METSÄLIITTO GROUP RELEASE 1(10)
5 February 2004 at 12.00
METSÄLIITTO GROUP 2003
The downturn on forest products markets continued in 2003 and turnover
for the Metsäliitto Group was about 6 per cent lower than in 2002.
Earnings before interest and depreciation (EBITDA) was down by around
24 per cent, and operating profit (EBIT) by some 64 per cent. Result
before extraordinary items was still well on the positive side in
autumn, but non-recurring expenses booked during the final quarter
caused the Group to return a loss for the year.
Metsäliitto Cooperative, the parent company, came close to reaching
its wood procurement target of 16.4 million cubic metres. Wood
purchasing went better than planned right up to August-September,
when prices for all wood species began to fall. This was immediately
reflected in the amount of wood offered for sale, and trading during
the last months of the year was very quiet.
The sawmills improved their financial results on the previous year.
The main reasons were greater efficiency, higher capacity utilization
rates and a modest rise in prices for sawn timber. On the other hand,
both birch and conifer plywood products suffered all year from
intensified competition and falling prices. The market deteriorated
even further after the summer. Finnforest was showing a profit of EUR
4 million for the first half of the year but as the seasonal
improvement in demand in the autumn failed to materialize, Finnforest
returned a loss for the year.
On paper markets prices have been falling for several years. The
strengthening of the euro by an average of 20 per cent against the
dollar during 2003 intensified competition in Europe and put further
pressure on prices. As a result of weak demand and production cut-
backs, M-reals paper machines operated at just 83 per cent of
capacity. There was no notable change in prices for board products,
but the capacity utilization rate slipped to 84 per cent.
M-reals turnover was 8 per cent down on 2002 and operating profit
almost 77 per cent down. Operations made a heavy loss during the
final quarter of the year, for which M-real booked non-recurring
expenses of EUR 73 million and costs of business closures of EUR 16
million.
The pulp producer Botnia returned a satisfactory result under the
circumstances, although turnover was 3 per cent lower than the
previous year. The lower turnover was due mainly to the fall in the
exchange rate for the dollar, although the impact on the financial
result was offset by a higher capacity utilization rate and higher
market prices for softwood pulp. The dollar-denominated price of
softwood pulp rose by an average of 14 per cent in 2003, whereas the
price of hardwood pulp quoted in euros, fell by 8 per cent.
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In January 2004, Metsäliitto Cooperative became Metsä Tissues owner
with 66 per cent of the companys shares. The tissue business is more
stable, and Metsä Tissues profitability has developed positively in
recent years. Metsä Tissues turnover for 2003 was up by 3 per cent
and operating profit by 13 per cent.
TURNOVER
Turnover for the Metsäliitto Group was EUR 8,318 million (8,868
million in 2002), a decrease of some 6 per cent. Operations in
Finland contributed EUR 863 million of turnover (1,004) i.e. 10 per
cent (11). Exports and foreign subsidiaries accounted for EUR 7,455
million (7,864).
FINANCIAL RESULTS
Operating profit was EUR 151.1 million, 1.8 per cent of turnover
(413.5 million and 4.7%). Other operating income was EUR 105.0
million (86.9).
The entire business operations of Logisware Oy, which is owned jointly
by Metsäliitto Cooperative and M-real, were transferred to IBM at the
beginning of September. The sale resulted in post-tax capital gains of
EUR 13.9 million.
Net financial expenses were EUR 191.0 million, 2.3 per cent of
turnover (204.0 million and 2.3%). Financial income was EUR 38.4
million (32.4) and financial expenses were EUR 229.3 million (236.4).
Financial items include exchange rate gains of EUR 19.9 million (-
7.8).
The Metsäliitto Groups result before extraordinary items was a loss
of EUR 39.8 million (209.5 million profit). The figure includes
around EUR 73 million in non-recurring expenses. These comprised loan
restructuring costs, bad debts, provisions made for environmental
liabilities and the cost of workforce reductions.
Extraordinary items totalled EUR -15.1 million (+144.5), consisting
mainly of the cost of business closures.
Result before taxes and minority interests was EUR -54.8 million
(+354.1). Taxes were EUR 20.6 million (89.0) and minority interests
EUR 58.9 million (-140.8). The result for the financial period was a
loss of EUR 16.5 million (124.3 million profit).
The return on capital employed was 2.5 per cent (6.3) and the return
on equity -2.4 per cent (+4.0).
FINANCING
The equity ratio was 35.4 per cent at the beginning of the year and
35.0 per cent at the end. The gearing ratio at the end of December
was 117 per cent (113). Net interest-bearing liabilities were EUR
3,468 million (3,543).
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Liquidity was good throughout the year. In line with the Groups
financial strategy, the amount of liquid funds and investments was
kept low and liquidity was maintained through the use of committed
credit lines.
The consolidated balance sheet shows liquid assets and investments
totalling EUR 215 million (242). At the end of the year the Group
also had committed credit facilities not shown in the balance sheet
totalling EUR 1,363 million (1,337). For its short-term financing
needs, the Group also has around EUR 0.8 billion in non-committed
domestic and foreign commercial paper programmes and forward credits
(0.8).
Metsäliitto Cooperatives members capital increased by EUR 77.8
million (53.5) to stand at EUR 544.7 million at the end of the year
(466.9). Additional members capital represents EUR 410 million of
members capital (338).
MAIN FINANCIAL EVENTS
Standard & Poors Rating Services downgraded M-reals credit rating
from BBB- /A3 to BB+/B, outlook stable. Correspondingly, Moodys
Investor Service lowered the credit rating from Baa3/Prime3 to
Ba1/Not-Prime, outlook negative.
In November, Metsäliitto Cooperatives Representative Council
approved new rules pertaining to members capital. An increase in
members capital will be used to strengthen the parent cooperatives
funds to correspond with the Groups growth. The increase will be
achieved in three ways. The first is to increase members payment
obligation, the second is to raise the maximum amount that can be
invested in additional members capital A, and the third is to open
additional members capital B for purposes of investment.
In April, Finnforest signed a EUR 240 million revolving credit
facility. Some of this will be used to refinance the USD 130 million
syndicated loan of 1998. The new loan has a maturity of five years.
In September, Botnia signed a EUR 210 million revolving credit
facility. The loan is being used for general corporate purposes and
for refinancing existing loans.
As part of its loan restructuring, in December M-real paid back loans
of JPY 34 billion.
CAPITAL EXPENDITURE
M-reals Board of Directors approved the construction of a mill to
produce bleached chemi-thermomechanical pulp (BCTMP) at Kaskinen. Most
of the mills production will be supplied to M-reals units outside
Finland. The new mill is expected to be completed in autumn 2005 at a
total cost of around EUR 180 million.
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Finnforest has chosen Hartola as the location for its new housing
module plant. Construction work has started, and production will
begin in autumn 2004. The plants production capacity will be
gradually increased to the equivalent of around 1,000 houses a year.
Botnia is planning to build two samills in Russia. One is to be built
at Podporozhye in Leningrad administrative region and the other at
Suda in the Vologda region. The aim of the project is to secure raw
material for the production of high-quality reinforcement pulp. The
Podporozhye sawmill will have an annual production capacity of around
300,000 cubic metres. The final decision will be made once all the
necessary contracts and permits have been agreed. There are plans for
a possible start-up of production in 2005. The schedule for the Suda
sawmill will be decided at a later date.
Biowatti plans to complete construction of a wood pellets plant at
Joutseno in autumn 2004. The company already has pellet plants at
Kaskinen, Turenki and Vöyri.
Gross capital expenditure by the Metsäliitto Group in 2003 was EUR 484
million (510).
ACQUISITIONS
In March, Metsä-Botnia bought 60 per cent of the Uruguayan company
Compania Forestal Oriental S.A. (Fosa) from Shell International
Renewables BV. Fosa owns 57,000 hectares of land in the west of
Uruguay, of which 36,000 hectares is eucalyptus plantations. By the
end of this decade, Fosa will be able to produce around one million
cubic metres of short-fibre raw material.
Finnforests subsidiary Moelven Industrier has signed a conditional
agreement to purchase the Swedish Are-Group. The Are-Group has five
production units in Sweden and one in Norway turning out sawn timber
and processed goods, as well as its own product distribution network.
It has a turnover of about EUR 100 million and a workforce of some
300.
OTHER RESTRUCTURING
In January, M-real announced it had acquired all Metsä Tissue
Corporation shares owned by SCA. This raised M-reals shareholding in
Metsä Tissue to 84.85 per cent. In February, M-real made a redemption
offer for all outstanding Metsä Tissue shares and share options. The
price offered was EUR 12.30 per share.
Metsä Tissues shares were removed from the main listing on the
Helsinki Stock Exchange on 19 June, when M-reals ownership of the
company had risen to 100 per cent. The total cost of the shares and
options purchased was roughly EUR 127 million.
In June, M-real submitted an offer to the Portuguese government to buy
a 25 per cent minority stake in the Portuguese pulp and paper company
Portucel Group. In September, M-real published a bulletin announcing
5 (10)
that it had not achieved its aims in its negotiations with the
Portuguese government.
M-real agreed to form a strategic partnership with IBM Global
Services. Under this agreement, M-real would transfer to IBM its IT
services business and the entire operations of Logisware Oy, which it
owns jointly with Metsäliitto Cooperative. The deal was completed at
the beginning of September.
In October, M-real decided to close the market pulp business of its
Lielahti CTMP mill. In future, the mills entire production will be
used for board manufacture at the companys Tako mill. The estimated
workforce reduction will be around 90.
PERSONNEL
Metsäliitto and its subsidiaries had an average total of 30,056
employees in 2003 (31,008). Of these, 10,029 worked in Finland
(10,279) and 20,027 abroad (20,729). The number of employees at the
end of the year was 29,164 (30,247), of whom 19,498 were located
outside Finland (20,383). The parent company had an average of 878
employees (894).
METSÄLIITTO COOPERATIVE
Metsäliitto Cooperatives turnover was EUR 1,154 million (1,096).
Operating profit was EUR 25.5 million, 2.2 per cent of turnover (25.8
million and 2.4%). Profit before extraordinary items was EUR 104.4
million (159.4). The figure includes dividend income of EUR 81.9
million (113.6). The return on capital employed was 11.3 per cent
(15.9) and the equity ratio at 31 December was 67.0 per cent (66.5).
FINNFOREST CORPORATION
Finnforest produced a turnover of EUR 1,791 million (1,811).
Operating profit was EUR 8.6 million, 0.5 per cent of turnover (34.9
million and 1.9%). The result before extraordinary items was a loss
of EUR 25.1 million (2.1 million profit). The return on capital
employed was 1.3 per cent (4.0) and the equity ratio, including
capital loans, was 39.3 per cent (40.6).
M-REAL CORPORATION
M-reals turnover was EUR 6,044 million (6,564) and operating profit
EUR 73.8 million (324.3). Operating profit was 1.2 per cent of
turnover (4.9). The result before extraordinary items was a loss of
EUR 80.2 million (134.3 million profit). The figure includes non-
recurring expenses of around EUR 73 million and non-recurring income
of around EUR 30 million. In addition, some EUR 16 million in costs
incurred from the closure of businesses has been entered under
extraordinary expenses.
Earnings per sha e were EUR -0.51 (0.36), return on capital employed
1.6 per cent (5.8) and the equity ratio 31.9 per cent (34.2).
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BOTNIA
Botnia booked a turnover of EUR 1,006 million (1,034) and an
operating profit of EUR 84.2 million (153.8). Operating profit was
8.4 per cent of turnover (14.9). Before extraordinary items there was
a profit of EUR 78.9 million (150.5). The return on capital employed
was 6.9 per cent (11.7) and the equity ratio at the year-end 70.3 per
cent (69.6).
EVENTS OCCURRING AFTER THE CLOSING OF ACCOUNTS
At the beginning of January 2004, M-real sold 66 per cent of Metsä
Tissue Corporations business operations to Metsäliitto Cooperative
and 17 per cent to the Tapiola Group. The sale was based on Metsä
Tissues debt-free value, which was roughly EUR 570 million. At the
end of January, M-real sold its remaining 17 per cent of the company
to Varma Mutual Pension Insurance Company and to Sampo Life Insurance
Company Ltd.
OUTLOOK
The Metsäliitto Groups profitability declined considerably last
year. Particularly difficult was the paper market, where product
prices have been falling for several years now. Towards the end of
the year, however, there were signs that demand is beginning to pick
up in areas important to the Metsäliitto Group. On the other hand, no
major change is expected to the prevailing situation during the early
part of the year.
The Metsäliitto Groups financial result for 2003 fell to an
unsatisfactory level. Vigorous measures have been started by all the
Groups companies to improve financial results and cash flows. The
Metsäliitto Groups most important goal is to strengthen its
financial position.
Espoo,February 2004
BOARD OF DIRECTORS
Pekka Kivelä
Senior VP, Group Communications
For more information, please contact
Hannu Anttila, Senior Vice President, CFO, tel. +358 1046 94260
Pekka Kivelä, Senior VP, Group Communications, tel. +358 1046 94545
M-real, Finnforest and Botnia publish their own financial reviews.
7 (10)
METSÄLIITTO COOPERATIVES OPERATING PROFIT REMAINS STABLE
Turnover for Metsäliitto Cooperative, the parent company, rose five
per cent to EUR 1,154 million (1,096 million in 2002). Operating
profit was EUR 25.5 million (25.8) and profit before extraordinary
items EUR 104.4 million (159.4). Profit includes dividend income of
EUR 81.9 million (113.6). Turnover for Finnforest was EUR 1,791
million, about the same as the previous year (1,811). Operating
profit was EUR 8.6 million (34.9) and before extraordinary items the
group made a loss of EUR 25.1 million (profit of 2.1 million). The
market for mechanical wood-processing products deteriorated,
especially during the second half of the year.
Turnover Operating Result before
Profit extraordinary items
MEUR 2003 2002 2003 2002 2003 2002
Metsäliitto
Cooperative 1 154 1 096 25 26 104 159
Thomesto 375 365 8 5 4 4
Biowatti 55 46 5 4 5 4
Finnforest 1 791 1 811 9 35 -25 2
-internal items -638 -613 -2 -39
Total 2 737 2 705 47 70 86 130
M-real 6 044 6 564 74 324 -80 134
Others and
internal items -463 -401 30 20 -46 -54
METSÄLIITTO
GROUP 8 318 8 868 151 414 -40 210
(all figures unaudited)
CONSOLIDATED FINANCIAL RESULT WEAKER BUT EQUITY RATIO UNCHANGED
The Metsäliitto Group booked a turnover for 2003 of EUR 8,318 million
(8,868) some six per cent lower than in 2002. Operating profit was
EUR 151,1 million (413.5), and before extraordinary items there was a
loss of EUR 39.7 million (profit of 209.5 million).
The weaker financial result is due mainly to the fall in sales prices
and the stronger euro, and to M-reals significant non-recurring
expenses booked for the final quarter.
The equity ratio was 35 per cent (35) and the return on capital
employed 2.5 per cent (6.3).
EFFICIENCY DRIVE CONTINUES
öDuring the past three years the forest industry has entered a deep
recession. Determined efforts to improve financial results and
financial position, together with growth in both demand and prices
for our products, are needed before the situation shows any material
improvement.ö
To reduce indebtedness we have launched a vigorous efficiency drive
in all the Groups companies. The Metsäliitto Groups primary goal is
to strengthen its financial positionö, stresses Metsäliitto Group
President and CEO Antti Oksanen.
8(10)
(All figures unaudited)
PROFIT AND LOSS 2003 2002 Change Change
ACCOUNT 1-12 % 1-12 % MEUR %
Turnover 8 318.3 100 8 867.8 100 -549.5 -6.2
Share of result from
associates -6.5 -3.2 -3.3
Other operating
income 105.0 86.9 18.1
Operating expenses -7 694.8 -7 998.6 303.8
Depreciation -570.9 -539.4 -31.5
Operating profit 151.1 1.8 413.5 4.7 -262.4 -63.5
Net exchange
gains/losses 19.9 0.2 -7.8 -0.1 27.7
Other financial
income and expenses -210.7 -2.5 -196.1 -2.2 -14.6
Result before
extraordinary items -39.7 -0.5 209.6 2.4 -249.3 -118.9
Extraordinary income 0.9 144.5 -143.6
Extraordinary expenses -16.0 0.0 -16.0
Profit before tax and
minority interest -54.8 -0.7 354.1 4.0 -408.9 -115.5
Taxation -20.6 -89.0 68.4
Minority interest 58.9 -140.8 199.7
Profit for the
financial period -16.5 -0.2 124.3 1.4 -140.8 -113.3
BALANCE SHEET 31.12.2003 31.12.2002
MEUR % MEUR %
Assets
Fixed assets 5 562.8 65.4 5 767.3 65.0
Current assets
Inventories 1 154.9 13.6 1 177.5 13.3
Other current
assets 1 574.6 18.5 1 688.9 19.0
Liquid funds 215.3 2.5 241.8 2.7
Total 8 507.6 100 8 875.5 100.0
Members´ funds and
libilities
Members´ capital and
members´ other funds 1 555.1 18.3 1 531.0 17.2
Capital note loans 139.3 1.6 139.0 1.6
Minority interest 1 408.0 16.6 1 602.3 18.1
Provisions 85.7 1.0 74.6 0.8
Liabilities
Long-term 3 605.8 3 540.5
Current 1 713.7 1 988.1
Total 5 319.5 62.5 5 528.6 62.3
Total 8 507.6 100 8 875.5 100
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Quarterly data IV/03 III/03 II/03 I/03
Turnover 2017.9 2023.5 2098.5 2178.4
Other operating
income 25.1 36.2 28.0 15.7
Operating expenses -1930.1 -1864.0 -1944.0 -1963.2
Depreciation -146.9 -141.7 -141.5 -140.8
Operating profit -34.0 54.0 41.0 90.1
% of turnover -1.7 2.7 2.0 4.1
Net exchange
gains/losses 9.3 -0.6 4.1 7.1
Fin. income and
expenses -86.4 -42.0 -37.2 -45.1
Result before
extraord. items -111.1 11.4 7.9 52.1
Quarterly data IV/02 III/02 II/02 I/02
Turnover 2173.6 2144.6 2236.8 2312.8
Other operating
income 31.4 19.7 17.6 18.2
Operating expenses -2001.0 -1908.2 -2040.3 -2052.3
Depreciation -128.5 -138.1 -137.2 -135.6
Operating profit 75.5 118.0 76.9 143.1
% of turnover 3.5 5.5 3.4 6.2
Net exchange
gains/losses 4.6 -10.5 10.7 -12.6
Fin. income and
expenses -54.6 -48.6 -45.1 -47.9
Result before
extraord. items 25.5 58.9 42.5 82.6
Turnover, MEUR 2003 2002
Metsäliitto Cooperative 1 153.9 1 096.4
Engineered Wood 290.3 277.8
Solid Wood 509.2 464.6
Market Areas 577.9 601.2
Moelven 604.8 596.1
Commercial Printing 1 503.5 1 638.4
Home & Office 682.9 782.7
Publishing 785.6 790.1
Consumer packaging 867.9 921.1
Map Merchants 1 392.6 1 542.8
Metsä Tissue 669.2 647.8
Others & internal sales -719.5 -491.2
Metsäliitto Group 8 318.3 8 867.8
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Operating profit, MEUR 2003 2002
Metsäliitto Cooperative 25.5 25.8
Engineered Wood 1.0 13.9
Solid Wood 3.4 -4.8
Market Areas 6.0 13.0
Moelven 8.6 14.9
Commercial Printing 10.6 106.7
Home & Office 48.2 102.8
Publishing 12.5 43.2
Consumer packaging 34.5 83.4
Map Merchants 6.5 -14.9
Metsä Tissue 48.9 43.1
Others -54.6 -13.6
Metsäliitto Group 151.1 413.5
Equity ratio, % Gearing ratio, %
2003 2002 2003 2002
Metsäliitto Cooperative 67,0 66,5 -28 -9
Finnforest *) 39,3 40,6 106 97
Finnforest 29,2 30,7 178 161
M-real 31,9 34,2 137 119
Botnia 70,3 69,6 3 0
Metsäliitto Group 35,0 35,4 117 113
*) capital note loan included in equity
Production, 1 000 units 2003 2002
Sawn goods, m3 2 348 2 181
Processed timber, m3 600 527
Moelven, m3 1 578 1 547
EW products, m3 690 644
Paper, t 3 707 3 663
Paperboard, t 659 679
Fluting and liner, t 348 394
Pulp, t (M-real) 1 216 1 191
Pulp, t (Botnia) 2 391 2 250
