M-real Corporation Interim report 1 January-30 June 2009
(Thomson Reuters ONE) - M-real Corporation Interim report 1 January-30 June 200923.7.2009 at 12:00M-real's operating result for the first half of the year excludingnon-recurring items was EUR -135 millionResult for the first half of 2009* Sales were EUR 1,208 million (Q1-Q2/2008: 1,688).* The operating result excluding non-recurring items amounted to EUR -135 million (13). The operating result including non-recurring items was EUR -191 million (108).* The result before taxes excluding non-recurring items totalled EUR -145 million (-57). The result before taxes including non-recurring items totalled EUR -212 million (38).* Earnings per share from continuing operations excluding non-recurring items were EUR -0.42 (-0.18) and including non-recurring items EUR -0.61 (0.10)Result for the second quarter of 2009* Sales were EUR 585 million (Q1/2009: 623).* The operating result excluding non-recurring items amounted to EUR -70 million (-65). The operating result including non-recurring items was EUR -73 million (-118).* The result before taxes excluding non-recurring items totalled EUR -83 million (-62). The result before taxes including non-recurring items totalled EUR -97 million (-115).* Earnings per share from continuing operations excluding non-recurring items were EUR -0.24 (-0.18) and including non-recurring items EUR -0.29 (-0.32)Events during the second quarter* The revised organisational structure was published. The Other Papers business area was renamed Speciality Papers* Matti Mörsky started as M-real's CFO* The Hallein paper mill was closed down and the production of standard coated fine paper was discontinued at the Gohrsmühle millEvents after the period* On 15 July 2009, M-real's associated company Oy Metsä-Botnia Ab and its owners, M-real Corporation, Metsäliitto Cooperative and UPM-Kymmene Corporation, signed a letter of intent regarding the divestment of the pulp mill and forests located in Fray Bentos, Uruguay, to UPM"Despite the weak demand environment, we have been able to defendpaper and board prices. Pulp prices have been rising now for almostfour months, and we believe that the positive development willcontinue. We are particularly pleased to say that despite the poorfinancial performance, we have succeeded in keeping our operatingcash flow neutral mainly by lowering operating net working capital."Mikko Helander, CEO, M-real CorporationKEY FIGURES 2009 2009 2008 2009 2008 2008 Q2 Q1 Q2 Q1-Q2 Q1-Q2Sales, EUR million 585 623 829 1,208 1,688 3,236EBITDA, EUR million -23 -48 127 -71 223 254 excl. non-recurring items, EURmillion -20 -13 55 -33 128 192Operating result, EUR million -73 -118 71 -191 108 -61 excl. non-recurring items, EURmillion -70 -65 -1 -135 13 -35Result before taxesfrom continuing operations, EURmillion -97 -115 36 -212 38 -204 excl. non-recurring items, EURmillion -83 -62 -36 -145 -57 -178Result for the period from continuing operations, EURmillion -93 -105 37 -198 37 -170 from discontinued operations,EUR million -2 -10 -45 -12 -64 -338 Total, EUR million -95 -115 -8 -210 -27 -508Result per share from continuing operations,EUR -0.29 -0.32 0.10 -0.61 0.10 -0.55 from discontinued operations,EUR -0.01 -0.03 -0.14 -0.04 -0.20 -1.03 Total, EUR -0.30 -0.35 -0.04 -0.65 -0.10 -1.58Result per share excl. non-recurring items,EUR -0.24 -0.18 -0.12 -0.42 -0.18 -0.48Return on equity, % -32.1 -32.0 7.9 -31.9 4.0 -10.4 excl. non-recurring items, % -27.2 -17.6 -7.4 -22.0 -6.1 -9.0Return on capital employed, % -10.2 -13.4 8.9 -11.5 7.3 -1.3 excl. non-recurring items, % -8.3 -7.0 -0.2 -7.3 1.4 -0.5Equity ratio at end of period,% 29.4 30.3 36.5 29.4 36.5 30.8Gearing ratio at end of period,% 168 151 112 168 112 152Net gearing ratio at end ofperiod, % 116 101 100 116 100 90Interest-bearing net liabilities,EUR million 1,276 1,243 1,888 1,276 1,888 1,254Gross investments, EUR million 16 16 30 32 51 128Deliveries, 1 000 tonnes Paper businesses 269 321 448 590 929 1,761 Consumer Packaging 296 274 351 570 693 1,345Personnel at the end of period in continuing operations 6,080 6,314 7,035 6,080 7,035 6,546 in discontinued operations 2,322 2,322EBITDA = Earnings before interest, taxes, depreciationand impairment chargesMap Merchant divested in 2007 and the Graphic Papers divested in 2008are reported under discontinued operations.Result for April-June compared with the previous quarterM-real's sales totalled EUR 585 million (Q1/2009): 623). Comparablesales were down 6.2 per cent. The operating result was EUR -73million (-118), and the operating result excluding non-recurringitems was EUR -70 million (-65).Non-recurring items in the operating result for January-June totalledEUR -3 million net consisting of the following:* EUR 1 million cost provision in the Consumer Packaging business area related to personnel cuts.* EUR 1 million cost provision in the Speciality Papers business area connected to the closure of the Hallein paper mill.* EUR 1 million cost under Other operations related to the streamlining of the sales network.The non-recurring items for the previous quarter totalled EUR -53million net. The key items were:* EUR 28 million cost provision and write-downs of in the Speciality Papers business area connected to the closure of the Hallein paper mill.* EUR 22 million cost provisions and write-downs of associated with the closure of the Metsä-Botnia Kaskinen mill. This total consists of EUR 16 million related to the Consumer Packaging business area and EUR 6 million to the Market Pulp and Energy segment.* EUR 2 million cost under Other operations related to the streamlining of the sales network.Compared to the previous period, the operating result excludingnon-recurring items was weakened by low pulp sales prices, a decreasein the price of uncoated fine paper and cost associated with thediscontinuation of the coated fine paper production. The result wasboosted by the implemented cost savings.The total paper business delivery volume was 269,000 tonnes forApril-June (321,000). Deliveries by the Consumer Packaging businessarea totalled 296,000 tonnes (274,000).Financing income and expenses totalled EUR -12 million (+4). Foreignexchange gains and losses from accounts receivable, accounts payable,financial income and expenses and the valuation of currency hedgingwere EUR 2 million (0). Net interest and other financing income andexpenses were EUR -14 million (4). Other financial expenses includeEUR 7 million of valuation gains on interest rate hedges (valuationgain: 2). The financing income of the previous quarter includes aprofit of about EUR 31 million from repurchases of M-real's EUR 400million bond due in December 2010.The result from continuing operations in April-June before taxes wasEUR -97 million (-115). The result includes a non-recurring item ofEUR -11 million from the Sunila pulp mill divested by MyllykoskiPaper in the line "share of results in associated companies". Theresult from continuing operations before taxes and non-recurringitems was EUR -83 million (-62). Income taxes, including the changein deferred tax liabilities, came to EUR +4 million (+10).Earnings per share were EUR -0.30 (-0.35). Earnings per share fromcontinuing operations excluding non-recurring items were EUR -0.24(-0.18). The return on equity was -32.1 per cent (-32.0); excludingnon-recurring items, -27.2 per cent (-17.6). Return on capitalemployed was -10.2 per cent (-13.4); excluding non-recurring items-8.3 per cent (-7.0).Result for January-June compared with the corresponding period lastyearM-real's sales totalled EUR 1,208 million (1,688). Comparable saleswere down 24.9 per cent. Operating result was EUR -191 million(+108), and the operating result excluding non-recurring items wasEUR -135 million (+13).Non-recurring items in the operating result for January-June totalledEUR -56 million net, including the following key items:* EUR 29 million cost provisions and write-downs of in the Speciality Papers business area connected to the closure of the Hallein paper mill.* EUR 22 million cost provisions and write-downs of associated with the closure of the Metsä-Botnia Kaskinen mill. This total consists of EUR 16 million related to Consumer Packaging business area and EUR 6 million to Market Pulp and Energy segment.* EUR 3 million cost under Other operations related to the streamlining of the sales network.The non-recurring items of the corresponding period in the previousyear were EUR 95 million net.Compared to the corresponding period last year, the operating resultexcluding non-recurring items was weakened by the reduced deliveryvolumes caused by weakened demand and the reduced value of product,wood and pulp inventories. The result was improved by the implementedprice increases and cost savings.The total paper business delivery volume was 590,000 tonnes forJanuary-June (930,000). Consumer Packaging deliveries totalled570,000 tonnes (693,000).Financial income and expenses over the period totalled EUR -8 million(-69). Foreign exchange gains and losses from accounts receivable,accounts payable, financial income and expenses and the valuation ofcurrency hedging were EUR 2 million (1). Net interest and otherfinancing income and expenses stood at EUR -10 million (-70). Otherfinancial expenses include EUR 9 million of valuation gains oninterest rate derivatives (valuation gain: 4). The financing incomeof the review period includes a profit of about EUR 31 million fromrepurchases of M-real's EUR 400 million bond due in December 2010.The result from continuing operations over the review period beforetaxes was EUR -212 million (38). The result includes a non-recurringitem of EUR -11 million from the Sunila pulp mill divested byMyllykoski Paper in the line "share of results in associatedcompanies". The result from continuing operations before taxes andexcluding non-recurring items was EUR -145 million (-57). Incometaxes, including the change in deferred tax liabilities, came to EUR+14 million (-1).Earnings per share were EUR -0.65 (-0.10). Earnings per share fromcontinuing operations excluding non-recurring items were EUR -0.42(-0.18). The return on equity was -31.9 per cent (4.0); excludingnon-recurring items -22.0 per cent (-6.1). Return on capital employedwas -11.5 per cent (+7.3); excluding non-recurring items -7.3 percent (1.4).PersonnelOn 30 June 2009, the company had 6,080 employees (31 March 2009:6,314), of which 2,318 (2,189) worked in Finland. In January-June2009, M-real employed an average of 6,252 people (2008: 9,087). Thenumbers include 30 per cent of Metsä-Botnia's personnel.InvestmentsGross investments in January-June totalled EUR 32 million(Q1-Q2/2008: 51). Investments include a EUR 6 million share ofMetsä-Botnia's capital expenditure (13). Metsä-Botnia's investmentshare is based on M-real's 30 per cent ownership.Structural changeIn February 2009, M-real launched a new profit improvement programmewith an annual target of EUR 80 million. The improvement actionstarget at savings in the business areas and streamlining the supportfunctions to reflect the new company structure and size after thedivestment of Graphic Papers. The full annual effect of the programmewill be visible from 2011. The majority of the profit improvementmeasures are expected to be implemented in 2009, and the profitimpact is estimated to be EUR 20-25 million in 2009. The relatednon-recurring costs booked during 2009 are expected to be about EUR18 million. M-real launched also a separate EUR 60 million programmeto improve the 2009 cash flow including, e.g., the reduction ofoperating net working capital and cuts in investments.In 2008, M-real announced to be planning the discontinuation of thestandard coated fine paper production at the Hallein and Gohrsmühlemills based on earlier examined strategic options. Both mills havebeen loss-making for a long period of time. At Hallein, paperproduction was discontinued at the end of April 2009. At theGohrsmühle mill, the standard coated fine paper production wasdiscontinued in April. At Gohrsmühle, the production of specialitypapers as well as uncoated fine paper reels and folio sheets has beenexpanded. M-real continues to explore various options for the Halleinpulp mill.The organisation of M-real was revised following the closure of theHallein paper mill and the discontinuation of standard coated finepaper production at the Gohrsmühle mill. The Other Papers businessarea was renamed Speciality Papers. The new structure took effect on17 June 2009.The strategic review of M-real's paper business continues.Management changesMatti Mörsky started as M-real's CFO on 4 May 2009.On 17 June 2009, Heikki Husso was appointed Head of the SpecialityPapers business area, and Soili Hietanen was appointed Head of MarketPulp and Energy segment. Hietanen is also responsible for contractmanufacturing between M-real and Sappi.FinancingAt the end of June 2009, M-real's equity ratio was 29.4 per cent (31December 2008: 30.8) and the gearing ratio 168 per cent (152). Netgearing ratio was 116 (90). Some of M-real's loan agreements set a120 per cent limit on the company's net gearing ratio and a 30 percent limit on the equity ratio. Calculated as defined in the loanagreements, the net gearing ratio at the end of June wasapproximately 91 per cent (74) and the equity ratio some 34 per cent(36).The change in the fair value of investments available for sale wasapproximately EUR -120 million in the first half of the year basedmainly on the decrease in the value of the Pohjolan Voima shares.At the end of June, net interest-bearing liabilities totalled EUR1,276 million (1,254). Foreign-currency-denominated loans accountedfor 14 per cent; 90 per cent were floating-rate and the rest werefixed-rate. At the end of June, the average interest rate on loanswas 5.2 per cent and the average maturity of long-term loans 2.9years. The interest rate maturity was 5.4 months at the end of June.During the period the interest rate maturity has varied between 2 and6 months.In January-June, cash flow from operations amounted to EUR -36million (Q1/2009: -20). Working capital was down by EUR 74 million(down 50).At the end of the period, an average of 4.1 months of net foreigncurrency exposure was hedged. The degree of hedging varied between 4and 5 months during the period; approximately 99 per cent of thenon-euro-denominated equity was hedged at the end of the period.Liquidity continues at a good level. At the end of the review period,liquidity was EUR 1,039 million, of which EUR 778 million consistedof committed credit facilities, and EUR 261 million of liquid assetsand investments. The amount of committed credit facilities includethe undrawn EUR 450 million share of the EUR 500 million syndicatedrevolving credit facility due in December 2009. In addition, theGroup had other interest-bearing receivables totalling EUR 310million. To meet its short-term financing needs, the Group also hadat its disposal uncommitted domestic and foreign commercial paperprogrammes and credit facilities amounting to about EUR 570 million.In the second quarter, M-real drew a EUR 60 million pension premium(TyEL) loan. After this draw down, M-real still has a total of aboutEUR 260 million of undrawn pension premium (TyEL) loans.In the first quarter, M-real repurchased its own bonds (EUR 400million bond due in December 2010) with a nominal value of EUR 59.95million. A gain of approximately EUR 31 million from the purchaseswas recorded in the first quarter result.M-real's liquidity is ensured and the company is in negotiations tosecure long-term financing.Standard & Poor's downgraded M-real's credit rating from B- to CCC+on 16 January 2009. The outlook of the rating remains negative. Thedowngrade has an about EUR 2 million impact on current annualfinancing costs.On 13 February 2009, Moody's Investors Service downgraded M-real's B3credit rating to Caa1. The outlook of the rating remains negative.The downgrade has an about EUR 2 million impact on current annualfinancing costs.SharesIn January-June 2009, the highest price for M-real's B share on theNASDAQ OMX Helsinki was EUR 0.92, the lowest EUR 0.19, and theaverage price EUR 0.50. At the end of June, the price of the B sharewas EUR 0.53.The trading volume of B shares was EUR 149 million, 104 per cent ofthe share capital. The market value of the A and B shares totalledEUR 212 million at the end of June.At the end of June, Metsäliitto Cooperative owned 38.6 per cent ofthe shares and held 60.5 per cent of the voting rights conferred bythese shares. International investors' holdings decreased to 15 percent.On 5 February 2009, Financier de l'Echiquier SA's holding in M-realdecreased to 4.8 per cent of the share capital and 1.6 per cent ofthe voting rights.The company does not hold any of its own shares.Events after the periodOn 15 July 2009, M-real Corporation's associated company OyMetsä-Botnia Ab and its owners, M-real Corporation, Metsäliitto Groupand UPM-Kymmene Oyj, signed a letter of intent regarding thedivestment of the pulp mill and forests located in Fray Bentos,Uruguay, to UPM.Once the transaction is closed, M-real's net debt will decrease byaround EUR 550 million, also taking into account the change ofMetsä-Botnia's consolidation method in M-real's consolidatedfinancial accounts. Cash proceeds to be received by M-real is aroundEUR 300 million. M-real will use the proceeds for debt repayments.The arrangement will not have a significant impact on M-real'sequity.After the closing of the transaction, M-real will change theconsolidation method of Metsä-Botnia in its consolidated financialaccounts and process its ownership in Metsä-Botnia as an associatedcompany according to IAS 28. As a result of the transaction and thechange in the consolidation method, approximately EUR 250 million ofconsolidated net debt will leave M-real Group. The closing of thetransaction and the change in the consolidation method ofMetsä-Botnia are estimated to decrease M-real's annual sales byaround EUR 250 million and to slightly improve the result beforetaxes compared to the first quarter 2009.The closing of the transaction is subject to approvals by therespective parties' Board of Directors, the execution of finalagreements, conclusion of negotiations with financing parties andapproval of the competition authorities. The transaction is estimatedto be closed during the last quarter of 2009. After the closing ofthe transaction M-real owns 30% of Metsä-Botnia, MetsäliittoCooperative 53% and UPM 17%.M-real's Board of Directors has processed and approved the letter ofintent acting without those of its members who are dependent onMetsäliitto Cooperative. At the request of M-real's Board ofDirectors Handelsbanken Capital Markets has issued a FairnessOpinion, according to which the transaction is financially fair fromthe point of view of M-real's shareholders. Castrén & Snellman Oy,Attorneys-at-law, provides legal advice in the transaction.Near-term outlookThe demand for folding boxboard improved steadily in the secondquarter, and the operating rates are approaching normal levels. Aprocess to increase prices of folding boxboard has been started inthe UK. Price increases are under consideration to be implementedalso in the other markets in Europe.Over the past few weeks, order inflows for uncoated fine paper haveimproved, and at the moment it appears that the price decline isbottoming out.The demand for coated papers has remained weak. After thediscontinuation of standard coated fine paper production at Halleinand Gohrsmühle, the strategic importance of coated papers is nolonger significant to M-real.Following the discontinuation of the standard coated fine paperproduction, the expansion of uncoated fine paper and speciality paperproduction has progressed according to plan. The demand forspeciality papers still remains somewhat under the normal level, butthe producers have managed to keep the price level fairly stable.Pulp prices have been rising for almost four months, but the europrices still remain clearly under the price level seen at the end of2008. The prices appear to continue their moderate rise primarilybased on production curtailments. With economic recovery and growingdemand for pulp, pulp prices are expected to rise more rapidly.M-real's internal profit improvement programmes, concurrently withdeclining wood raw material and chemical costs, will ease thechallenging profitability situation. Performance in 2009 will benegatively affected by significant extraordinary operating costsrelated to adapting operations to a smaller scale and more profitableentity.Despite some recent signs of improvement, M-real's operating resultfor 2009, excluding non-recurring items, will be clearly weaker thanlast year's result, due to the company's weak performance in thefirst part of the year.Near-term business risksThe weakening of and general uncertainty in the global economy havealso had a negative impact on the operating conditions of theEuropean paper and board industry. Despite some signs of improvement,there is still the risk that the slowdown of the global economy andthe resulting weak demand for paper and board will be prolonged. Aprolonged period of weak demand increases the risk of weakening cashflow.Due to the overall situation of the financial market, theavailability of corporate financing remains constrained. M-real ownssignificant assets that can be liquidated when needed in order toensure sufficient financing.Weak demand may lead to production curtailments that are larger thanplanned. There is also the risk that product prices may fall.There is a risk of a strengthening euro, particularly in relation tothe US dollar and the British pound, which would have a negativeimpact on operating conditions in the paper and board industry.Because the forward-looking estimates and statements of thesefinancial statements are based on current plans and estimates, theycontain risks and other uncertain factors that may cause the resultsto differ from the statements concerning them.In the short term, M-real's result will be particularly affected bythe price of, and demand for, finished products, raw material costs,the price of energy, and the exchange rate development of the euro.More information about longer-term risk factors can be found on pages37-38 of M-real's 2008 annual report.M-REAL CORPORATIONFurther information:Matti Mörsky, CFO, tel. +358 10 465 4913Juha Laine, Vice President, Investor Relations and Communications,tel. +358 10 465 4335More information available starting from 1 pm on 23 July 2009.A telephone conference for investors and analysts starts at 3 pm.BUSINESS AREAS AND MARKET TRENDS 2009 2009 2008 2008 2008 2009 2008 2008Consumer Packaging Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2Sales, EUR million 237 226 248 274 274 463 540 1,061EBITDA, EUR million 24 15 11 37 23 39 60 108 excl. non-recurringitems 25 19 11 37 23 44 61 109Operating result, EURmillion 4 -17 -13 17 3 -13 20 24 excl. non-recurringitems 5 -1 -9 17 3 4 21 29Return on capitalemployed, % 2.1 -8.8 -6.0 8.3 1.4 -3.4 5.0 3.2 excl. non-recurringitems, % 2.5 -0.4 -4.0 8.3 1.4 1.0 5.3 3.8Deliveries, 1,000tonnes 296 274 303 348 351 570 693 1,345Production, 1,000tonnes 275 292 293 347 335 567 696 1,336Personnel at the endof period 1,690 1,535 1,541 1,576 1,825 1,690 1,825 1,541Result for April-June compared with the previous quarterThe operating result excluding non-recurring items for the ConsumerPackaging business area improved from the previous quarter and wasEUR 5 million (Q1/2009: -1). The result was improved by the increasein delivery volumes. The result was weakened by falling averageselling prices caused mainly by the weakening of the US dollar.The result includes a non-recurring item consisting of a EUR -1million cost provision in the Consumer Packaging business arearelated to personnel reductions. The result for the previous quarterincluded non-recurring items of EUR -16 million in cost provisions,and write-downs related to the closure of the Metsä-Botnia Kaskinenmill.The deliveries of European folding boxboard producers were 2 per centhigher compared with the previous quarter. Consumer Packaging'sdeliveries of folding boxboard were up by 9 per cent.Result for January-June compared with the corresponding period lastyearThe operating result excluding non-recurring items for the ConsumerPackaging business area weakened compared to the corresponding periodlast year and totalled EUR 4 million (21). The most significantfactor weakening the result was the general decline in demand. Priceincreases, the implementation of cost-saving measures and thestrengthening of the US dollar improved the result.The result includes EUR -17 million non-recurring items. The resultfor the corresponding period last year included non-recurring itemsof EUR -1 million.The deliveries of European folding boxboard producers fell by 19 percent compared with the corresponding period last year. ConsumerPackaging's deliveries of folding boxboard were down by 17 per cent. 2009 2009 2008 2008 2008 2009 2008 2008Office Papers Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2Sales, EUR million 131 147 174 203 204 278 427 804EBITDA, EUR million -3 -2 -3 11 10 -5 27 35 excl. non-recurringitems -3 -2 -1 11 10 -5 27 37Operating result, EURmillion -18 -17 -38 -6 -7 -35 -9 -53 excl. non-recurringitems -18 -17 -14 -6 -7 -35 -9 -29Return on capitalemployed, % -13.7 -12.4 -25.6 -3.2 -3.2 -12.9 -1.8 -7.4 excl. non-recurringitems, % -13.7 -12.4 -9.2 -3.2 -3.2 -12.9 -1.8 -3.8Deliveries, 1,000tonnes 190 203 237 270 274 393 574 1,081Production, 1,000tonnes 202 199 177 226 245 401 502 905Personnel at the endof period 1,428 1,454 1,495 1,518 1,504 1,428 1,504 1,495Result for April-June compared with the previous quarterThe operating result excluding non-recurring items for the OfficePapers business area weakened compared with the previous quarter andwas EUR -18 million (Q1/2009: -17). The result was weakened by thelower average selling prices. The result was improved by lowerproduction costs. The result does not include non-recurring items.The result for the previous quarter did not include non-recurringitems.Total deliveries by European uncoated fine paper producers were downby 3 per cent compared to the previous quarter. The delivery volumeof Office Papers fell by 6 per cent.Result for January-June compared with the corresponding period lastyearThe operating result excluding non-recurring items for Office Papersweakened compared to the corresponding period last year and totalledEUR -35 million (-9). The result was weakened by the lower averageselling prices and the reduced demand for products. The result wasimproved by lower raw material costs and implemented cost savingsmeasures. The result did not include non-recurring items.The result for the corresponding period last year did not includenon-recurring items.Total deliveries by European uncoated fine paper producers fell by 17per cent compared to the corresponding period last year. The deliveryvolume of Office Papers fell by 32 per cent. This figure includes theimpact of the divestment of the New Thames mill. 2009 2009 2008 2008 2008 2009 2008 2008Speciality Papers Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2Sales, EUR million 82 117 147 153 158 199 322 622EBITDA, EUR million -17 -33 -1 7 8 -50 39 45 excl. non-recurringitems -16 -5 1 7 9 -21 15 23Operating result, EURmillion -23 -40 -75 -3 -2 -63 19 -59 excl. non-recurringitems -22 -12 -8 -3 -1 -34 -4 -15Return on capitalemployed, % -32.2 -43.4 -63.5 -2.3 -1.2 -37.6 8.3 -14.3 excl. non-recurringitems, % -30.4 -12.5 -5.8 -2.3 -0.8 -19.8 -1.7 -3.4Deliveries, 1,000tonnes 80 118 157 168 174 198 355 680Production, 1,000tonnes 74 99 160 170 186 173 376 705Personnel at the endof period 1,742 1,971 1,965 2,009 2,026 1,742 2,026 1,965Result for April-June compared with the previous quarterThe operating result excluding non-recurring items for the SpecialityPapers business area weakened compared to the previous quarter andwas EUR -22 million (Q1/2009: -12). The result was weakened by thecosts associated with discontinuation of the standard coated finepaper production.The result includes a non-recurring item of EUR -1 million connectedto the closure of the Hallein paper mill.The result for the previous quarter included non-recurring items ofEUR -28 million connected to the closure of the Hallein paper mill.Total deliveries by European coated fine paper producers fell by 5per cent compared to the previous quarter. The delivery volume ofSpeciality Papers fell by 32 per cent; this figure includes thediscontinuation of the standard coated fine paper production.Result for January-June compared with the corresponding period lastyearThe operating result excluding non-recurring items for SpecialityPapers weakened compared to the corresponding period last year andtotalled EUR -34 million (-4). The result was weakened by the heavydecline in the demand for products and the cost associated withdiscontinuation of coated fine paper production. The result wasimproved by higher selling prices and implemented cost savingsmeasures.The result includes total EUR -29 million in non-recurring items.The result for the corresponding period last year includednon-recurring items of EUR 23 million.Total deliveries by European coated fine paper producers fell by 26per cent compared to the corresponding period last year. The deliveryvolume of Speciality Papers fell by 44 per cent; this figure includesthe discontinuation of the standard coated fine paper production. 2009 2009 2008 2008 2008 2009 2008 2008Market Pulp and Energy Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2Sales, EUR million 116 134 150 172 160 250 322 644EBITDA, EUR million -10 -4 8 23 96 -14 117 148 excl. non-recurringitems -10 -3 8 23 22 -13 43 73Operating result, EURmillion -19 -18 -2 12 86 -37 96 106 excl. non-recurringitems -19 -12 -2 12 12 -31 22 32Return on capitalemployed, % -9.2 -8.4 -1.3 5.1 37.3 -8.8 22.8 12.6 excl. non-recurringitems, % -9.2 -5.8 -1.3 5.1 4.8 -7.5 5.0 3.6Deliveries, 1,000tonnes 327 287 264 291 279 614 559 1,115Result for April-June compared with the previous quarterThe operating result excluding non-recurring items for the MarketPulp and Energy reporting segment weakened compared with the previousquarter and was EUR -19 million (Q1/2009: -12). The result wasweakened by lower pulp selling prices due to weakened US dollar.Lower wood costs improved the result.The result did not include non-recurring items.The result for the previous quarter included EUR -6 million innon-recurring items.Result for January-June compared with the corresponding period lastyearThe operating result excluding non-recurring items for the MarketPulp and Energy reporting segment weakened compared to thecorresponding period last year and totalled EUR -31 million (22). Theresult was weakened by the lower selling price of pulp and theproduction curtailments of pulp mills due to low demand. The resultwas improved by lower wood costs.In addition, cost provisions and write-downs of EUR 6 millionassociated with the closure of the Metsä-Botnia Kaskinen mill wererecognised as non-recurring items in the result.The result for the corresponding period last year included EUR 74million non-recurring items.Condensed consolidated statement of comprehensiveincome 2009 2008 2008 2009 2009EUR million Q1-Q2 Q1-Q2 Change Q1 Q2Continuing operationsSales 1,208 1,688 -480 3,236 623 585Other operating income 61 148 -87 182 33 28Operating expenses -1,340 -1,613 273 -3,164 -704 -636Depreciation and impairmentlosses -120 -115 -5 -315 -70 -50Operating result -191 108 -299 -61 -118 -73 % of sales -15.8 6.4 -1.9 -18.9 -12.5Share of results inassociated companies -13 -1 -12 -1 -1 -12Net exchange gains andlosses 2 1 1 13 0 2Other net financial items -10 -70 60 -155 4 -14Result before income tax -212 38 -250 -204 -115 -97 % of sales -17.5 2.3 -6.3 -18.5 -16.6Income taxes 14 -1 15 34 10 4Result for the period fromcontinuingoperations -198 37 -235 -170 -105 -93 % of sales -16.4 2.2 -5.3 -16.9 -15.9Discontinued operationsResult from discontinuedoperations -12 -64 52 -338 -10 -2Result for the period -210 -27 -183 -508 -115 -95Other comprehensive incomeCash flow hedges 12 12 0 -41 -1 13Available for sale financialassets -120 67 -187 87 -63 -57Translation differences 3 -2 5 11 3 0Income tax relating tocomponents ofother comprehensive income 28 -22 50 -19 18 10Other comprehensive income,net of tax -77 55 -132 38 -43 -34Total comprehensive incomefor the period -287 28 -315 -470 -158 -129Result for the periodattributable to Shareholders of parentcompany -212 -31 -181 -517 -116 -96 Minority interest 2 4 -2 9 1 1 -210 -27 -183 -508 -115 -95Total comprehensive income for theperiodattributable to Shareholders of parentcompany -289 26 -315 -481 -162 -127 Minority interest 2 2 0 11 4 -2 -287 28 -315 -470 -158 -129Earnings per share for resultattributable toshareholders of parent company(EUR/share) from continuingoperations -0.61 0.10 -0.71 -0.55 -0.32 -0.29 from discontinuedoperations -0.04 -0.20 0.16 -1.03 -0.03 -0.01 Total -0.65 -0.10 -0.55 -1.58 -0.35 -0.30The change in the fair value of investments available for sale isbased mainly on the decrease in the value of the Pohjolan Voimashares. The change in the fair value of the Pohjolan Voima sharesrelates mainly to the decrease of the 12 month moving average valueof Nord Pool electricity futures used in the valuation.Condensed consolidated balance sheet 30.6. 30.6. 31.12.EUR million 2009 % 2008 % 2008 %ASSETSNon-current assetsGoodwill 51 1.4 172 3.3 51 1.1Other intangible assets 47 1.3 71 1.4 51 1.1Tangible assets 1,468 39.1 2,633 50.7 1,808 40.1Biological assets 2 0.1 43 0.8 57 1.3Investments in associatedcompanies 49 1.3 62 1.2 63 1.4Available for sale investments 304 8.1 387 7.4 440 9.8Non-current financial assets 229 6.1 33 0.6 232 5.2Deferred tax receivables 5 0.1 3 0.1 5 0.1 2,155 57.5 3,404 65.5 2,707 60.1Current assetsInventories 373 9.9 653 12.6 505 11.2Accounts receivables and otherreceivables 575 15.3 1,068 20.5 743 16.5Cash and cash equivalents 247 6.6 73 1.4 550 12.2 1,195 31.8 1,794 34.5 1,798 39.9Assets classified as held forsale 402 10.7Total assets 3,752 100.0 5,198 100.0 4,505 100.0SHAREHOLDERS' EQUITY AND LIABILITIESShareholders' equityEquity attributableto shareholders of parentcompany 1,040 27.7 1,836 35.3 1,329 29.5Minority interest 59 1.6 56 1.1 57 1.3Total equity 1,099 29.3 1,892 36.4 1,386 30.8Non-current liabilitiesDeferred tax liabilities 184 4.9 307 5.9 232 5.1Post-employment benefitobligations 92 2.4 141 2.7 98 2.2Provisions 81 2.2 45 0.9 99 2.2Borrowings 1,394 37.2 1,637 31.5 1,568 34.8Other liabilities 15 0.4 30 0.6 18 0.4 1,766 47.1 2,160 41.6 2,015 44.7Current liabilitiesCurrent borrowings 337 9.0 491 12.6 538 11.9Accounts payable and otherliabilities 414 11.0 655 9.4 566 12.6 751 20.0 1,146 22.0 1,104 24.5Liabilities classified as heldfor sale 136 3.6Total liabilities 2,653 70.7 3,306 63.6 3,119 69.2Total shareholders'equityand liabilities 3,752 100.0 5,198 100.0 4,505 100.0Condensed consolidated cash flow statement 2009 2008 2008 2009EUR million Q1-Q2 Q1-Q2 Q2Result for the period -211 -27 -508 -97Total adjustments 101 126 619 57Change in working capital 74 -60 7 24Cash flow arising fromoperations -36 39 118 -16Net financial items -1 -54 -193 -17Income taxes paid 10 -23 -22 13Net cash flow arising fromoperating activities -27 -38 -97 -20Investments in intangible andtangible assets -32 -51 -128 -16Divestments of assets and other 5 138 483 3Net cash flow arising frominvesting activities -27 87 355 -13Share issue, minority interest 0 2 2 0Changes in non-current loans and inother financial items -235 -337 -71 -6Dividends paid 0 -20 -20 0Net cash flow arising fromfinancing activities -235 -355 -89 -6Changes in cash andcash equivalents -289 -306 169 -39Cash and cash equivalents at beginningof period 550 380 380 301Translation difference in cash and cashequivalents 0 -1 1 -1Changes in cash and cash equivalents -289 -306 169 -39Assets held for sale -14 0 0 -14Cash and cash equivalents at endof period 247 73 550 247Statement of changes in shareholders' equity Equity attributable to shareholders of parent company Fair Trans- value Share lation and Share premium diffe- other Retained MinorityEUR million capital account rences reserves earnings Total interest TotalShareholders'equity,1 January2008 558 667 -11 225 391 1,830 52 1,882Dividendspaid -20 -20 -20Metsä Botniarestructuringin Uruguay 2 2Comprehensiveincomefor theperiod -2 59 -31 26 2 28Shareholders'equity,30 June 2008 558 667 -13 284 340 1,836 56 1,892Shareholders'equity,1 January2009 558 667 -9 259 -146 1,329 57 1,386Comprehensiveincomefor theperiod 4 -81 -212 -289 2 -287Shareholders'equity,30 June 2009 558 667 -5 178 -358 1,040 59 1,099Key ratios 2009 2008 2008 2009 Q1-Q2 Q1-Q2 Q2Sales, EUR million 1,208 1,688 3,236 585EBITDA, EUR million -71 223 254 -23 excl. non-recurring items, EUR million -33 128 192 -20Operating result, EUR million -191 108 -61 -73 excl. non-recurring items, EUR million -135 13 -35 -70Result from continuing operations before taxes, EUR million -212 38 -204 -97 excl. non-recurring items, Eur million -145 -57 -178 -83Result for the period from continuing operations, EUR million -198 37 -170 -93 from discontinued operations, EUR million -12 -64 -338 -2 Total, EUR million -210 -27 -508 -95Earnings per share from continuing operations, EUR -0.61 0.10 -0.55 -0.29 from discontinued operations, EUR -0.04 -0.20 -1.03 -0.01 Total, EUR -0.65 -0.10 -1.58 -0.30Earnings per share, excl. non-recurringitems, EUR -0.42 -0.18 -0.48 -0.24Return on equity, % -31.9 4.0 -10.4 -32.1 excl. non-recurring items, % -22.0 -6.1 -9.0 -27.2Return on capital employed, % -11.5 7.3 -1.3 -10.2 excl. non-recurring items, % -7.3 1.4 -0.5 -8.3Equity ratio at end of period, % 29.4 36.5 30.8 29.4Gearing ratio at end of period, % 168 112 152 168Net gearing ratio at end of period, % 116 100 90 116Shareholders' equity per share at end ofperiod, EUR 3.17 5.60 4.05 3.17Interest-bearing net liabilities, EUR million 1,276 1,888 1,254 1,276Gross capital expenditure, EUR million 32 51 128 16Deliveries, 1 000 tonnes Paper business 590 929 1,761 269 Consumer Packaging 570 693 1,345 296Personnel at the end of period in continuing operations 6,080 7,035 6,546 6,080 in discontinued operations 2,322EBITDA = Earnings before interest, taxes, depreciationand impairment chargesSecurities and guarantees 2009 2008 2008EUR million Q2 Q2For own liabilities 130 58 61On behalf of associated companies 1 1 1On behalf of Group companies 5 5 5On behalf others 4 3 2Total 140 67 69Open derivative contracts 2009 2008 2008EUR million Q2 Q2Interest rate derivatives 1,334 1,815 1,286Currency derivatives 3,166 3,326 2,805Other derivatives 290 176 185Total 4,790 5,317 4,276The fair value of open derivative contracts calculated at marketvalue at the end of the review periodwas EUR -14.6 million (EUR 15.0 million 31 December 2008 and EUR 27.7million 30 June 2008).Also include other closed contracts to a total amount ofEUR 2,611.2 million(EUR 2,068.8 million 31 December 2008 and EUR 2,623.2 millionJune 30 2008 ).Commitments related to fixed assets 2009 2008 2008EUR million Q2 Q2Payments due in following 12 months 4 5 0Payments due later 2 1 1Changes in property, plant and equipment 2009 2008 2008EUR million Q2 Q2Carrying value at beginning of period 1,808 2,820 2,820Capital expenditure 29 51 128Decreases -1 -73 -670Assets classified as held for sale -253 0 0Depreciation and impairment charges -112 -107 -282related to discontinued operations 0 -38 -149Translation difference -3 -20 -39Carrying value at end of period 1,468 2,633 1,808Depreciation and impairment losses related to discontinued operationsinclude Graphic Papers business.Related-party transactionTransaction and balances with parent and sistercompanies 2009 2008 2008EUR million Q2 Q2Sales 15 16 34Other operating income 2 2 3Purchases 163 318 571Interest income 2 3 7Interest expences 1 3 4Non-current receivables 5 19 5Current receivables 60 117 49Non-current liabilities 0 0 0Current liabilities 203 34 228Transaction with associated companies 2009 2008 2008EUR million Q2 Q2Sales 0 0 0Purchases 2 2 4Non-current receivables 1 2 0Current receivables 7 10 7Current liabilities 1 2 2Accounting policiesThis unaudited interim report has been prepared in accordance withaccounting policies set out inInternational Accounting Standard 34 and in the M-real's AnnualReport for 2008.The Group has adopted thefollowing standards:IAS 1 (revisited), Presentation of Financial Statements. Therevisited standard is aimed at improvingusers' ability to analyse and compare the information given infinancial statements by separating changesin equity of an entity arising from transactions with owners fromother changes in equity. The Grouppresents non-owner changes in equity in the statement ofcomprehensive income.IFRS 8, Operating Segments. The new standard replaces IAS 14. Thenew standard requires a'management approach', under which segment information is presentedon the same basis as that usedfor internal reporting purposes. The operating segments are the sameas in 2008 according to IAS 14 orConsumer Packaging, Office Papers, Speciality Papers and MarketPulp and Energy.The figures in the financial statement areunaudited.Calculation of key ratios (Result from continuing operations before tax - directReturn on equity (%) = taxes) per (Shareholders' equity (average)) (Result from continuing operations before tax + interest expenses,Return on capital employed net exchange gains/losses and(%) = other financial expenses) per (Shareholders' equity + interest-bearing borrowings (average))Equity ratio (%) = (Shareholders' equity) per (Total assets - advance payments received) (Interest-bearing borrowings)Gearing ratio (%) = per (Shareholders' equity) (Interest-bearing borrowings - liquid funds - interest-bearingNet gearing ratio (%) = receivables) per (Shareholders' equity) (Profit attributable to shareholders of parent company)Earnings per share = per (Adjusted number of shares (average)) (Equity attributable toShareholders'equity per shareholders of parent company)share = per (Adjusted number of shares at the end of period)Sales and result by segment 2009 2009 2008 2008 2008 2009 2008 2008EUR million Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2Consumer Packaging 237 226 248 274 274 463 540 1 061Office Papers 131 147 174 203 204 278 427 804Speciality Papers 82 117 147 153 158 199 322 622Market Pulp andEnergy 116 134 150 172 160 250 322 644Other operations 40 34 57 77 87 74 189 323Internal sales -21 -35 -54 -53 -54 -56 -112 -218Sales 585 623 722 826 829 1 208 1 688 3 236Consumer Packaging 24 15 11 37 23 39 60 108Office Papers -3 -2 -3 11 10 -5 27 35Speciality Papers -17 -33 -1 7 8 -50 39 45Market Pulp andEnergy -10 -4 8 23 96 -14 117 148Other operations -17 -24 -33 -29 -10 -41 -20 -82EBITDA -23 -48 -18 49 127 -71 223 254 % of sales -3,9 -7,7 -2,5 5,9 15,3 -5,9 13,2 7,8Consumer Packaging 4 -17 -13 17 3 -13 20 24Office Papers -18 -17 -38 -6 -7 -35 -9 -53Speciality Papers -23 -40 -75 -3 -2 -63 19 -59Market Pulp andEnergy -19 -18 -2 12 86 -37 96 106Other operations -17 -26 -33 -28 -9 -43 -18 -79Operating result -73 -118 -161 -8 71 -191 108 -61 % of sales -12,5 -18,9 -22,3 -1,0 8,6 -15,8 6,4 -1,9Non-recurringitemsConsumer Packaging -1 -16 -4 0 0 -17 -1 -5Office Papers 0 0 -24 0 0 0 0 -24Speciality Papers -1 -28 -67 0 -1 -29 23 -44Market Pulp andEnergy 0 -6 0 0 74 -6 74 74Other operations -1 -3 -14 -11 -1 -4 -1 -27Non-recurringitems in operatingresult -3 -53 -110 -11 72 -56 95 -26Consumer Packaging 25 19 11 37 23 44 61 109Office Papers -3 -2 -1 11 10 -5 27 37Speciality Papers -16 -5 1 7 9 -21 15 23Market Pulp andEnergy -10 -3 8 23 22 -13 43 73Other operations -16 -22 -15 -18 -8 -38 -18 -50EBITDA, excl.non-recurringitems -20 -13 4 60 55 -33 128 192 % of sales -3,4 -2,1 0,6 7,3 6,6 -2,7 7,6 5,9Consumer Packaging 5 -1 -9 17 3 4 21 29Office Papers -18 -17 -14 -6 -7 -35 -9 -29Speciality Papers -22 -12 -8 -3 -1 -34 -4 -15Market Pulp andEnergy -19 -12 -2 12 12 -31 22 32Other operations -16 -23 -18 -17 -8 -39 -17 -52Operating result,excl.non-recurringitems -70 -65 -51 3 -1 -135 13 -35 % of sales -12,0 -10,4 -7,1 0,4 -0,1 -11,2 0,8 -1,1Return on capitalemployed %Consumer Packaging 2,1 -8,8 -6,0 8,3 1,4 -3,4 5,0 3,2Office Papers -13,7 -12,4 -25,6 -3,2 -3,2 -12,9 -1,8 -7,4Speciality Papers -32,2 -43,4 -63,5 -2,3 -1,2 -37,6 8,3 -14,3Market Pulp andEnergy -9,2 -8,4 -1,3 5,1 37,3 -8,8 22,8 12,6Group -10,2 -13,4 -19,7 -0,5 8,9 -11,5 7,3 -1,3Capital employedEUR millionConsumer Packaging 771 774 801 839 829 771 829 801Office Papers 501 517 556 645 664 501 664 556Speciality Papers 241 312 415 518 532 241 532 415Market Pulp andEnergy 822 876 899 929 921 822 921 899Unallocated andeliminations 611 609 822 -12 165 611 165 822Group 2 946 3 088 3 493 2 919 3 111 2 946 3 111 3 493The capital employed for a segment included its assets: goodwill,other intangible goods, tangible assets,biological assets, investments in associates, inventories, accountsreceivables, prepayments and accruedincome (excluding interest and taxes), less the segment's liabilities(accounts payable, advance payments,accruals and deferred income (excludinginterest and taxes).Deliveries 2009 2009 2008 2008 2008 2009 2008 20081,000 tonnes Q2 Q1 Q4 Q3 Q2 Q1-Q2 Q1-Q2Consumer Packaging 296 274 303 348 351 570 693 1,345Office Papers 190 203 237 270 274 393 574 1,081Speciality Papers 80 118 157 168 174 198 355 680Paper business,total 269 321 394 438 448 590 929 1,761Market Pulp 327 287 264 291 279 614 559 1,115Production1,000 tonnesConsumer Packaging 275 292 293 347 335 567 696 1,336Office Papers 202 199 177 226 245 401 502 905Speciality Papers 74 99 160 170 186 173 376 705Paper business,total 276 298 337 396 431 574 878 1,610Metsä-Botnia pulp 1) 210 231 235 270 233 441 485 990M-real pulp 264 277 303 377 391 541 806 1,4861) corresponds to M-real's ownership share of 30% in Metsä-Botniahttp://hugin.info/3071/R/1330509/314552.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 23.07.2009 - 11:00 Uhr
Sprache: Deutsch
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"M-real Corporation Interim report 1 January-30 June 2009"
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