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Interim report January-June 2001

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INTERIM REPORT JANUARY - JUNE 2001


    * Turnover EUR 625.7 million (667.3 million for January - June 2000)
    * Operating profit EUR 185.1 million (219.5 million)
    * Profit before extraordinary items EUR 178.5 million (201.2 million)
    * Investments EUR 81.8 million (44.9 million)
    * Return on capital employed 27.8% (33.1%)
    * Equity ratio 67.9% (59.4%)

Turnover and financial results

Turnover for the first six months was EUR 625.7 million (667.3 million for the
same period last year) and operating profit EUR 185.1 million (219.5 million).
Profit before extraordinary items was EUR 178.5 million, 11.3 per cent down on
last year's figure of EUR 201.2 million. Return on capital employed was 27.8
per cent (33.1%) and the gearing ratio was 26.0 per cent (41.3%). 

Profitability was poorer than for this period last year. Market pulp prices in
euros were on average about 6 per cent higher than for the first six months of
last year, but sales volumes were 16 per cent down. 
Profitability for the second quarter was weaker than during the first, with
profit after financial items less than half of that for January - March.
Euro-denominated market pulp prices were 16 per cent lower and sales volumes 3
per cent lower than in the first quarter. 

Market review

The decline in demand for market pulp that began last autumn continued during
the first half of this year. The capacity utilization rate in the Norscan
countries for the first six months of the year was 84 per cent, yet stocks
remained at 1.8 million tonnes. 

The price of softwood pulp fell from USD 705 to USD 515/tonne during the review
period. Short-fibre pulp prices fell correspondingly from EUR 720 to EUR
520/tonne. 

Orderstocks for linerboard are currently low. Invoicing for the first half of
the year was only 84 per cent of budget. However, despite the slack demand,
price levels have been maintained. 

Production and deliveries

Pulp deliveries for the first six months were 948,425 tonnes, 16 per cent down
on this period last year. Substantial curtailments in production during the
same period (some 290,000 tonnes) have been necessary to bring production into
line with demand. 

Linerboard deliveries were 143,135 tonnes, 7 per cent less than for the first
half of last year. Linerboard production has also been curtailed to meet
demand. 

Production will continue to be curtailed during the second half of the year.

Investments

Joutseno's new fibre line started up on schedule in mid-May. The final cost was
below the original budget of EUR 250 million. 

Start-up went smoothly, and the targets set for both quality and output have
been achieved. Environmental emissions have fallen considerably, and Joutseno
is now one of the world's leading mills in this respect. 

Outlook

The poorer economic outlook in the USA and, to some extent also in the EU, is
likely to keep demand for market pulp slack in the next few months, with no
immediate improvement in sight. However, buyers' pulp stocks are low, and
demand will rise quickly once the global economy starts to recover. 

Prices will probably bottom out during the summer. The poor profitability
resulting from low prices is likely to mean low capacity utilization rates
during late summer and early autumn. This in turn could allow prices to be
raised to some extent before the end of the year. 

Metsä-Botnia's financial result for the second half of the year will be much
weaker than for the first.

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