Drop in paper price and rising euro weakened M-real's profitability in 2004 ( 4 February, 2005)
M-real Corporation Stock Exchange bulletin 4.2.2005 at 1 p.m.
The M-real Group's operating result, excluding non-recurring items, declined in 2004 and was a loss of EUR 2.0 million, compared with an operating profit of EUR 88.5 million in the previous year. The main factors behind the drop in the operating result were the fall in the price of paper and the appreciation of the euro. The operating result was also reduced by the divestment of Metsä Tissue in January 2004. Net non-recurring expenses of EUR 72.7 million were booked as a charge to the operating result (14.7 million in 2003), the biggest items of which were the recognition of negative goodwill of EUR 14.3 million connected with the purchase of shares in Kemiart Liners Oy, the write-down of fixed assets of the Savon Sellu fluting mill in Finland and the Zanders Reflex paper mill in Germany, to a total value of EUR 53.5 million, an EUR 8.4 million reversal of the write-down of Savon Sellu's fixed assets, the EUR 24 million expense provision connected with the profitability improvement programme launched at Zanders' Gohrsmühle and Reflex mills and a EUR 5.3 million provision for the restructuring of the operations of Modo Merchants Ltd and James McNaughton Paper Group Ltd. The operating result was a loss of EUR 74.7 million (a profit of 73.8). Key figures in 2004: - Turnover: EUR 5,460.3 million (6,044.1 in 2003) - Operating result, excluding non-recurring items: a loss of EUR 2.0 million (a profit of EUR 88.5 million) - Operating result: a loss of EUR 74.7 million (a profit of 73.8) - The result before extraordinary items net of non-recurring items was a loss of EUR 119.1 million (a loss of 37.5) - The result before extraordinary items was a loss of EUR 209.0 million (a loss of 80.2) - Result for the financial year: a net loss of EUR 15.3 million (a loss of 95.0 million) - Earnings per share: EUR 0.79 negative (0.43 negative) - Board of Directors' dividend proposal: EUR 0.12 per share (0.25) - Cash flow from operations: EUR 251.6 million (425.1) - Return on capital employed: 1.0 per cent negative (1.6 positive) - Equity ratio: 41.5 per cent (31.9) - Gearing: 82 per cent (137) - Operating rate at the paperboard mills: 89 per cent (84); operating rate at the paper mills: 88 per cent (83) Of the businesses, Cartons and Map Merchants improved their profitability. Demand for paper and paperboard grew substantially compared with the previous year. M-real's deliveries of paper increased by 7 per cent and deliveries of paperboard were similarly up 7 per cent on a comparable basis. A drop occurred in the selling prices of all papers, especially in uncoated fine paper. No major change took place in the selling price of paperboard. The appreciation of the euro nevertheless lowered the selling price in euros obtained from deliveries of paper and paperboard outside Europe. President & CEO Hannu Anttila comments on the outlook for the current year: "Measures to raise the prices of coated paper grades and folding boxboard are continuing. There is also a considerable need for price increases in uncoated fine papers." "The EUR 30 million cost savings target which was set for 2004 was exceeded, and we have increased our estimate on the impact of cost-savings and efficiency improvement measures during 2005 and 2006 to EUR 200 million. The objective is to lift the level of earnings into the black during the second half of the current year. To achieve the objective the planned cost-savings are to be realized, the sought-after price increases are to go through during the first part of the year and the United States dollar is not to weaken significantly from its current level." M-real's first-quarter result before taxes and excluding non-recurring items is nevertheless forecast to be slightly in the red. M-REAL CORPORATION Corporate Communications For further information, contact Hannu Anttila, President and CEO, tel. +358 10 469 4343 or Juhani Pöhö, Senior Vice President and CFO, tel. +358 10 469 5283 Year 2004 financial results M-real Corporation is a European paper and paperboard company with nearly 16,500 employees. M-real provides fibre-based solutions for consumer packaging, communications and advertising end-uses. Through its worldwide sales network, M-real serves its customers consisting mostly of publishers, printers, paper merchants, offices and well-known consumer product companies. The turnover of M-real in 2003 amounted to 6 billion euros. The company is headquartered in Finland, and it is listed on the Helsinki Stock Exchange. www.m-real.com