M-real Corporation: Operating result excluding non-recurring items improved to EUR 11.1 million (29 October, 2004)

M-real Corporation Stock Exchange Bulletin 29.10.2004 at 1.00 p.m. 1(20)

In the third quarter, M-real Group's operating result, excluding non-recurring
items, rose to a profit of EUR 11.1 million from a loss of EUR 19.9 million in
the previous quarter.  Compared with the second quarter, the operating result
was improved mainly by the growth in the volume of paper delivered. In
addition, profitability in the previous quarter was burdened by the costs of
annual maintenance shutdowns. 
 
Included as non-recurring items in the operating result were write-downs on
fixed assets of the Savon Sellu fluting mill in Finland and the Reflex paper
mill in Germany, to a total value of EUR 53.5 million, as well as the
recognition of negative goodwill of EUR 14.3 million connected with the
purchase of shares in Kemiart Liners Oy. The operating result was a loss of EUR
28.1 million (a loss of 19.9 million). 
 
Key figures for the third quarter:
- Operating result, excluding non-recurring items: a profit of EUR 11.1 million
(a loss of 19.9 million in the previous quarter) 
- The result before extraordinary items and excluding non-recurring items was a
loss of EUR 20.3 million (a loss of 49.6 million). 
- Operating result: a loss of EUR 28.1 million (a loss of 19.9 million)
- The result before extraordinary items was a loss of EUR 59.5 million (a loss
of 49.6 million) 
- Earnings per share: EUR 0.34 negative (0.18 negative)
- Result for the report period: a loss of EUR 62.1 million (a loss of 31.5
million). 
- Cash flow from operations: EUR 77.0 million (0.7 negative)
- Return on capital employed: 1.9 per cent negative (1.0 negative)
- Turnover: EUR 1,362.7 million (1,333.3)
- Equity ratio at the end of the period: 37.2 per cent (35.8)
- Key figures adjusted for the effects of the rights issue: equity ratio: 41.9
per cent, gearing: 81 per cent, interest bearing net debt: EUR 2 189 million 
- Capacity utilisation rate at the paperboard mills: 96 per cent (86); capacity
utilisation rate at the paper mills: 89 per cent (86) 
 
All businesses except for Map Merchants reported an improved operating result,
excluding non-recurring items. The improvement in profitability was due mainly
to the growth in delivery volumes. 
 
The growth in paper demand continued in the third quarter. M-real's deliveries
of paperboard also remained at the good level seen in the first half of the
year and production capacity was nearly in full use. 
 
During the quarter the price of coated and uncoated fine paper fell slightly
and the price of coated magazine paper remained at nearly the previous
quarter's level. 
 
"Thanks to continued strong demand, we are still confident in our ability to
implement price increases for both coated and uncoated fine papers, although
the effect of this on 2004 is likely to be minor", said Senior Executive Vice
President & COO Hannu Anttila, commenting on the market situation. "In respect
of folding boxboard, we have announced our intention to raise prices before the
end of the year, but for coated magazine papers, the more significant price
increases are considered from the beginning of 2005." 
 
"The 200 million euro cost reduction and profitability improvement programme,
which was announced in the beginning of the year, proceeds as planned", Anttila
states. 
 
"Although demand will probably hold up well, the seasonal variation will lower
delivery volumes, and the fourth-quarter result, excluding extraordinary items,
will be weaker than the third quarter," was Anttila's estimate of the near-term
outlook.