUR +4 million (+10). Earnings per share were EUR -0.30 (-0.35). Earnings per share from continuing operations excluding non-recurring items were EUR -0.24 (-0.18). The return on equity was -32.1 per cent (-32.0); excluding non-recurring items, -27.2 per cent (-17.6). Return on capital employed was -10.2 per cent (-13.4); excluding non-recurring items -8.3 per cent (-7.0). Result for January-June compared with the corresponding period last year M-real's sales totalled EUR 1,208 million (1,688). Comparable sales were down 24.9 per cent. Operating result was EUR -191 million (+108), and the operating result excluding non-recurring items was EUR -135 million (+13). Non-recurring items in the operating result for January-June totalled EUR -56 million net, including the following key items: * EUR 29 million cost provisions and write-downs of in the Speciality Papers business area connected to the closure of the Hallein paper mill. * EUR 22 million cost provisions and write-downs of associated with the closure of the Metsä-Botnia Kaskinen mill. This total consists of EUR 16 million related to Consumer Packaging business area and EUR 6 million to Market Pulp and Energy segment. * EUR 3 million cost under Other operations related to the streamlining of the sales network. The non-recurring items of the corresponding period in the previous year were EUR 95 million net. Compared to the corresponding period last year, the operating result excluding non-recurring items was weakened by the reduced delivery volumes caused by weakened demand and the reduced value of product, wood and pulp inventories. The result was improved by the implementedprice increases and cost savings. The total paper business delivery volume was 590,000 tonnes for January-June (930,000). Consumer Packaging deliveries totalled 570,000 tonnes (693,000). Financial income and expenses over the period totalled EUR -8 million (-69). Foreign exchange gains and losses from accounts receivable, accounts payable, financial income and expenses and the valuation of currency hedging were EUR 2 million (1). Net interest and other financing income and expenses stood at EUR -10 million (-70). Other financial expenses include EUR 9 million of valuation gains on interest rate derivatives (valuation gain: 4). The financing income of the review period includes a profit of about EUR 31 million from repurchases of M-real's EUR 400 million bond due in December 2010. The result from continuing operations over the review period before taxes was EUR -212 million (38). The result includes a non-recurring item of EUR -11 million from the Sunila pulp mill divested by Myllykoski Paper in the line "share of results in associated companies". The result from continuing operations before taxes and excluding non-recurring items was EUR -145 million (-57). Income taxes, including the change in deferred tax liabilities, came to EUR +14 million (-1). Earnings per share were EUR -0.65 (-0.10). Earnings per share from continuing operations excluding non-recurring items were EUR -0.42 (-0.18). The return on equity was -31.9 per cent (4.0); excluding non-recurring items -22.0 per cent (-6.1). Return on capital employed was -11.5 per cent (+7.3); excluding non-recurring items -7.3 per cent (1.4). Personnel On 30 June 2009, the company had 6,080 employees (31 March 2009: 6,314), of which 2,318 (2,189) worked in Finland. In January-June 2009, M-real employed an average of 6,252 people (2008: 9,087). The numbers include 30 per cent of Metsä-Botnia's personnel. Investments Gross investments in January-June totalled EUR 32 million (Q1-Q2/2008: 51). Investments include a EUR 6 million share of Metsä-Botnia's capital expenditure (13). Metsä-Botnia's investment share is based on M-real's 30 per cent ownership. Structural change In February 2009, M-real launched a new profit improvement programme with an annual target of EUR 80 million. The improvement actions target at savings in the business areas and streamlining the support functions to reflect the new company structure and size after the divestment of Graphic Papers. The full annual effect of the programme will be visible from 2011. The majority of the profit improvement measures are expected to be implemented in 2009, and the profit impact is estimated to be EUR 20-25 million in 2009. The related non-recurring costs booked during 2009 are expected to be about EUR 18 million. M-real launched also a separate EUR 60 million programme to improve the 2009 cash flow including, e.g., the reduction of operating net working capital and cuts in investments. In 2008, M-real announced to be planning the discontinuation of the standard coated fine paper production at the Hallein and Gohrsmühle mills based on earlier examined strategic options. Both mills have been loss-making for a long period of time. At Hallein, paper production was discontinued at the end of April 2009. At the Gohrsmühle mill, the standard coated fine paper production was discontinued in April. At Gohrsmühle, the production of speciality papers as well as uncoated fine paper reels and folio sheets has been expanded. M-real continues to explore various options for the Hallein pulp mill. The organisation of M-real was revised following the closure of the Hallein paper mill and the discontinuation of standard coated fine paper production at the Gohrsmühle mill. The Other Papers business area was renamed Speciality Papers. The new structure took effect on 17 June 2009. The strategic review of M-real's paper business continues. Management changes Matti Mörsky started as M-real's CFO on 4 May 2009. On 17 June 2009, Heikki Husso was appointed Head of the Speciality Papers business area, and Soili Hietanen was appointed Head of Market Pulp and Energy segment. Hietanen is also responsible for contract manufacturing between M-real and Sappi. Financing At the end of June 2009, M-real's equity ratio was 29.4 per cent (31 December 2008: 30.8) and the gearing ratio 168 per cent (152). Net gearing ratio was 116 (90). Some of M-real's loan agreements set a 120 per cent limit on the company's net gearing ratio and a 30 per cent limit on the equity ratio. Calculated as defined in the loan agreements, the net gearing ratio at the end of June was approximately 91 per cent (74) and the equity ratio some 34 per cent (36). The change in the fair value of investments available for sale was approximately EUR -120 million in the first half of the year based mainly on the decrease in the value of the Pohjolan Voima shares. At the end of June, net interest-bearing liabilities totalled EUR 1,276 million (1,254). Foreign-currency-denominated loans accounted for 14 per cent; 90 per cent were floating-rate and the rest were fixed-rate. At the end of June, the average interest rate on loans was 5.2 per cent and the average maturity of long-term loans 2.9 years. The interest rate maturity was 5.4 months at the end of June. During the period the interest rate maturity has varied between 2 and 6 months. In January-June, cash flow from operations amounted to EUR -36 million (Q1/2009: -20). Working capital was down by EUR 74 million (down 50). At the end of the period, an average of 4.1 months of net foreign currency exposure was hedged. The degree of hedging varied between 4 and 5 months during the period; approximately 99 per cent of the non-euro-denominated equity was hedged at the end of the period. Liquidity continues at a good level. At the end of the review period, liquidity was EUR 1,039 million, of which EUR 778 million consisted of committed credit facilities, and EUR 261 million of liquid assets and investments. The amount of committed credit facilities include the undrawn EUR 450 million share of the EUR 500 million syndicated revolving credit facility due in December 2009. In addition, the Group had other interest-bearing receivables totalling EUR 310 million. To meet its short-term financing needs, the Group also had at its disposal uncommitted domestic and foreign commercial paper programmes and credit facilities amounting to about EUR 570 million. In the second quarter, M-real drew a EUR 60 million pension premium (TyEL) loan. After this draw down, M-real still has a total of about EUR 260 million of undrawn pension premium (TyEL) loans. In the first quarter, M-real repurchased its own bonds (EUR 400 million bond due in December 2010) with a nominal value of EUR 59.95 million. A gain of approximately EUR 31 million from the purchases was recorded in the first quarter result. M-real's liquidity is ensured and the company is in negotiations to secure long-term financing. Standard & Poor's downgraded M-real's credit rating from B- to CCC+ on 16 January 2009. The outlook of the rating remains negative. The downgrade has an about EUR 2 million impact on current annual financing costs. On 13 February 2009, Moody's Investors Service downgraded M-real's B3 credit rating to Caa1. The outlook of the rating remains negative. The downgrade has an about EUR 2 million impact on current annual financing costs. Shares In January-June 2009, the highest price for M-real's B share on the NASDAQ OMX Helsinki was EUR 0.92, the lowest EUR 0.19, and the average price EUR 0.50. At the end of June, the price of the B share was EUR 0.53. The trading volume of B shares was EUR 149 million, 104 per cent of the share capital. The market value of the A and B shares totalled EUR 212 million at the end of June. At the end of June, Metsäliitto Cooperative owned 38.6 per cent of the shares and held 60.5 per cent of the voting rights conferred by these shares. International investors' holdings decreased to 15 per cent. On 5 February 2009, Financier de l'Echiquier SA's holding in M-real decreased to 4.8 per cent of the share capital and 1.6 per cent of the voting rights. The company does not hold any of its own shares. Events after the period On 15 July 2009, M-real Corporation's associated company Oy Metsä-Botnia Ab and its owners, M-real Corporation, Metsäliitto Group and UPM-Kymmene Oyj, signed a letter of intent regarding the divestment of the pulp mill and forests located in Fray Bentos, Uruguay, to UPM. Once the transaction is closed, M-real's net debt will decrease by around EUR 550 million, also taking into account the change of Metsä-Botnia's consolidation method in M-real's consolidated financial accounts. Cash proceeds to be received by M-real is around EUR 300 million. M-real will use the proceeds for debt repayments. The arrangement will not have a significant impact on M-real's equity. After the closing of the transaction, M-real will change the consolidation method of Metsä-Botnia in its consolidated financial accounts and process its ownership in Metsä-Botnia as an associated company according to IAS 28. As a result of the transaction and the change in the consolidation method, approximately EUR 250 million of consolidated net debt will leave M-real Group. The closing of the transaction and the change in the consolidation method of Metsä-Botnia are estimated to decrease M-real's annual sales by around EUR 250 million and to slightly improve the result before taxes compared to the first quarter 2009. The closing of the transaction is subject to approvals by the respective parties' Board of Directors, the execution of final agreements, conclusion of negotiations with financing parties and approval of the competition authorities. The transaction is estimated to be closed during the last quarter of 2009. After the closing of the transaction M-real owns 30% of Metsä-Botnia, Metsäliitto Cooperative 53% and UPM 17%. M-real's Board of Directors has processed and approved the letter of intent acting without those of its members who are dependent on Metsäliitto Cooperative. At the request of M-real's Board of Directors Handelsbanken Capital Markets has issued a Fairness Opinion, according to which the transaction is financially fair from the point of view of M-real's shareholders. Castrén & Snellman Oy, Attorneys-at-law, provides legal advice in the transaction. Near-term outlook The demand for folding boxboard improved steadily in the second quarter, and the operating rates are approaching normal levels. A process to increase prices of folding boxboard has been started in the UK. Price increases are under consideration to be implemented also in the other markets in Europe. Over the past few weeks, order inflows for uncoated fine paper have improved, and at the moment it appears that the price decline is bottoming out. The demand for coated papers has remained weak. After the discontinuation of standard coated fine paper production at Hallein and Gohrsmühle, the strategic importance of coated papers is no longer significant to M-real. Following the discontinuation of the standard coated fine paper production, the expansion of uncoated fine paper and speciality paper production has progressed according to plan. The demand for speciality papers still remains somewhat under the normal level, but the producers have managed to keep the price level fairly stable. Pulp prices have been rising for almost four months, but the euro prices still remain clearly under the price level seen at the end of 2008. The prices appear to continue their moderate rise primarily based on production curtailments. With economic recovery and growing demand for pulp, pulp prices are expected to rise more rapidly. M-real's internal profit improvement programmes, concurrently with declining wood raw material and chemical costs, will ease the challenging profitability situation. Performance in 2009 will be negatively affected by significant extraordinary operating costs related to adapting operations to a smaller scale and more profitable entity. Despite some recent signs of improvement, M-real's operating result for 2009, excluding non-recurring items, will be clearly weaker than last year's result, due to the company's weak performance in the first part of the year. Near-term business risks The weakening of and general uncertainty in the global economy have also had a negative impact on the operating conditions of the European paper and board industry. Despite some signs of improvement, there is still the risk that the slowdown of the global economy and the resulting weak demand for paper and board will be prolonged. A prolonged period of weak demand increases the risk of weakening cash flow. Due to the overall situation of the financial market, the availability of corporate financing remains constrained. M-real owns significant assets that can be liquidated when needed in order to ensure sufficient financing. Weak demand may lead to production curtailments that are larger than planned. There is also the risk that product prices may fall. There is a risk of a strengthening euro, particularly in relation to the US dollar and the British pound, which would have a negative impact on operating conditions in the paper and board industry. Because the forward-looking estimates and statements of these financial statements are based on current plans and estimates, they contain risks and other uncertain factors that may cause the results to differ from the statements concerning them. In the short term, M-real's result will be particularly affected by the price of, and demand for, finished products, raw material costs, the price of energy, and the exchange rate development of the euro. More information about longer-term risk factors can be found on pages 37-38 of M-real's 2008 annual report. M-REAL CORPORATION Further information: Matti Mörsky, CFO, tel. +358 10 465 4913 Juha Laine, Vice President, Investor Relations and Communications, tel. +358 10 465 4335 More information available starting from 1 pm on 23 July 2009. A telephone conference for investors and analysts starts at 3 pm. BUSINESS AREAS AND MARKET TRENDS 2009 2009 2008 2008 2008 2009 2008 2008 Consumer Packaging Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 237 226 248 274 274 463 540 1,061 EBITDA, EUR million 24 15 11 37 23 39 60 108 excl. non-recurring items 25 19 11 37 23 44 61 109 Operating result, EUR million 4 -17 -13 17 3 -13 20 24 excl. non-recurring items 5 -1 -9 17 3 4 21 29 Return on capital employed, % 2.1 -8.8 -6.0 8.3 1.4 -3.4 5.0 3.2 excl. non-recurring items, % 2.5 -0.4 -4.0 8.3 1.4 1.0 5.3 3.8 Deliveries, 1,000 tonnes 296 274 303 348 351 570 693 1,345 Production, 1,000 tonnes 275 292 293 347 335 567 696 1,336 Personnel at the end of period 1,690 1,535 1,541 1,576 1,825 1,690 1,825 1,541 Result for April-June compared with the previous quarter The operating result excluding non-recurring items for the Consumer Packaging business area improved from the previous quarter and was EUR 5 million (Q1/2009: -1). The result was improved by the increase in delivery volumes. The result was weakened by falling average selling prices caused mainly by the weakening of the US dollar. The result includes a non-recurring item consisting of a EUR -1 million cost provision in the Consumer Packaging business area related to personnel reductions. The result for the previous quarter included non-recurring items of EUR -16 million in cost provisions, and write-downs related to the closure of the Metsä-Botnia Kaskinen mill. The deliveries of European folding boxboard producers were 2 per cent higher compared with the previous quarter. Consumer Packaging's deliveries of folding boxboard were up by 9 per cent. Result for January-June compared with the corresponding period last year The operating result excluding non-recurring items for the Consumer Packaging business area weakened compared to the corresponding period last year and totalled EUR 4 million (21). The most significant factor weakening the result was the general decline in demand. Price increases, the implementation of cost-saving measures and the strengthening of the US dollar improved the result. The result includes EUR -17 million non-recurring items. The result for the corresponding period last year included non-recurring items of EUR -1 million. The deliveries of European folding boxboard producers fell by 19 per cent compared with the corresponding period last year. Consumer Packaging's deliveries of folding boxboard were down by 17 per cent. 2009 2009 2008 2008 2008 2009 2008 2008 Office Papers Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 131 147 174 203 204 278 427 804 EBITDA, EUR million -3 -2 -3 11 10 -5 27 35 excl. non-recurring items -3 -2 -1 11 10 -5 27 37 Operating result, EUR million -18 -17 -38 -6 -7 -35 -9 -53 excl. non-recurring items -18 -17 -14 -6 -7 -35 -9 -29 Return on capital employed, % -13.7 -12.4 -25.6 -3.2 -3.2 -12.9 -1.8 -7.4 excl. non-recurring items, % -13.7 -12.4 -9.2 -3.2 -3.2 -12.9 -1.8 -3.8 Deliveries, 1,000 tonnes 190 203 237 270 274 393 574 1,081 Production, 1,000 tonnes 202 199 177 226 245 401 502 905 Personnel at the end of period 1,428 1,454 1,495 1,518 1,504 1,428 1,504 1,495 Result for April-June compared with the previous quarter The operating result excluding non-recurring items for the Office Papers business area weakened compared with the previous quarter and was EUR -18 million (Q1/2009: -17). The result was weakened by the lower average selling prices. The result was improved by lower production costs. The result does not include non-recurring items. The result for the previous quarter did not include non-recurring items. Total deliveries by European uncoated fine paper producers were down by 3 per cent compared to the previous quarter. The delivery volume of Office Papers fell by 6 per cent. Result for January-June compared with the corresponding period last year The operating result excluding non-recurring items for Office Papers weakened compared to the corresponding period last year and totalled EUR -35 million (-9). The result was weakened by the lower average selling prices and the reduced demand for products. The result was improved by lower raw material costs and implemented cost savings measures. The result did not include non-recurring items. The result for the corresponding period last year did not include non-recurring items. Total deliveries by European uncoated fine paper producers fell by 17 per cent compared to the corresponding period last year. The delivery volume of Office Papers fell by 32 per cent. This figure includes the impact of the divestment of the New Thames mill. 2009 2009 2008 2008 2008 2009 2008 2008 Speciality Papers Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 82 117 147 153 158 199 322 622 EBITDA, EUR million -17 -33 -1 7 8 -50 39 45 excl. non-recurring items -16 -5 1 7 9 -21 15 23 Operating result, EUR million -23 -40 -75 -3 -2 -63 19 -59 excl. non-recurring items -22 -12 -8 -3 -1 -34 -4 -15 Return on capital employed, % -32.2 -43.4 -63.5 -2.3 -1.2 -37.6 8.3 -14.3 excl. non-recurring items, % -30.4 -12.5 -5.8 -2.3 -0.8 -19.8 -1.7 -3.4 Deliveries, 1,000 tonnes 80 118 157 168 174 198 355 680 Production, 1,000 tonnes 74 99 160 170 186 173 376 705 Personnel at the end of period 1,742 1,971 1,965 2,009 2,026 1,742 2,026 1,965 Result for April-June compared with the previous quarter The operating result excluding non-recurring items for the Speciality Papers business area weakened compared to the previous quarter and was EUR -22 million (Q1/2009: -12). The result was weakened by the costs associated with discontinuation of the standard coated fine paper production. The result includes a non-recurring item of EUR -1 million connected to the closure of the Hallein paper mill. The result for the previous quarter included non-recurring items of EUR -28 million connected to the closure of the Hallein paper mill. Total deliveries by European coated fine paper producers fell by 5 per cent compared to the previous quarter. The delivery volume of Speciality Papers fell by 32 per cent; this figure includes the discontinuation of the standard coated fine paper production. Result for January-June compared with the corresponding period last year The operating result excluding non-recurring items for Speciality Papers weakened compared to the corresponding period last year and totalled EUR -34 million (-4). The result was weakened by the heavy decline in the demand for products and the cost associated with discontinuation of coated fine paper production. The result was improved by higher selling prices and implemented cost savings measures. The result includes total EUR -29 million in non-recurring items. The result for the corresponding period last year included non-recurring items of EUR 23 million. Total deliveries by European coated fine paper producers fell by 26 per cent compared to the corresponding period last year. The delivery volume of Speciality Papers fell by 44 per cent; this figure includes the discontinuation of the standard coated fine paper production. 2009 2009 2008 2008 2008 2009 2008 2008 Market Pulp and Energy Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Sales, EUR million 116 134 150 172 160 250 322 644 EBITDA, EUR million -10 -4 8 23 96 -14 117 148 excl. non-recurring items -10 -3 8 23 22 -13 43 73 Operating result, EUR million -19 -18 -2 12 86 -37 96 106 excl. non-recurring items -19 -12 -2 12 12 -31 22 32 Return on capital employed, % -9.2 -8.4 -1.3 5.1 37.3 -8.8 22.8 12.6 excl. non-recurring items, % -9.2 -5.8 -1.3 5.1 4.8 -7.5 5.0 3.6 Deliveries, 1,000 tonnes 327 287 264 291 279 614 559 1,115 Result for April-June compared with the previous quarter The operating result excluding non-recurring items for the Market Pulp and Energy reporting segment weakened compared with the previous quarter and was EUR -19 million (Q1/2009: -12). The result was weakened by lower pulp selling prices due to weakened US dollar. Lower wood costs improved the result. The result did not include non-recurring items. The result for the previous quarter included EUR -6 million in non-recurring items. Result for January-June compared with the corresponding period last year The operating result excluding non-recurring items for the Market Pulp and Energy reporting segment weakened compared to the corresponding period last year and totalled EUR -31 million (22). The result was weakened by the lower selling price of pulp and the production curtailments of pulp mills due to low demand. The result was improved by lower wood costs. In addition, cost provisions and write-downs of EUR 6 million associated with the closure of the Metsä-Botnia Kaskinen mill were recognised as non-recurring items in the result. The result for the corresponding period last year included EUR 74 million non-recurring items. Condensed consolidated statement of comprehensive income 2009 2008 2008 2009 2009 EUR million Q1-Q2 Q1-Q2 Change Q1 Q2 Continuing operations Sales 1,208 1,688 -480 3,236 623 585 Other operating income 61 148 -87 182 33 28 Operating expenses -1,340 -1,613 273 -3,164 -704 -636 Depreciation and impairment losses -120 -115 -5 -315 -70 -50 Operating result -191 108 -299 -61 -118 -73 % of sales -15.8 6.4 -1.9 -18.9 -12.5 Share of results in associated companies -13 -1 -12 -1 -1 -12 Net exchange gains and losses 2 1 1 13 0 2 Other net financial items -10 -70 60 -155 4 -14 Result before income tax -212 38 -250 -204 -115 -97 % of sales -17.5 2.3 -6.3 -18.5 -16.6 Income taxes 14 -1 15 34 10 4 Result for the period from continuing operations -198 37 -235 -170 -105 -93 % of sales -16.4 2.2 -5.3 -16.9 -15.9 Discontinued operations Result from discontinued operations -12 -64 52 -338 -10 -2 Result for the period -210 -27 -183 -508 -115 -95 Other comprehensive income Cash flow hedges 12 12 0 -41 -1 13 Available for sale financial assets -120 67 -187 87 -63 -57 Translation differences 3 -2 5 11 3 0 Income tax relating to components of other comprehensive income 28 -22 50 -19 18 10 Other comprehensive income, net of tax -77 55 -132 38 -43 -34 Total comprehensive income for the period -287 28 -315 -470 -158 -129 Result for the period attributable to Shareholders of parent company -212 -31 -181 -517 -116 -96 Minority interest 2 4 -2 9 1 1 -210 -27 -183 -508 -115 -95 Total comprehensive income for the period attributable to Shareholders of parent company -289 26 -315 -481 -162 -127 Minority interest 2 2 0 11 4 -2 -287 28 -315 -470 -158 -129 Earnings per share for result attributable to shareholders of parent company (EUR/share) from continuing operations -0.61 0.10 -0.71 -0.55 -0.32 -0.29 from discontinued operations -0.04 -0.20 0.16 -1.03 -0.03 -0.01 Total -0.65 -0.10 -0.55 -1.58 -0.35 -0.30 The change in the fair value of investments available for sale is based mainly on the decrease in the value of the Pohjolan Voima shares. The change in the fair value of the Pohjolan Voima shares relates mainly to the decrease of the 12 month moving average value of Nord Pool electricity futures used in the valuation. Condensed consolidated balance sheet 30.6. 30.6. 31.12. EUR million 2009 % 2008 % 2008 % ASSETS Non-current assets Goodwill 51 1.4 172 3.3 51 1.1 Other intangible assets 47 1.3 71 1.4 51 1.1 Tangible assets 1,468 39.1 2,633 50.7 1,808 40.1 Biological assets 2 0.1 43 0.8 57 1.3 Investments in associated companies 49 1.3 62 1.2 63 1.4 Available for sale investments 304 8.1 387 7.4 440 9.8 Non-current financial assets 229 6.1 33 0.6 232 5.2 Deferred tax receivables 5 0.1 3 0.1 5 0.1 2,155 57.5 3,404 65.5 2,707 60.1 Current assets Inventories 373 9.9 653 12.6 505 11.2 Accounts receivables and other receivables 575 15.3 1,068 20.5 743 16.5 Cash and cash equivalents 247 6.6 73 1.4 550 12.2 1,195 31.8 1,794 34.5 1,798 39.9 Assets classified as held for sale 402 10.7 Total assets 3,752 100.0 5,198 100.0 4,505 100.0 SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity Equity attributable to shareholders of parent company 1,040 27.7 1,836 35.3 1,329 29.5 Minority interest 59 1.6 56 1.1 57 1.3 Total equity 1,099 29.3 1,892 36.4 1,386 30.8 Non-current liabilities Deferred tax liabilities 184 4.9 307 5.9 232 5.1 Post-employment benefit obligations 92 2.4 141 2.7 98 2.2 Provisions 81 2.2 45 0.9 99 2.2 Borrowings 1,394 37.2 1,637 31.5 1,568 34.8 Other liabilities 15 0.4 30 0.6 18 0.4 1,766 47.1 2,160 41.6 2,015 44.7 Current liabilities Current borrowings 337 9.0 491 12.6 538 11.9 Accounts payable and other liabilities 414 11.0 655 9.4 566 12.6 751 20.0 1,146 22.0 1,104 24.5 Liabilities classified as held for sale 136 3.6 Total liabilities 2,653 70.7 3,306 63.6 3,119 69.2 Total shareholders' equity and liabilities 3,752 100.0 5,198 100.0 4,505 100.0 Condensed consolidated cash flow statement 2009 2008 2008 2009 EUR million Q1-Q2 Q1-Q2 Q2 Result for the period -211 -27 -508 -97 Total adjustments 101 126 619 57 Change in working capital 74 -60 7 24 Cash flow arising from operations -36 39 118 -16 Net financial items -1 -54 -193 -17 Income taxes paid 10 -23 -22 13 Net cash flow arising from operating activities -27 -38 -97 -20 Investments in intangible and tangible assets -32 -51 -128 -16 Divestments of assets and other 5 138 483 3 Net cash flow arising from investing activities -27 87 355 -13 Share issue, minority interest 0 2 2 0 Changes in non-current loans and in other financial items -235 -337 -71 -6 Dividends paid 0 -20 -20 0 Net cash flow arising from financing activities -235 -355 -89 -6 Changes in cash and cash equivalents -289 -306 169 -39 Cash and cash equivalents at beginning of period 550 380 380 301 Translation difference in cash and cash equivalents 0 -1 1 -1 Changes in cash and cash equivalents -289 -306 169 -39 Assets held for sale -14 0 0 -14 Cash and cash equivalents at end of period 247 73 550 247 Statement of changes in shareholders' equity Equity attributable to shareholders of parent company Fair Trans- value Share lation and Share premium diffe- other Retained Minority EUR million capital account rences reserves earnings Total interest Total Shareholders' equity, 1 January 2008 558 667 -11 225 391 1,830 52 1,882 Dividends paid -20 -20 -20 Metsä Botnia restructuring in Uruguay 2 2 Comprehensive income for the period -2 59 -31 26 2 28 Shareholders'equity, 30 June 2008 558 667 -13 284 340 1,836 56 1,892 Shareholders' equity, 1 January 2009 558 667 -9 259 -146 1,329 57 1,386 Comprehensive income for the period 4 -81 -212 -289 2 -287 Shareholders' equity, 30 June 2009 558 667 -5 178 -358 1,040 59 1,099 Key ratios 2009 2008 2008 2009 Q1-Q2 Q1-Q2 Q2 Sales, EUR million 1,208 1,688 3,236 585 EBITDA, EUR million -71 223 254 -23 excl. non-recurring items, EUR million -33 128 192 -20 Operating result, EUR million -191 108 -61 -73 excl. non-recurring items, EUR million -135 13 -35 -70 Result from continuing operations before taxes, EUR million -212 38 -204 -97 excl. non-recurring items, Eur million -145 -57 -178 -83 Result for the period from continuing operations, EUR million -198 37 -170 -93 from discontinued operations, EUR million -12 -64 -338 -2 Total, EUR million -210 -27 -508 -95 Earnings per share from continuing operations, EUR -0.61 0.10 -0.55 -0.29 from discontinued operations, EUR -0.04 -0.20 -1.03 -0.01 Total, EUR -0.65 -0.10 -1.58 -0.30 Earnings per share, excl. non-recurring items, EUR -0.42 -0.18 -0.48 -0.24 Return on equity, % -31.9 4.0 -10.4 -32.1 excl. non-recurring items, % -22.0 -6.1 -9.0 -27.2 Return on capital employed, % -11.5 7.3 -1.3 -10.2 excl. non-recurring items, % -7.3 1.4 -0.5 -8.3 Equity ratio at end of period, % 29.4 36.5 30.8 29.4 Gearing ratio at end of period, % 168 112 152 168 Net gearing ratio at end of period, % 116 100 90 116 Shareholders' equity per share at end of period, EUR 3.17 5.60 4.05 3.17 Interest-bearing net liabilities, EUR million 1,276 1,888 1,254 1,276 Gross capital expenditure, EUR million 32 51 128 16 Deliveries, 1 000 tonnes Paper business 590 929 1,761 269 Consumer Packaging 570 693 1,345 296 Personnel at the end of period in continuing operations 6,080 7,035 6,546 6,080 in discontinued operations 2,322 EBITDA = Earnings before interest, taxes, depreciation and impairment charges Securities and guarantees 2009 2008 2008 EUR million Q2 Q2 For own liabilities 130 58 61 On behalf of associated companies 1 1 1 On behalf of Group companies 5 5 5 On behalf others 4 3 2 Total 140 67 69 Open derivative contracts 2009 2008 2008 EUR million Q2 Q2 Interest rate derivatives 1,334 1,815 1,286 Currency derivatives 3,166 3,326 2,805 Other derivatives 290 176 185 Total 4,790 5,317 4,276 The fair value of open derivative contracts calculated at market value at the end of the review period was EUR -14.6 million (EUR 15.0 million 31 December 2008 and EUR 27.7 million 30 June 2008). Also include other closed contracts to a total amount of EUR 2,611.2 million (EUR 2,068.8 million 31 December 2008 and EUR 2,623.2 million June 30 2008 ). Commitments related to fixed assets 2009 2008 2008 EUR million Q2 Q2 Payments due in following 12 months 4 5 0 Payments due later 2 1 1 Changes in property, plant and equipment 2009 2008 2008 EUR million Q2 Q2 Carrying value at beginning of period 1,808 2,820 2,820 Capital expenditure 29 51 128 Decreases -1 -73 -670 Assets classified as held for sale -253 0 0 Depreciation and impairment charges -112 -107 -282 related to discontinued operations 0 -38 -149 Translation difference -3 -20 -39 Carrying value at end of period 1,468 2,633 1,808 Depreciation and impairment losses related to discontinued operations include Graphic Papers business. Related-party transaction Transaction and balances with parent and sister companies 2009 2008 2008 EUR million Q2 Q2 Sales 15 16 34 Other operating income 2 2 3 Purchases 163 318 571 Interest income 2 3 7 Interest expences 1 3 4 Non-current receivables 5 19 5 Current receivables 60 117 49 Non-current liabilities 0 0 0 Current liabilities 203 34 228 Transaction with associated companies 2009 2008 2008 EUR million Q2 Q2 Sales 0 0 0 Purchases 2 2 4 Non-current receivables 1 2 0 Current receivables 7 10 7 Current liabilities 1 2 2 Accounting policies This unaudited interim report has been prepared in accordance with accounting policies set out in International Accounting Standard 34 and in the M-real's Annual Report for 2008. The Group has adopted the following standards: IAS 1 (revisited), Presentation of Financial Statements. The revisited standard is aimed at improving users' ability to analyse and compare the information given in financial statements by separating changes in equity of an entity arising from transactions with owners from other changes in equity. The Group presents non-owner changes in equity in the statement of comprehensive income. IFRS 8, Operating Segments. The new standard replaces IAS 14. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The operating segments are the same as in 2008 according to IAS 14 or Consumer Packaging, Office Papers, Speciality Papers and Market Pulp and Energy. The figures in the financial statement are unaudited. Calculation of key ratios (Result from continuing operations before tax - direct Return on equity (%) = taxes) per (Shareholders' equity (average)) (Result from continuing operations before tax + interest expenses, Return on capital employed net exchange gains/losses and (%) = other financial expenses) per (Shareholders' equity + interest-bearing borrowings (average)) Equity ratio (%) = (Shareholders' equity) per (Total assets - advance payments received) (Interest-bearing borrowings) Gearing ratio (%) = per (Shareholders' equity) (Interest-bearing borrowings - liquid funds - interest-bearing Net gearing ratio (%) = receivables) per (Shareholders' equity) (Profit attributable to shareholders of parent company) Earnings per share = per (Adjusted number of shares (average)) (Equity attributable to Shareholders'equity per shareholders of parent company) share = per (Adjusted number of shares at the end of period) Sales and result by segment 2009 2009 2008 2008 2008 2009 2008 2008 EUR million Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Consumer Packaging 237 226 248 274 274 463 540 1 061 Office Papers 131 147 174 203 204 278 427 804 Speciality Papers 82 117 147 153 158 199 322 622 Market Pulp and Energy 116 134 150 172 160 250 322 644 Other operations 40 34 57 77 87 74 189 323 Internal sales -21 -35 -54 -53 -54 -56 -112 -218 Sales 585 623 722 826 829 1 208 1 688 3 236 Consumer Packaging 24 15 11 37 23 39 60 108 Office Papers -3 -2 -3 11 10 -5 27 35 Speciality Papers -17 -33 -1 7 8 -50 39 45 Market Pulp and Energy -10 -4 8 23 96 -14 117 148 Other operations -17 -24 -33 -29 -10 -41 -20 -82 EBITDA -23 -48 -18 49 127 -71 223 254 % of sales -3,9 -7,7 -2,5 5,9 15,3 -5,9 13,2 7,8 Consumer Packaging 4 -17 -13 17 3 -13 20 24 Office Papers -18 -17 -38 -6 -7 -35 -9 -53 Speciality Papers -23 -40 -75 -3 -2 -63 19 -59 Market Pulp and Energy -19 -18 -2 12 86 -37 96 106 Other operations -17 -26 -33 -28 -9 -43 -18 -79 Operating result -73 -118 -161 -8 71 -191 108 -61 % of sales -12,5 -18,9 -22,3 -1,0 8,6 -15,8 6,4 -1,9 Non-recurring items Consumer Packaging -1 -16 -4 0 0 -17 -1 -5 Office Papers 0 0 -24 0 0 0 0 -24 Speciality Papers -1 -28 -67 0 -1 -29 23 -44 Market Pulp and Energy 0 -6 0 0 74 -6 74 74 Other operations -1 -3 -14 -11 -1 -4 -1 -27 Non-recurring items in operating result -3 -53 -110 -11 72 -56 95 -26 Consumer Packaging 25 19 11 37 23 44 61 109 Office Papers -3 -2 -1 11 10 -5 27 37 Speciality Papers -16 -5 1 7 9 -21 15 23 Market Pulp and Energy -10 -3 8 23 22 -13 43 73 Other operations -16 -22 -15 -18 -8 -38 -18 -50 EBITDA, excl. non-recurring items -20 -13 4 60 55 -33 128 192 % of sales -3,4 -2,1 0,6 7,3 6,6 -2,7 7,6 5,9 Consumer Packaging 5 -1 -9 17 3 4 21 29 Office Papers -18 -17 -14 -6 -7 -35 -9 -29 Speciality Papers -22 -12 -8 -3 -1 -34 -4 -15 Market Pulp and Energy -19 -12 -2 12 12 -31 22 32 Other operations -16 -23 -18 -17 -8 -39 -17 -52 Operating result, excl. non-recurring items -70 -65 -51 3 -1 -135 13 -35 % of sales -12,0 -10,4 -7,1 0,4 -0,1 -11,2 0,8 -1,1 Return on capital employed % Consumer Packaging 2,1 -8,8 -6,0 8,3 1,4 -3,4 5,0 3,2 Office Papers -13,7 -12,4 -25,6 -3,2 -3,2 -12,9 -1,8 -7,4 Speciality Papers -32,2 -43,4 -63,5 -2,3 -1,2 -37,6 8,3 -14,3 Market Pulp and Energy -9,2 -8,4 -1,3 5,1 37,3 -8,8 22,8 12,6 Group -10,2 -13,4 -19,7 -0,5 8,9 -11,5 7,3 -1,3 Capital employed EUR million Consumer Packaging 771 774 801 839 829 771 829 801 Office Papers 501 517 556 645 664 501 664 556 Speciality Papers 241 312 415 518 532 241 532 415 Market Pulp and Energy 822 876 899 929 921 822 921 899 Unallocated and eliminations 611 609 822 -12 165 611 165 822 Group 2 946 3 088 3 493 2 919 3 111 2 946 3 111 3 493 The capital employed for a segment included its assets: goodwill, other intangible goods, tangible assets, biological assets, investments in associates, inventories, accounts receivables, prepayments and accrued income (excluding interest and taxes), less the segment's liabilities (accounts payable, advance payments, accruals and deferred income (excluding interest and taxes). Deliveries 2009 2009 2008 2008 2008 2009 2008 2008 1,000 tonnes Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2 Consumer Packaging 296 274 303 348 351 570 693 1,345 Office Papers 190 203 237 270 274 393 574 1,081 Speciality Papers 80 118 157 168 174 198 355 680 Paper business, total 269 321 394 438 448 590 929 1,761 Market Pulp 327 287 264 291 279 614 559 1,115 Production 1,000 tonnes Consumer Packaging 275 292 293 347 335 567 696 1,336 Office Papers 202 199 177 226 245 401 502 905 Speciality Papers 74 99 160 170 186 173 376 705 Paper business, total 276 298 337 396 431 574 878 1,610 Metsä-Botnia pulp 1) 210 231 235 270 233 441 485 990 M-real pulp 264 277 303 377 391 541 806 1,486 1) corresponds to M-real's ownership share of 30% in Metsä-Botnia |
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