M-REAL POSTS AN IMPROVED OPERATING RESULT IN THE FIRST QUARTER
M-real Corporation Stock Exchange Bulletin 28.4.2005 at 1.00 p.m.
1(25)
M-REAL POSTS AN IMPROVED OPERATING RESULT IN THE FIRST QUARTER
In the first quarter of the year M-real Groups operating result net
of non-recurring items rose to EUR 30 million from EUR 19 million in
the previous quarter. Compared with the previous quarter, the
operating result was improved mainly by lower fixed costs as well as
a rise in the average price of coated magazine paper. Fourth-quarter
profitability was burdened by the costs of annual maintenance
shutdowns in Finland.
The operating result included net non-recurring income of EUR 85
million (net expenses of EUR 34 million in the previous quarter), the
main item being a capital gain of EUR 80 million booked on the sale
of an 8 per cent holding in Metsä-Botnia. The operating result was a
profit of EUR 115 million (a loss of 14 million).
Key figures for the first quarter:
- Sales: EUR 1,344 million (1,365 million in the previous quarter)
- Operating result, excluding non-recurring items: EUR 30 million
(EUR 19 million)
- Operating result: profit of EUR 115 million (a loss of 14 million)
- The result before taxes, excluding non-recurring items: a loss of
EUR 8 million (a loss of 3 million)
- Result before taxes: profit of EUR 77 million (a loss of 36
million)
- Result for the report period: profit of EUR 76 million (a loss of
46 million).
- Earnings per share excluding non-recurring items: EUR 0.03 negative
(0.15 negative)
- Earnings per share: EUR 0.23 (0.23 negative)
- Return on capital employed excluding non-recurring items: 3.0 per
cent (1.7)
- Return on capital employed: 9.9 per cent (-1.1)
- Equity ratio: 38.6 per cent (37.5)
- Gearing ratio: 81 per cent (89)
- Comparable volume of paperboard delivered: 281,000 (282,000);
volume of paper delivered: 1,019,000 (1,038,000)
Of the business areas, Publishing, Commercial Printing and Office
Papers improved their profitability.
Demand for paper declined somewhat and demand for paperboard
increased on the previous quarter. M-reals paper deliveries were
down 2 per cent, with comparable paperboard deliveries remaining at
the level of the previous quarter.
Selling prices of folding boxboard and coated magazine paper rose.
The operating result net of non-recurring items improved also on the
same period of last year thanks to the increased volume of paper and
paperboard delivered as well as lower fixed costs.
Commenting on the market situation for M-reals main products,
President & CEO Hannu Anttila said: Weve succeeded in increasing
the prices of folding boxboard and magazine paper in the first part
of the year. Price increases for coated fine papers in the first
quarter were proceeded more slowly than planned, but we believe that
the increases will go through later this spring. The market situation
within office papers remains challenging.
Firming up of the companys capital structure is on track in just
over a year, weve succeeded in reducing interest-bearing net debt by
nearly 1.3 billion euros. Henceforth, we can focus even more on
measures improving the efficiency of our operations and lowering
costs, observes Anttila.
The second-quarter result is estimated to fall somewhat short of the
first quarter due to seasonal factors and weaker-than-forecast price
development for fine papers.
An imminent paperworkers strike in Finland would, if it
materializes, have a negative impact on M-reals second-quarter
earnings.
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
INTERIM REPORT 1 JANUARY - 31 MARCH 2005
ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
M-real made the transition from Finnish Accounting Standards (FAS) to
International Financial Reporting Standards (IFRS) from the beginning
of 2005.
The transition was made on 1 January 2004, and an opening balance
sheet in accordance with IFRS accounting principles was prepared at
that date. Certain exemptions permitted to first-time adopters of
IFRS have been applied in preparing the opening balance sheet. More
detailed information and specifications of the effects of the
transition on the companys balance sheet and income statement as
well as the changes in accounting principles have been given in the
stock exchange release of 19 April 2005.
The first financial statements according to International Financial
Reporting Standards will be published for the period 1 January 31
December 2005. This Interim Report has been prepared according to the
accounting and valuation principles of IFRS.
JANUARY-MARCH EARNINGS COMPARED WITH THE PREVIOUS QUARTER
In the first quarter M-reals consolidated sales was EUR 1,344
million (Sep.-Dec. 2004: EUR 1,365 million). Comparable sales fell by
0.6 per cent.
The Group reported an operating profit of EUR 115 million (a loss of
EUR 14 million). The operating result includes a capital gain of EUR
81 million on the sale of an 8 per cent holding in Metsä-Botnia as
well as an EUR 4 million insurance compensation payment for the
Alizay pulp mill. The operating result for the previous quarter
included EUR 34 million of net non-recurring charges.
The operating result, excluding non-recurring items, was a profit of
EUR 30 million (19). Compared with the previous quarter, the
operating result was improved mainly by lower fixed costs and the
higher average price of coated magazine paper. Fourth-quarter
profitability was furthermore burdened by the costs of annual
maintenance shutdowns in Finland.
Of the business areas, Publishing, Commercial Printing and Office
Papers improved their profitability.
Deliveries of paperboard to customers totalled 281,000 tonnes
(340,000). The Savon Sellu pulp mill is included in the previous
quarters delivery volume. The delivery volume of Kemiart Liners is
accounted for to the full extent in both quarters. The comparable
delivery volume in the previous quarter was 282,000. Production was
curtailed by 17,000 tonnes in line with demand (23,000).
Paper deliveries from the mills totalled 1,019,000 tonnes
(1,038,000). Production curtailments amounted to 64,000 tonnes
(46,000).
Financial income and expenses were EUR 39 million negative (EUR 21
million negative). These items included net interest and other
financial expenses of EUR 28 million (42) as well as foreign exchange
differences on accounts receivable, accounts payable, foreign
exchange hedges and financial items amounting to EUR 11 million
negative (EUR 21 million positive).
At the end of March, the exchange rate of the United States dollar
against the euro was 4.8 per cent and the rate of the British pound
against the euro 2.3 per cent higher than at the end of 2004. On
average, the dollar weakened by 1.1 per cent and sterling appreciated
by 2.3 per cent compared with the previous quarter.
The result before taxes was a profit of EUR 77 million (a loss of 36
million). The result, excluding the above-mentioned non-recurring
items, was a loss of EUR 8 million (a loss of 3 million).
Net profit for the report period was EUR 76 million (a net loss of 46
million). Income taxes, including the change in the deferred tax
liability, were EUR 0 million (8).
Earnings per share were EUR 0.23 (0.23 negative). Excluding non-
recurring items, earnings per share were 0.03 negative (0.15
negative).
The return on equity was 12.5 per cent (7.9 negative); excluding non-
recurring items, 1.3 per cent negative (3.6 negative). The return on
capital employed was 9.9 per cent (-1.1); excluding non-recurring
items, 3.0 per cent (1.7).
EARNINGS IN JANUARY-MARCH COMPARED WITH THE SAME PERIOD OF 2004
M-reals consolidated sales was EUR 1,344 million (Jan.Mar. 2004:
EUR 1,412 million). Comparable sales fell by 2.1 per cent.
The operating result was a profit of EUR 115 million (24). The
operating result includes the above-mentioned 85 million of non-
recurring income. Last years first-quarter result did not include
non-recurring items.
The operating result, excluding non-recurring items, was a profit of
EUR 30 million (24). Profitability was improved above all by the
growth in the volume of paper and paperboard delivered and the
decrease in fixed costs in the paper business areas. M-real succeeded
in improving profitability despite a stronger euro, the fall in the
average price of uncoated fine paper and the rise in costs of oil-
based raw materials.
Of the business areas, Consumer Packaging and Publishing improved
their profitability. The operating result of Commercial Printing and
Map Merchants, excluding non-recurring items, was on a par with the
comparison period.
Deliveries of paperboard to customers totalled 281,000 tonnes
(341,000). The Savon Sellu pulp mill is included in the comparison
periods delivery volume. The delivery volume of Kemiart Liners is
accounted for to the full extent in both quarters. On a like-for-like
basis, the delivery volume in the comparison period was 290,000
tonnes. Production was curtailed by 17,000 tonnes in line with demand
(40,000).
The total volume of paper deliveries was 1,019,000 tonnes (982,000).
Production curtailments amounted to 64,000 tonnes (107,000).
Financial income and expenses were EUR 39 million negative (EUR 66
million negative). These items include net interest and other
financial expenses of EUR 28 million (48) as well as foreign exchange
differences on accounts receivable, accounts payable, foreign
exchange hedges and financial items amounting to EUR 11 million
negative (EUR 18 million negative).
At the end of March, the exchange rate of the United States dollar
against the euro was 6.1 per cent lower and the rate of the British
pound against the euro 3.4 per cent lower than at the end of March
2004. On average, the dollar weakened by 4.8 per cent and sterling by
2.0 per cent compared with the same period of last year.
The result before taxes was a profit of EUR 77 million (a loss of 42
million). The result, excluding the above-mentioned non-recurring
items, was a loss of EUR 8 million (a loss of 42 million).
Net profit for the report period was EUR 76 million (141). The result
for the comparison period includes a capital gain of EUR 176 million
on the divestment of Metsä Tissue. Income taxes, including the change
in the deferred tax liability, were EUR 0 million (7).
Earnings per share were EUR 0.23 (0.66). Excluding non-recurring
items, earnings per share were 0.03 negative (0.66).
The return on equity was 12.5 per cent (7.1 negative); excluding non-
recurring items, 1.3 per cent negative (7.1 negative). The return on
capital employed was 9.9 per cent (2.0); excluding non-recurring
items, 3.0 per cent (2.0).
PERSONNEL
The payroll at the end of March was 15,453 employees (15,960 at 31
December 2004), of whom 4,490 worked in Finland (4,912). The net
reduction in personnel was 507 employees. The net effect of
acquisitions and divestments on the reduced headcount was 374
employees.
The Groups personnel includes 39 per cent of Metsä-Botnias
employees. At the end of 2004 the Groups payroll included 47 per
cent of Metsä-Botnias staff.
CAPITAL EXPENDITURES
Capital expenditures on fixed assets totalled EUR 93 million in
January-March (Jan.Mar. 2004: 22).
The capital expenditure project for building a new BCTMP mill in
Kaskinen is proceeding according to plan. The main equipment
installations will be completed in June and the mill will come on
stream in August.
An investment of about EUR 60 million at the Simpele mill was
announced. The mills board machine will be modernized, the slitter-
winder and reel and sheet packaging equipment will be rebuilt and the
sheeting capacity will be increased. When the investment is
completed, paperboard production capacity will rise to 215,000 tonnes
a year. The investment project will be completed stage by stage by
spring 2006.
ACQUISITIONS, DIVESTMENTS AND RESTRUCTURING
The sale of forestland to Forestia Holding Oy was seen to completion
in January. 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 earnings.
In March, Metsä-Botnia, the resource company that is jointly owned by
M-real, UPM-Kymmene and Metsäliitto, announced its decision to invest
in a new pulp mill in Uruguay. The total cost of the investment will
be about 1.1 billion dollars. The mill will produce eucalyptus pulp
and it is estimated to start up during the third quarter of 2007.
Concurrently, M-real announced it was selling its 8% holding in Metsä-
Botnia to Metsäliitto Osuuskunta for EUR 164 million. A capital gain
of EUR 81 million was booked on the deal. Following the transaction,
the shareholdings in Metsä-Botnia are M-real 39%, Metsäliitto 14% and
UMP-Kymmene 47%. The transaction was completed on 31 March.
FINANCING
Interest-bearing net liabilities amounted to EUR 1,988 million at the
end of March (Dec. 2004: 2,183).
The equity ratio at the end of the period was 38.6 per cent (Dec.
2004: 37.5) and the gearing ratio was 81 per cent (Dec. 2004: 89).
Liquidity is good. Liquidity at the end of March was EUR 1,706
million, of which EUR 1,564 million consisted of binding long-term
credit commitments and EUR 142 million represented 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 550
million.
At the end the report period an average of 5 months of 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 94 per cent of the shareholders equity not in euros
was hedged. At the end of the period the average interest rate
maturity of Groups interest bearing liabilities was 27 months.
During the report period the interest rate maturity has varied from
22 to 27 months.
In March, Standard & Poors Rating Services lowered the rating on M-
reals long-term loans from BB+ to BB- and changed the outlook for
the rating from negative to stable. Moodys Investors Services
credit rating for M-real is Ba2, with a stable outlook.
SHARES
The highest price of M-reals Series B share on the Helsinki Stock
Exchange during the January-March period was EUR 4.93, the low EUR
4.10 and the average price EUR 4.47. In 2004 the average price was
EUR 5.59. The price of the Series B share was EUR 4.56 at the end of
the report period on 31 March 2005.
Turnover of the Series B share was EUR 356 million, or 27 per cent of
the shares outstanding. The market value of the Series A and B shares
at 31 March 2005 totalled EUR 1,495 million.
At 31 March 2005 Metsäliitto Osuuskunta owned 38.6 per cent of M-real
Corporations shares and held 60.5 per cent of the voting rights
conferred by these shares. International investors owned 36.7 per
cent of the shares.
On 14 March the Annual General Meeting approved the Board of
Directors proposal for amending the Articles of Association. An
Article 16 concerning the conversion of shares will be added to the
Articles of Association, its principal content being that an M-real
Series A share can be converted into a Series B share upon the
written demand of a shareholder or authorized agent for nominee-
registered shares. No cash consideration is payable for carrying out
a conversion. The change in the Articles of Association was entered
in the Trade Register on 18 April 2005.
In March, application was made to the Helsinki Stock Exchange for
permission to reduce the companys round lot for traded shares from
500 to 200 shares. The change entered into effect on 14 March.
The Board of Directors does not have current authorizations to carry
out share issues or issues of convertible bonds or bonds with
warrants.
DIVIDEND
The Annual General Meeting resolved on 14 March, in accordance with
the Board of Directors proposal, to pay a dividend of EUR 0.12 per
share for the financial year ended 31 December 2004, for a total of
EUR 39,379,873.44. The dividend was paid out on 24 March 2005.
BOARD OF DIRECTORS AND AUDITORS
The Annual General Meeting elected the following persons to seats on
M-reals Board of Directors for a term extending up to the next
Annual General Meeting: Heikki Asunmaa, Kim Gran, Kari Jordan, Asmo
Kalpala, Erkki Karmila, Runar Lillandt, Antti Tanskanen and Arimo
Uusitalo.
At its organization meeting, the Board of Directors elected Kari
Jordan chairman and Arimo Uusitalo vice chairman.
The Annual General Meeting elected as M-reals auditors Göran
Lindell, Authorized Public Accountant, and the firm of independent
public accountants PriceWaterhouseCoopers Oy, with Jouko Malinen,
Authorized Public Accountant, acting as Principal Auditor and Björn
Renlund, Authorized Public Accountant, and Markku Marjomaa,
Authorized Public Accountant, acting as deputy auditors.
The term of office of the auditors and deputy auditors lasts until
the end of the next Annual General Meeting.
NEAR-TERM OUTLOOK
Economic growth in Europe has remained weak and estimates of overall
growth for 2005 have been lowered during the first part of the year.
Economic growth is generally forecast to be slower in Europe, North
America and Asia than it was in 2004. The amount of money spent on
printed advertising, which moves fairly much in tandem with economic
growth is nevertheless estimated to increase in western Europe at
last years rate. The weakening in the United States dollar will have
a negative impact on the competitiveness of the forest industry in
western Europe.
Paper demand held up fairly well in the first quarter of 2005. Demand
was at the level of the same quarter a year earlier. Production
capacity was still underused, especially for fine paper grades. M-
reals deliveries of paperboard remained at a good level. Demand for
paper and paperboard is expected to hold up well, but seasonal
variation is likely to lower second-quarter delivery volumes compared
with the first quarter. M-real has succeeded in increasing prices of
folding boxboard and magazine paper slightly during the first part of
the year. Price increases for coated fine paper proceeded more slowly
than planned during the first quarter. Measures aiming to increase
prices will continue. The market situation within office papers is
still challenging.
Because of the high market price of crude oil, prices of the oil-
based raw materials as well as transport costs have risen.
Second-quarter earnings are estimated to come in somewhat lower than
the first quarter due to seasonal factors and the weaker-than-
forecast price trend for fine paper grades.
An imminent paperworkers strike in Finland would, if it
materializes, have a negative impact on M-reals second-quarter
earnings.
Espoo, 28 April 2005
BOARD OF DIRECTORS
BUSINESS AREAS AND MARKET TRENDS
Consumer Packaging
I 05 IV III II I 04 2004 IV 04-I
04 04 04 05
change
Sales 238 256 264 267 258 1,04 -7.0%
5
EBITDA 1) 49 45 49 42 44 180 +8.8%
EBITDA % 20.6 17.6 18.6 15.7 17.0 17.2
Operating result 27 30 25 18 20 93 -10.0%
Operating 11.3 11.7 9.4 6.7 7.8 8.9
result, %
Non-recurring items 0 +3 0 0 0 +3
Return on capital 11.1 11.9 9.7 7.2 8.0 9.5
employed, %
Return on capital 11.1 10.7 9.7 7.2 8.0 9.2
employed
excl. non-recurring
items, %
Deliveries, 1,000 t 281 340 345 349 341 1,37 -17.3%
4
Paperboard 293 326 355 319 331 1,33 -10.1%
production, 1,000 t 0
1) EBITDA = operating result before depreciation and impairment
charges
The Consumer Packaging business area reported operating profit of EUR
27 million (Oct.-Dec. 2004: 30). Operating profit included non-
recurring net income of EUR 3 million in the previous quarter.
The operating result, excluding non-recurring items, was a profit of
EUR 27 million (27). Fourth-quarter profitability was burdened by the
costs of annual maintenance shutdowns. The Savon Sellu pulp mill is
included in the figures for 2004. Kemiart Liners is included in its
entirety from the beginning of 2004.
Deliveries by west European folding boxboard producers were up 8 per
cent on the previous quarter. M-reals folding boxboard deliveries
were at the previous quarters level. The selling price of folding
boxboard rose in most of the main market areas.
Deliveries of linerboard increased markedly. Selling prices remained
at the previous quarters level.
Compared with the same period of last year, the operating result
increased by EUR 7 million. The operating result was improved mainly
by the growth in the volume of folding boxboard deliveries. The
appreciation of the euro kept the average prices of the business
areas product groups nearly unchanged.
Deliveries by west European folding boxboard producers were up 6 per
cent compared with the same period of last year. Deliveries by
producers to western Europe were unchanged. M-reals deliveries
likewise grew by 6 per cent. Deliveries to eastern Europe and North
America showed the best growth.
Publishing
I 05 IV III II I 04 2004 IV 04-I
04 04 04 05
change
Sales 208 225 202 188 187 802 -7.6%
EBITDA 1) 29 26 31 17 26 101 +11.5%
EBITDA % 13.9 11.6 15.3 9.0 13.9 12.6
Operating result 8 4 9 -5 4 12
Operating 3.8 1.8 4.5 -2.7 2.1 1.5
result, %
Non-recurring items 0 +1 0 0 0 +1
Return on capital 2.7 1.5 3.0 -1.5 1.5 1.1
employed, %
Return on capital 2.7 1.2 3.0 -1.5 1.5 1.0
employed
excl. non-recurring
items, %
Deliveries, 1,000 t 307 336 301 283 273 1,19 -8.6%
2
Production, 1,000 t 308 314 309 257 268 1,14 -1.9%
8
1) EBITDA = operating result before depreciation and impairment
charges
The Publishing business areas operating profit was EUR 8 million
(4). The result in the previous quarter included non-recurring net
income of EUR 1 million.
The operating result, excluding non-recurring items, was a profit of
EUR 8 million (3). Profitability was improved mainly by the rise in
the average selling price coupled with an increase in product stocks.
Fourth-quarter profitability was furthermore burdened by the costs of
annual maintenance shutdowns.
Deliveries by west European producers of magazine paper fell by 13
per cent. The Publishing business areas delivery volume fell by 9
per cent.
Compared with the same period of last year, the operating result rose
by EUR 4 million. The operating result was improved by the growth in
delivery volumes, the fall in fixed costs and a higher level of
product stocks.
Deliveries of coated magazine paper by west European producers were
up 8 per cent on the corresponding period a year ago. The Publishing
business areas delivery volume rose by 12 per cent thanks to the
growth in deliveries outside western Europe.
The average price was at the level of the same period of last year.
The strengthening of the euro depressed the euro-denominated selling
price of exports.
Commercial Printing
I 05 IV III II I 04 2004 IV 04-I
04 04 04 05
change
Sales 363 372 368 362 372 1,47 -2.4%
4
EBITDA 1) 22 -8 20 23 22 56
EBITDA % 6.1 -2.2 5.4 6.4 5.9 3.8
Operating result -4 -35 -7 -4 -4 -49
Operating -1.1 -9.4 -1.9 -1.1 -1.1 -3.3
result, %
Non-recurring items 1 -27 0 0 0 -27
Return on capital -1.0 - -1.8 -0.8 -1.2 -3.5
employed, % 10.1
Return on capital -1.3 -2.1 -1.8 -0.8 -1.2 -1.5
employed
excl. non-recurring
items, %
Deliveries, 1,000 t 453 469 464 450 459 1,84 -3.4%
2
Production, 1,000 t 470 472 471 470 472 1,88 -0.4%
5
1) EBITDA = operating result before depreciation and impairment
charges
The Commercial Printing business areas operating result was a loss
of EUR 4 million (a loss of 35 million). The result includes non-
recurring income from Commercial Printings share of the insurance
compensation for the Alizay pulp mill in France, amounting to about
one million euros. The result in the previous quarter included non-
recurring net expenses of EUR 27 million.
The operating result, excluding non-recurring items, was a loss of
EUR 5 million (a loss of 8 million). Profitability was improved
mainly by the fall in fixed costs and the increase in product stocks.
Deliveries by west European producers of coated fine paper fell by 4
per cent. M-reals volume of coated fine paper deliveries declined by
6 per cent.
The average selling price of coated fine paper was at the previous
quarters level.
Compared with the same period a year ago, the operating result was
unchanged.
Deliveries of coated fine paper by west European producers fell by
one per cent compared with the same period of last year. M-reals
volume of coated fine paper deliveries likewise fell by one per cent.
The biggest decline in deliveries was in western Europe.
The price of fine paper was at the level of the same period a year
ago. The strengthening in the euro depressed the average euro-
denominated selling price of exported products.
Office Papers
I 05 IV III II I 04 2004 IV 04-
04 04 04 I 05
change
Sales 176 162 168 159 178 667 +8.6%
EBITDA 1) 20 16 20 15 21 71 +25.0%
EBITDA % 11.4 9.9 11.9 9.4 11.8 10.6
Operating result 5 0 4 -1 6 10
Operating result, 2.8 0 2.4 -0.6 3.4 1.5
%
Non-recurring items 3 0 0 0 0 0
Return on capital 2.4 0.1 1.9 -0.2 3.0 1.2
employed, %
Return on capital 0.9 0.1 1.9 -0.2 3.0 1.2
employed
excl. non-recurring
items, %
Deliveries, 1,000 t 259 233 246 228 254 961 +11.2%
Production, 1,000 t 248 244 241 243 247 975 +1.6%
1) EBITDA = operating result before depreciation and impairment
charges
The Office Papers business area generated operating profit of EUR 5
million (0). The result includes non-recurring income from Office
Papers share of the insurance compensation for the Alizay pulp mill,
amounting to about 3 million euros.
The operating result, excluding non-recurring items, was a profit of
EUR 2 million (0). The growth in delivery volume lifted
profitability, though it was weakened by the fall in the average
selling price and decrease in product stocks.
Deliveries by west European producers of uncoated fine paper rose by
4 per cent. The delivery volume of the Office Papers business areas
products rose by 12 per cent.
Compared with the same period of last year, the operating result,
excluding non-recurring items, decreased by EUR 4 million.
Profitability was weakened by the 4 per cent drop in the average
selling price.
Deliveries of uncoated fine paper by west European producers declined
by one per cent compared with the corresponding period a year ago.
The volume of deliveries by the Office Papers business area rose by 2
per cent.
Map Merchant Group
I 05 IV III II I 04 2004 IV 04-I
04 04 04 05
change
Sales 341 343 332 339 354 1,36 -0.6%
8
EBITDA 1) 8 2 6 8 8 24
EBITDA % 2.3 0.6 1.8 2.4 2.3 1.8
Operating result 6 0 4 7 6 17
Operating 1.8 0 1.2 2.1 1.7 1.2
result, %
Non-recurring items 0 -8 0 0 0 -8
Return on capital 7.7 0.5 4.7 8.0 8.2 5.1
employed, %
Return on capital 7.7 9.3 4.7 8.0 8.2 7.6
employed
excl. non-recurring
items, %
Deliveries, 1,000 t 325 330 321 319 338 1,30 -1.5%
8
1) EBITDA = operating result before depreciation and impairment
charges
The operating result of the Map paper merchanting business was a
profit of EUR 6 million (0). The result in the previous quarter
included net non-recurring expenses of EUR 8 million.
The operating result, excluding non-recurring items, was a profit of
EUR 6 million (8). Profitability was weakened by seasonal factors.
Compared with the same period a year ago, the operating result was
unchanged.
M-REAL GROUP (all figures unaudited)
CONDENSED CONSOLIDATED INCOME STATEMENT
EUR million 1-3/05 1-3/04 Change 1-12/04 10-
12/04
Sales 1 344 1 412 -68 5 529 1 365
Other operating income 114 17 97 89 21
Operating expenses -1 245 -1 306 61 -5 199 -1 309
Depreciation and -98 -99 1 -392 -91
impairment losses
Operating profit 115 24 91 27 -14
% of sales 8.6 1.7 0.5 -1.0
Share of result in 1 0 1 0 -1
associated companies
Net exchange gains and -11 -18 7 4 21
losses
Other financial income -28 -48 20 -140 -42
and
expenses, net
Profit on continuing 77 -42 119 -109 -36
operations before tax
% of sales 5.7 -3.0 -2.0 -2.6
Income tax 0 7 -7 -18 -8
Profit on continuing 77 -35 112 -127 -44
operations
% of sales 5.7 -2.5 -2.3 -3.2
Profit on discontinued 0 176 -176 175 -1
operations
Profit of the period 77 141 -64 48 -45
% of sales 5.7 10.0 0.9 -3.3
Minority interest -1 0 -1 -3 -1
Profit/loss attributable 76 141 -65 45 -46
to
shareholders of parent
company
% of sales 5.7 10.0 0.8 -3.4
CONDENSED CONSOLIDATED BALANCE SHEET
EUR million 31.3.05 % 31.3.04 % 31.12.0 %
4
ASSETS
Non-current assets
Intangible assets 645 10.1 643 9.7 644 9.8
Tangible assets 3 160 49.8 3 338 50.7 3 262 50.3
Biological assets 28 0.4 192 2.9 189 2.9
Shares in associated 125 2.0 144 2.2 126 2.0
and other companies
Interest bearing 42 0.7 56 0.8 43 0.7
receivables
Deferred tax 39 0.6 31 0.5 39 0.6
receivables
Other non-interest 25 0.4 10 0.2 10 2.2
bearing receivables
4 064 64.0 4 414 67.0 4 313 66.5
Current assets
Inventories 726 11.4 732 11.1 726 11.2
Receivables
Interest bearing 218 3.4 89 1.4 38 0.6
receivables
Non-interest 1 199 18.9 1 208 18.3 1 167 18.0
bearing
receivables
Cash and cash 142 2.2 146 2.2 242 3.7
equivalents
2 285 36.0 2 175 33.0 2 173 33.5
Total assets 6 349 100.0 6 589 100.0 6 486 100.0
SHAREHOLDERS EQUITY 31.3.05 % 31.3.04 % 31.12.0 %
AND LIABILITIES 4
Shareholder´s
equity
Equity 2 431 38.3 2 038 30.9 2 393 36.9
attributable to
shareholders of
parent
company
Minority interest 30 0.5 29 0.5 37 0.6
Total equity 2 461 38.8 2 067 31.4 2 430 37.5
Non-current
liabilities
Deferred tax 373 5.9 412 6.3 421 6.5
receivables
Post employment 216 3.4 244 3.7 216 3.4
benefit
obligations
Provisions 36 0.6 25 0.3 36 0.5
Other non- 71 1.1 71 1.1 15 0.2
interest bearing
liabilities
Interest bearing 1 502 23.6 1 862 28.3 1 640 25.3
liabilities
2 198 34.6 2 614 39.6 2 328 35.9
Current liabilities
Non-interest 802 12.6 860 13.1 862 13.3
bearing
liabilities
Interest bearing 888 14.0 1 048 15.9 866 13.3
liabilities
1690 26.6 1 908 29.0 1 728 26.6
Total liabilities 3 888 61.2 4 522 68.6 4 056 62.5
Total shareholder´s 6 349 100.0 6 589 100.0 6 486 100.0
equity and
liabilities
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
EUR million 1-3/ 1-3/ 1-12/
05 04 04
Cash flow from
Operating
Activities
Profit for the period 76 141 45
Adjustments to the 79 -45 316
profit, total
Change in working -111 38 52
capital
Cash flow arising from 44 134 413
Operations
Finance costs, net -21 -79 -162
Income taxes paid -10 3 -34
Net cash arising from 13 58 217
Operating Activities
Investments in -93 -22 -245
intangible and
tangible assets
Asset sales and other 311 426 462
investing
cash flow
Net cash flow arising 218 404 217
from
Investing Activities
Share issue 448
Changes in loans and in -292 -447 -771
other financial items
Dividends paid -39 -54 -54
Net cash flow arising -331 -501 -377
from
Financial Activities
Changes in Cash and -100 -39 57
Cash
Equivalents
Cash and Cash 242 185 185
Equivalents
at beginning of period
Translation adjustments 0 0 0
Changes in Cash and -100 -39 57
Cash
Equivalents
Cash and Cash 142 146 242
Equivalents
at end of period
STATEMENT OF CHANGES Share Share Other Retaine Minorit Total
IN SHAREHOLDER´S capital premium funds d y
EQUITY fund earning interes
EUR million s t
Shareholder´s equity 304 473 106 1362 19 2264
according to FAS, Dec
31, 2003
Effects of adopting -285 10 -275
IFRS
Shareholder´s equity, 304 473 106 1077 29 1989
Dec 31, 2003
Dividend paid -54 -54
Share issue 254 194 -12 436
Translation 6 6
differences
Change in minority 8 8
interest
during the period
Profit for the period 45 45
Shareholder´s equity, 558 667 106 1062 37 2430
Dec 31, 2004
Dividend paid -39 -39
Translation 1 1
differences
Change in minority -7 -7
interest
during the period
Profit for the period 76 76
Shareholder´s equity, 558 667 106 1100 30 2461
Mar 31, 2005
KEY FIGURES 1-3/ 1-3/ 1-12/ 10-12/
05 04 04 04
Sales, MEUR 1344 1412 5529 1365
Operating profit, MEUR 115 24 27 -14
Excl. non-recurring 30 24 60 19
items
Profit before taxes, 77 -42 -109 -36
MEUR
Excl. non-recurring -8 -42 -76 -3
items
Profit for the period, 76 141 45 -46
MEUR
Earnings per share, EUR 0.23 0.66 0.20 -0.23
Excl. non-recurring -0.03 0.66 0.28 -0.15
items
From continuing 0.23 -0.17 -0.52 -0.12
operations, EUR
From discontinued 0.83 0.72 -0.11
operations, EUR
Return on equity, % 12.5 -7.1 -5.8 -7.9
Excl. non-recurring -1.3 -7.1 -4.6 -3.6
items , %
Return on capital 9.9 2.0 0.9 -1.1
employed, %
Excl. non-recurring 3.0 2.0 1.5 1.7
items, %
Equity ratio, % 38.6 31.4 37.5 37.5
Gearing ratio, % 81 127 89 89
Shareholder´s equity per 7.38 9.59 7.29 7.29
share, EUR
Interest-bearing net 1988 2619 2183 2183
liabilities, MEUR
Gross capital 93 22 259 100
expenditure,
MEUR
Personnel at the end of 15453 16409 15960 15960
the period
Non-recurring items for the period are capital gain on sale of Metsä
Botnia shares (81) and indemnity received by M-real Alizay (4).
SECURITIES AND 3/05 3/04 12/04
GUARANTEES
EUR million
For own loans 139 190 161
For associated 1 1 1
companies
For affiliated 5 5 5
companies
For others 11 11 11
Total 156 206 178
OPEN DERIVATIVE 3/05 3/04 12/04
CONTRACTS
EUR million
Interest rate 9822 13620 15265
derivatives
Currency derivatives 6015 7622 6641
Other derivatives 23 0 9
Total 15860 21242 21915
The fair value of open derivative contracts calculated at market
value at the end of the review period was -22,3 EUR million (-40,5
EUR million on 31.12.2004 and +1,6 EUR million on 31.3.2004).
RECONCILIATION OF INCOME STATEMENT
Condensed Consolidated Income Statement
EUR million 1-3/2004
Reported Effects IFRS
FAS of 1-3/04
1-3/04 transitio
n to IFRS
Sales 1 382 30 1 412
Other operating 16 1 17
income
Operating expenses -1 288 -18 -1 306
Share of results in -2 2 0
associated
companies
Depreciation and -107 8 -99
impairment losses
Operating profit 1 23 24
Share of results in 0 0 0
associated
companies
Net exchange gains 5 -23 -18
and losses
Other financial -34 -14 -48
income and
expenses, net
Profit on -28 -14 -42
continuing
operations before
tax
Income taxes -2 9 7
Profit on -30 -5 -35
continuing
operations
Profit on 173 3 176
discontinued
operations
Profit for the 143 -2 141
period
Minority interests -1 1 0
Profit/loss 142 -1 141
attributable to
shareholders of
parent company
RECONCILIATION OF BALANCE SHEET
Condensed Consolidated Balance Sheet
EUR million Reported Effects IFRS
FAS of
31.3.04 transitio 31.3.04
n to IFRS
ASSETS
Non-current assets
Intangible assets 696 -53 643
Tangible assets 3 271 -67 3 338
Biological assets 187 5 192
Shares in 142 2 144
associated and
other companies
Interest bearing 54 2 56
receivables
Deferred tax 16 15 31
receivables
Other non-interest 10 0 10
bearing receivables
4 376 38 4 414
Current assets
Inventories 725 7 732
Receivables
Interest bearing 89 0 89
receivables
Non-interest 1 215 -7 1 208
bearing
receivables
Cash and cash 145 1 146
equivalents
2 174 1 2 175
Total assets 6 550 39 6 589
SHAREHOLDERS´ Reported Effects IFRS
EQUITY AND FAS of 31.3.04
LIABILITIES 31.3.04 transitio
n to IFRS
Shareholders´
equity
Equity 2 328 -290 2038
attributable to
shareholders of
parent
company
Minority interest 19 10 29
Total equity 2 347 -280 2067
Non-current
liabilities
Deferred tax 412 0 412
liabilities
Post employment 24 220 244
benefit
obligations
Provisions 40 -15 25
Other non- 24 47 71
interest bearing
liabilities
Interest bearing 1 841 21 1862
liabilities
2 341 273 2614
Current liabilities
Non-interest 863 -3 860
bearing
liabilities
Interest bearing 999 49 1048
liabilities
1 862 46 1908
Total liabilities 4 203 319 4522
Total shareholder´s 6 550 39 6589
equity and
liabilities
Quarterly information
SALES BY SEGMENTS I 05 IV III II I 04 2004
EUR million 04 04 04
Consumer Packaging 238 256 264 267 258 1045
Publishing 208 225 202 188 187 802
Commercial Printing 363 372 368 362 372 1474
Office Papers 176 162 168 159 178 667
Map Merchant Group 341 343 332 339 353 1368
Internal sales and 18 6 55 47 63 171
other
operations
GROUP TOTAl 1344 1365 1389 1363 1412 5529
OPERATING RESULT I 05 IV III II I 04 2004
BY SEGMENTS 04 04 04
EUR million
Consumer Packaging 27 30 25 18 20 93
Publishing 8 4 9 -5 4 12
Commercial Printing -4 -35 -7 -4 -4 -49
Office Papers 5 0 4 0 6 10
Map Merchant Group 6 0 4 7 6 17
Other operations 74 -13 -27 -6 -8 -55
Operating result 115 -14 8 10 24 27
% of sales 8.6 -1.1 0.6 0.7 1.7 0.5
Share of result in 1 -1 1 0 0 0
associated
companies
Net exchange gains -11 21 4 -3 -18 4
and losses
Other financial -28 -42 -36 -14 -48 -140
income and expenses,
net
Profit before 77 -36 -24 -7 -42 -109
continuing
operations before
tax
Income tax 0 -8 -7 -10 7 -18
Profit on continuing 77 -44 -31 -17 -35 -127
operations
Profit on 0 -1 0 0 176 175
discontinued
operations
Profit of the period 77 -45 -31 -17 141 48
Minority interest -1 -1 -1 -1 0 -3
Profit/loss 76 -46 -32 -18 141 45
attributable to
shareholders of
parent company
Earnings per share 0.23 - - - 0.66 0.20
adjusted 0.23 0.15 0.08
for share issue, EUR
NON-RECURRING ITEMS I 05 IV III II I 04 2004
04 04 04
Consumer Packaging 0 3 0 0 0 3
Publishing 0 1 0 0 0 1
Commercial Printing 1 -27 0 0 0 -27
Office Papers 3 0 0 0 0 0
Map Merchant Group 0 -8 0 0 0 -8
Other operations 81 -2 0 0 0 -2
Non-recurring items 85 -33 0 0 0 -33
in operations, total
Non-recurring 0 0 0 0 0 0
financial
items
Non-recurring items, 85 -33 0 0 0 -33
total
Operating result 30 19 8 10 24 60
excl. non-recurring
items
% of sales 2.2 1.4 0.6 0.7 1.7 1.1
Result before taxes, -9 -3 -24 -7 -42 -76
excl. non-recurring
items
% of sales -0.7 -0.2 -1.7 -0.5 -3.0 -1.4
Earnings per share, - - - - 0.66 0.28
excl. non-recurring 0.03 0.15 0.15 0.08
items
Return on equity, -1.3 -3.6 -6.1 -3.2 -7.1 -4.6
excl. non-recurring
items
Return on capital 3.0 1.7 1.0 1.7 2.0 1.5
employed,
excl. non-recurring
items, %
RETURN ON
CAPITAL
EMPLOYED, %
I 05 IV 04 III 04 II 04 I 04 2004
Consumer 11.1 11.9 9.7 7.2 8.0 9.5
Packaging
Publishing 2.7 1.5 3.0 -1.5 1.5 1.1
Commercial -1.0 -10.1 -1.8 -0.8 -1.2 -3.5
Printing
Office Papers 2.4 0.1 1.9 -0.2 3.0 1.2
Map Merchant 7.7 -0.5 4.7 8.0 8.2 5.1
Group
GROUP TOTAL 9.9 -1.1 0.9 1.7 2.0 0.9
CAPITAL EMPLOYED
EUR million
I 05 12/04 9/04 6/04 3/04
Consumer 957 1002 1025 1074 1089
Packaging
Publishing 1186 1208 1211 1199 1227
Commercial 1356 1320 1367 1370 1430
Printing
Office Papers 823 829 863 840 833
Map Merchant 333 329 326 333 321
Group
Other assets 195 247 -185 158 76
GROUP TOTAL 4851 4935 4605 4975 4976
PERSONNEL I 05
Average 2004
Consumer Packaging 2 595 3 082
Publishing 1 434 1 526
Commercial Printing 4 858 4 963
Office Papers 1 975 2 036
Map Merchant Group 2 518 2 528
Other operations 2 172 2 397
GROUP TOTAL 15 553 16 532
DELIVERIES
1000 tons I 05 IV 04 III 04 II 04 I 04 2004
Consumer Packaging 281 340 345 349 341 1374
Publishing 306 336 301 283 273 1192
Commercial Printing 453 469 464 450 459 1842
Office Papers 259 233 246 228 254 961
Paper businesses total 1019 1037 1011 961 986 3995
Map Merchant Group 325 330 321 319 336 1308
PRODUCTION
1000 tons I 05 IV 04 III 04 II 04 I 04 2004
Consumer Packaging 293 326 355 319 331 1330
Publishing 308 314 309 257 268 1148
Commercial Printing 470 472 471 469 472 1885
Office Papers 248 244 241 243 247 975
Paper businesses total 1026 1030 1021 969 987 4008
Metsä-Botnia´s pulp1) 307 283 290 279 300 1151
M-real´s pulp 317 399 384 369 381 1533
1) Equals to M-real´s ownership (47% in Metsä-Botnia).
M-REAL CORPORATION
Hannu Anttila
President and CEO
