METSÄLIITTO GROUP INTERIM REPORT JANUARY
METSÄLIITTO GROUP RELEASE
29 April 2004 at 1.00 p.m.
METSÄLIITTO GROUP INTERIM REPORT JANUARY MARCH 2004
Turnover EUR 2,155 million (1-3/2003: EUR 2,178 million)
Profit before extraordinary items EUR 5.5 million (1-3/2003:
EUR 52.1 million)
Return on capital employed 3.0% (1-3/2003: 5.6%)
Equity ratio 34.0% (35.0% at 31 December 2003)
TURNOVER AND FINANCIAL RESULTS
Turnover for the Metsäliitto Group for the period January March was
EUR 2,155 million, one per cent down on last years corresponding
figure of EUR 2,178 million.
Operating profit for the review period was EUR 49.8 million (90.1).
The fall in operating profit is due to lower sales prices for paper
and to the strengthening of the euro by 16.5 per cent against the
dollar.
Delivery volumes were the same as, or slightly higher than, during the
first quarter of last year. The Groups paper machines operated at an
average 88 per cent of capacity (90) and the board machines at 89 per
cent of capacity (94) during the period. Botnia´s pulp mills operated
at 95 per cent of capacity (91).
In January, M-real sold Metsä Tissue to a number of insurance
companies (34%) and Metsäliitto Cooperative (66%). M-real has booked
extraordinary income of EUR 195 million on the disposal of this
business. As Metsä Tissue is continuing as a subsidiary of Metsäliitto
Cooperative, the corresponding extraordinary income has been
eliminated in the Metsäliitto Groups consolidated accounts. The
capital gain of EUR 19 million from the sale has been entered in the
consolidated accounts under other operating income.
Net financial expenses were 2.0 per cent of turnover (1.7). Financial
income was EUR 7.0 million (14.3) and financial expenses EUR 51.3
million (52.3). Financial items include exchange gains of EUR 6.2
million (7.1). Profit before extraordinary items was EUR 5.5 million
(52.1).
Direct taxes, including the change in deferred tax liability, were EUR
4.7 million (21.8). Minority interest was EUR 17.7 million (-13.7) and
profit for the period was EUR 18.5 million (16.6).
Return on capital employed for the first quarter of 2004 was 3.0 per
cent (5.6).
BALANCE SHEET AND FINANCING
At the end of March the equity ratio was 34.0 per cent and the
gearing ratio 120 per cent (35.0% and 117% at 31 March 2003).
Interest-bearing net liabilities were EUR 3,537 million (3,469
million at 31 December 2003).
The Groups total liquidity at the end of March was EUR 1.9 billion
(12/03: 1.6 billion). Of this amount, EUR 0.2 billion was in the form
of liquid funds and investments (0.2) and EUR 1.7 billion in the form
of committed credit facilities not shown in the balance sheet (1.4).
For its short-term financing needs the Group also had around EUR 0.6
billion available in non-committed domestic and foreign commercial
paper programmes and forward credits.
CAPITAL EXPENDITURE
Gross capital expenditure on fixed assets and company acquisitions by
the Metsäliitto Group during the first quarter was EUR 47 million
(206).
Kaskinens BCTMP mill investment project is progressing according to
plan. The main items of equipment have been chosen as have the
suppliers. Excavation work on the mill site began at the end of March.
The mill will have a capacity of 300,000 t/a of bleached chemi-
thermomechanical pulp and start-up is planned for August 2005.
ACQUISITIONS
At the beginning of January Metsäliitto Cooperative bought 66 per
cent and Tapiola Group 17 per cent of Metsä Tissue from M-real. At
the end of January M-real sold the remaining 17 per cent to Varma
Mutual Pension Insurance Company (9.86%) and Sampo Life Insurance
Company Ltd (7.14%).
In February, Finnforest bought the German company Merk GmbH, one of
Europes leading suppliers to the wood construction sector. The
company specializes in the planning and implementation of wood
construction projects. Its range of products comprises wood-based
panels, Kerto laminated veneer lumber, I-joists, glulam and other
products combining wood with different materials.
In accordance with a letter of intent signed last October, the Are-
Group became part of Moelvens sawmilling division at the beginning
of 2004. The acquisition has raised Moelvens further processing
capacity by 240,000 cubic metres and sawmilling capacity by 350,000
cubic metres.
In March, Moelven bought the building modules manufacturer Mobilarum
AB, which has two production plants in Sweden.
PERSONNEL
The Metsäliitto Group had an average of 29,355 employees during the
period January March (30,108). The number at the end of March was
29,331 (29,999), compared with 29,173 at the end of 2003.
METSÄLIITTO COOPERATIVE
Metsäliitto Cooperatives turnover for the first quarter of the year
was EUR 327 million (309). Operating profit was EUR 8.5 million, 2.6
per cent of turnover (6.5 million and 2.1%). Profit before
extraordinary items was EUR 49.5 million (81.5). The figure includes
dividend income of EUR 40.7 million (75.8). Return on capital
employed for the period was 7.7 per cent (10.9).
The equity ratio at the end of March was 59.5 per cent (67.0% at 31
December 2003). The strengthening of members funds during the first
few months of the year reflects the positive reception given by
members to the increase in members capital and to the new investment
opportunity. Members capital totalling EUR 24.3 million has been
received since the start of the year (16.9). Members capital
increased by EUR 7.9 million, additional members capital A by EUR
12.7 million and additional members capital B by EUR 3.7 million. At
the end of March, Metsäliitto had a total of 130,471 members (131,213
at 31 December 2003).
At its meeting on 7 April 2004, Metsäliitto Cooperatives
Representative Council decided that interest of 6.5 per cent would be
paid on members capital for 2003 (6.5%) and interest of 5.5 per cent
on additional members capital A (6.5%).
Capital expenditure for the first quarter was EUR 105 million (3).
The most notable investment concerned the acquisition by Metsäliitto
Cooperative of 66 per cent of Metsä Tissues business operations from
M-real at the beginning of January.
Wood markets
Trading in wood raw material began as normal from the beginning of
the year. Metsäliittos wood purchases for the first quarter were
roughly 3.7 million cubic metres (3.9), which represents just under a
quarter of the years purchasing target. Purchases of wood for energy
generation was about 0.2 million cubic metres. Prices for all wood
species were about the same as last autumn.
Wood consumption by the Groups mills during the first quarter was
well above budget. Because of the large volume of deliveries,
Metsäliittos reserves of sawlogs are slightly smaller than normal.
Reserves correspond to 4.4 months demand.
Deliveries by Thomesto totalled 2.9 million cubic metres (2.7). Wood
imports to Finland were around 0.8 million cubic metres (0.9).
The reorganization of Metsäliittos domestic wood procurement
operations continues to go according to plan. Under the new process-
based business model there are five procurement areas and delivery
units and 18 procurement districts. The reorganization will mean
about 50 fewer managerial and administrative posts at Head Office,
the forest offices and districts. The new organization comes into
effect on 1 July 2004.
Stands marked for summer harvesting are now in good demand.
Purchasing will focus on spruce-dominated stands marked for clear
felling, but the increase in demand for pulpwood will also permit the
purchase of pine stands for thinning throughout much of Finland.
Prices being paid for spruce logs are now closer to sales prices for
sawn timber than at any time since 1980. In view of the trend in
prices and poor profitability for wood products there is no
possibility of an increase in sawlog prices.
Metsäliitto has raised its purchasing target for 2004 from 16.9
million cubic metres to 17.5 million. Trading will have to be brisk
and free from disruptions if this target is to be reached.
METSÄ TISSUE
The economic downturn in Europe has meant that growth in demand for
tissue products has been well below the long-term average. At the
same time more production capacity has come onto the markets of
Western Europe. This has led to over-supply and greater price
competition in all Metsä Tissues main markets.
Despite the more difficult market conditions, Metsä Tissue succeeded
in raising its sales volumes and increasing its market shares.
Turnover for the first quarter was up by some 3 per cent on last
year. On a comparative basis, Metsä Tissues operating profit rose by
6 per cent. Greater efficiency and the resulting better cost-
effectiveness have helped to compensate for losses due to lower sales
prices.
Metsä Tissue booked a turnover for January March of EUR 169 million
(165) and an operating profit of EUR 9.1 million (11.7). The smaller
operating profit is due to greater depreciations arising from the
transactions in January.
The Consumer Hygiene business progressed well in Western Europe but
has not yet reached its sales targets in Poland. Sales in the Nordic
countries were slightly below target because of the more difficult
market conditions.
The Away-from-Home business progressed as planned in Western Europe
and Poland, but sales in the Nordic countries fell just short of the
target.
The positive trend in both sales and profitability continued for the
Table Top and Baking & Cooking businesses.
Outlook
Price competition caused by over-supply on tissue markets will
continue to intensify. Thanks to greater business efficiency however,
Metsä Tissue is likely to meet its earnings targets for the year as a
whole.
FINNFOREST
Finnforests turnover was EUR 471 million, about 6 per cent higher
than the EUR 444 million for this period last year. Operating profit
was EUR 5.0 million (8.4). Before extraordinary items there was a
loss of EUR 3.8 million (+0.2). Return on capital employed was 2.1
per cent (3.7).
The equity ratio at the end of March was 35.0 per cent and the
gearing ratio 127 per cent (39.3% and 106% at 31 December 2003). If
capital loans are included under liabilities, the equity ratio was
26.0 per cent and the gearing ratio 205 per cent (29.2% and 178% at
31 December 2003).
Engineered Wood
Turnover for the EW division was EUR 77 million (72) and operating
profit EUR 4.7 million (1.4). The market for birch plywood continued
to be difficult. At the end of the review period, however, the
downward trend in the market came to an end and production and sales
volumes rose slightly. Prices were about the same as at the end of
last year. There was a clear improvement in demand for conifer
plywood during the review period. Both production and sales volumes
rose, although prices were unchanged on the end of last year.
Sales of Kerto LVL have progressed well and the mills operated at
full capacity. Sales of other products were also up on this period
last year. There has been no significant change in sales prices,
however.
Finnforests investment in housing module production is going
according to plan. The 20,000 square metre production facility being
built by the municipality of Hartola will be completed on schedule
during the second quarter. Recruitment of the workforce has started
and module production will begin during the autumn.
Solid Wood
The SW division produced a turnover of EUR 135 million (124) and an
operating profit of EUR 0.9 million (3.1). Operating profit was
slightly lower than for this period last year, mainly due to the fall
in prices for sawn timber and by-products. Invoicing prices for sawn
timber averaged 2.2 per cent lower than in the first quarter last
year. Prices for sawlogs fell marginally, but this has not yet been
reflected in first-quarter results.
Demand for Nordic softwood timber on the main markets was normal. The
markets for redwood and whitewood timber were marginally over-
supplied. Output by the sawmills during the first quarter was 645,000
cubic metres (614,000), comprising 59 per cent whitewood and 41 per
cent redwood.
Sales and distribution
The division returned a turnover of EUR 157 million (139) and an
operating profit of EUR 3.6 million (2.7). The fall in supplies of
panel products from South America and Asia affected the European
market, and prices for several panel products began to rise towards
the end of the review period.
The sales targets were reached in both Britain and France, but
business in Germany continued to show a loss. Organizational changes
were introduced in Poland and Hungary. Sales picked up towards the
end of the period but were still below target.
Moelven
The first quarter produced a turnover of EUR 161 million (154) and an
operating loss of EUR 0.4 million (+3.0). The performance of the
sawmilling business was affected by the downturn in construction,
which is usual at this time of year, and by the unfavourable
relationship between raw material costs and product prices. Domestic
demand for glulam products was normal. The reorganization of both
production and the product portfolio has brought a marked improvement
in cost structure.
The result for the Building Group was as expected. Construction of
business and office premises remained slack in Scandinavia, but
deliveries of modules for special projects such as the Snöhvit gas
field project in the northern Arctic Ocean and the power plant being
built on the Vatnajökul glacier in Iceland had a positive impact on
results.
Outlook
With the exception of redwood timber, prices are no longer falling.
Demand and orders for the main products are strengthening and price
rises are planned in certain product groups.
The efficiency programmes started towards the end of last year are
continuing. The aim is to implement measures relating to sales,
logistics, production and support functions by this autumn.
M-REAL
M-real booked a turnover of EUR 1,381 million (1,595) and an operating
profit of EUR 0.8 million (67.4) for the first quarter. Profitability
was hit particularly by lower sales prices for paper and by the 16.5
per cent fall in the value of the dollar against the euro. Operating
profit was also affected by the sale of Metsä Tissues business
operations in January 2004.
The imbalance between supply and demand meant that production
curtailments had to be continued. To correspond with demand, board
production was cut by 37,000 tonnes (19,000) and paper production by
110,000 tonnes (94,000).
Before extraordinary items there was a loss of EUR 28.3 million
(+38.6). Financial income was EUR 8.3 million (12.7) and financial
expenses were EUR 37.4 million (41.5). Financial income includes
exchange gains of EUR 5.2 million (6.2).
Profit before taxes and minority interest was EUR 166.7 million
(38.6). Capital gains of EUR 195 million from the sale of Metsä Tissue
have been entered under extraordinary income.
Earnings per share for the period were EUR -0.17 (+0.12) and the
return on capital employed was 0.3 per cent (5.0). At the end of March
the equity ratio was 35.8 per cent and the gearing ratio 109 per cent
(31.9% and 137% at 31 December 2003).
Outlook
Demand for M-reals main products is expected to grow as the European
economy recovers. For seasonal reasons, however, demand for products
in the second quarter is expected to be slightly weaker than in the
first. The markets for M-reals papers are still over-supplied, and
production will have to be curtailed in line with demand. No major
changes in prices for paper and folding boxboard are anticipated
during the second quarter.
M-reals financial result before extraordinary items for the second
quarter is expected to be weaker than for the first quarter.
BOTNIA
Turnover was 8.5 per cent up on the first quarter of last year at EUR
263 million (243). Operating profit was EUR 21.4 million (15.4) and
profit before extraordinary items was EUR 20.8 million (15.3). Return
on capital employed was 7.2 per cent (5.3).
Botnias financial position is good. In March, the equity ratio was
70.1 per cent and the gearing ratio 4 per cent (70.3% and 3% at 31
December 2003).
The price of softwood pulp rose during the first quarter from USD 560
to USD 620/tonne while that of hardwood pulp rose from USD 490 to USD
520. Market prices for softwood pulp in foreign currencies were up by
an average of 23 per cent on the first quarter of last year, while
hardwood pulp prices were 4 per cent higher. On the other hand, the
dollar was 16.5 per cent weaker against the euro.
Demand for pulp has risen during the early part of the year,
especially in Western Europe, due to higher utilization of fine paper
capacity. Demand has also been strong in China. Customers pulp
stocks are at normal levels in Europe but growing in Asia.
The new World-19 report replaced Norscans stock reporting at the
beginning of the year. The World-19 report is more extensive and
includes all the worlds major market pulp producers apart from
Indonesia and Russia. Pulp stocks held by the 19 producer countries
at the end of February were 3.26 million tonnes.
Botnias production for the first quarter totalled 638,000 tonnes
(595,000). The capacity utilization rate was 95 per cent (91).
In autumn 2003, Botnia began exploring the possibility of starting
pulp production in Uruguay. An environmental impact assessment and
socio-economic survey for a pulp mill were completed in March. A
decision on whether to go ahead with construction of a mill to
produce around one million t/a of bleached eucalyptus pulp will be
possible by the end of this year.
Outlook
The market outlook for the second quarter is brightened by economic
growth in the USA and Asia, higher capacity utilization rates at the
paper mills, and maintenance downtime at pulp mills worldwide. On the
other hand, the outlook is clouded by uncertainty over demand for
paper, Chinas pulp stocks and the trend in the value of the dollar.
OUTLOOK
The forest industry is currently adapting to the fourth consecutive
year of the current downswing. The markets are still showing no signs
of any change that, in the short term, would improve the profitability
of the European forest industry.
The Metsäliitto Groups result during the first quarter of 2004 was
unsatisfactory. This was due primarily to lower sales prices for paper
and to the stronger euro. No notable change in the trend in prices is
anticipated in the near future. It is also too early to draw any
conclusions relating to the slight strengthening of the dollar that
began in February.
The Metsäliitto Group has instigated a range of measures designed to
raise business efficiency and cut costs. Some of these are being
implemented this year, while other measures will be finalized during
2005.
Espoo, 29 April 2004
BOARD OF DIRECTORS
For more information:
Mr. Hannu Anttila, Senior VP, CFO, tel. int +358 1046 94260
Mr. Pekka Kivelä, Senior VP, Group Communications,
tel. int +358 1046 94545
JANUARY MARCH 2004
(all figures are unaudited)
Turnover Operating profit
EUR million I/04 I/03 I-IV/03 I/04 I/03 I-IV/03
Metsäliitto
Cooperative 327 309 1,154 8.5 6.5 25.5
Thomesto 101 92 375 0.7 1.4 7.6
Biowatti 19 13 55 0.4 0.7 4.8
Finnforest 471 444 1,791 5.0 8.4 8.6
Metsä Tissue* 169 165 669 9.1 11.7 48.9
-internal sales -176 -162 -638
Total 911 696 2,737 23.7 17.0 46.5
M-real 1,381 1,595 6,044 0.8 67.4 73.8
Other and
internal items -137 -113 -463 25.3 5.7 30.8
METSÄLIITTO
GROUP 2,155 2,178 8,318 49.8 90.1 151.1
*figures for 2003 included in M-reals figures
Metsäliitto Cooperatives turnover for the first quarter was up 6 per
cent at EUR 327 million (309). Operating profit improved by 30 per
cent to EUR 8.5 million (6.5). Turnover for the wood products company
Finnforest was EUR 471 million (444) and operating profit EUR 5.0
million (8.4). Metsä Tissue also succeeded in increasing its
turnover, which was 3 per cent up on this period last year. On a
comparative basis, Metsä Tissues operating profit rose by 6 per
cent.
M-real produced a turnover of EUR 1,381 million (1,595). On a
comparative basis, turnover was down by 4 per cent. Operating profit
was EUR 0.8 million (67.4), the decline being due to lower sales
prices and the stronger euro.
Turnover for the Metsäliitto Group for January March was EUR 2,155
million, one per cent down on last years corresponding figure of EUR
2,178 million. Operating profit was EUR 49.8 million (90.1). The
figure includes capital gain of EUR 19 million from the sale of Metsä
Tissue. Profit before extraordinary items was EUR 5.5 million (52.1).
Return on capital employed for the first quarter of 2004 was 3.0 per
cent (5.6). The equity ratio at the end of March was 34.0 per cent
(35.0% at 31 December 2003).
OUTLOOK
The forest industry is currently adapting to the fourth consecutive
year of the current downswing. The Metsäliitto Group constantly has a
number of measures in force aimed at improving business efficiency and
cutting costs.ö
Capacity utilization rates at the paper and board mills have
improved somewhat on the second half of last year. Capacity
utilization rates at the pulp mills were satisfactory, and it was
possible to raise pulp prices. After a prolonged slide, the important
value of the dollar has embarked on a slight rise. For paper and
board the slide in prices seems to have stopped. An increase in
prices for these products is necessary in restoring a satisfactory
profitability. The recovering demand indicates that planned price
rises could be implementedö, states President and CEO
Antti Oksanen.
(All figures unaudited)
PROFIT AND LOSS 2004 2003 Change 2003
ACCOUNT 1-3 % 1-3 % MEUR 1-12 %
Turnover 2155.5 100 2178.4 100 -22.9 8318.3 100
Share of result from
associates 2.3 1.9 0.4 -6.5
Other operating
income 39.9 15.7 24.2 105.0
Operating expenses -2007.3 -1965.1 -42.2 -7694.9
Depreciation -140.6 -140.8 0.2 -570.8
Operating profit 49.8 2.3 90.1 4.1 -40.3 151.1 1.8
Net exchange
gains/losses 6.2 7.1 -0.9 19.9
Other financial
income and expenses -50.5 -45.1 -5.4 -210.8
Result before
extraordinary items 5.5 0.3 52.1 2.4 -46.6 -39.8 -0.5
Extraordinary income 0.0 0.0 0.0 0.9
Extraordinary expenses 0.0 0.0 0.0 -16.0
Result before tax and
minority interest 5.5 0.3 52.1 2.4 -46.6 -54.8 -0.7
Taxation -4.7 -21.8 17.1 -20.6
Minority interest 17.7 -13.7 31.4 58.9
Result for the period 18.5 0.9 16.6 0.8 1.9 -16.5 -0.2
BALANCE SHEET 31.3.2004 31.3.2003 31.12.2003
MEUR % MEUR % MEUR %
Assets
Fixed assets 5 512.6 63.2 5 761.6 64.8 5 562.8 65.4
Current assets
Inventories 1 231.9 14.1 1 213.2 13.7 1 154.9 13.6
Other current
assets 1 779.8 20.4 1 721.2 19.4 1 574.6 18.5
Liquid funds 203.2 2.3 189.7 2.1 215.3 2.5
Total 8 727.5 100 8 885.7 100 8 507.6 100
Members´ funds and
liabilities
Members´ capital and
members´ other funds 1 595.4 18.3 1 556.7 17.5 1 555.2 18.3
Capital note loans 139.4 1.6 139.1 1.6 139.3 1.6
Minority interest 1 357.6 15.5 1 495.6 16.8 1 408.0 16.6
Provisions 78.9 0.9 70.0 0.8 85.7 1.0
Liabilities
Long-term 3 523.5 3 511.9 3 605.8
Current 2 032.7 2 112.4 1 713.6
Total 5 556.2 63.7 5 624.3 63.3 5 319.4 62.5
Total 8 727.5 100 8 885.7 100 8 507.6 100
9 (10)
Quarterly data I/04 IV/03 III/03 II/03 I/03
Turnover 2155.5 2017.9 2023.5 2098.5 2178.4
Other operating
income 39.9 25.1 36.2 28.0 15.7
Operating expenses -2005.0 -1930.1 -1864.0 -1944.0 -1963.2
Depreciation -140.6 -146.9 -141.7 -141.5 -140.8
Operating profit 49.8 -34.0 54.0 41.0 90.1
% of turnover 2.3 -1.7 2.7 2.0 4.1
Net exchange
gains/losses 6.2 9.3 -0.6 4.1 7.1
Fin. income and
expenses -50.5 -86.4 -42.0 -37.2 -45.1
Result before
extraord. items 5.5 -111.1 11.4 7.9 52.1
Turnover, MEUR I/04 I/03 I-IV/03
Metsäliitto Cooperative 327.3 308.7 1 153.9
Engineered Wood 76.5 72.0 290.3
Solid Wood 135.2 124.0 509.2
Sales and distribution 156.9 139.0 577.9
Moelven 160.7 154.2 604.8
Metsä Tissue 169.1 164.7 669.2
Cartons 204.1 215.6 809.0
Graphic products
and Speciality papers 591.1 622.1 2 348.0
Offices 175.8 191.6 682.9
Map Merchant Group 354.0 367.5 1 392.6
Others & internal sales -195.2 -181.0 -719.5
Metsäliitto Group 2 155.5 2 178.4 8 318.3
Operating profit, MEUR I/04 I/03 I-IV/03
Metsäliitto Cooperative 8.5 6.5 25.5
Engineered Wood 4.7 1.4 1.0
Solid Wood 0.9 3.1 3.4
Sales and distribution 3.6 2.7 6.0
Moelven -0.4 3.0 8.6
Metsä Tissue 9.1 11.7 48.9
Cartons 14.0 18.1 33.3
Graphic products
and Speciality papers 2.5 29.1 24.3
Offices 3.5 21.8 48.2
Map Merchant Group 3.8 5.4 6.5
Others & internal sales -0.4 -12.7 -54.6
Metsäliitto Group 49.8 90.1 151.1
Equity ratio, % Gearing ratio, %
I/04 I/03 IV/03 I/04 I/03 IV/03
Metsäliitto Cooperative 59.5 66.0 67.0 -22 -21 -28
Finnforest *) 35.0 38.8 39.3 127 108 106
Finnforest 26.0 29.2 29.2 205 177 178
M-real 35.8 32.6 31.9 109 133 137
Botnia 70.1 67.9 70.3 4 13 3
Metsäliitto Group 34.0 34.5 35.0 120 120 117
*) capital note loan included in equity
Production, 1 000 units I/04 I/03 I-IV/03
Sawn goods, m3 1 123 1 029 3 958
Processed timber, m3 297 120 691
EW products, m3 222 206 800
Paper, t 1 022 1 004 3 785
Paperboard, t 253 250 913
Pulp & CTMP, t (M-real) 381 366 1 439
Pulp, t (Botnia) 638 595 2 391
