DROP IN PAPER PRICE AND RISING EURO WEAK


M-real Corporation Stock Exchange Release 5 February 2004 at 12.00
a.m.

DROP IN PAPER PRICE AND RISING EURO WEAKENED M-REAL’S PROFITABILITY
IN 2003

In 2003 M-real Group’s operating profit net of non-recurring items
fell to EUR 88.5 million from EUR 336.3 million in the previous year.
The main reasons for the weakening in profitability were the fall in
the selling price of paper and the strengthening in the euro.

Key figures in 2003:
- Operating profit net of non-recurring items: EUR 88.5 million
(336.3)
- The result before extraordinary items net of non-recurring items
was a loss of EUR 37.5 million (profit of 146.3)
- Operating profit: EUR 73.8 million (324.3)
- Result before extraordinary items: a loss of EUR 80.2 million
(profit of 134.3)
- Earnings per share: EUR 0.51 negative (EUR 0.36 positive in 2002)
- Board of Directors’ dividend proposal: 0.30 euro per share (0.60)
- Result for the financial year: a net loss of 95.0 million (net
profit of 208.9 million)
- Cash flow from operations: EUR 425.1 million (666.4)
- Return on capital employed: 1.6 per cent (5.8)
- Turnover: EUR 6,044.1 million (6,564.2)
- Equity ratio at the end of the year: 31.9 per cent (34.2)
- Key figures adjusted for the effects of the sale of Metsä Tissue:
 equity ratio 36.7 per cent, gearing 105 per cent, interest-bearing
 net liabilities EUR 2,540 million
- Capacity utilization rate at the paperboard mills: 84 per cent
(92); capacity utilization rate at the paper mills: 83 per cent (85)

In addition to the fall in the price of paper and the appreciation of
the euro, fourth-quarter profitability was weakened by the
maintenance shutdowns in December and the costs resulting from them
as well as by the paper industry workers’ one-day strike in December.
Major non-recurring expenses were also booked to the last quarter.

Demand for folding boxboard in western Europe was on a par with 2002.
Selling prices remained at the previous year’s level. The situation
in the paper market, however, was weak all year long. Demand remained
low and selling prices fell markedly.

“The economic outlook is still uncertain. There are some signs of
improved economic growth, but they are not yet feeding through into
demand for paper and paperboard,ö says CEO Jouko M. Jaakkola, sizing
up the near-term outlook.

M-real moved ahead with its cost-saving and profitability-improvement
programmes in line with its targets. “The EUR 295 million savings
programmes were seen to completion for the most part by the end of
the year. A good third of the savings will nevertheless not be
realized until the market situation improves. We are continuing our
efficiency-boosting measures. The new programmes, which seek to
achieve total savings of about 200 million euros by the end of 2006,
are targeted at sales, marketing, logistics, purchasing and
production. Out of the total amount approximately 35 million euros
realizes when demand increases. It is estimated that savings of about
40 million euros will be realized during 2004," comments Jaakkola.

M-REAL CORPORATION


Corporate communications

For further information, contact:
Jouko M. Jaakkola, President and CEO, M-real Corporation, tel. +358
10 469 4118
Heikki Saarinen, Senior Vice President & CFO, M-real Corporation,
tel. +358 10 469 4686

M-REAL CORPORATION
FINANCIAL STATEMENT BULLETIN 2003

REPORT OF THE BOARD OF DIRECTORS, 2003

MARKET SITUATION IN 2003

The slowdown in economic growth that got started in 2000 continued in
Europe in 2003. Growth is forecast to come in at just under one per
cent. Economic growth in North America, however, is generally
expected to have improved further in 2003 compared with the growth of
over two per cent in 2002. Asia’s economic growth is also estimated
to have improved from the over 2 per cent growth registered in 2002.
The volume of advertising, which is closely in line with the trend in
the economy, remained by and large at the previous year’s level in
Western Europe. On the foreign exchange markets, the United States
dollar and British pound weakened markedly against the euro.

Demand for folding boxboard in western Europe was at the previous
year’s level in 2003 despite weak economic growth. West European
producers’ deliveries to markets outside Europe increased. There was
no significant change in selling prices. The appreciation of the euro
nevertheless weakened the euro-denominated average selling price and
the price competitiveness of producers in the euro countries.
Deliveries by producers of linerboard increased and fluting
deliveries were at the previous year’s level, mainly thanks to the
growth in deliveries to eastern Europe.

The paper market faced a difficult year. Overall growth in demand
remained low throughout the year. The west European market was
characterized by overcapacity, a drop in selling prices, increased
deliveries to markets outside Europe and a strengthening euro, which
resulted in a fall of the selling price of exports in euros and an
increase in imports of uncoated fine paper.

Deliveries by west European producers of coated fine paper grew by 6
per cent, mainly owing to increased exports. Deliveries by producers
of uncoated fine paper fell by one per cent. Deliveries of coated
magazine paper rose by 8 per cent. Exports grew more than deliveries
to Europe. Selling prices in all the main product groups declined
markedly.

Demand for tissue products in western Europe was on a par with last
year. New capacity led to a tougher competitive situation.

M-REAL’S PROFIT FOR THE FINANCIAL YEAR

M-real’s consolidated operating profit in 2003 was EUR 73.8 million
(324.3 million in 2002). Operating profit includes non-recurring net
expenses of EUR 14.7 million (12.0). Non-recurring income amounted to
EUR 15.8 million (25) and non-recurring expenses were EUR 30.5
million (37).

The biggest of the non-recurring income items was a capital gain of
EUR 7 million on the sale of the Logisware Oy business, which was
booked in the third quarter. Other non-recurring items were booked to
the last quarter.

The biggest non-recurring expense items were the larger-than-normal
credit losses of EUR 12 million, agreed expense provisions for the
personnel reductions at the Kirkniemi and Lielahti mills, totalling
EUR 7 million and provisions booked for environmental liabilities,
EUR 6 million.

Operating profit net of non-recurring items was EUR 88.5 million
(336.3), representing 1.5 per cent of turnover. The main reasons for
the fall in operating profit were the fall in the average selling
price of paper, the strengthening in the euro as well as the lower
delivery volumes of the Consumer packaging business area.

Apart from the Map Merchants paper merchanting business, the
profitability of all the business areas weakened. Metsä Tissue’s
earnings improved slightly.

Deliveries of paperboard to customers totalled 1,082,000 tonnes
(1,144,000 tonnes). The mills’ production was curtailed by 177,000
tonnes (41,000) in line with demand. The capacity utilization rate
was 84 per cent (92). With the coming on stream of the rebuilt board
machine at Äänekoski, folding boxboard production capacity increased
by about 45,000 tonnes in 2003.

Total deliveries of paper from the mills amounted to 3,724,000 tonnes
(3,638,000). In comparable terms, the delivery volume rose by 4 per
cent from the previous year. The volume of fine paper delivered was
on a par with the previous year, and the comparable volume of coated
magazine paper delivered rose by 15 per cent. Owing to the imbalance
in supply and demand, production had to be curtailed substantially.
Production curtailments amounted to 585,000 tonnes (605,000 tonnes).
The capacity utilization rate at the mills was 83 per cent (85).

Hedging income from foreign exchange derivatives added EUR 24.2
million to operating profit (8.1). By the end of 2003 the United
States dollar weakened by 20.4 per cent and the British pound by 8.3
per cent compared with the previous turn of the year. On average, the
euro exchange rate of the dollar was 19.7 per cent lower than in 2002
and the exchange rate of the British pound 10 per cent lower.

Turnover was EUR 6,044.1 million (6,564.2). In comparable terms,
turnover fell by 8 per cent. Sales to Finland accounted for 6 per
cent of turnover (6).

Financial income and expenses were EUR 154.0 million negative (190.0
million negative). They include a net exchange rate gain of EUR 20.7
million on financial items (30.5 million negative) as well as net
interest and other financial expenses of EUR 174.7 million (159.5).
Non-recurring net expenses of EUR 28 million connected with the
restructuring of loans has been booked to other financial expenses.
Non-recurring income amounted to EUR 14.1 million and non-recurring
expenses were EUR 42.1 million. The non-recurring income has been
booked to the second, third and last quarters and the expenses to the
last quarter.

Other operating income amounted to EUR 73.8 million (73.4). The sum
does not include non-recurring items.

The result before extraordinary items was a loss of EUR 80.2 million
(profit of 134.3 million). The result before extraordinary items net
of the above-mentioned non-recurring items was a loss of EUR 37,5
million (profit of 146.3)

Extraordinary expenses include write-downs on the asset items of
certain businesses and winding up expenses to a total amount of EUR
16 million.

The result for the financial period was a loss of EUR 95.0 million
(profit of 208.9 million in 2002). Taxes, including the change in the
imputed deferred tax liability, were EUR 0.7 million negative
(deferred taxes of 59.8 million in 2002).

Earnings per share were EUR 0.51 negative (EPS of 0.36 in 2002).

The return on capital employed was 1.6 per cent (5.8). The return on
equity was 3.8 per cent negative (3.0).



OCTOBER-DECEMBER EARNINGS COMPARED WITH THE PREVIOUS QUARTER

The operating result was a loss of EUR 37,3 million (July–Sept. 2003:
28.9). The operating profit includes non-recurring net expenses of
EUR 18.9 million. The operating result net of non-recurring items was
a loss of EUR 18.4 million (profit of 28.9 million), which is -1.2
per cent of turnover. The main reasons for the weakening in
profitability were the lower selling prices of paper, the
strengthening in the euro as well as the maintenance shutdowns in
December and the costs resulting from them.

The profitability of the Home&Office business area, MAP Merchant and
Metsä Tissue improved.

The result before extraordinary items was a loss of EUR 105.2 million
(a loss of 3.9 million). The result before extraordinary items net of
non-recurring items was a loss of 47.2 (a loss of 6.8 million).

Deliveries of paperboard to customers totalled 269,000 tonnes
(265,000 tonnes). The mills’ production was curtailed by 56,000
tonnes in line with demand (43,000). The capacity utilization rate
was 79 per cent (87).

The total volume of deliveries of paper from the mills was 917,000
tonnes (906,000). Production curtailments amounted to 170,000 tonnes
(195,000 tonnes). The capacity utilization rate of the paper mills
was 79 per cent (80).

Consolidated turnover was EUR 1,474.2 million (1,467.2).

PERSONNEL

The number of personnel at the end of December was 19,636 employees
(20,323 employees at 31 December 2002), of whom 5,835 employees
worked in Finland (5,941). The net reduction in personnel was 687
employees. The net effect of acquisitions and divestments was a
decrease in personnel of 49 employees.

The Group’s personnel includes 47 per cent of Metsä-Botnia’s
employees.

CAPITAL EXPENDITURES ON FIXED ASSETS

Capital expenditures on fixed assets totalled EUR 232 million in 2003
(Jan.–Dec. 2002: 304). In addition, a total of EUR 165 million was
paid for shares in acquired companies.

In September it was decided to build a BCTMP plant with an annual
capacity of 300,000 tonnes in Kaskinen. The total expenditure for the
investment will be about EUR 180 million. The pulp mill’s entire
production will be used as raw material for the Group’s mills. The
investment will contribute to improving the quality of paper grades
and lowering costs. The mill will be completed in autumn 2005 and it
will provide employment for about 65 people.

In December M-real decided to participate in the building of the new
nuclear power plant by Teollisuuden Voima Oy in Olkiluoto, Finland.
The plant will come on stream in the year 2009.


ACQUISITIONS AND DIVESTMENTS

During January-June, M-real purchased all the Metsä Tissue
Corporation shares owned by SCA and other shareholders. Metsä Tissue
was delisted from the Main List of Helsinki Exchanges on 19 June. The
total price of the shares and stock options purchased was about EUR
128 million.

In November a Letter of Intent was signed on selling a 66 per cent
stake in Metsä Tissue Corporation’s business operations to
Metsäliitto Osuuskunta.

The acquisition by Map Merchant Group of Narpex, a paper merchant in
the Czech Republic, entered into force in January. In addition, in
January, Map Merchants Group acquired the shares held by minority
shareholders in its Danish subsidiary Schramm-Papirgros A/S.

In March M-real purchased 24.7 per cent of the shares in Oy Hangö
Stevedoring Ab, whereby the company became a wholly-owned subsidiary
of M-real.

In March Metsä-Botnia purchased 60 per cent of the shares in the
Uruguayan company Compania Forestal Oriental S.A (FOSA) from Shell
International Renewables BV.

OTHER STRUCTURAL ARRANGEMENTS

In June M-real announced an agreement with IBM Global Services
concerning transfer of M-real’s own information technology services
and the entire operations of its associated company Logisware Oy to
IBM’s organization. The agreement came into force in September.

In October the company announced that it was discontinuing the
present market pulp business at the Lielahti chemithermal mechanical
pulp mill and that the mill’s entire production would be used in the
manufacture of M-real’s own paperboard. The arrangement will be seen
to completion by the end of 2004 and the estimated downsizing
requirement is about 90 employees.

Codetermination negotiations with the personnel groups at the
Kirkniemi mill were started in October. The negotiations were
completed in November and in them it was agreed that the number of
employees at the Kirkniemi mill would be reduced by 155 by the end of
2006.

RESEARCH AND DEVELOPMENT

Research and development costs in 2003 amounted to EUR 27 million,
representing 0.6 per cent of turnover excluding the Map Merchants
paper merchanting business. The R&D priorities were to improve the
efficiency of production processes, develop new products and the
processes connected with their manufacture as well as the
technologies of the future. The number of patents that M-real applied
for grew by 30 per cent. The number of ideas and invention reports
also increased markedly during the year.

At M-real’s mills, inputs were made into boosting the efficiency of
processes during 2003. Productivity gains were made at nearly every
production unit. Substantial improvements were achieved at Alizay,
Biberist, Husum and Kirkniemi.

M-real is participating in a number of cooperation projects. The
objective of these efforts is to find new applications of paper
involving innovative ways of integrating paper and ICT (Information
and Communication Technology). M-real has made outlays and achieved
good results in applications connected with process intelligence.
This development area will be a development focus in coming years as
well.

ENVIRONMENT

During 2003 environmental information and bulletins to customers were
developed, existing environmental liabilities were surveyed and the
level of environmental protection which suppliers are required to
meet was set out more specifically in purchasing agreements. At the
end of the report year, all M-real’s production facilities have an
environmental system in accordance with the ISO 14001 standard.

M-real has given its commitment to using wood raw material that comes
from sustainably managed forests. Accordingly, measures were
continued to verify the Chain of Custody of roundwood and to promote
the certification of forests. In Russia and the Baltic countries,
inspections of the felling sites were increased.

The most important environmental investment will be the waste water
treatment plant at the Husum mill. The facility will start up in
2004. The investment has a cost estimate of EUR 40 million.

During 2003 M-real made additional provisions for environmental
liabilities of EUR 6 million. Together with previously made
provisions, the final amount of environmental provisions at the end
of 2003 was EUR 7 million.

Inputs continued to be made into improving energy-efficiency,
reducing the emissions from our own power plants and increasing the
share of bioenergy. M-real’s carbon dioxide emissions per tonne of
product produced diminished by 3 per cent compared with the previous
year.

M-real will publish a separate Environmental Report for 2003.

FINANCING

Interest-bearing net liabilities amounted to EUR 3,109 million at the
end of the financial year (Dec. 2002: 3,019).

The equity ratio at the end of the period was 31,9 per cent (Dec.
2002: 34,0) and the gearing ratio was 137 per cent (Dec. 2002: 119).

Liquidity is good. Liquidity at the end of the year was EUR 1,124
million, of which EUR 940 million consisted of committed long-term
credit facilities and EUR 184 million represented liquid funds and
investments (200). In addition, to meet its short-term financing
needs the Group had at its disposal  domestic and foreign commercial
paper programmes and credit facilities amounting to about EUR 750
million.

At the end the financial year an average of 4 months of net foreign
currency exposure was hedged. The degree of hedging during the report
period has varied between 3 and 5 months. At the end of the report
period, about 90 per cent of the shareholders’ equity not in euros
was hedged. At the end of the year the Group’s liabilities were tied
to fixed-interest rates for a period of 18 months. During the period
the fixed-rate period has varied from 12 to 18 months.

At the close of the year, 15 per cent of the Group’s long-term loans
were denominated in foreign currencies. Of these loans, 45 per cent
was subject to floating interest rates and the rest to fixed interest
rates. The average interest rate on the loans was 4.6 per cent at the
end of 2003 and their average maturity was 3.6 years.

Because liquidity was good during the report period, there was no
need for new major loan arrangements.

In September Metsä-Botnia signed an EUR 210 million syndicated loan
that will be used as a revolving credit facility.

During the year, 3 bond issues to a total amount of about EUR 150
million were floated within the framework of an international bond
programme.

In October Moody’s Investor Service lowered the credit rating for
long-term loans from Baa3 to Ba1 and for short-term loans from Prime
3 to Not-Prime, with a negative outlook.

In December Standard & Poor’s Ratings Services lowered the company’s
credit for long-term loans from BBB- to BB+ and for short-term loans
from A3 to B, with a stable outlook.

In December loans amounting to 34 billion yen (EUR 311 million) were
repaid in connection with loan restructuring agreements.
                  
BOARD OF DIRECTORS AND AUDITORS

The Annual General Meeting held on 17 March 2003 re-elected the
following persons to seats on M-real’s Board of Directors for a term
extending up to the next Annual General Meeting: Timo Haapanen, Asmo
Kalpala, Erkki Karmila, Runar Lillandt, Matti Niemi, Antti Oksanen,
Antti Tanskanen and Arimo Uusitalo.

Elected as auditors were Göran Lindell, Authorized Public Accountant,
and the firm of independent public accountants PriceWaterhouseCoopers
Oy, with Ilkka Haarlaa, Authorized Public Accountant, acting as Chief
Auditor. Björn Renlund, Authorized Public Accountant, and Jouko
Malinen, Authorized Public Accountant, acted as the deputy auditors.
                  
SHARES

The highest price of M-real’s Series B share on Helsinki Exchanges
during the financial year was EUR 8.99 and the lowest price was EUR
6.21. The average share price was EUR 7.26. In 2002 the average price
was EUR 8.28. The price of the Series B share was EUR 7.03 at the end
of the financial year on 31 December 2003.

Turnover of the Series B share was EUR 585 million, or 56 per cent of
the shares outstanding. The market capitalization of the Series A and
B shares at 31 December 2003 totalled EUR 1,286 million.

At 31 December 2003, Metsäliitto Osuuskunta owned 38.5 per cent of M-
real Corporation’s shares and 64.2 per cent of the voting rights
conferred by these shares. International investors owned 34.2 per
cent of the shares.

The Board of Directors does not have valid authorizations to carry
out a share issue or issues of convertible bonds or bonds with
warrants.

IAS PROJECT

On 7 June 2002 the Commission of the European Union approved the
proposed regulation according to which publicly listed companies that
are registered in the EU area must prepare their consolidated annual
accounts in accordance with IAS/IFRS (International Accounting
Standards / International Financial Reporting Standards) no later
than for the 2005 financial year.

In autumn 2001 M-real initiated a project to put in place IAS
capabilities. The project has moved ahead in accordance with plans
and the company will prepare its consolidated annual accounts in
accordance with IAS as from the beginning of 2005.

The relevant measures carried out during 2003 included a study of the
effect of IAS standards on the accounting policy applied to the
consolidated financial statements, the arranging of comprehensive
training for the Group’s finance staff and preparations of the
Group’s IAS accounting guidelines.

The financial statement accounting policies will change at least in
the following subareas: the calculation of pension expenses and
liabilities, the treatment of certain lease agreements and financing
arrangements, the valuation of forest assets and the booking of
financial instruments.

EVENTS AFTER THE CLOSE OF THE FINANCIAL PERIOD

At the beginning of January, a 66 per cent stake in Metsä Tissue was
sold to Metsäliitto Osuuskunta in accordance with a Letter of Intent.
In addition, 17 per cent was sold to the Tapiola Group. At the end of
January, the remaining 17 per cent was sold to Varma Mutual Pension
Insurance Company (9.86 per cent) and Sampo Life Insurance Company
Limited (7.14 per cent). The transactions were carried out on the
same terms and conditions and were based on a debt-free value of EUR
570 million. The after-tax capital gain on the disposals was about
EUR 155 million.

The key figures for 2003 adjusted for the effects of the sale of
Metsä Tissue were: Interest-bearing net liabilities: EUR 2,540
million; equity ratio: 36.7 per cent; gearing: 105 per cent.

FINANCIAL REPORTING IN 2004

M-real revamped its organization in June 2003. Operations were
divided into four parts: Cartons, Graphics, Offices and Map Merchant
Group. M-real’s financial reporting will change in line with the new
business area structure as from the beginning of 2004. Metsä Tissue
will no longer be included in the reporting in 2004. The comparison
figures according to the new business area structure will be released
before publication of the first-quarter results.

The financial statement information for 2003 is reported in
accordance with the old business area structure. The old business
areas are: Consumer packaging, Commercial printing, Home & Office,
Publishing, Map Merchant Group and Metsä Tissue.

OUTLOOK FOR THE CURRENT YEAR

In the current year the economic outlook in Europe is still
uncertain. Some signs of improvement can nevertheless be seen.
Economic growth in North America and Asia is generally expected to
improve compared with 2003. Clear-cut signs of a significant revival
in the demand for M-real’s main products are nevertheless not yet on
the horizon. M-real’s paper markets in western Europe are still beset
by oversupply, and the strengthening in the euro has led to an
increase in imports of uncoated fine paper to western Europe. Paper
production will have to still be curtailed in step with demand.

Price pressures on the selling price of paper have also continued
after the turn of the year. The prices of paper are expected to rise
when the demand recovers. Major changes are not expected to take
place in the selling prices of folding boxboard. The strong euro will
weaken the profitability of deliveries outside Europe. M-real’s first-
quarter result before extraordinary items is estimated to be
negative.

Espoo, 5 February 2004

BOARD OF DIRECTORS


BUSINESS AREAS AND MARKET TRENDS

Consumer packaging

                  2003  2002   IV   III   II  I 03    IV   2002-
                               03    03   03          02    2003
                                                          change
Turnover          867,  921, 211,  214, 211,  229,  227,   -5,8%
                     9     1    6     8    6     9     0
Operating profit  34,5  83,4 -1,3  15,2  2,0  18,6   7,0  -58,6%
Operating          4,0   9,1 -0,6   7,1  0,9   8,1   3,1        
profit, %
Return on          3,9   9,1 -1,1   6,8  1,3   7,8   3,7        
capital
employed, %
Mill deliveries,  1082  1129  269   265  265   283   283   -4,2%
1,000 t
Capacity            84    92   79    87   78    94    92        
utilization rate
at the
paperboard
mills, %

The Consumer packaging business area faced a more challenging
operating environment in 2003 than a year ago. The operating
environment was characterized by economic and political uncertainty
as well as the appreciation of the euro. The business area’s
deliveries to markets in western Europe declined. Deliveries to
markets outside Europe, however, increased. The strengthening in the
euro, especially against the dollar, as well as increased deliveries
to markets outside Europe depressed the euro-denominated selling
price of all product groups.

The business area’s profitability weakened a great deal compared with
the figure a year ago. The business area reported operating profit of
EUR 34.5 million (83.4). The weakened profitability was attributable
mainly to the strengthening of the euro and a fall in the delivery
volume. In addition, profitability was weakened by the gradual
winding up of the market pulp business at the Lielahti chemithermal
mechanical pulp mill and the integration of the mill’s operations as
part of the Tako board mill’s operations. Owing to the savings
measures carried out during the year, costs were lower than a year
ago. The average capacity utilization rate of the paperboard machines
was 84 per cent (92). The average order book at the end of the year
was about two weeks.

Overall demand for folding boxboard in western Europe was on a par
with the previous year. M-real’s deliveries of folding boxboard to
the European market declined. The increase in the volumes delivered
to Asia and especially to the United States meant that M-real’s total
deliveries nevertheless remained at the previous year’s level. No
major change took in place in the selling prices of folding boxboard.
The strengthening in the euro nonetheless depressed the euro-
denominated selling price. The average price of deliveries in Europe
was slightly higher than a year ago.

The delivery volume of linerboard was down on the previous year,
especially in Europe. Deliveries to the USA, however, increased.
Demand for fluting remained weak all year long. Worldwide demand for
wallpaper base continued to weaken and deliveries fell.

Operating result in the last quarter fell compared with the previous
quarter and was a loss of EUR 1.3 million (profit of 15.2 million in
July–Sept. 2003). Profitability was weakened by the fall in euro-
denominated selling prices due to the stronger euro, the reduction of
stocks and the costs of the maintenance shutdowns that were carried
out in December.

Deliveries of folding boxboard rose slightly in the last quarter. The
selling price in euros fell. The delivery volumes of linerboard fell,
whereas fluting volumes rose. Deliveries of wallpaper base
increased.

Commercial printing

                 2003    2002   IV   III   II  I 03    IV   2002-
                                03    03   03          02    2003
                                                           change
Turnover       1503,5       1 362,  364, 372,  403,  368,   -8,2%
                        638,4    2     9    8     6     1
Operating        10,6   106,7    -  -2,2  5,1  18,3  16,6  -90,1%
profit                        10,6
Operating         0,7     6,5 -2,9  -0,6  1,4   4,5   4,5        
profit, %
Return on         0,9     7,1 -2,7  -0,4  1,4   5,3   4,4        
capital
employed, %
Mill             1768   1 757  436   433  439   460   425   +0,6%
deliveries,
1,000 t
Capacity           83      81   81    82   83    86    79        
utilization
rate, %

The weak market situation that started in the Commercial printing
business area as early as 2001, continued on in 2003. Demand in the
main markets of Western Europe remained at the previous year’s level.
Deliveries by the industry to markets outside Europe increased. M-
real’s deliveries to markets outside Europe were nevertheless on a
par with the level a year ago. The average selling price of coated
fine paper was about 9–10 per cent below the figures a year ago. The
strengthening in the euro depressed the average euro-denominated
selling price. In the last quarter M-real announced it was starting
negotiations on 5–7 per cent price increases for reels of coated fine
paper in Europe. The new prices are to come into effect on 1 April
2004.

Profitability weakened considerably compared with 2002. Operating
profit was EUR 10.6 million (106.7). Profitability was weakened above
all by the fall in the average selling price and the strengthening in
the euro.

Deliveries by west European producers of coated fine paper rose by 6
per cent in 2003. The delivery volume of the Commercial printing
business area’s products rose by just under one per cent. The average
running time of the paper machines was 5 days shorter than in 2002
and the capacity utilization rate was 83 per cent (81). The order
book at the end of the year was two weeks.

The operating result in the last quarter fell markedly compared with
the previous quarter. Profitability was weakened by the fall in the
average selling price and the appreciation of the euro.

Zanders was transferred to the Commercial printing business area as
from the beginning of 2003. The figures for 2002 have been adjusted
accordingly.

Home & Office

                   2003   2002    IV  III    II  I 03   IV   2002-
                                  03   03    03         02    2003
                                                            change
Turnover          682,9  782,7  169, 151,  170,  191, 200,  -12,8%
                                   5    3     5     6    8
Operating          48,2  102,8   8,6  3,9  13,9  21,8 19,6  -53,1%
profit
Operating           7,1   13,1   5,1  2,6   8,2  11,4  9,8        
profit, %
Return on           5,4   11,0   4,1  2,0   5,7   9,4 10,0        
capital
employed, %
Mill                892    902   209  207   229   246  211   -1,1%
deliveries,
1,000 t
Capacity             82     89    75   73    89    93   79        
utilization
rate, %

The Home&Office business area’s operating environment remained
challenging in 2003. Demand in the main markets was still weak and
despite the fall in the dollar, deliveries by industry to markets
outside Europe increased. The weaker dollar also increased imports of
uncoated fine paper to the west European market. These factors,
together with increased production capacity, led to tougher
competition, particularly in the second half of the year. The average
selling price of uncoated fine paper fell by about 9–10 per cent
compared with the previous year.

The sector was significantly weaker than last year. Operating profit
was EUR 48.2 million (102.8). Profitability was weakened mainly by
the fall in the average selling price.

Deliveries by west European producers of uncoated fine paper fell by
one per cent. The volume of products delivered by the Home&Office
business area likewise fell by one per cent. The average running time
of the paper machines was 23 days shorter than in 2002 and the
capacity utilization rate was 82 per cent (89). The order book at the
end of the year was slightly less than three weeks.

Profitability in the fourth quarter improved compared with the
previous quarter. Operating profit was EUR 8.6 million (3.9).
Profitability was boosted by lower costs and an improved product mix.
The fall in the average selling price cut into earnings.

Publishing

                2003  2002    IV  III    II  I 03   IV    2002-
                              03   02    03         02     2003
                                                         change
Turnover        785,  790,  195, 199,  187,  204, 204,    -0,6%
                   6     1     0    3     1     2    0
Operating       12,5  43,1  -3,2 12,1  -6,7  10,3  8,8   -71,1%
profit
Operating        1,6   5,5  -1,6  6,1  -3,6   5,0  4,3         
profit, %
Return on        1,1   3,6  -0,9  4,0  -2,1   3,5  2,7         
capital
employed, %
Mill            1064   977   272  265   258   269  255    +8,9%
deliveries,
1,000 t
Capacity          85    79    79   84    84    93   87         
utilization
rate, %

Demand for the Publishing business area’s products grew slightly in
western Europe in 2003. M-real increased its volume of deliveries to
both the main market in Europe and to markets outside Europe. Average
selling prices were down about 9–10 per cent. The strengthening in
the euro depressed the average euro-denominated selling price. In the
last quarter M-real announced it was starting negotiations on 5–7 per
cent price increases for reels of coated magazine paper in Europe.
The new prices are to come into effect on 1 April 2004.

The business area’s profitability weakened markedly despite the
increase in delivery volumes. Operating profit was EUR 12.5 million
(43.1). Operating profit was burdened by a total of about EUR 6
million of non-recurring expenses that were booked in the fourth
quarter in connection with the staff reduction programme at the
Kirkniemi mill. Operating profit net of non-recurring items was 18.2
(43.1). Profitability was weakened by the fall in the average selling
price and the appreciation of the euro. In addition, the figures for
2002 included 50 per cent of the Albbruck mill’s earnings in
accordance with M-real’s holding. The shareholding was divested in
June 2002.

Deliveries of coated magazine paper (LWC) in western Europe rose by 8
per cent. The comparable delivery volume of the Publishing business
area’s products rose by 15 per cent. The average running time of the
paper machines was 2 days shorter than in 2002 and the capacity
utilization rate was 85 per cent (79). The order book at the end of
the year was just over two weeks.

Fourth-quarter profitability weakened compared with the previous
quarter, resulting in a loss of EUR 3.2 million (a profit of 12.1
million in July–Sept. 2003). Profitability was weakened by the fall
in the euro-denominated average selling price owing to a stronger
euro, the maintenance shutdowns in December and the costs arising
from them as well as the previously mentioned non-recurring expenses.

Map Merchant Group

                  2003  2002    IV   III   II  I 03    IV  2002-
                                03    03   03          02   2003
                                                          change
Turnover          1392  1542  347,  332, 345,  367,  375,  -9,7%
                    ,6    ,8     6     5    0     5     0
Operating profit   6,5     -   0,4  -2,7  3,4   5,4  -9,3       
                        14,9
Operating          0,5  -1,0   0,1  -0,8  1,0   1,5  -2,5       
profit, %
Return on          2,0  -3,0   0,4  -2,3  4,0   5,8  -9,0       
capital
employed, %
Delivery          1283  1275   327   312  317   328   317  +0,6%
volumes, 1,000 t

The Map paper merchanting business area’s financial year was also
overshadowed by the continuing difficult market situation. Map moved
ahead with its programme for integrating and reorganizing functions.
The positive effects on earnings of these and other cost-saving
measures began to show up. Performance improved in all the main areas
of operations.

Operating profit was EUR 6.5 million (a loss of 14.9 million in
2002). Profitability was improved mainly by lower costs. In addition,
the previous year’s operating result was burdened by a total of EUR
17.3 million of non-recurring expenses.

Delivery volumes during the report year totalled 1,283,000 tonnes, up
about one per cent on 2002.

Fourth-quarter operating profit was EUR 0.4 million (a loss of 2.7
million in 2002). Profitability was improved by the 5 per cent growth
in the delivery volumes.
Furthermore, the previous quarter’s earnings were burdened by non-
recurring expense entries totalling about EUR 2 million.

OTHER BUSINESSES

Metsä Tissue Corporation

                 2003   2002   IV   III   II  I 03    IV   2002-
                               03    03   03          02    2003
                                                          change
Turnover         669,   647, 170,  164, 169,  164,  170,   +3,3%
                    2      8    6     9    0     7     7
Operating        48,9   43,1 15,1  13,8  8,3  11,7   5,9  +13,5%
profit
Operating         7,3    6,7  8,9   8,4  4,9   7,1   3,5 
profit, %
Return on        14,8   13,2 18,2  16,6 10,2  14,5   7,6    
capital
employed, %

There was only small growth in the demand for tissue products in
Europe in 2003. At the same time, new capacity entered the market,
which has caused the competitive situation to tighten further.

Operating profit in 2003 was EUR 48.9 million (43.1). The improvement
in profitability was due to the growth in the sales volume and to an
improved product range. Operating profit also includes non-recurring
income of about EUR 3 million.

Metsä Tissue’s sales volume rose by about 3 per cent in comparable
terms, but the euro-denominated average selling price was down 5 per
cent compared with the previous year. The fall in the average selling
price was attributable especially to a lowering in the market price
of raw paper, but also to the growth in deliveries from eastern
Europe.

Fourth-quarter operating profit rose to EUR 15.1 million from EUR
13.8 million in the previous quarter. Operating profit was improved
by the non-recurring income mentioned above.
The investment and development programme covering the business
operations in Germany, which was launched in October 2002, progressed
according to plans. The aim of the programme is to improve quality
and the degree of converting, especially within consumer products,
whilst raising productivity. Capital expenditures under the programme
total about EUR 45 million and it will for the most part be carried
out by the end of 2004.

During January-June, M-real purchased all the Metsä Tissue
Corporation shares owned by SCA and other shareholders. Metsä Tissue
thereby became a wholly-owned subsidiary of M-real and Metsä Tissue
was delisted from the Main List of Helsinki Exchanges on 19 June.
M-REAL GROUP (All figures unaudited)

PROFIT AND LOSS ACCOUNT   1-12/03      %  1-12/02      %
(EUR million)
Turnover                  6 044.1  100.0  6 564.2  100.0
  Interest in                -5.2            -4.9       
  associated companies
  Other operating            73.8            73.4       
  income
  Operating expenses      5 557.9         5 850.7       
  Depreciation              481.0           457.7       
Operating profit             73.8    1.2    324.3    4.9
  Net exchange               20,7           -30,5       
  gains/losses
  Other financial          -174.7   -2.5   -159.5   -2.9
income
  and expenses
Profit before               -80.2    1.3    134.3    2.0
extraordinary items
  Extraordinary items       -15.1           144.5       
Profit before taxes and     -95.3   -1.6    278.8    4.2
minority interest
  Taxes                      -0.7           -59.8       
  Minority interest           1.0           -10.1       
Profit for the period       -95.0   -1.6    208.9    3.2

PROFIT AND LOSS ACCOUNT    Change      % 10-12/02      %
(EUR million)
Turnover                   -520.1   -7.9  1 474.2  100.0
  Interest in                 0.3            -4.1       
  associated companies
  Other operating             0.4            23.8       
  income
  Operating expenses       -292.8         1 410.5       
  Depreciation               23.3           120.7       
Operating profit           -250.5  -77.2    -37.3   -2.5
  Net exchange               51.2             9.7       
  gains/losses
  Other financial           -15.2           -77.6       
income
  and expenses
Profit before              -214.5 -159.7   -105.2   -7.1
extraordinary items
  Extraordinary items      -159.6           -15.1       
Profit before taxes and    -374.1 -134.2   -120.3   -8.2
minority interest
  Taxes                      59.1            22.3       
  Minority interest          11.1             2.0       
Profit for the period      -303.9 -145.5    -96.0   -6.5



BALANCE SHEET                  12/2003        %   12/2002      %
(EUR million)
Assets                                                          
 Fixed assets                  4 768.7     67.1   4 934.6   66.6
 Current assets                                                 
   Inventories                   802.0     11.3     814.9   11.0
   Other current assets        1 351.9     19.0   1 460.9   19.7
   Liquid funds                  183.6      2.6     199.8    2.7
Total                          7 106.2    100.0   7 410.2  100.0
                                                                
Liabilities                                                     
 Shareholders´ equity          2 245.3     31.6   2 461.0   33.2
 Minority interest                18.9      0.3      74.6    1.0
 Provisions for liabilities       77.4      1.1      66.3    0.9
 and charges
 Long-term liabilities         3 030.6     42.6   3 030.3   40.9
 Short-term liabilities        1 734.0     24.4   1 778.0   24.0
Total                          7 106.2    100.0   7 410.2  100.0




CASH FLOW STATEMENTS           1-12/03  1-12/02 10-12/03
(EUR million)
 Profit before extraordinary     -80.2    134.3   -105.2
 items
 Depreciation                    481.0    457.7    120.7
 Taxation                        -19.0    -56.7     19.7
 Other changes                    35.5    -14.3     27.3
Funds from operations            417,3    521.0     62.5
 Change in working capital         7.8    145.4     70.1
Cash flow from operations        425.1    666.4    132.6
 Gross capital                  -396.7   -310.0   -106.8
 expenditures 1)
 Disposal and other changes       -2.5    223.9     -2.5
 in fixed assets
Cash flow after capital           25.9    580.3     23.3
expenditure
 Interest-bearing net debt of     -8.5     -9.0      0.0
 companies acquired and
 divested
 Dividend                       -107.4   -108.4      0.0
Change in interest-bearing       -90.0    462.9     23.3
liabilities
(+ decrease / - increase)                               

1) Excl. interest-bearing net debt of acquired companies.



KEY FIGURES                    1-12/03  1-12/02 10-12/03
Earnings per share EUR           -0.51     0.36    -0.52
(diluted 1-12/03; -0,51 EUR)                     
Return on capital employed %       1.6      5.8     -2.4
Return on equity %                -3.8      3.0    -16.3
Gross capital expenditures         397      310      107
EUR million 1)
Personnel, averages             20 372   21 070   19 801
1) Excl. interest-bearing net                           
debt of acquired companies
                                 12/03    12/02
Shareholders´ equity per         12.54    13.75
share EUR
Equity ratio %                    31.9     34.2
Gearing ratio %                    137      119

Securities and guarantees EUR    12/03    12/02
million
For own loans                      287      487
For associated companies             1        0
For affiliated companies             5       26
For others                          15        5
Total                              308      518
                                               
Open derivative contracts        Gross    Gross
EUR million                     amount   amount
                                 12/03    12/02
Interest rate derivatives       13  017    9 998
Currency derivatives             4 601    4 832
Total                           17 618   14 830

The fair value of open derivative contracts calculated at market
value at the end of the review period was -1,6 EUR million (-15,2).

TURNOVER           Quarter I-IV                 Quarterly
EUR Million         2003    2002   IV 03 III 03   II 03    I 03  IV 02
 Consumer          867.9   921.1   211.6  214.8   211.6   229.9  227.0
 packaging
 Commercial      1 503.5 1 638.4   362.2  364.9   372.8   403.6  368.1
 printing
 Home & Office     682.9   782.7   169.5  151.3   170.5   191.6  200.8
 Publishing        785.6   790.1   195.0  199.3   187.1   204.2  204.0
 Map Merchant    1 392.6 1 542.8   347.6  332.5   345.0   367.5  375.0
 Group
 Tissue Group      669.2   647.8   170.6  164.9   169.0   164.7  170.7
 Internal sales    142.4   241.3    17.7   39.5    51.8    33.4   41.7
and other
 operations
GROUP TOTAL      6 044.1 6 564.2  1 474.2      1 1 507.8 1 594.9 1 587.3
                                          467.2
                                                                      
OPERATING PROFIT   Quarter I-IV                 Quarterly
AND RESULT
EUR Million         2003    2003   IV 03  III 03  II 03    I 03  IV 02
 Consumer           34.5    83.4    -1.3    15.2    2.0    18.6    7.0
packaging
 Commercial         10.6   106.7   -10.6    -2.2    5.1    18.3   16.6
printing
 Home & Office      48.2   102.8     8.6     3.9   13.9    21.8   19.6
 Publishing         12.5    43.1    -3.2    12.1   -6.7    10.3    8.8
 Map Merchant        6.5   -14.9     0.4    -2.7    3.4     5.4   -9.3
 Group
 Tissue Group       48.9    43.1    15.1    13.8    8.3    11.7    5.9
 Other             -87.4   -40.0   -46.3   -11.2  -11.2   -18.7    2.1
operations
 OPERATING          73.8   324.3   -37.3    28.9   14.8    67.4   50.7
PROFIT
 % of turnover       1.2     4.9    -2.5     2.0    1.0     4.2    3.2
 Net exchange       20.7   -30.5     9.7    -0.5    5.3     6.2    5.0
 gains/losses
 Other financial  -174.7  -159.5   -77.6   -32.3  -29.8   -35.0  -45.6
income and
expenses
PROFIT BEFORE      -80.2   134.3  -105.2    -3.9   -9.7    38.6   10.1
EXTRAORDINARY
ITEMS
 % of turnover      -1.3     2.1    -7.1    -0.3   -0.6     2.4    0.6
OPERATING          Quarter I-IV                 Quarterly
PROFIT %
                    2003    2002   IV 03  III 03  II 03    I 03  IV 02
 Consumer            4.0     9.1    -0.6     7.1    0.9     8.1    3.1
 packaging
 Commercial          0.7     6.5    -2.9    -0.6    1.4     4.5    4.5
 printing
 Home & Office       7.1    13.1     5.1     2.6    8.2    11.4    9.8
 Publishing          1.6     5.5    -1.6     6.1   -3.6     5.0    4.3
 Map Merchant        0.5    -1.0     0.1    -0.8    1.0     1.5   -2.5
 Group
 Metsä Tissue        7.3     6.7     8.9     8.4    4.9     7.1    3.5
GROUP TOTAL          1.2     4.9    -2.5     2.0    1.0     4.2    3.2


RETURN ON CAPITAL                    Year           Year
EMPLOYED %
                                     2003        2002       2001
 Consumer packaging                   3.7         9.1       14.9
 Commercial printing                  0.9         7.1        6.2
 Home & Office                        5.4        11.0        6.2
 Publishing                           1.1         3.6        5.7
 Map Merchant Group                   2.0        -3.0       -0.8
 Metsä Tissue                        14.8        13.2       10.3
 GROUP TOTAL                          1.6         5.8        6.9
                                                                
CAPITAL EMPLOYED.              31.12.2003   31.12.2002 31.12.2001
EUR Million
                                                           
 Consumer packaging                 944.9       991.0      934.0
 Commercial printing              1 557.1     1 567.5    1 621.1
 Home & Office                      839.0       973.7    1 018.4
 Publishing                       1 229.8     1 256.2    1 378.2
 Map Merchant Group                 383.2       410.4      484.8
 Tissue Group                       343.5       325.5      342.3
 Other assets                       390.9       372.8      515.1
 GROUP TOTAL                      5 688.4     5 897.1    6 293.8

PERSONNEL.                                                      
Average                              2003        2002       2001
                                                           
 Consumer packaging                 3 051       3 151     3  089
 Commercial printing                5 283       5 831      6 402
 Home & Office                      2 107       2 125      2 106
 Publishing                         1 593       1 769      2 261
 Map Merchant Group                 2 554       2 745      2 855
 Metsä Tissue                       3 308       3 067      3 000
 Other operations                   2 476       2 382      2 524
 GROUP TOTAL                       20 372      21 070     22 237


PRODUCTION                    Year             Quarterly
1000 tonnes                2003    2002   IV 03   III 03   II 03
 Commercial printing      1 772   1 757     434      431     446
 Home & Office              873     915     203      200     233
 Publishing 1)            1 062     990     255      270     254
 Paperboard                 659     679     150      172     154
 Fluting                    186     224      50       50      38
 Liner 2)                   144     151      34       36      33
 CTMP                       328     280      81       88      77
 Metsä-Botnia’s pulp 2)   1 124   1 057     270      305     269
 M-real’s pulp            1 216   1 191     312      290     303

PRODUCTION                              Quarterly
1000 tonnes                I 03   IV 02  III 02    II 02    I 02
 Commercial printing        461     436     406      448     467
 Home & Office              237     207     231      233     244
 Publishing 1)              283     256     244      235     255
 Paperboard                 183     173     167      169     170
 Fluting                     48      57      64       49      54
 Liner 2)                    41      37      40       39      35
 CTMP                        82      76      79       63      62
 Metsä-Botnia’s pulp 2)     280     249     294      250     264
 M-real’s pulp              311     308     290      304     289


1) Includes 50 % of the production of Albbruck (until 30.6.2002).
2) Equals to M-real´s ownership (47 %).

M-REAL CORPORATION

Jouko M. Jaakkola
President and CEO

About Us

Metsä Boardwww.metsaboard.com Metsä Board is a leading European producer of premium fresh fibre paperboards including folding boxboards, food service boards and white kraftliners. Our lightweight paperboards are developed to provide better, safer and more sustainable solutions for consumer goods as well as retail-ready and food service applications. We work together with our customers on a global scale to innovate solutions for better consumer experiences with less environmental impact. The pure fresh fibres Metsä Board uses are a renewable resource, traceable to origin in sustainably managed northern forests. The global sales network of Metsä Board supports customers worldwide, including brand owners, retailers, converters and merchants. In 2016, the company’s sales totalled EUR 1.7 billion, and it has approximately 2,500 employees. Metsä Board, part of Metsä Group, is listed on the Nasdaq Helsinki.

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