DROP IN PAPER PRICE AND RISING EURO WEAKENED M-REAL?S PROFITABILITY
M-real Corporation Stock Exchange Bulletin 4.2.2005 at 1.00 p.m.
1(24)
DROP IN PAPER PRICE AND RISING EURO WEAKENED M-REALS PROFITABILITY
IN 2004
The M-real Groups operating result, excluding non-recurring items,
declined in 2004 and was a loss of EUR 2.0 million, compared with an
operating profit of EUR 88.5 million in the previous year. The main
factors behind the drop in the operating result were the fall in the
price of paper and the appreciation of the euro. The operating result
was also reduced by the divestment of Metsä Tissue in January 2004.
Net non-recurring expenses of EUR 72.7 million were booked as a
charge to the operating result (14.7 million in 2003), the biggest
items of which were the recognition of negative goodwill of EUR 14.3
million connected with the purchase of shares in Kemiart Liners Oy,
the write-down of fixed assets of the Savon Sellu fluting mill in
Finland and the Zanders Reflex paper mill in Germany, to a total
value of EUR 53.5 million, an EUR 8.4 million reversal of the write-
down of Savon Sellus fixed assets, the EUR 24 million expense
provision connected with the profitability improvement programme
launched at Zanders Gohrsmühle and Reflex mills and a EUR 5.3
million provision for the restructuring of the operations of Modo
Merchants Ltd and James McNaughton Paper Group Ltd. The operating
result was a loss of EUR 74.7 million (a profit of 73.8).
Key figures in 2004:
- Turnover: EUR 5,460.3 million (6,044.1 in 2003)
- Operating result, excluding non-recurring items: a loss of EUR 2.0
million (a profit of EUR 88.5 million)
- Operating result: a loss of EUR 74.7 million (a profit of 73.8)
- The result before extraordinary items net of non-recurring items
was a loss of EUR 119.1 million (a loss of 37.5)
- The result before extraordinary items was a loss of EUR 209.0
million (a loss of 80.2)
- Result for the financial year: a net loss of EUR 15.3 million (a
loss of 95.0 million)
- Earnings per share: EUR 0.79 negative (0.43 negative)
- Board of Directors dividend proposal: EUR 0.12 per share (0.25)
- Cash flow from operations: EUR 251.6 million (425.1)
- Return on capital employed: 1.0 per cent negative (1.6 positive)
- Equity ratio: 41.5 per cent (31.9)
- Gearing: 82 per cent (137)
- Operating rate at the paperboard mills: 89 per cent (84); operating
rate at the paper mills: 88 per cent (83)
Of the businesses, Cartons and Map Merchants improved their
profitability.
Demand for paper and paperboard grew substantially compared with the
previous year. M-reals deliveries of paper increased by 7 per cent
and deliveries of paperboard were similarly up 7 per cent on a
comparable basis.
A drop occurred in the selling prices of all papers, especially in
uncoated fine paper. No major change took place in the selling price
of paperboard. The appreciation of the euro nevertheless lowered the
selling price in euros obtained from deliveries of paper and
paperboard outside Europe.
President & CEO Hannu Anttila comments on the outlook for the current
year: Measures to raise the prices of coated paper grades and
folding boxboard are continuing. There is also a considerable need
for price increases in uncoated fine papers.
The EUR 30 million cost savings target which was set for 2004 was
exceeded, and we have increased our estimate on the impact of cost-
savings and efficiency improvement measures during 2005 and 2006 to
EUR 200 million. The objective is to lift the level of earnings into
the black during the second half of the current year. To achieve the
objective the planned cost-savings are to be realized, the sought-
after price increases are to go through during the first part of the
year and the United States dollar is not to weaken significantly from
its current level.
M-reals first-quarter result before taxes and excluding non-
recurring items is nevertheless forecast to be slightly in the red.
M-REAL CORPORATION
Corporate Communications
For further information, contact Hannu Anttila, President and CEO,
tel. +358 10 469 4343 or Juhani Pöhö, Senior Vice President and CFO,
tel. +358 10 469 5283
M-REAL CORPORATION
FINANCIAL STATEMENT BULLETIN 2004
REPORT OF THE BOARD OF DIRECTORS, 2004
MARKET SITUATION IN 2004
Economic growth in Europe picked up in 2004 compared with 2003 for
the first time since 2000. Growth is nevertheless expected to have
been fairly moderate, at a level of about 2 per cent. Economic growth
in North America improved further in 2004 compared with the growth
rate of about three per cent in 2003. Asias economic growth also
improved from the 3 per cent growth registered a year ago. The amount
of money spent on printed advertising, which moves fairly much in
tandem with economic growth, headed upward in Western Europe. On the
foreign exchange market, the United States dollar continued to slide
and was on average at its weakest level since the introduction of the
euro. The British pound was at the previous years level.
Demand for folding boxboard in Western Europe was at the previous
years level. West European producers deliveries to Eastern Europe
and markets outside Europe increased substantially. There was no
significant change in selling prices. The appreciation of the euro
nevertheless lowered the selling prices in euro obtained for
deliveries outside Europe and the price competitiveness of West
European producers. Deliveries by producers of linerboard and fluting
increased.
Despite the pick-up in demand, it was a difficult and dual-trend year
in the paper markets. The favourable trend in the economy and in
printed advertising lifted demand in the main market areas Western
and Eastern Europe, North America and Asia. On the other hand, the
market situation was still characterized by overcapacity and falling
prices in the west European markets, along with increased deliveries
to markets outside Europe as the euro edged higher, and by a rise in
imports of uncoated fine paper to the west European market.
Deliveries by west European producers of coated fine paper increased
by 11 per cent and deliveries by producers of uncoated fine paper by
5 per cent, with producers of coated magazine paper reporting an
increase of 8 per cent. Selling prices of all papers, especially of
uncoated fine paper, decreased.
RESULT FOR THE FINANCIAL YEAR
M-reals consolidated operating result in 2004 was a loss of EUR 74.7
million (profit of 73.8 million in 2003). The operating result
includes EUR 72.7 million of non-recurring net expenses (14.7). Non-
recurring income amounted to EUR 26.9 million (15.8) and non-
recurring expenses were EUR 99.6 million (30.5).
The biggest of the non-recurring income items were the recognition of
negative goodwill of EUR 14.3 million connected with the purchase of
shares in Kemiart Liners Oy, which was booked in the third quarter,
as well as the EUR 8.4 million reversal of the write-down of Savon
Sellu fluting mills fixed assets in the fourth quarter owing to the
divestment of the Savon Sellu business and the proceeds from the
sale. The other non-recurring income amounting to a total of EUR 4.2
million was booked to the last quarter.
The most important of the non-recurring expenses were the write-
downs, booked in the third quarter, of fixed assets of the Savon
Sellu fluting mill in Finland and the Zanders Reflex paper mill in
Germany, to a total value of EUR 53.5 million, the EUR 24 million
expense provision connected with the profitability improvement
programme launched at Zanders Gohrsmühle and Reflex mills and booked
to the last quarter as well as the EUR 5.3 million of expense
provision for the restructuring of the operations of Modo Merchants
Ltd and James McNaughton Paper Group Ltd, which was likewise booked
to the last quarter. The other non-recurring expenses amounting to a
total of EUR 16.8 million were booked to the last quarter.
The operating result, excluding non-recurring items, was a loss of
EUR 2.0 million (a profit of 88.5 million), or 0.0 per cent of
turnover. The main reasons for the drop in the operating result were
the fall in the selling price of paper and the appreciation of the
euro. The operating result was also reduced by the divestment of
Metsä Tissue in January 2004.
Apart from Cartons and Map Merchants, all the businesses reported a
weaker operating result, excluding non-recurring items.
Deliveries of paperboard to customers totalled 1,155,000 tonnes
(1,007,000 tonnes). Production was curtailed by 82,000 tonnes in line
with demand (163,000). The operating rate was 89 per cent (84).
Kemiart Liners is included in its entirety in the second-half figures
for 2004.
The total volume of paper deliveries was 4,129,000 tonnes
(3,857,000). Production curtailments amounted to 351,000 tonnes
(597,000). The operating rate of the paper mills was 88 per cent
(83).
The effect of currency hedging on the operating result was EUR 9.5
million positive (24.2). At the end of 2004 the exchange rate of the
euro against the United States dollar was 7.8 per cent lower than at
the end of 2003, and the exchange rate of the British pound was at
the same level as at the end of 2003. On average, the dollar was down
9.9 per cent and the pound strengthened by 2.0 per cent.
Turnover was EUR 5,460.3 million (6,044.1). Turnover was lowered by
the same factors which impacted the operating result. Comparable
turnover was up 1.2 per cent. Sales to Finland accounted for 6 per
cent of turnover.
Net financial expenses were EUR 134.3 million (154.0 million). These
items included net interest and other financial expenses of EUR 146.8
million (174.7) as well as foreign exchange gains on financial items
of EUR 12.5 million (20.7). Other financial expenses include a non-
recurring entry in the last quarter of EUR 17.2 million of expenses
for the share offering carried out in September and October as well
as an entry of EUR 2.9 million of expenses connected with the new EUR
500 million revolving credit facility.
Other operating income amounted to EUR 86.3 million (73.8). The sum
does not include non-recurring items.
The consolidated result before extraordinary items was a loss of EUR
209.0 million (a loss of 80.2 million). The result includes non-
recurring net expenses of EUR 89.9 million (42.7). The result before
extraordinary items net of non-recurring items was a loss of EUR
119.1 million (a loss of 37.5).
A capital gain of EUR 194.0 million on the sale of Metsä Tissue was
booked to extraordinary income as well as EUR 4.2 million from
discharging the unused portion of the expense provision for
terminating the Price&Pierce trading business, which was entered in
2003.
The result for the financial year was a net loss of EUR 15.3 million
(a net loss of 95.0 million). Taxes, including the change in deferred
tax liability, were EUR 3.1 million (0.7). The deferred tax liability
decreased by a total of EUR 22.6 million owing to the lowering of
Finlands corporate tax rate from 29 per cent to 26 per cent.
Earnings per share were EUR 0.79 negative (0.43 negative).
The return on capital employed was 1.0 per cent negative (1.6
positive). The return on equity was 7.7 per cent negative (3.8
negative).
OCTOBER-DECEMBER EARNINGS COMPARED WITH THE PREVIOUS QUARTER
M-reals operating result was loss of EUR 27.5 million (July-
Sept./2004: a loss of EUR 28.1 million). The operating result
includes EUR 33.5 million of non-recurring net expenses (39.2). The
operating result excluding non-recurring items was a profit of EUR
6.0 million (11.1 million), which is 0.4 per cent (0.8) of turnover.
The operating result was weakened mainly by the costs of annual
maintenance shutdowns, the appreciation of the euro as well as the
rise in the costs of oil-based raw materials. The result was improved
by the reversals of periodizations of expenses, made in
JanuarySeptember, to a total amount of EUR 10 million.
The operating result of Map Merchants improved and the operating
result of the other businesses areas, excluding non-recurring items,
weakened.
Deliveries of paperboard to customers totalled 305,000 tonnes
(310,000 tonnes). Because of the imbalance between supply and demand,
production was curtailed by 17,000 tonnes (7,000) in line with
demand. The operating rate at the mills was 85 per cent (96).
Paper deliveries from the mills totalled 1,070,000 tonnes
(1,043,000). Production curtailments amounted to 52,000 tonnes
(85,000). The operating rate at the mills was 90 per cent (89).
The effect of currency hedging on the operating result was a gain of
EUR 21.0 million (4.1). At the end of December, the exchange rate of
the United States dollar against the euro was 9.8 per cent and the
rate of the British pound against the euro 2.7 per cent lower than at
the end of September. On average, the dollar was down 6.1 per cent
and the pound fell by 3.4 per cent.
Turnover was EUR 1,382.8 million (1,362.7). Comparable turnover was
up 3.3 per cent.
Net financial expenses were EUR 44.1 million (31.4 million). These
items included net interest and other financial expenses of EUR 52.2
million (31.4) as well as foreign exchange gains on financial items
of EUR 8.1 million (0.0). Other financial expenses include a non-
recurring entry of EUR 17.2 million of expenses for the rights issue
as well as an entry of EUR 2.9 million of expenses connected with the
new EUR 500 million revolving credit facility.
The result before extraordinary items was a loss of EUR 71.6 million
(loss of 59.5 million). The operating result includes EUR 50.7
million of net non-recurring charges (39.2). The result, excluding
non-recurring items, was a loss of EUR 20.9 million (a loss of 20.3).
The result for the last quarter of the year was a loss of EUR 64.1
million (a loss of 62.1 million).
PERSONNEL
The number of personnel at the end of December was 15,960 employees
(19,636 employees at 31 December 2003), of whom 4,912 employees
worked in Finland (5,835). The net reduction in personnel was 3,676
employees. Acquisitions and divestments resulted in a net decrease of
3,260 employees in the reduced headcount.
The Groups personnel includes 47 per cent of Metsä-Botnias
employees.
CAPITAL EXPENDITURES
Capital expenditures for fixed assets in 2004 totalled EUR 239
million (2003: 232). In addition, EUR 20 million was paid for the
shares of companies that were acquired. In 2003, EUR 165 million was
paid for the shares of companies that were acquired.
The investment project in the new BCTMP mill in Kaskinen, which will
have a total price tag of EUR 180 million, is progressing according
to plans. Installations of the main equipment are under way and
training of the personnel has been started. The mill will have an
annual capacity of 300,000 tonnes of bleached chemithermal mechanical
pulp (BCTMP) and is set to come on stream in August 2005.
ACQUISITIONS, DIVESTMENTS AND RESTRUCTURING
At the beginning of January, a 66 per cent stake in Metsä Tissue was
sold to Metsäliitto Cooperative. 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). Each
transaction was 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 173 million.
At the beginning of August, the company bought the holdings of
Metsäliitto Cooperative and UPM-Kymmene in Kemiart Liners Oy, a total
stake of 53 per cent. The purchase price of the shares was about 13
million euros, in addition to which the M-real Groups interest-
bearing net liabilities increased by about 23 million euros. The
negative goodwill of EUR 14.3 million that arose as a consequence of
the transaction was recognized as income in the third quarter.
In a deal that entered into effect at the end of September, the Price
& Pierce trading business was sold to Gould Paper Corporation. The
transaction did not have a major economic impact on M-real.
At the end of December, an agreement was signed on sale of the Savon
Sellu business to a company owned by Dr Dermot F. Smurfit as a
private individual, and a group of other international investors. The
purchase price was about EUR 20 million, of which some EUR 12 million
was allocated to fixed assets. Savon Sellu has a production capacity
of 245,000 tonnes a year and about 250 people are employed at the
mill. The transaction entered into force on 1 January 2005. A write-
down of EUR 22.4 million was made on the fixed assets of Savon Sellu
in the third quarter. On the basis of the disposal of the business
and the proceeds from it, a EUR 8.4 million reversal of the write
down was made in the fourth quarter.
At the end of December, a Letter of Intent was signed on sale of
forestland to a company to be founded, called Forestia Holding Oy,
which is to be owned by Metsäliitto Cooperative, with a share of
49.9%, Suomi Mutual Life Assurance Company, with a share of 39.7% and
the Central Union of Agricultural producers and Forest owners, with a
share of 10.4%. The total purchase price according to the Letter of
Intent was EUR 172 million, of which M-real's share was 95 per cent.
The transaction does not have a material impact on M-reals financial
result.
RESEARCH AND DEVELOPMENT
Research and development costs in 2004 were EUR 28 million, or 0.7
per cent of turnover, excluding the Map Merchants paper merchanting
business. The number of patents applied for grew by 50 per cent.
The research and development focus areas were the characteristics and
behaviour of fibre in various production processes, process know-how
as well as the development of the optical characteristics of paper
and paperboard. In recent years M-real has strengthened its expertise
in the area of chemithermal mechanical pulp (CTMP), thereby making
possible the development of new and competitive grades of paper and
paperboard.
At M-reals mills, efforts were made to improve production
efficiency. Productivity improvements were achieved at nearly every
production unit.
ENVIRONMENT
During 2004, preparations were made for the start of EU emissions
trading in 2005. Furthermore, product-specific reporting of chain of
origin information was started, old environmental liabilities were
ascertained and soil investigations were launched at the mills in
operation.
The guidelines for M-reals climate strategy were finalized in the
spring 2004. An investment project aiming at increasing the use of
biofuels was started at the Hallein mill and a similar project moved
ahead at Biberist as well. The production units have obtained the
emissions permits and allowances for start-up of EU emissions trading
in accordance with the national legislation and regulations.
Assessments of energy efficiency were continued with the aim of
mapping out areas were energy can be saved. M-reals carbon dioxide
emissions increased by approximately 1 per cent (the emissions of
Metsä Tissue excluded) on the previous year.
All M-reals production plants have an environmental system that is
certified under the ISO 14001 standard as well as objectives and
programmes for improving operations. Total emissions increased by
approximately1 per cent (the emissions of Metsä Tissue excluded)
compared with the previous year. The most important capital
expenditure was the Husum waste water treatment plant, which went
into operation in autumn 2004. The total capital expenditure was
approximately EUR 40 million. The extension to the waste water
treatment plant at the Kyro paperboard mill reduced waste water
effluents markedly below the terms and conditions set out in the
mills permit.
The provisions made for attending to M-reals environmental
liabilities amounted to EUR 7 million at the end of 2004. Clean-up of
the soil at the Kolho impregnation plant located in Vilppula will be
carried out in 2005. M-reals share of the costs is about EUR 2
million. The production units in operation started soil
investigations in their plant areas in order to map any polluted
areas. The results will be ready in spring 2005.
M-real has committed to using wood raw material that comes from
sustainably managed silvicultural forests and to promoting the
certification of forests and the use of certified wood and fibre in
its products. In 2004 reporting of the origin of wood used in the
manufacture of M-real's products was started on the Annex pages to
the Paper Profile environmental product declaration sheets. Thomesto
Oy, which is responsible for M-reals wood procurement outside
Finland, has increased inspections of logging areas in Russia and
last year 62 per cent of the wood volume came from inspected sites.
M-real will publish a separate Social Responsibility Report for 2004,
which will include sections dealing with environmental responsibility
issues.
FINANCING
Interest-bearing net liabilities amounted to EUR 2,161 million at the
end of December (Dec. 2003: 3,109 million).
The equity ratio at the end of the period was 41.5 per cent (Dec.
2003: 31.9) and the gearing was 82 per cent (Dec. 2003: 137).
Liquidity is good. Liquidity at the end of December was EUR 1,798
million, of which 1,556 million consisted of binding long-term credit
commitments and 242 million was liquid funds and investments. In
addition, to meet its short-term financing needs, the Group had at
its disposal non-binding domestic and foreign commercial paper
programmes and credit facilities amounting to about EUR 600 million.
At the end the report period an average of 4 months of the net
foreign currency exposure was hedged. The degree of hedging during
the report period has varied between 4 and 5 months. At the end of
the report period, about 98 per cent of the shareholders equity not
in euros was hedged. At the end of the period the Groups liabilities
were tied to fixed interest rates for a period of 23 months. During
the report period the interest rate maturity has varied from 18 to 25
months.
At the close of the year, 7 per cent of the Groups long-term loans
were not denominated in euros. Of these loans, 32 per cent was
subject to variable interest rates and the rest to fixed interest
rates. The average interest rate on the loans was 4.2 per cent at the
end of 2004 and the average maturity of long-term loans was 4.0
years.
In April, Standard&Poor´s changed the outlook for M-real's long-term
loans rating, BB+, from stable to negative.
In July Moodys Investors Services placed M-real on Credit Watch
Negative for a possible lowering of the credit rating.
In November, Moodys Investors Services lowered M-reals credit
rating from Ba1 to Ba2, with a stable outlook.
In December, M-real signed a EUR 500 million syndicated revolving
credit facility agreement. The facility will be used to refinance the
EUR 700 million credit agreement signed in 2000. The term of the
facility is five years. A total of 21 banks participated in the
arrangement.
During the year, seven bond issues to a total amount of about EUR 172
million were implemented within the framework of an international
bond programme.
SHARES
The highest share issue-adjusted price of the M-real Series B share
on the Helsinki Stock Exchange last year was EUR 6.43, and the low
was EUR 4.18, with an average share price of EUR 5.59. In 2003 the
average price was EUR 6.11. The price of the Series B share was EUR
4.70 at the end of the report period on 31 December 2004.
Turnover of the Series B share was EUR 1,013 million, or 62 per cent
of the total shares outstanding after the rights offering. The market
value of the Series A and B shares at 31 December 2004 totalled EUR
1,542 million.
At 31 December 2004 Metsäliitto Osuuskunta owned 38.6 per cent of M-
real Corporations shares and the voting rights conferred by these
shares was 60.5 per cent. International investors owned 38.3 per cent
of the shares.
On 7 September 2004, the Board of Directors decided, on the basis of
an authorization granted by the extraordinary meeting of shareholders
on 6 September 2004, to arrange a rights offering to an amount of EUR
447,498,561. The subscription period for the shares commenced on 15
September 2004 and ended on 1 October 2004. The subscription price
was EUR 3.00 per share. Each M-real shareholder was entitled to
subscribe for five (5) new Series B shares for each six (6) Series A
or B shares which the shareholder owned on the record date, 10
September 2004. The subscription warrants were traded publicly on the
Helsinki Stock Exchange from 15 to 24 September 2004 and turnover in
them amounted to EUR 63 million, or 49 million warrants. The high for
the subscription warrant was EUR 1.60 and the low EUR 1.11. According
to the final outcome of the rights offering, 148,633,415 Series B
shares were subscribed for on the basis of the subscription warrants
in the primary offering, corresponding to 99.64 per cent of the total
amount of offered shares. In addition, subscription commitments for
31,098,942 Series B shares were submitted in the secondary offering,
exceeding the number of shares being offered (532,772 shares) nearly
60-fold.
The shares subscribed for in the primary offering were accepted for
public trading on the Helsinki Stock Exchange as interim shares on 4
October 2004 (M-real B new shares). The corresponding increase in
the share capital was entered in the Trade Register and the interim M-
real B New Shares were combined with M-reals present Series B share
class on 7 October 2004. The increase in share capital corresponding
to the subscriptions accepted in the secondary offering was entered
in the Trade Register on 13 October 2004.
Following the registration of the shares subscribed for in the
secondary offering, M-reals share capital is EUR 557,881,540.40 and
consists of 328,165,612 shares, of which 36,340,550 are Series A
shares and 291,825,062 are Series B shares.
The net increase in shareholders equity after expenses resulting
from the rights offering was EUR 430 million. The share capital rose
by EUR 253.6 million to EUR 557.9 million.
The proceeds of the rights offering have been used to pay down the
companys debt.
The Board of Directors does not have current authorizations to carry
out share issues or issues of convertible bonds or bonds with
warrants.
BOARD OF DIRECTORS AND AUDITORS
The Annual General Meeting held on 15 March 2004 elected the
following persons to seats on M-reals Board of Directors for a term
extending up to the next Annual General Meeting: Antti Oksanen,
President of Metsäliitto Group, Arimo Uusitalo, Titular Farming
Counsellor, Kim Gran, President of Nokian Tyres plc, Timo Haapanen,
Titular Farming Counsellor, Asmo Kalpala, CEO of Tapiola Group, Erkki
Karmila, Executive Vice President of Nordic Investment Bank, Runar
Lillandt, Titular Farming Counsellor, and Antti Tanskanen, CEO of the
OP Bank Group.
At its organization meeting, the Board of Directors elected Antti
Oksanen as its Chairman and Arimo Uusitalo as its Vice Chairman.
Elected as auditors were Göran Lindell, Authorized Public Accountant,
and PriceWaterhouseCoopers Oy, Authorized Public Accountants firm,
with Ilkka Haarlaa, M.Sc. (Econ.), Authorized Public Accountant, as
responsible auditor and Björn Renlund, Authorized Public Accountant,
and Jouko Malinen, Authorized Public Accountant, as the deputy
auditors.
The term of office of the auditors and deputy auditors lasts until
the end of the next Annual General Meeting.
CORPORATE GOVERNANCE
In accordance with the new Helsinki Stock Exchange recommendation on
the corporate governance of listed companies, M-real Corporations
Board of Directors decided at the beginning of April to set up an
Audit Committee, a Compensation Committee and a Nomination Committee.
Each committee assists the Board of Directors in preparing matters
within its own area of responsibility. The Board has confirmed
written rules of procedure for the committees.
The members of the Audit Committee are Asmo Kalpala (chairman), CEO
of Tapiola Group, Kim Gran, President of Nokian Tyres plc and Erkki
Karmila, Executive Vice President of Nordic Investment Bank.
The members of the Compensation Committee are Antti Oksanen
(chairman), President of Metsäliitto Group, Erkki Karmila, Executive
Vice President of Nordic Investment Bank, and Arimo Uusitalo, Titular
Farming Counsellor.
The members of the Nomination Committee are Arimo Uusitalo
(chairman), Titular Farming Counsellor, Runar Lillandt, Titular
Farming Counsellor, and Antti Tanskanen, CEO of the OP Bank Group.
NEW PRESIDENT AND CEO
In June M-reals Board of Directors appointed Hannu Anttila, 49,
M.Sc. (Econ.), as the companys new President and CEO. Mr Anttila
took over as M-real's Senior Executive Vice President on 1 July 2004.
He became Chief Operating Officer on 1 September 2004 and President
and CEO on 1 January 2005, following the retirement of the former
CEO, Jouko M. Jaakkola.
REVISED STRATEGY, NEW ORGANIZATION AND CORPORATE EXECUTIVE BOARD
The revised business strategy and renewed business area and
organizational structure were announced in August.
The core business areas are Consumer Packaging, Publishing,
Commercial Printing and Office Papers. The development possibilities
of the Map Merchant paper merchanting business and the related
potential for carrying out ownership arrangements are being assessed.
The companys main objective over the next few years is to achieve a
clear improvement in profitability and internal efficiency.
The financial targets set were an average return on capital employed
of at least 10 per cent over the business cycle and a gearing ratio
not to exceed 100 per cent. Total capital expenditures, including any
acquisitions, will come to a maximum of about the amount of
depreciation in 2005 and 2006.
According to the revised business area and organizational structure,
the management of each business area has total responsibility for the
operations of its own business area, including sales, marketing and
production. In addition, the heads of the business areas are
responsible for implementing each business areas strategy as well as
for profitability and the return on capital employed.
Within the new organization, the heads of the business areas are
members of the Corporate Executive Board. The tasks of the Corporate
Executive Board are, among other things, to assess the strategy of
each business area and strategic investments, taking into account the
companys financial targets.
The new organization came into force on 1 September 2004.
FINANCIAL REPORTING IN 2005
M-reals financial reporting will change in line with the business
area structure as from the beginning of 2005. The comparative figures
according to the new business area structure will be published in the
first half of April 2005.
ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
M-real adopted International Financial Reporting Standards (IFRS) as
from 1 January 2005. In August the company published a preliminary
estimate of the effects of the transition on the opening balance
sheet prepared according to IFRS as of 1 January 2004. According to
the estimate, the transition to IFRS will reduce the Groups
shareholders equity by EUR 320 million. Of this amount, the effect
of impairment charges for property, plant and equipment as well as
goodwill is EUR 110 million, the effect of defined benefit pension
arrangements EUR 141 million and the effects of other changes in
accounting principles total EUR 69 million. Total assets are
estimated to increase by about EUR 70 million and interest-bearing
liabilities will grow by about EUR 60 million.
The estimate of the decrease in shareholders equity (EUR 320
million) includes EUR 40 million of the disability pension liability
under the Finnish pension plan (TEL). After the preliminary estimate
was made public, the Finnish authorities have approved changes in the
principles applied in calculating disability pension contributions,
which will come into force on 1 January 2006. As a consequence of the
changes, and as a departure from the previous interpretation, the
disability pension arrangement will be considered as a defined
contribution plan. Accordingly, provisions will be entered in the
opening IFRS balance sheet only up to an amount that is sufficient to
cover disability pension contributions that are estimated to be paid
during 2004 and 2005. This is estimated to be around 20 per cent of
the original sum of EUR 40 million.
In the first half of April 2005, M-real will publish a separate
announcement setting out its accounting policies in accordance with
IFRS, their principal effects as well as reconciliations between
the IFRS figures and the financial statements prepared according to
Finnish accounting practices for 2004.
INVESTIGATIONS BY THE EU COMMISSIONS COMPETITION AUTHORITIES
On 25 May 2004 the EU Commissions competition authorities made a
visit of inspection at M-reals offices. The visit was connected with
the competition authorities investigations into alleged cooperation
with producers of fine paper in the fine paper segment.
M-real has commissioned Herbert Smith, an international law firm, to
examine the documents that were handed over to the competition
authorities during the visit of inspection and to carry out the
internal investigations, which are continuing.
Class actions related to the matter have been brought against M-real
in the United States.
EVENTS AFTER THE CLOSE OF THE FINANCIAL PERIOD
At the end of January the sale of forest assets to Forestia Holding
Oy was completed in accordance with the Letter of Intent signed at
the end of December. The total purchase price was EUR 172 million, of
which M-real's share was EUR 163 million. The transaction does not
have a material impact on M-reals result.
OUTLOOK FOR THE CURRENT YEAR
European economic growth picked up in 2004 compared with 2003. The
growth is estimated to have remained at a moderate level of about 2
per cent. Economic growth in North America and Asia also improved
compared with the previous year. In 2005 economic growth is generally
forecast to slow down in Europe and North America as well as in Asia.
The amount of money spent on printed advertising, which moves fairly
much in tandem with economic growth, is estimated to increase in
Western Europe at last years rate. A continued weakening of the
United States dollar would have a negative impact on the price
competitiveness of dollar-based exports by the west European forest
industry.
Paper demand held up well in the last quarter of 2004. Apart from
uncoated fine paper, M-reals paper deliveries to all the main
markets grew. Production capacity was nevertheless still
underutilized. M-reals deliveries of paperboard were at the previous
quarters good level. Demand for paper and paperboard is expected to
remain good providing that the general economic trend and the growth
in printed advertising remain favourable.
Average prices of coated fine paper, coated magazine paper and
folding boxboard are forecast to be at a somewhat higher level at the
close of the first quarter than they were in the last quarter of
2004.
M-reals first-quarter result before taxes and excluding non-
recurring items is forecast to be slightly in the red.
Espoo, 4 February 2005
BOARD OF DIRECTORS
BUSINESSES AND MARKET TRENDS
Cartons
2004 2003 IV III II I 04 IV 2003-
04 04 04 03 2004
change
Turnover 879. 809. 227. 237. 210. 204. 196. +8.7%
7 0 9 6 1 1 2
Operating result 60.3 33.3 25.8 10.7 9.8 14.0 -2.3 +81.1%
Operating result, % 6.9 4.1 11.3 4.5 4.7 6.9 -1.2
Return on capital 7.6 3.9 13.2 5.6 4.9 6.7 -1.1
employed, %
Deliveries, 1,000 t 1 1 305 310 275 265 250 +14.7%
155 007
Paperboard 1 913 294 322 242 253 217 +21.7%
production, 1,000 t 111
Operating rate, % 89 84 85 96 86 89 79
The operating environment of the Cartons business in 2004 was
characterised by moderate growth in the European economy and a
strengthening euro. All the main product groups enjoyed increasing
demand. Demand grew in Eastern Europe, North America and Asia.
The business posted an operating profit in 2004 of EUR 60.3 million
(2003: 33.3). The operating profit includes non-recurring net
expenses of EUR 5.4 million (4.0), the largest of which were the EUR
22.4 million write-down of Savon Sellus fixed assets as well as the
recognition of negative goodwill of EUR 14.3 million connected with
the purchase of shares in Kemiart Liners Oy. In the fourth quarter a
EUR 8.4 million reversal was made on the write-down of Savon Sellus
fixed assets owing to the disposal of the Savon Sellu business and
the proceeds from the sale. The operating result, excluding non-
recurring items, was EUR 65.7 million (37.3). Profitability was
improved mainly by the growth in delivery volumes in all product
groups as well as by the cost savings that were realized. The
strengthening of the euro depressed the selling price in euros within
all product groups. The average operating rate of the paperboard
machines was 89 per cent (84). The average order book at the end of
December was about three weeks. Kemiart Liners is included in its
entirety in the second-half figures.
Deliveries by west European folding boxboard producers were up 6 per
cent compared with 2003. Deliveries by the producers to Western
Europe were unchanged. M-reals deliveries of folding boxboard grew
by 13 per cent. The biggest growth was seen in deliveries to Western
and Eastern Europe as well as North America. The average selling
price of folding boxboard fell, largely in the wake of a
strengthening euro.
Delivery volumes of linerboard were up slightly, stripping out the
growth in delivery volumes due to the acquisition of Kemiart Liners.
The appreciation of the euro depressed selling prices.
The volume of fluting deliveries increased. The company succeeded in
raising the delivery volume and selling price, especially in the
lower profitability markets outside Europe. The average selling price
nevertheless fell in step with the strengthening euro.
The operating result in October-December was EUR 25.8 million (July-
Sept: 10.7) The operating result, excluding the above-mentioned non-
recurring items that were booked to the October-December period, was
EUR 23.1 million (33.1). The operating result was weakened by the
fall in the average selling price as the euro continued to edge
higher, the costs of maintenance shutdowns in December, the drop in
the volume of deliveries of both linerboard and fluting as well as by
the increase in costs of oil-based raw materials. Additionally the
result was improved by reversals of cost periodisations booked during
January-September, at a value of approximately EUR 7 million.
Deliveries by west European folding boxboard producers declined by 2
per cent compared with the previous quarter. M-reals deliveries of
folding boxboard increased slightly. No major change took place in
the selling price of folding boxboard.
Graphics Products and Speciality Papers
2004 2003 IV III II I 04 IV 2003-
04 04 04 03 2004
change
Turnover 2 377 2 348 616. 589. 581. 591. 572. +1.3%
.9 .0 2 5 1 1 6
Operating result -90.0 24.3 - - - 2.5 -
47.4 33.2 11.9 12.8
Operating result, -3.8 1.0 -7.7 -5.6 -2.1 0.4 -2.2
%
Return on capital 3.4 1.0 -7.7 -5.1 -1.6 0.5 -1.7
employed, %
Deliveries, 1,000 3 168 2 965 837 797 767 767 745 +6.8%
t
Production, 1,000 3 169 2 912 817 814 763 775 708 +8.8%
t
Operating rate, % 88 84 90 90 85 87 80
There was a dual trend market situation for the main product groups
of the Graphics Products and Speciality Papers business in 2004. The
positive trend in printed advertising lifted demand in the main
market areas in Western and Eastern Europe, North America and Asia.
By contrast, selling prices in Europe fell, and the appreciation of
the euro lowered the selling price in euros received bywest European
producers for dollar-based exports.
The business operating loss was EUR 90.0 million (a profit of 24.3
million). The operating result includes EUR 56.2 million of non-
recurring net expenses (6.4), the biggest of which were the EUR 31.0
million write-down of the fixed assets of the Zanders Reflex mill in
Germany booked in the third quarter, as well as the EUR 24 million
expense provision connected with the profitability improvement
programme launched at Zanders Gohrsmühle and Reflex mills and booked
in the fourth quarter. The operating result, excluding non-recurring
net expenses, was a loss of EUR 33.8 million (a loss of 30.7).
Profitability was weakened mainly by the fall in the average selling
price.
Deliveries by west European producers of coated fine paper rose by 11
per cent and deliveries by producers of coated magazine paper by 8
per cent. M-reals volume of coated fine paper delivered rose by 10
per cent and the volume of coated magazine paper fell by 5 per cent.
M-reals delivery volume for speciality paper increased.
The operating rate of the paper machines was 88 per cent (84). The
order book at the end of December was just over two weeks.
The average price of coated fine paper fell by 5 per cent and coated
magazine paper was down 3 per cent. Prices of speciality paper
declined slightly on average. The strengthening in the euro depressed
the average selling price within all product groups.
The operating result in October-December was a loss of EUR 47.4
million (a loss of 33.2 million). The operating result includes non-
recurring net expenses of EUR 25.2 million (31.0), the biggest of
which was the above-mentioned EUR 24 million expense provision
connected with the profitability improvement programme at Zanders.
The operating result, excluding non-recurring net expenses, was a
loss of EUR 22.2 million (a loss of 2.2). Profitability was hit by
the drop in the selling price in euros as the currency continued to
ascend, by the costs of annual maintenance shutdowns as well as by
the increase in costs of oil-based raw materials.
Deliveries by west European producers of coated fine paper rose by 5
per cent in October-December and deliveries by producers of coated
magazine paper were up 11 per cent on the previous quarter. M-reals
delivery volume for coated fine paper rose by 5 per cent, and coated
magazine paper increased by 18 per cent in volume. M-reals delivery
volume for speciality paper decreased.
The average prices of coated fine paper and coated magazine paper
were at the level of the previous quarter. Prices of speciality paper
declined slightly. The strengthening in the euro depressed the
average selling price within all product groups.
Offices
2004 2003 IV III II I 04 IV 2003-
04 04 04 03 2004
change
Turnover 670. 682. 164. 167. 158. 180. 169. -1.9%
0 9 1 1 5 3 5
Operating result -3.9 48.2 -1.2 0.0 -6.2 3.5 8.6
Operating result, % -0.6 7.1 -0.7 0.0 -3.9 2.0 5.1
Return on capital -0.6 5.4 -1.2 0.0 -3.2 2.1 4.1
employed, %
Deliveries, 1,000 t 961 892 233 246 228 254 209 +7.7%
Production, 1,000 t 975 873 244 241 243 247 203 +11.7%
Operating rate, % 89 82 91 86 87 92 75
Despite the pick-up in demand, the market situation for the Offices
business remained difficult in 2004. Imports of uncoated fine paper
to the west European market, which increased as a result of the
sinking dollar, coupled with an increase in production capacity kept
the competition situation very tight all year long. This caused a
sharp fall in the selling prices of uncoated fine paper. Deliveries
by west European producers to the markets outside Europe were largely
unchanged despite the weakening in the dollar.
The business reported an operating loss of EUR 3.9 million (profit of
48.2 million). Profitability was weakened mainly by the fall in
selling prices.
Deliveries by west European producers of uncoated fine paper rose by
5 per cent. The volume of products delivered by the Offices business
area grew by 8 per cent. The operating rate of the paper machines was
89 per cent (82). The order book at the end of December was just over
two weeks.
The average selling price fell by approximately 9 per cent.
The operating result in October-December was at the previous
quarters level.
Deliveries by west European producers of uncoated fine paper rose by
1 per cent in the last quarter. The volume of products delivered by
the Offices business fell by 5 per cent.
Map Merchant Group
2004 2003 IV III II I IV 2003-
04 04 04 04 03 2004
change
Turnover 1 368 1 392 342 332 339 354 347 -1.7%
.4 .6 .8 .4 .2 .0 .6
Operating result 4.7 6.5 - 0.9 3.0 3.8 0.4
2.9
Operating result, 0.3 0.5 - 0.3 0.9 1.1 0.1
% 0.8
Return on capital 1.5 2.0 - 0.9 3.2 4.6 0.4
employed, % 2.9
Deliveries, 1,000 1 308 1 283 330 321 319 338 327 +1.9%
t
Demand for Map Merchant Groups products improved in 2004 despite the
continued difficult market situation. Thanks to the improved demand
and implemented efficiency improvement measures the financial
performance improved in all major market areas. The integration and
reorganisation of operations was continued during the year and a
restructuring of the operations of Modo Merchants and James
McNaughton in the UK was initiated.
Map Merchant posted an operating profit of EUR 4.7 million (6.5). The
profit includes non-recurring net expenses of EUR 8.3 million of
which the most important were the EUR 5.3 million expense provision
for the restructuring of Modo Merchants Ltd and James McNaughton
Paper Group Ltd and the EUR 2,4 million cost incurred by the
termination of Modo Merchants warehouse lease agreement. The
operating profit excluding non-recurring items was EUR 13.0 million
(6.5). The improvement in profitability was attributable to the
increased delivery volumes and the positive effects of the efficiency
improvement measures.
The operating result in October-December was a loss of EUR 2.9
million (a profit of 0.9 million). The operating result, excluding
the above-mentioned non-recurring expenses, was a profit of EUR 5.4
million (a profit of EUR 0.9). Earnings were improved by the increase
in delivery volumes and the third quarter was also weakened by
seasonal factors related to the summer holidays.
M-REALGROUP (all figures are unaudited)
PROFIT AND LOSS ACCOUNT 1-12/04 1-12/03 Change 10-
(EUR million) 12/04
Turnover 5460.3 6 044.1 -583.8 1382.8
Interest in -7.4 -5.2 -2.2 -2.7
associated companies
Other operating 86.3 73.8 12.5 22.6
income
Operating expenses 5 152.4 5 557.9 -405.5 1330.7
Depreciation 461.5 481.0 -19.5 99.5
Operating profit -74.7 73.8 -148.5 -27.5
% of turnover -1.4 1.2 -2.0
Net exchange 12.5 20.7 -8.2 8.1
gains/losses
Other financial -146.8 -174.7 27.9 -52.2
income
and expenses
Profit before -209.0 -80.2 -128.8 -71.6
extraordinary items
% of turnover -3.8 -1.3 -5.2
Extraordinary items 198.2 -15.1 213.3 -3.3
Profit before taxes and -10.8 -95.3 84.5 -68.3
minority interest
% of turnover -0.2 -1.6 -4.9
Taxes -3.1 -0.7 -2.4 3.9
Minority interest -1.4 1.0 -2.4 0.3
Profit for the period -15.3 -95.0 79.7 -64.1
% of turnover -0.3 -1.6 -4.6
Taxes include taxes corresponding to profit for the period.
BALANCE SHEET 12/2004 % 12/2003 %
(EUR million)
Assets
Fixed assets 4 198.7 65.7 4 768.7 67.1
Current assets
Inventories 726.8 11.4 802.0 11.3
Other current assets 1 227.3 19.1 1 351.9 19.0
Liquid funds 241.6 3.8 183.6 2.6
Total 6 394.4 100.0 7 106.2 100.0
Liabilities
Shareholders´ equity 2 626.8 41.1 2 245.3 31.6
Minority interest 23.9 0.4 18.9 0.3
Provisions for 58.1 0.9 77.4 1.1
liabilities
and charges
Long-term liabilities 2 019.8 31.5 3 030.6 42.6
Short-term liabilities 1 665.8 26.1 1 734.0 24.4
Total 6 394.4 100.0 7 106.2 100.0
CASH FLOW STATEMENTS 1-12/04 1-12/03 10-12/04
(EUR million)
Profit before extraordinary -209.0 -80.2 -71.6
items
Depreciation 461.5 481.0 99.5
Taxation -30.9 -19.0 -11.8
Other changes 10.4 35.5 -3.9
Funds from operations 232.0 417.3 12.2
Change in working capital 19.6 7.8 83.6
Cash flow from operations 251.6 425.1 95.8
Gross capital -258.8 -396.7 -99.7
expenditures 1)
Disposal and other changes 439.7 -2.5 13.8
in fixed assets
Cash flow after capital 432.5 25.9 9.9
expenditure
Share issue 447.5 0.0 106.7
Interest-bearing net debt of 121.5 -8.5 0.5
companies acquired and
divested
Dividend -53.7 -107.4 0.0
Change in interest-bearing 947.8 -90.0 117.1
liabilities
(+ decrease/- increase)
1) Excl. interest-bearing net debt of acquired companies.
KEY FIGURES 1-12/04 1-12/03 10-12/04
Earnings per share, EUR -0.79 -0.43 -0.21
Return on capital employed,% -1.0 1.6 -2.1
Return on equity, % -7.7 -3.8 -11.6
Gross capital expenditures, 259 397 100
EUR million 1)
Personnel, average 16 490 20 372 16 068
12/04 12/03
Shareholders´ equity per 8.00 10.56
share, EUR
Equity ratio, % 41.5 31.9
Gearing ratio, % 82 137
1) Excl. interest-bearing net debt of acquired
companies.
Securities and guarantees, 12/04 12/03
EUR million
For own loans 192 287
For associated companies 1 1
For affiliated companies 5 5
For others 11 15
Total 209 308
Open derivative contracts,
EUR million 12/04 12/03
Interest rate derivatives 15 265 13 017
Currency derivatives 6 641 4 601
Other derivatives 9 0
Total 21 915 17 618
The fair value of open derivative contracts calculated at market
value at the end of the review period
was 1.6 EUR million (-1.6).
TURNOVER Year Quarterly
EUR Million 2004 2003 IV 04 III 04 II 04 I 04 IV 03
Cartons 879.7 809.0 227.9 237.6 210.1 204.1 196.2
Graphics 2377.9 2348.0 616.2 589.5 581.1 591.1 572.6
products
and Speciality
papers
Offices 670.0 682.9 164.1 167.1 158.5 180.3 169.5
Map Merchant 1368.4 1392.6 342.8 332.4 339.2 354.0 347.6
Group
Internal sales 164.2 811.6 31.8 36.1 44.4 52.0 188.3
and
other operations
GROUP TOTAL 5460.3 6044.1 1382.8 1362.7 1333.3 1381.5 1474.2
TURNOVER
EUR Million III 03 II 03 I 03
Cartons 200.3 196.9 215.6
Graphics 578.7 574.6 622.1
products
and Speciality
papers
Offices 151.3 170.5 191.6
Map Merchant 332.5 345.0 367.5
Group
Internal sales 204.4 220.8 198.1
and
other operations
GROUP TOTAL 1467.2 1507.8 1594.9
OPERATING PROFIT Year Quarterly
AND RESULT
EUR Million 2004 2003 IV 04 III 04 II 04 I 04 IV 03
Cartons 60.3 33.3 25.8 10.7 9.8 14.0 -2.3
Graphics -90.0 24.3 -47.4 -33.2 -11.9 2.5 -12.8
products
and Speciality
papers
Offices -3.9 48.2 -1.2 0.0 -6.2 3.5 8.6
Map Merchant 4.7 6.5 -2.9 0.9 3.0 3.8 0.4
Group
Other operations -45.8 -38.5 -1.8 -6.5 -14.5 -23.0 -31.2
OPERATING PROFIT -74.7 73.8 -27.5 -28.1 -19.9 0.8 -37.3
% of turnover -1.4 1.2 -2.0 -2.1 -1.5 0.1 -2.5
Net exchange 12.5 20.7 8.1 0.0 -0.8 5.2 9.7
gains/
losses
Other financial -146.8 -174.7 -52.2 -31.4 -28.9 -34.3 -77.6
income
and expenses
PROFIT BEFORE -209.0 -80.2 -71.6 -59.5 -49.6 -28.3 -105.2
EXTRAORDINARY
ITEMS
% of turnover -3.8 -1.3 -5.2 -4.4 -3.7 -2.1 -7.1
OPERATING PROFIT
AND RESULT
EUR Million III 03 II 03 I 03
Cartons 15.1 2.5 18.1
Graphics 10.0 -2.1 29.1
products
and Speciality
papers
Offices 3.9 13.9 21.8
Map Merchant -2.7 3.4 5.4
Group
Other operations 2.6 -2.9 -7.0
OPERATING PROFIT 28.9 14.8 67.4
% of turnover 2.0 1.0 4.2
Net exchange -0.5 5.3 6.2
gains/
losses
Other financial -32.3 -29.8 -35.0
income
and expenses
PROFIT BEFORE -3.9 -9.7 38.6
EXTRAORDINARY
ITEMS
% of turnover -0.3 -0.6 2.4
OPERATING Year Quarterly
PROFIT, %
2004 2003 IV 04 III 04 II 04 I 04 IV 03
Cartons 6.9 4.1 11.3 4.5 4.7 6.9 -1.2
Graphics -3.8 1.0 -7.7 -5.6 -2.1 0.4 -2.2
products
and Speciality
papers
Offices -0.6 7.1 -0.7 0.0 -3.9 2.0 5.1
Map Merchant 0.3 0.5 -0.8 0.3 0.9 1.1 0.1
Group
GROUP TOTAL -1.4 1.2 -2.0 -2.1 -1.5 0.1 -2.5
OPERATING
PROFIT, %
III 03 II 03 I 03
Cartons 7.5 1.2 8.4
Graphics 1.7 -0.4 4.7
products
and Speciality
papers
Offices 2.6 8.2 11.4
Map Merchant -0.8 1.0 1.5
Group
GROUP TOTAL 2.0 1.0 4.2
RETURN ON CAPITAL Year Year Year
EMPLOYED, %
2004 2003 2002
Cartons 7.6 3.9 9.4
Graphics products and -3.4 1.0 5.5
Speciality papers
Offices -0.6 5.4 11.0
Map Merchant Group 1.5 2.0 -3.0
GROUP TOTAL -1.0 1.6 5.8
CAPITAL EMPLOYED, 31.12.04 31.12.03 31.12.02
EUR Million
Cartons 913.4 882.1 921.6
Graphics products and 2 591.5 2 849.7 2 893.1
Speciality papers
Offices 854.3 839.0 973.7
Map Merchant Group 387.7 383.2 410.4
Other assets 387.8 734.4 698.3
GROUP TOTAL 5 134.7 5 688.4 5 897.1
PERSONNEL, Year Year Year
average 2004 2003 2002
Cartons 2 842 2 970 3 080
Graphics products and 6 670 6 957 7 671
Speciality papers
Offices 2 036 2 107 2 125
Map Merchant Group 2 528 2 554 2 745
Other operations 2 414 5 784 5 449
GROUP TOTAL 16 490 20 372 21 070
DELIVERIES Year Quarterly
1000 tons 2004 2003 IV 04 III 04 II 04 I 04 IV 03
Cartons 1) 1155 1007 305 310 275 265 250
Graphics products 3168 2965 837 797 767 767 745
and Speciality
papers
Offices 961 892 233 246 228 254 209
Paper businesses 4129 3857 1070 1043 995 1021 955
total
Map Merchant 1308 1283 330 321 319 338 327
Group
DELIVERIES
1000 tons III 03 II 03 I 03
Cartons 1) 246 246 265
Graphics products 729 727 763
and Speciality
papers
Offices 207 229 246
Paper businesses 937 956 1009
total
Map Merchant 312 317 328
Group
PRODUCTION Year Quarterly
1000 tons 2004 2003 IV 04 III 04 II 04 I 04 IV 03
Cartons 1111 913 294 322 242 253 217
paperboard mills
1)
Graphics products 3169 2912 817 814 763 775 708
and Speciality
papers
Offices 975 873 244 241 243 247 203
Paper mills total 4144 3785 1061 1055 1006 1022 912
Metsä-Botnia´s 1151 1124 282 290 279 300 270
pulp 2)
M-real´s pulp 1533 1439 399 384 369 381 368
PRODUCTION
1000 tons III 03 II 03 I 03
Cartons 238 208 250
paperboard mills
1)
Graphics products 719 718 767
and Speciality
papers
Offices 200 233 237
Paper mills total 919 950 1004
Metsä-Botnia´s 305 269 280
pulp 2)
M-real´s pulp 350 355 366
1) Equals to M-real´s ownership (47 % in Kemiart Liners until QII
2004 and 100% as from QIII 2004).
2) Equals to M-real´s ownership (47 % in Metsä-Botnia).
OPERATING RATES, Year Quarterly
%
2004 2003 IV 04 III 04 II 04 I 04 IV 03
Cartons 89 84 85 96 86 89 79
paperboard mills
Graphics products 88 84 90 90 85 87 80
and Speciality
papers
Offices 89 82 91 86 87 92 75
Paper mills total 88 83 90 89 86 88 79
OPERATING RATES,
%
III 03 II 03 I 03
Cartons 87 78 94
paperboard mills
Graphics products 83 83 89
and Speciality
papers
Offices 73 89 93
Paper mills total 80 84 90
M-REAL CORPORATION
Hannu Anttila
President and CEO
