M-real Corporation’s operating result excluding non-recurring items was EUR 59 million in 2011

M-real Corporation Financial Statement 1 January–31 December 2011, 9 February 2012 at 12:00 noon

Full year result for 2011

• Sales were EUR 2,485 million (Q1–Q4/2010: 2,605)
• The operating result excluding non-recurring items was EUR 59 million (173). The operating result including non-recurring items was EUR -214 million (146).
• The result before taxes excluding non-recurring items was EUR 0 million (92). The result before taxes including non-recurring items was EUR -281 million (48).
• Earnings per share from continuing operations excluding non-recurring items were EUR 0.02 (0.23) and including non-recurring items EUR -0.83 (0.09).

Result for the fourth quarter of 2011

• Sales were EUR 524 million (Q3/2011: 616)
• The operating result excluding non-recurring items was EUR -22 million (6). The operating result including non-recurring items was EUR -215 million (-13).
• The result before taxes excluding non-recurring items was EUR -33 million (-11). Result before taxes including non-recurring items was EUR -230 million (-29).
• Earnings per share from continuing operations excluding non-recurring items were EUR -0.04 (-0.05) and including non-recurring items EUR -0.63 (-0.11).

 Events during the fourth quarter of 2011

• Delivery volumes decreased in all main products due to the general economic uncertainty.
• The Äänekoski paper machine 2 was shut down and the mill’s reel production is moved to the Husum mill in Sweden.
• The annual folding boxboard capacity at the Kyro mill was increased by 40,000 tonnes.

 Events after the period

• M-real announced it will sell the Premium Paper operations of the Reflex mill to Hahnemühle FineArt GmbH.
• M-real revised its management and reporting structure. As of the first quarter of 2012, the company’s reporting segments will be Paperboard, and Paper and Pulp. Pasi Piiparinen was appointed Head of the Paperboard business area as of 20 March 2012.
• M-real Corporation’s Board of Directors proposes to the Annual General Meeting convening on 28 March 2012 that the company’s business name is changed to Metsä Board Corporation.

“The uncertainty in the general economic situation in Europe decreased the delivery volumes that weakened our profitability especially in the pulp and paper business in the last quarter of 2011. Paperboard delivery volumes decreased as well, but less than pulp and paper.

Order inflows for cartonboard that declined considerably in the latter half of 2011 have shown a recovery in recent weeks. The end demand for cartonboard has not showed signs of weakening. However, due to the general economic uncertainty, estimating the future delivery volumes remains challenging.

The expansion investment at the Kyro folding boxboard mill was completed according to plan in November. As announced earlier, M-real will also increase the capacity of the Äänekoski folding boxboard mill in the spring. As the demand for cartonboard normalises, M-real will be in a very good position to address demand and improve its profitability through its modernised production machinery.

Our planned measures to eliminate losses in the paper business are proceeding as planned. In December, the production of coated fine paper at the Äänekoski mill was discontinued and its reel production is moved to the Husum mill. Statutory negotiations concerning the Alizay mill and the speciality paper operations are targeted to be completed in the first quarter of 2012. The proposed discontinuation of these unprofitable operations would improve the company’s profitability considerably.

 M-real Corporation’s Board of Directors proposes to the Annual General Meeting convening on 28 March 2012 that the company’s business name is changed to Metsä Board Corporation. During the past few years, we have been working determinedly to transform ourselves from a paper company into a profitable paperboard company. Our restructuring has progressed to a point where we want also our name to reflect this. As part of Metsä Group’s new unified image, we will be able to strengthen our presence in the market.”    

 Mikko Helander, CEO

Near-term outlook

End demand for cartonboard has not shown material weakening in the main markets, with the exception of certain market segments in southern Europe. Cartonboard order inflow declined considerably in the latter half of 2011, which is estimated to mainly be due to the decreased inventory levels in different parts of the delivery chain as the general economic uncertainty increased. In the first half of 2011, the inventory levels in the delivery chain were exceptionally high, mainly due to the challenging availability of cartonboard.

Cartonboard order books have been growing in recent weeks but continue to be below the normal level. The long-term demand and profitability outlook for cartonboard continues strong and M-real is increasing its folding boxboard capacity as planned. The last of the investments in the programme announced earlier, the increase of folding boxboard capacity at the Äänekoski mill, will be completed in the second quarter of 2012.

The prices for the 2012 annual folding boxboard contracts are, on average, at the same level as in 2011.

Order books for paper products and pulp continue to be below the normal level and production curtailments will be implemented at most mills also in early 2012. Visibility in the European paper and pulp markets is currently weak.

Production costs are estimated to decrease slightly over the next few months.

It is expected that the statutory negotiations concerning the unprofitable operations of the Alizay mill and the speciality paper operations will be completed in the first quarter of 2012. The proposed discontinuation of these unprofitable operations would improve the company’s profitability considerably.

M-real’s operating result for the first quarter of 2012, excluding non-recurring items, is expected to improve from the last quarter of 2011 mainly due to higher paperboard and pulp delivery volumes. Furthermore, the losses of Alizay mill and the speciality paper business are expected to somewhat reduce already in the first quarter of 2012.

Disclosure procedure
M-real Corporation has started to follow the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority and hereby publishes its Financial Statement 2011 enclosed to this stock exchange release. M-real's complete Financial Statement is attached to this release in pdf-format and is also available on the company's web site at www.m-real.com.

M-REAL CORPORATION

Further information:

Matti Mörsky, CFO, tel. +358 (0)10 465 4913

Juha Laine, Vice President, Investor Relations and Communications, tel. +358 (0)10 465 4335

More information will be available starting from 1 p.m. on 9 February 2012. A conference call held in English for investors and analysts starts at 3 p.m. (EET). Conference call participants are requested to dial in and register a few minutes prior to the start of the conference call on the following numbers:

Europe: +44 (0)20 7162 0025

US: +1 334 323 6201

The conference ID is 910828.

M-real is Europe’s leading fresh forest fibre paperboard producer and a major paper supplier. It offers premium solutions for consumer packaging and communications and advertising end uses. The company’s sales network serves brand owners, carton printers, printing houses, merchants and office suppliers.

M-real is part of Metsä Group and is listed on the NASDAQ OMX Helsinki. In 2011, M-real’s sales totalled EUR 2.5 billion. The company has approximately 4,000 employees.

M-real Corporation’s Board of Directors proposes to the Annual General Meeting convening on 28 March 2012 that the company’s business name is changed to Metsä Board Corporation.