POSITIVE RESULT BEFORE TAXES FOR M-REAL?S FIRST QUARTER
M-real Corporation Stock Exchange Bulletin 27 April 2006 at 1.00.00 p.m.
POSITIVE RESULT BEFORE TAXES FOR M-REALS FIRST QUARTER
M-reals consolidated result before taxes, excluding non-recurring
items, improved to EUR 16 million from a loss of EUR 11 million in
the previous quarter. The operating result excluding non-recurring
items amounted to EUR 35 million (11). Profitability improved mainly
due to the increase in the volume of paperboard and fine paper
delivered, as well as lower fixed costs achieved through implemented
savings measures. By contrast, profitability was weakened by the
significant increase in energy costs and higher fibre cost,
particularly in the Commercial Printing business area.
KEY FIGURES 1-3/06 10- 1-3/05 1-12/05
12/05
Sales, M 1,441 1,369 1,344 5,241
Operating result, M 35 -27 115 36
excluding non-recurring 35 11 30 4
items, M
Result before taxes, M 16 -49 77 -114
excluding non-recurring 16 -11 -8 -142
items, M
Result for the period, M 3 -38 77 -80
Earnings per share, e 0.01 -0.12 0.23 -0.25
Return on equity, % 0.5 -6.6 12.5 -3.4
excluding non-recurring 0.5 -0.5 -1.3 -4.8
items, %
Return on capital employed, % 3.4 -1.8 10.1 1.2
excluding non-recurring 3.4 1.4 3.0 0.5
items, %
Equity ratio at end of period, 36.2 36.6 38.6 36.6
%
Gearing ratio at end of period, 100 95 81 95
%
Interest-bearing net 2,296 2,205 1,988 2,205
liabilities, M
Gross investments, M 103 144 93 452
Paperboard deliveries, 1,000 304 268 281 1,006
tonnes
Paper deliveries, 1,000 tonnes 1,080 1,037 1,019 4,046
Personnel at end of period 15,046 15,154 15,453 15,154
M-reals President & CEO Hannu Anttila comments: While we achieved a
positive financial result in line with our objectives, our
profitability is modest. This is due to a sharp rise in costs, which
we have not been able to successfully offset by raising product
prices. The upward trend in production costs and resulting pressure
to raise the prices of paper and paperboard continues.
M-real's gearing ratio has reached the set maximum level. This is
attributable to profitability being weaker than anticipated, losses
due to last summer's labour disputes and investments allocated to
strategic projects such as the Kaskinen BCTMP mill, Simpele board
mill and Metsä-Botnia's pulp mill in Uruguay. In the short-term we
will focus on cost savings projects as well as managing the
indebtedness development. While our second-quarter performance is
anticipated to be weaker than in the first quarter, we are confident
the financial result for 2006 excluding non-recurring items will be
positive, Anttila concludes.
M-REAL CORPORATION
Corporate Communications
For further information please contact Mr Hannu Anttila, President
and CEO, tel. +358 10 469 4343 or Mr Juhani Pöhö, Executive Vice
President and CFO, tel. +358 10 469 5283
M-REAL CORPORATION
INTERIM REPORT 1 JANUARY - 31 MARCH 2006
MARKET SITUATION
Economic growth in the eurozone increased slightly as domestic demand
picked up. Several indicators pointed to economic growth also
elsewhere in Europe. Overall growth in the world economy continued
strong with Asia leading the way. Uncertainty factors still include
the price of crude oil, the US trade deficit and the dollar exchange
rate.
In Western Europe, printed advertising spending is this year
estimated to grow slightly faster than the general economy.
Demand for folding boxboard developed positively in Europe,
especially in Eastern Europe. Deliveries by west European producers
to Europe increased by almost 10 per cent, while exports to markets
outside Europe fell slightly from the previous year. Deliveries of
white top liner also increased markedly. The market prices of both
folding boxboard and white top liner remained stable.
Deliveries of coated and uncoated fine papers by west European
producers rose clearly above the levels of the corresponding period
in 2005. Total deliveries of coated magazine papers continued
unchanged. While demand in Europe picked up slightly, deliveries to
markets outside Europe fell somewhat short of the previous year's
levels.
There were no major changes to the European paper market prices. The
price of office paper showed a slight upturn at the end of the report
period.
JANUARY-MARCH EARNINGS COMPARED WITH THE PREVIOUS QUARTER
In the first quarter, M-reals consolidated sales amounted to EUR
1,441 million (10-12/2005: 1,369). Sales were up 5.3 per cent.
Operating result was EUR 35 million (-27). The operating result does
not include non-recurring items. The operating result for the
previous quarter included EUR 38 million of non-recurring net
expenses. The previous quarter's operating result excluding non-
recurring items amounted to EUR 11 million.
The operating result improved mainly due to the increase in the
volume of paperboard and fine paper delivered and lower fixed costs
thanks to the implemented savings measures. The financial result was
weakened by the considerable increase in energy costs. This weakening
was moderated by valuation gains of EUR 8 million on electricity
derivatives realized at Group level. Higher fibre costs, particularly
in the Commercial Printing business area, weakened profitability.
Deliveries of paperboard to customers totalled 304,000 tonnes
(268,000). Production was curtailed by 12,000 tonnes in line with
demand (20,000).
Total deliveries of paper totalled 1,080,000 tonnes (1,037,000).
Production curtailments amounted to 36,000 tonnes (38,000).
Profitability improved in all business areas except Publishing.
The share of the results in associated companies amounted to a loss
of EUR 1 million (profit of 1).
Financial income and expenses were in total EUR -18 million (-23).
Foreign exchange differences on accounts receivable and payable,
financial items and the valuations of currency hedging were EUR 8
million (-7). Net interest and other financial expenses were EUR -26
million (-16).
Other financial expenses include EUR 4 million of valuation gains on
interest rate derivatives. In the previous quarter, valuation gains
of EUR 10 million were booked on the corresponding instruments.
Currency and interest rate hedges are used to hedge future cash flows
against fluctuations in foreign exchange and interest rates. The
valuation gains and losses that were booked are attributable
primarily to changes in the exchange rate of the US dollar and in the
general level of interest rates. Beginning in the third quarter of
2005, M-real has applied partial hedge accounting according to IAS 39
to hedge its dollar cash flow exposure, and from the last quarter, it
has also hedged the cash flow exposure of the Swedish krona.
Valuation gains of EUR 6 million were recognised in shareholders'
equity at the end of March.
At the end of March, the US dollar exchange rate against the euro was
2.6 per cent lower and the rate of the British pound against the euro
1.6 per cent lower than at the end of December. On average, the
dollar weakened by 1.1 per cent and sterling by 0.9 per cent compared
with the previous quarter.
The result before taxes was EUR 16 million (-49). Excluding non-
recurring items, the result before taxes for the previous period
amounted to EUR -11 million.
M-reals financial result for the reporting period was EUR 3 million
(-38). Income taxes, including the change in the deferred tax
liability, amounted to EUR 13 million (positive 11).
Earnings per share were EUR 0.01 (-0.12) and net of non-recurring
items, EUR 0.01 (-0.01).
The return on equity was 0.5 per cent (-6.6); excluding non-recurring
items, 0.5 per cent (-0.5). The return on capital employed was 3.4
per cent (-1.8); excluding non-recurring items, 3.4 per cent (1.4).
JANUARY-MARCH EARNINGS COMPARED WITH THE CORRESPONDING PERIOD IN 2005
Sales were EUR 1,441 million (1-3/2005: 1,344). Comparable sales rose
by 7.9 per cent.
Operating result was EUR 35 million (115). The operating result does
not include non-recurring items. The operating result for the
corresponding period, excluding non-recurring items, was EUR 30
million.
Profitability was improved mainly by the increase in the volumes of
coated fine paper and paperboard delivered, the rise in the price of
coated magazine paper and the strengthening of the dollar. By
contrast, profitability was weakened by a significant increase in
energy costs in all business areas, higher fibre costs in Commercial
Printing and a fall in the price of uncoated graphic paper.
Deliveries of paperboard to customers totalled 304,000 tonnes
(281,000). Production was curtailed by 12,000 tonnes in line with
demand (17,000).
The total volume of paper deliveries was 1,080,000 tonnes
(1,019,000). Production curtailments amounted to 36,000 tonnes
(64,000).
Profitability improved in the Publishing, Commercial Printing and Map
Merchant business areas.
The operating result for the reporting period includes a 39 per cent
share of Metsä-Botnia's operating result, as compared to 47 per cent
share in the corresponding period.
The share of the results in associated companies amounted to a loss
of EUR 1 million (profit of 1).
Financial income and expenses in total were EUR -18 million (-39).
Foreign exchange differences on accounts receivable and payable,
financial items and the valuations of currency hedging were EUR 8
million (-11). Net interest and other financial expenses were EUR -26
million (-28).
Other financial expenses include EUR 4 million of valuation gains on
interest rate hedges.
At the end of March, the exchange rate of the US dollar against the
euro was 9.0 per cent higher and the rate of the British pound
against the euro 1.1 per cent lower than at the end of March 2005. On
average, the dollar strengthened by 8.3 per cent and sterling by 1.0
per cent compared with the first quarter in 2005.
The result before taxes was EUR 16 million (77). The result before
taxes excluding non-recurring items was EUR 16 million (-8).
M-reals financial result for the reporting period was EUR 3 million
(77). Income taxes, including the change in the deferred tax
liability, amounted to EUR 13 million (0).
Earnings per share were EUR 0.01 (0.23). Excluding non-recurring
items, earnings per share were EUR 0.01 (-0.03).
The return on equity was 0.5 per cent (12.5); excluding non-recurring
items, 0.5 per cent (-1.3 per cent). The return on capital employed
was 3.4 per cent (10.1); excluding non-recurring items, 3.4 per cent
(3.0).
PERSONNEL
The number of personnel at the end of March was 15,046 employees
(15,154 employees at 31 December 2005), of whom 4,430 employees
worked in Finland (4,488). The net reduction was 108 employees, of
which 12 employees as a result of changes in group structure.
M-real employed an average of 15,082 people during the period under
review.
The Groups personnel includes 39 per cent of Metsä-Botnias
employees.
CAPITAL EXPENDITURES
Gross investments were EUR 103 million during the period under review
(1-3/2005: 93).
Capital expenditures on property, plant and equipment totalled EUR 81
million, which includes a EUR 37 million share of Metsä-Botnia's
investments (15). The share of the Metsä-Botnias investments for the
reporting period is based on a 39 per cent share ownership in Metsä-
Botnia, as compared to 47 per cent ownership in the corresponding
period.
M-real has also paid a purchase price of EUR 22 million for shares in
companies acquired (corresponding to M-real's share in those
companies), which consists of additional shares in Metsä-Botnia's
subsidiaries and associated companies in Uruguay.
The Simpele mill investment project progressed according to plan. The
main shutdown of the investment project took place from 20 March to 6
April, and the mill is currently in post-shutdown start-up phase.
When the investment is completed, the mill's paperboard production
capacity will rise to 215,000 tonnes annually.
FINANCING
At the end of March, the equity ratio was 36.2 per cent (12/2005:
36.6) and the gearing ratio 100 per cent (12/2005: 95).
Interest-bearing net liabilities amounted to EUR 2,296 million at the
end of March (12/2005: 2,205). Seven per cent of the Group's long-
term loans were denominated in foreign currencies. Of these loans, 68
per cent was subject to variable interest rates and the rest to fixed
interest rates. The average interest rate on the loans was 5 per cent
at the end of March and the average maturity of long-term loans was
4.5 years. The interest rate maturity was 12 months. During the
reporting period the interest rate maturity has varied from 12 to 16
months.
First-quarter cash flow from operations before investments and
financing was EUR 65 million (10-12/2005: 29). Working capital was up
EUR 65 million from the turn of the year due to seasonal factors.
At the end of the period under review, an average of 7 months of net
foreign currency exposure was hedged. The degree of hedging during
the period has varied between 7 and 9 months. At the end of the
reporting period, approximately 98 per cent of the non euro-
denominated shareholders equity was hedged.
Liquidity is good. Liquidity at the end of March was EUR 1,564
million, of which EUR 1,454 million consisted of binding long-term
credit commitments and EUR 110 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 700
million.
On 8 February, Standard & Poors Ratings Services lowered the rating
on M-reals long-term loans from BB to BB- and changed the outlook
for the rating from stable to negative.
On 28 February, Moodys Investors Services lowered the rating on M-
real's long-term loans from Ba2 to Ba3; the outlook for the credit
rating remained negative.
In March, M-real launched a 7-year 500 million Eurobond issue. The
bond is due on 1 April 2013 and pays a coupon of 7.25 per cent. The
issue price was 98.655 to give a yield of 7.50 per cent. The bond was
used to repay syndicated revolving credit facilities.
SHARES
The highest price of M-reals Series B share on the Helsinki Stock
Exchange during the January-March period 2006 was EUR 5.57, the
lowest EUR 4.00 and the average price EUR 4.77. At the end of the
March, the price of the Series B share was EUR 5.47. In 2005 the
average price was EUR 4.36. The last quotation of the share price at
the end of 2005 was EUR 4.22.
The trade volume of the Series B share in the January-March period
was EUR 740 million, or 53 per cent of the shares outstanding. The
market value of the Series A and B shares at the end of March
totalled EUR 1,795 million.
At the end of March, Metsäliitto Cooperative 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 33.9 per cent
of the shares.
The Annual General Meeting on 13 March 2006 authorized the Board of
Directors for one year from the date of the Annual General Meeting to
decide on increasing the share capital through one or more rights
issues and/or one or more issues of convertible bonds such that in
the rights issue or issue of convertible bonds, a total maximum of
58,365,212 M-real Corporation Series B shares with a nominal value of
EUR 1.70 can be subscribed for, and that the company's share capital
can be increased by a total maximum of EUR 99,220,860.40.
The authorization will confer the right to disapply shareholders' pre-
emptive right to subscribe for new shares and/or issues of
convertible bonds and to decide on the subscription prices and other
terms and conditions. Shareholders' pre-emptive subscription rights
can be disapplied providing that there is a significant financial
reason for the company to do so, such as strengthening of the
company's balance sheet, making possible business structuring
arrangements or taking other measures for developing the company's
business operations. The Board of Directors may not disapply the pre-
emptive subscription rights on behalf of a related party.
DIVIDEND
The Annual General Meeting resolved to pay a dividend of EUR 0.12 per
share for the financial year ended 31 December 2005, for a total of
EUR 39,379,873.44. The dividend was paid out on 23 March.
BOARD OF DIRECTORS AND AUDITORS
The Annual General Meeting elected the following persons to M-reals
Board of Directors: Mr Heikki Asunmaa, Titular Counsellor of Forest
Economy; Mr Kim Gran, President of Nokian Tyres plc; Mr Kari Jordan,
President & CEO of Metsäliitto Cooperative; Mr Asmo Kalpala, CEO of
Tapiola Group; Mr Erkki Karmila, Executive Vice President of Nordic
Investment Bank; Mr Runar Lillandt, Titular Farming Counsellor; Mr
Antti Tanskanen, CEO of the OP Bank Group, and Mr Arimo Uusitalo,
Titular Farming Counsellor. The term of office of the Board members
extends up to the end of the next Annual General Meeting.
At its organising meeting, the Board of Directors elected Mr Kari
Jordan as Chairman and Mr Arimo Uusitalo as Vice Chairman.
The Annual General Meeting elected as M-reals auditors Mr Göran
Lindell, Authorized Public Accountant, and the Authorized Public
Accountants PricewaterhouseCoopers Oy, with Mr Jouko Malinen,
Authorized Public Accountant, acting as Principal Auditor and Mr
Björn Renlund, Authorized Public Accountant, and Mr 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.
STRATEGY REVIEW
On 13 March, M-real's Board of Directors has initiated a strategic
review of M-real's current business portfolio, with a view to M-real
exploring potential benefits of participation in the consolidation
and restructuring of the European paper industry. The strategy review
is in its early stages and M-real is not in a position to speculate
as to the likely outcome thereof.
METSÄ-BOTNIA'S PULP MILL PROJECT IN URUGUAY
Construction work for the pulp mill progressed normally during the
first quarter. Foundation work for the buildings has been completed
and construction above ground has started. The construction site
employed 1,760 people at the end of March.
In April, Metsä-Botnia suspended the construction works for ten days
with the aim of contributing to opening a space for dialogue between
the governments of Uruguay and Argentina. Metsä-Botnia has announced
its desire to assist in solving the dispute to its best ability and,
since the start of the project, has openly disclosed information
regarding the mill's impact on the region.
The dispute between Uruguay and Argentina over the construction of
Metsä-Botnia's pulp mill continues.
NEAR TERM OUTLOOK
In 2006, economic growth in Western Europe is forecast to accelerate
slightly, but will likely remain at approximately 2 per cent.
Spending on printed advertising is expected to increase by over 2 per
cent compared with 2005. The rising market price of crude will keep
oil-based raw materials expensive and transport costs high. The
continuing upward trend in energy prices and the increase in the
market price of pulp will significantly add to the production costs.
During the first quarter, the demand for M-reals main products was
good and is forecast to remain approximately at the same level in the
second quarter.
The prices of uncoated fine paper and certain speciality papers were
raised during the first quarter. The price of coated fine paper
sheets was raised in Continental Europe at the beginning of April.
Further price increases concerning uncoated fine paper will be made
in May. The average prices of fine paper grades are thus in the
second quarter expected to be slightly above the levels of the
previous quarter. The prices of coated magazine paper and folding
boxboard are expected to remain unchanged during the second quarter.
In addition to seasonal factors, the second-quarter performance will
also be negatively affected by costs due to maintenance and
investment shutdowns and lower production volumes.
M-reals second-quarter result before taxes excluding non-recurring
items is forecast to be below the first-quarter level.
Espoo, 27 April 2006
BOARD OF DIRECTORS
BUSINESS AREAS AND MARKET TRENDS
Consumer Packaging
I 06 IV III II I 05 2005 I
05 05 05 06/IV
05,
change
Sales 257 231 196 199 238 864 +11.3%
EBITDA 44 37 33 6 49 125 +18.9%
EBITDA, % 17.1 16.0 16.8 3.0 20.6 14.5
Operating result 24 16 14 -16 27 41
Operating result, 9.3 6.9 7.1 -8.0 11.3 4.7
%
Non-recurring items 0 0 0 0 0 0
Return on capital 10.9 7.8 6.7 -6.9 11.9 4.8
employed, %
Return on capital 10.9 7.8 6.7 -6.9 11.9 4.8
employed, excluding
non-recurring
items, %
Deliveries, 1,000 t 304 268 226 231 281 1,00 +13.4%
6
Paperboard 299 272 292 128 293 985 +9.9%
production, 1,000 t
EBITDA = Earnings before interest, taxation, depreciation and
amortization
The first quarter compared with the previous quarter
The Consumer Packaging business area reported an operating result of
EUR 24 million for the first quarter (10-12/2005: 16). This result
does not include non-recurring items. The operating result was
improved mainly by the increase in delivery volumes.
Deliveries by west European folding boxboard producers were up 7 per
cent. M-reals deliveries of folding boxboard were up 13 per cent.
The selling price of folding boxboard was on par with the previous
quarter.
The volume of linerboard deliveries was up 14 per cent. The average
selling price was on a par with the previous quarter.
The first quarter compared with the corresponding quarter in 2005
The operating result weakened by EUR 3 million compared with the
corresponding period in 2005. The operating result was weakened
mainly by the increase in fibre and energy costs.
Deliveries by west European folding boxboard producers increased by 7
per cent compared with the corresponding period in 2005. M-real's
deliveries were up 6 per cent, the highest growth occurring in
Eastern Europe and the Far East. The average euro-denominated selling
price of folding boxboard rose slightly thanks to the stronger
dollar.
The volume of linerboard deliveries rose by 15 per cent. On average,
the selling price remained at the level of the corresponding period
last year.
Publishing
I 06 IV III II I 05 2005 I
05 05 05 06/IV
05,
chang
e
Sales 225 230 181 177 208 796 -2.2%
EBITDA 32 34 35 0 29 98
EBITDA, % 14.2 14.8 19.3 0.0 13.9 12.3
Operating result 11 13 14 -21 8 14
Operating result, % 4.9 5.7 7.7 - 3.8 1.8
11.9
Non-recurring items 0 0 0 -2 0 -2
Return on capital 4.1 4.8 5.6 -7.7 2.9 1.3
employed, %
Return on capital 4.1 4.8 5.6 -7.0 2.9 1.6
employed, excluding
non-recurring items,
%
Deliveries, 1,000 t 318 326 257 256 307 1.146 -2.5%
Production, 1,000 t 307 315 294 155 308 1.072 -2.5%
EBITDA = Earnings before interest, taxation, depreciation and
amortization
The first quarter compared with the previous quarter
The Publishing business area reported an operating result of EUR 11
million for the first quarter (10-12/2005: 13). The operating result
does not include non-recurring items. The operating result was
weakened mainly by higher energy costs.
Deliveries by west European producers of coated magazine paper were
down 10 per cent. The Publishing business areas delivery volume was
down 3 per cent.
The first quarter compared with the corresponding quarter in 2005
The operating result improved by EUR 3 million compared with the
corresponding period in 2005. This was largely attributable to a 6
per cent rise in the average selling price.
Deliveries by west European coated magazine paper producers were at
the level of the corresponding period in 2005. The Publishing
business areas delivery volume was up 4 per cent.
Commercial Printing
I 06 IV III II I 05 2005 I
05 05 05 06/IV
05,
chang
e
Sales 394 376 381 368 363 1,488 +4.8%
EBITDA 24 3 25 9 22 58
EBITDA, % 6.1 0.8 6.6 2.4 6.1 3.9
Operating result -2 -41 0 -17 -4 -62
Operating result, % -0.5 - 0.0 -4.6 -1.1 -4.2
10.9
Non-recurring items 0 -29 0 -1 +1 -29
Return on capital -0.5 - 0.0 -5.5 -1.0 -4.9
employed, % 13.7
Return on capital -0.5 -3.9 0.0 -5.1 -1.3 -2.6
employed, excluding
non-recurring items,
%
Deliveries, 1,000 t 497 469 480 464 453 1,866 +6.0%
Production, 1,000 t 509 476 482 452 470 1,880 +6.9%
EBITDA = Earnings before interest, taxation, depreciation and
amortization
The first quarter compared with the previous quarter
The Publishing business area reported an operating loss of EUR 2
million for the first quarter (10-12/2005: -41). The financial result
for the previous quarter included EUR 29 million of non-recurring
expenses. The previous quarter's operating result, excluding non-
recurring items, amounted to EUR -12 million.
Profitability improved mainly due to the increase in delivery and
production volumes, as well as lower fixed costs achieved through
implemented savings measures. Fibre and energy costs were clearly
above the previous quarter's levels.
Deliveries by west European producers of coated fine paper were up 1
per cent. M-reals deliveries of coated fine paper were up 6 per
cent. The average selling price was on par with the previous quarter.
The price of certain speciality papers was successfully raised during
the first quarter. The prices of coated fine paper sheets was raised
in Continental Europe at the beginning of April.
The first quarter compared with the corresponding quarter in 2005
The business area's operating result improved by EUR 2 million
compared with the corresponding period in 2005. Profitability was
mainly improved by increased delivery volumes, which were up 10 per
cent due to positive demand, and lower fixed costs. By contrast,
selling prices were below last year's levels. The financial result of
the first quarter was negatively affected by the higher fibre and
energy costs.
Deliveries by west European producers of coated fine paper were up 7
per cent. M-reals deliveries of coated fine paper were up 13 per
cent on the previous year. Deliveries to Europe and North America
were up in particular.
Office Papers
I 06 IV III II I 05 2005 I
05 05 05 06/IV
05,
chang
e
Sales 183 167 174 187 176 704 +9.6%
EBITDA 20 18 13 5 20 57
EBITDA, % 10.9 10.8 7.5 2.7 11.4 8.1
Operating result 4 3 -3 -10 5 -5
Operating result, % 2.2 1.8 -1.7 -5.3 2.8 -0.7
Non-recurring items 0 0 0 -12 3 -9
Return on capital 2.2 1.6 -1.1 -5.1 2.4 -0.5
employed, %
Return on capital 2.2 1.6 -1.1 1.0 1.0 0.6
employed, excluding
non-recurring items,
%
Deliveries, 1,000 t 266 242 254 279 259 1,034 +9.9%
Production, 1,000 t 264 258 260 268 248 1,034 +2.3%
EBITDA = Earnings before interest, taxation, depreciation and
amortization
The first quarter compared with the previous quarter
The Office Papers business area reported an operating result of EUR 4
million for the first quarter (10-12/2005: 3). Profitability improved
mainly by the increase in the delivery volume and lower fixed costs
thanks to the implemented savings measures.
Deliveries by west European producers of uncoated fine paper were up
4 per cent. The delivery volume of the Office Papers business area's
products was up 10 per cent.
The first quarter compared with the corresponding quarter in 2005
The Office Papers business area reported a decrease of EUR 1 million
in the operating result compared with the first quarter in 2005. The
financial result was weakened by an increase in energy costs. By
contrast, the result was improved by a 2 per cent increase in the
average selling price and a 3 per cent increase in delivery volume.
Deliveries by west European producers of uncoated fine paper were up
3 per cent. The delivery volume of the Office Papers business area's
products was thus up 3 per cent. Deliveries were up in all market
areas.
Map Merchant Group
I 06 IV III II I 05 2005 I
05 05 05 06/IV
05,
chang
e
Sales 365 357 341 351 341 1,390 +2.2%
EBITDA 9 2 6 9 8 26
EBITDA, % 2.5 0.6 1.8 2.6 2.3 1.9
Operating result 7 0 5 7 6 18
Operating result, % 1.9 0.0 1.5 2.0 1.8 1.3
Non-recurring items 0 -4 0 0 0 -4
Return on capital 8.7 2.1 4.5 9.3 8.3 6.0
employed, %
Return on capital 8.7 7.1 4.5 9.3 8.3 7.2
employed, excluding
non-recurring items,
%
Deliveries, 1,000 t 363 347 337 343 332 1,359 +4.6%
EBITDA = Earnings before interest, taxation, depreciation and
amortization
The first quarter compared with the previous quarter
The Map Merchants paper merchanting business reported an operating
result of EUR 7 million for the first quarter (10-12/2005: 0). The
operating result for the previous quarter included EUR 4 million of
non-recurring expenses. The financial result for the previous quarter
was EUR 4 million excluding non-recurring items.
The result was improved by the seasonal increase in the delivery
volumes.
The first quarter compared with the corresponding quarter in 2005
The operating result improved by EUR 1 million compared with the
corresponding period in 2005. Profitability improved mainly due to an
increase in delivery volumes.
M-REAL GROUP (all figures unaudited)
CONDENSED CONSOLIDATED INCOME STATEMENT
EUR million 1-3/06 1-3/05 Change 1-12/05 10-
12/05
Continuing operations:
Sales 1 441 1 344 97 5 241 1 369
Other operating income 37 114 -77 206 32
Operating expenses -1 350 -1 245 -105 -5 008 -1 310
Depreciation and -93 -98 5 -403 -118
impairment losses
Operating result 35 115 -80 36 -27
% of sales 2.4 8.6 0.7 -2.0
Share of results in -1 1 -2 -2 1
associated companies
Net exchange gains and 8 -11 19 -33 -7
losses
Other financial income -26 -28 2 -115 -16
and expenses, net
Result before taxes 16 77 -61 -114 -49
% of sales 1.1 5.7 -2.2 -3.6
Income taxes -13 0 -13 34 11
Result for the period 3 77 -74 -80 -38
% of sales 0.2 5.7 -1.5 -2.8
Attributable to:
Shareholders of parent 2 76 -74 -81 -38
company
Minority interest 1 1 0 1 0
Earnings per share for 0.01 0.23 -0.22 -0.25 -0.12
result attributable to
the shareholders of
parent company, euros
CONDENSED CONSOLIDATED BALANCE SHEET
31.3.06 % 31.3.05 % 31.12.05 %
EUR million
ASSETS
Non-current assets
Intangible assets 677 10.7 645 10.1 654 10.3
Tangible assets 3 166 50.0 3 160 49.8 3 178 50.2
Biological assets 46 0.7 28 0.4 36 0.6
Shares in 116 1.8 125 2.0 114 1.8
associated and
other companies
Interest bearing 40 0.7 42 0.7 46 0.7
receivables
Deferred tax 31 0.5 39 0.6 33 0.5
receivables
Other non-interest 20 0.3 25 0.4 23 0.4
bearing receivables
4 096 64.7 4 064 64.0 4 084 64.5
Current assets
Inventories 746 11.8 726 11.5 749 11.8
Receivables
Interest bearing 172 2.7 218 3.4 167 2.7
receivables
Non-interest 1 204 19.0 1 199 18.9 1 215 19.2
bearing
Cash and cash 110 1.8 142 2.2 112 1.8
equivalents
2 232 35.3 2 285 36.0 2 243 35.5
Total assets 6 328 100.0 6 349 100.0 6 327 100.0
SHAREHOLDERS
EQUITY AND
LIABILITIES
Shareholders
equity
Equity attributable 2 237 35.4 2 431 38.3 2 271 35.9
to shareholders of
parent company
Minority interest 49 0.8 30 0.5 45 0.7
Total equity 2 286 36.2 2 461 38.8 2 316 36.6
Non-current
liabilities
Deferred tax 335 5.3 373 5.9 336 5.3
liabilities
Post employment 210 3,3 216 3,4 211 3,3
benefit obligations
Provisions 58 0,9 36 0,6 62 1,0
Other non-interest 51 0,8 71 1,1 60 0,9
bearing liabilities
Interest bearing 2 077 32,8 1 502 23,6 1 877 29,7
liabilities
2 731 43,1 2 198 34,6 2 546 40,2
Current liabilities
Non-interest 769 12,1 802 12,6 813 12,9
bearing liabilities
Interest bearing 542 8,6 888 14,0 652 10,3
liabilities
1 311 20,7 1 690 26,6 1 465 23,2
Total liabilities 4 042 63,8 3 888 61,2 4 011 63,4
Total shareholders 6 328 100.0 6 349 100.0 6 327 100.0
equity and
liabilities
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
EUR million 1-3/ 1-3/ 1-12/ 10-12/
06 05 05 05
Cash flow from
Operating Activities
Result for the period 3 77 -80 -38
Adjustments to the 127 78 480 131
result, total
Change in working -65 -111 -82 -64
capital
Cash flow arising from 65 44 318 29
Operations
Finance costs, net -30 -21 -136 -40
Income taxes paid -5 -10 -46 -15
Net cash flow arising 30 13 136 -26
from Operating
Activities
Investments in -103 -93 -452 -144
intangible and
tangible assets
Asset sales and other 2 311 312 -8
investing cash flow
Net cash flow arising -101 218 -140 -152
from
Investing Activities
Minoritys share in 19 0 12 12
share issue
Changes in loans and 90 -292 -100 158
in
other financial items
Dividends paid -39 -39 -39 0
Net cash flow arising 70 -331 -127 170
from Financial
Activities
Changes in Cash and -1 -100 -131 -8
Cash Equivalents
Cash and Cash 112 242 242 120
Equivalents at
beginning of period
Translation -1 0 1 0
adjustments
Changes in Cash and -1 -100 -131 -8
Cash Equivalents
Cash and Cash 110 142 112 112
Equivalents at end of
period
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
EUR million Share Share Translati Fair Retained Minori Total
capit premium on value earnings ty
al fund differenc and intere
es other st
reserve
s
Shareholders 558 667 6 2 1 160 37 2 430
equity Jan 1,
2005, IFRS
Translation 0
differences
Net expenses -2 -2
recognised
directly in
equity
Change in 7 7
minority
interest during
the period
Result for the -81 1 -80
period
Total recognised -2 -81 8 -75
income for the
period
Dividends paid -39 -39
Shareholders 558 667 6 0 1 040 45 2 316
equity Dec 31,
2005
Translation -3 -3
differences
Net expenses 6 6
recognised
directly in
equity
Change in 3 3
minority
interest during
the period
Result for the 2 1 3
period
Total recognised -3 6 2 4 9
income for the
period
Dividends paid -39 -39
Shareholders 558 667 3 6 1 003 49 2 286
equity Mar 31,
2006
KEY RATIOS
1-3/ 1-3/ 1-12/ 10-12/
06 05 05 05
Sales, EUR Million 1 441 1 344 5 241 1 369
Operating result, EUR 35 115 36 -27
Million
excl. non-recurring 35 30 4 11
items
Result before taxes, 16 77 -114 -49
EUR Million
excl. non-recurring 16 -8 -142 -11
items
Result for the period, 3 77 -80 -38
EUR Million
Earnings per share, EUR 0.01 0.23 -0.25 -0.12
excl. non-recurring 0.01 -0.03 -0.35 -0.01
items EUR
from continuing 0.01 0.23 -0.25 -0.12
operations EUR
from discontinued 0.00 0.00 0.00 0.00
operations
EUR
Return on equity, % 0.5 12.5 -3.4 -6.6
excl. non-recurring 0.5 -1.3 -4.8 -0.5
items, %
Return on capital 3.4 10.1 1.2 -1.8
employed, %
excl. non-recurring 3.4 3.0 0.5 1.4
items, %
Equity ratio, % 36.2 38.6 36.6 36.6
Gearing ratio, % 100 81 95 95
Shareholders equity 6.82 7.38 6.92 6.92
per share, EUR
Interest-bearing net 2 296 1 988 2 205 2 205
liabilities, EUR
Million
Gross capital 103 93 452 144
expenditure, EUR
Million
Personnel at the end of 15 046 15 453 15 154 15 154
the period
SECURITIES AND GUARANTEES
3/06 3/05 12/05
EUR million
For own loans 98 139 108
For associated 1 1 1
companies
For affiliated 5 5 5
companies
For others 10 11 11
Total 114 156 125
OPEN DERIVATIVE 3/06 3/05 12/05
CONTRACTS
EUR million
Interest rate 4 336 9 822 7 416
derivatives
Currency derivatives 3 447 6 015 5 365
Other derivatives 106 23 54
Total 7 889 15 860 12 835
The fair value of open derivative contracts calculated at market
value at the end of the review period was -3.2 EUR million (-37.3 EUR
million Dec 31, 2005).
Also includes other closed contracts to a total amount of euros 3
685.9 million euros (8 164.8 million euros Dec 31, 2005).
QUARTERLY INFORMATION
SALES BY SEGMENTS I 06 IV III II I 05 IV III 2005
EUR million 05 05 05 04 04
Consumer Packaging 257 231 196 199 238 256 264 864
Publishing 225 230 181 177 208 225 202 796
Commercial 394 376 381 368 363 372 368 1488
Printing
Office Papers 183 167 174 187 176 162 168 704
Map Merchant Group 365 357 341 351 341 343 332 1390
Internal sales and 17 8 -4 -23 18 6 53 -1
other operations
GROUP TOTAL 1441 1369 1269 1259 1344 1364 1387 5241
OPERATING RESULT I 06 IV III II I 05 IV III 2005
BY SEGMENTS, EUR 05 05 05 04 04
million
Consumer Packaging 24 16 14 -16 27 30 25 41
Publishing 11 13 14 -21 8 4 9 14
Commercial -2 -41 0 -17 -4 -35 -7 -62
Printing
Office Papers 4 3 -3 -10 5 0 4 -5
Map Merchant Group 7 0 5 7 6 0 4 18
Other operations -9 -18 -10 -15 73 -16 -18 30
Operating result 35 -27 20 -72 115 -17 17 36
% of sales 2,4 -2,0 1,6 -5,7 8,6 -1,3 1,2 0,7
Share of result in -1 2 0 -4 1 -1 1 -2
associated
companies
Net exchange gains 8 -7 0 -15 -11 21 4 -33
and losses
Other financial -26 -17 -19 -52 -28 -42 -36 -115
income and
expenses, net
Result on 16 -49 1 -143 77 -39 -14 -114
continuing
operations before
tax
Income tax -13 11 2 21 0 -8 -8 34
Result on 3 -38 3 -122 77 -47 -23 -80
continuing
operations
Result on 0 0 0 0 0 2 -8 0
discontinued
operations
Result for the 3 -38 3 -122 77 -45 -31 -80
period
Earnings per share 0.01 - 0.0 - 0.23 - - -
adjusted for share 0.12 1 0.37 0.23 0.15 0.25
issue, EUR
NON-RECURRING I 06 IV III II I 05 IV III 2005
ITEMS 05 05 05 04 04
Consumer Packaging 0 0 0 0 0 3 0 0
Publishing 0 0 0 -2 0 1 0 -2
Commercial 0 -29 0 -1 1 -27 0 -29
Printing
Office Papers 0 0 0 -12 3 0 0 -9
Map Merchant Group 0 -4 0 0 0 -8 0 -4
Other operations 0 -5 0 0 81 -2 0 76
Non-recurring 0 -38 0 -15 85 -33 0 32
items in
operations, total
Non-recurring 0 0 0 -4 0 0 0 -4
financial items
Non-recurring 0 -38 0 -19 85 -33 0 28
items, total
Operating result 35 11 20 -57 30 19 8 4
excl. non-
recurring items
% of sales 2.4 0.8 1.6 -4.5 2.2 1.4 0.6 0.1
Result before 16 -11 1 -124 -9 -3 -24 -142
taxes, result
excl. non-
recurring items
% of sales 1.1 -0.8 0.1 -9.8 -0.7 -0.2 -1.7 -2.7
Earnings per 0.01 - 0.01 - - - - -
share, excl. non- 0.01 0.32 0.03 0.15 0.15 0.35
recurring items
Return on equity, 0.5 -0.6 0.4 - -1.3 -3.6 -6.1 -4.9
excl. non- 17.6
recurring items
Return on capital 3.4 1.3 2.3 -0.3 3.0 1.7 1.0 0.4
employed, excl.
non-recurring
items
RETURN ON I 06 IV 05 III 05 II 05 I 05 IV 04 III 04
CAPITAL 2005
EMPLOYED, %
Consumer 10.9 7.8 6.7 -6.9 11.9 12.8 10.6 4.8
Packaging
Publishing 4.1 4.8 5.6 -7.7 2.9 1.6 3.2 1.3
Commercial -0.5 -13.7 0.0 -5.5 -1.0 -10.4 -1.8 -4.9
Printing
Office 2.2 1.6 -1.1 -5.1 2.4 0.1 2.0 -0.5
Papers
Map Merchant 8.7 2.1 4.5 9.3 8.3 -0.6 5.1 6.0
Group
GROUP TOTAL 3.4 -1.8 2.3 -5.7 10.1 -1.4 1.7 1.2
CAPITAL EMPLOYED 03/06 12/05 9/05 6/05 3/05 12/04 9/04
EUR million
Consumer 917 878 857 835 894 943 949
Packaging
Publishing 1 124 1 094 1 077 1 056 1 121 1 132 1 144
Commercial 1 273 1 178 1 204 1 225 1 249 1 313 1 362
Printing
Office Papers 754 762 764 780 805 818 826
Map Merchant 323 324 315 308 306 301 301
Group
Other assets 514 610 506 479 476 428 23
GROUP TOTAL 4 904 4 846 4 723 4 683 4 851 4 935 4 605
Segments capital employed includes segments assets (= goodwill,
other intangible assets, tangible assets, biological assets,
investments in associated companies, inventories and accounts
receivables, prepayment and accrued income (excluding interest and
tax items) ) deducted by segments liabilities (= accounts payable,
advances received and accruals and deferred income (excluding
interest and tax items)).
PERSONNEL I 2006 I 2005 I-IV
Average 2005
Consumer Packaging 2 557 2 595 2 667
Publishing 1 431 1 434 1 486
Commercial Printing 4 646 4 858 4 816
Office Papers 1 853 1 975 1 948
Map Merchant Group 2 518 2 518 2 515
Other operations 2 077 2 172 2 146
GROUP TOTAL 15 082 15553 15 578
DELIVERIES
1000 tons I 06 IV 05 III II 05 I 05 IV 04 III 2005
05 04
Consumer Packaging 304 268 226 231 281 340 345 1006
Publishing 318 326 257 256 307 336 301 1146
Commercial Printing 497 469 480 464 453 469 464 1866
Office Papers 266 242 254 279 259 233 246 1034
Paper businesses 1 080 1 037 991 999 1 019 1 038 1 011 4 046
total
Map Merchant Group 363 347 337 343 332 330 321 1 359
PRODUCTION
1000 tons I 06 IV 05 III II 05 I 05 IV 04 III 2005
05 04
Consumer Packaging 299 272 292 128 293 326 355 985
Publishing 307 315 294 155 308 314 309 1 072
Commercial Printing 509 476 482 452 470 472 471 1 880
Office Papers 264 258 260 268 248 244 241 1 034
Paper mills total 1 079 1 048 1 036 875 1 026 1 030 1 021 3 985
Metsä-Botnias pulp 251 252 234 108 307 283 290 901
1)
M-reals pulp 440 421 379 350 383 399 384 1 533
1) Equals to M-reals ownership in Metsä-Botnia (39% as from II 05,
47% until I 05).
M-REAL CORPORATION
Hannu Anttila
President and CEO
