M-real's operating result excluding non-recurring items for the January-September 2011 EUR 81 million
M-real Corporation Interim Report 1 January–30 September 2011 2 November 2011 at 12:00 EET
Result for January–September 2011
• Sales were EUR 1,961 million (Q1–Q3/2010: 1,940)
• Operating result excluding non-recurring items EUR 81 million (136). Operating result including non-recurring items EUR 1 million (150).
• Result before taxes excluding non-recurring items EUR 33 million (72). Result before taxes including non-recurring items EUR -51 million (70).
• Earnings per share from continuing operations excluding non-recurring items EUR 0.06 (0.16), and including non-recurring items EUR -0.20 (0.15)
Result for the third quarter of 2011
• Sales EUR 616 million (Q2/2011: 660)
• Operating result excluding non-recurring items EUR 6 million (32). Operating result including non-recurring items EUR -13 million (-32).
• Result before taxes excluding non-recurring items EUR -11 million (16). Result before taxes including non-recurring items EUR -29 million (-53).
• Earnings per share from continuing operations excluding non-recurring items EUR -0.05 (0.04), and including non-recurring items EUR -0.11 (-0.17)
Events during the third quarter of 2011
• Profitability of cartonboard production continued to be good
• Profitability of paper and pulp production weakened
• A new coating unit of the Kemi linerboard machine was commissioned
• Divestment of Hallein pulp mill to Schweighofer Group was completed
Events after the period
• M-real announced to start processes to close the Alizay mill and discontinue the unprofitable operations at the Gohrsmühle mill.
• M-real announced to continue the Chromolux business and investigate opportunities to launch a folding boxboard customer service and logistics centre and a sheeting plant in Gohrsmühle.
• M-real announced in November plans to restructure its coated paper business, including proposed closure of Äänekoski paper mill and increase of Husum mill’s production
“Profitability of our cartonboard production continued to be strong in the third quarter. At the same time, the weakening of the paper and pulp market, our on-going measures at the Alizay mill and in Speciality Papers as well as the maintenance and investment shutdowns in Kemi and at the Metsä-Botnia mills weakened our profitability, as expected, in the third quarter.”
“Cartonboard order books have been declining from the record level of early year 2011. Nevertheless, the demand and profitability outlook of folding boxboard are strong, and when the inventory levels of customers normalize, the order inflows are believed to improve rapidly. M-real will increase its folding boxboard capacity as planned in order to meet the increasing demand.”
“The measures to eliminate losses of Alizay, Specialty Papers and coated paper operations are progressing. They constitute a significant portion of the company's strategic transformation into a successful cartonboard company and will raise M-real's profitability to a new, improved level. Concurrently, taking full advantage of the potential of our cartonboard machines will further improve our cost competitiveness and support M-real's profitable growth.” Mikko Helander, CEO
| KEY FIGURES | 2011 | 2011 | 2011 | 2010 | 2011 | 2010 | 2010 |
| Q3 | Q2 | Q1 | Q3 | Q1-Q3 | Q1-Q3 | Q1-Q4 | |
| Sales, EUR million | 616 | 660 | 685 | 662 | 1 961 | 1 940 | 2 605 |
| EBITDA, EUR million | 24 | 48 | 77 | 95 | 149 | 238 | 312 |
| excl. non-recurring items, EUR million | 36 | 62 | 74 | 85 | 172 | 234 | 305 |
| EBITDA, % | 3.9 | 7.3 | 11.2 | 14.4 | 7.6 | 12.3 | 12.0 |
| excl. non-recurring items, % | 5.8 | 9.4 | 10.8 | 12.8 | 8.8 | 12.1 | 11.7 |
| Operating result, EUR million | -13 | -32 | 46 | 66 | 1 | 150 | 146 |
| excl. non-recurring items, EUR million | 6 | 32 | 43 | 54 | 81 | 136 | 173 |
| EBIT, % | -2.1 | -4.8 | 6.7 | 10.0 | 0.1 | 7.7 | 5,6 |
| excl. non-recurring items, % | 1.0 | 4.8 | 6.3 | 8.2 | 4.1 | 7.0 | 6.6 |
| Result before taxes | |||||||
| from continuing operations, EUR million | -29 | -53 | 31 | 45 | -51 | 70 | 48 |
| excl. non-recurring items, EUR million | -11 | 16 | 28 | 33 | 33 | 72 | 92 |
| Result for the period | |||||||
| from continuing operations, EUR million | -33 | -59 | 28 | 38 | -64 | 49 | 27 |
| from discontinued operations, EUR million | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total, EUR million | -33 | -59 | 28 | 38 | -64 | 49 | 27 |
| Result per share | |||||||
| from continuing operations, EUR | -0.11 | -0.17 | 0.08 | 0.12 | -0.20 | 0.15 | 0.09 |
| from discontinued operations, EUR | 0.00 | 0.00 | 0.00 | 000 | 0.00 | 0.00 | 0.00 |
| Total, EUR | -0.11 | -0.17 | 0.08 | 0.12 | -0.20 | 0.15 | 0.09 |
| Result per share | |||||||
| excl. non-recurring items, EUR | -0.05 | 0.04 | 0.07 | 0.08 | 0.06 | 0.16 | 0.23 |
| Return on equity, % | -14.1 | -23.5 | 10.8 | 15.5 | -8.9 | 6.8 | 2.8 |
| excl. non-recurring items, % | -6.3 | 4.2 | 9.5 | 10.7 | 2.7 | 7.1 | 7.6 |
| Return on capital employed, % | -1.5 | -6.1 | 8.4 | 11.6 | 0.4 | 7.8 | 5.7 |
| excl. non-recurring items, % | 2.0 | 6.4 | 7.8 | 9.6 | 5.4 | 8.0 | 7.6 |
| Equity ratio at end of period, % | 32.7 | 33.9 | 33.6 | 31.8 | 32.7 | 31.8 | 32.1 |
| Gearing ratio at end of period, % | 128 | 120 | 125 | 135 | 128 | 135 | 135 |
| Net gearing ratio at end of period, % | 83 | 84 | 78 | 81 | 83 | 81 | 83 |
| Interest-bearing net liabilities, EUR million | 772 | 809 | 799 | 821 | 772 | 821 | 827 |
| Gross investments, EUR million | 17 | 31 | 12 | 31 | 60 | 48 | 66 |
| Deliveries, 1 000 tonnes | |||||||
| Paper businesses | 254 | 277 | 301 | 269 | 832 | 858 | 1 155 |
| Consumer Packaging | 307 | 315 | 334 | 353 | 956 | 1 046 | 1 390 |
| Personnel at the end of period | |||||||
| in continuing operations | 4,163 | 4,699 | 4,515 | 4,682 | 4,163 | 4,682 | 4,538 |
| EBITDA = Earnings before interest, taxes, depreciation and impairment charges | |||||||
Near-term outlook
No signs of weakness have been observed in the end demand of cartonboard. Cartonboard delivery volumes were at a record high level in late last year and early this year. Nevertheless, inventory levels have been clearly reduced in recent months in different parts of the supply chain as the general economic situation has become more uncertain and the producers' ability to supply board has improved. The long-term demand and profitability outlook of cartonboard continues to be strong. The inventory levels of cartonboard are expected to start normalize during the coming months.
M-real will increase its folding boxboard capacity as planned despite the temporarily weaker order book. At the Kyro mill a capacity increase investment is carried out in November, which will result in a shutdown of the mill for slightly more than a week. The capacity increase investment at the Äänekoski mill will be carried out in the spring of 2012.
Folding boxboard annual contract negotiations for 2012 have progressed as planned, and by the end of October, slightly more than a half of next year's annual contracts were signed. Depending on the end use segment and market area, the prices have remained unchanged or increased slightly compared to the 2011 level.
General economic uncertainty has weakened the paper and pulp market situation in all main markets in recent months. Paper and pulp order books are currently below the normal level and production curtailments are carried out in most mills during the remainder of the year. The price of office paper is estimated to decrease slightly in Europe during the last quarter of the year. Due to the reduced demand of paper and the maintenance works done at Husum pulp mill, M-real’s pulp deliveries are estimated to decline slightly in the final quarter of the year. The euro-denominated average pulp price is estimated to decrease in the coming months.
Cost inflation has clearly accelerated in 2011. However, costs are not expected to increase further in the last quarter of the year. M-real launched a EUR 70 million profit improvement programme for 2011 in January. The combined positive impact of M-real's 2011 profit improvement programme and the programmes launched earlier is estimated to be EUR 90 million in 2011, which is believed to mainly offset the increased cost inflation.
M-real’s operating result, excluding non-recurring items, is in the last quarter of 2011 expected to be roughly at the same level as in the third quarter of 2011. Profitability of cartonboard production is expected to continue strong. The measures under implementation in Alizay mill and in Speciality Papers business area will stress the paper business’ results operatively also in the last quarter of 2011. Profitability of pulp production is expected to weaken during the remaining part of this year.
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 interim report January–September 2011 enclosed to this stock exchange release. M-real's complete interim report January–September 2011 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 10 465 4913
Juha Laine, Vice President, Investor Relations and Communications, tel. +358 10 465 4335
More information available starting from 1 p.m. on 2 November 2011. 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 891240.