M-real's result improved in the third quarter to Euro 1 million

Oct 31, 2005. /Lesprom Network/. M-real's consolidated result before taxes, excluding non-recurring items, improved in the third quarter to Euro 1 million from a loss of Euro 124 million in the previous quarter. The operating result net of non-recurring items improved to Euro 20 million, from a loss of Euro 57 million. Profitability was improved mainly by the rise in the price of coated magazine paper, the increase in the volume of coated fine paper delivered and the ending of the labour dispute that had disrupted the Finnish paper industry.

All in all, the labour dispute in Finland is estimated to have cut Euro 15-20 million off of the third-quarter operating result. The figure takes into account the lost delivery volumes, the positive effect on earnings of the return of product stocks to a normal level, the effects on fixed costs as well as Metsä-Botnia's lower operating result.  In the second quarter, the total effect was a decrease of about Euro 70 million in the operating result.

Key figures for the third quarter of 2005, excluding non-recurring items:  

In Euro

Key figures for the third quarter of 2005:

- Turnover: Euro 1 269 million (1 259 million)

- Operating result: Euro 20million (a loss of 72)

- Result before taxes: Euro 1 million (a loss of 143 million)

- Result for the report period: Euro 2 million (a loss of 121).

- Earnings per share: Euro 0.01 (0.37 negative)

- Return on capital employed: 2.3% (5.7 negative)

- Equity ratio: 37.4% (38.4)

- Gearing ratio: 87% (85)

- Volume of paperboard delivered: 226 000 (231 000); volume of paper delivered: 991 000 (999 000)

The third-quarter result before taxes was improved by a valuation gain on interest rate derivatives of Euro 11 million owing to the rise in the level of interest rates. In the previous quarter, a valuation loss of Euro 17 million was booked on the corresponding instruments. Operating profit in the second quarter was also burdened by a one-off expense provision of Euro 15 million to cover the efficiency-boosting programme in Sweden.

The cumulative result before taxes for January-September was a loss of Euro 65 million. During the corresponding period last year a loss of Euro 69 million was posted. Excluding non-recurring items the result weakened by Euro 62 million to a loss of Euro 131 million, particularly due to the losses caused by the labour disputes, the weakening in the United States dollar and the British pound, the fall in the price of uncoated fine paper, the rise in oil-based raw material prices as well as the higher energy costs.

Commenting on the progress of M-real's cost-savings programme and the market situation for its main products, president and CEO Hannu Anttila said: "M-real's Euro 230 million savings and efficiency-boosting programme is progressing in line with targets, and we are actively looking for new areas where savings can be realized. After the labour dispute in the Finnish paper industry came to an end, demand for most grades of paper and paperboard has been good and the market balance more favourable. The revival in our volumes of packaging board delivered has nevertheless been slower than forecast, but we believe the situation will improve during the latter part of the year. Within coated magazine paper, we have a strong order book at present and price increases have been put through. Sales volumes of coated fine paper have developed favourably and prices have been rather steady. Within office papers, the company has succeeded in raising the prices of the lowest quality grades. The efficiency improvement of the Map paper merchanting business has proceeded according to plans. Integrating the functions of the Modo Merchants chain into James McNaughton - a process that was started towards the end of last year - was seen to completion."

In the last quarter of the year, demand for the company's main products is forecast to remain good. Deliveries are estimated to increase in the consumer packaging and publishing business areas, where the labour dispute lowered the volume of deliveries in the third quarter. Average prices of coated magazine paper and uncoated fine paper are estimated to rise slightly. No significant change is expected in the price of coated fine paper, and the price of folding boxboard is expected to remain stable. The fourth quarter result before taxes, excluding non-recurring items, is not estimated to differ significantly from the previous quarter. The full-year result before taxes will be in the red.

M-real is one of Europe’s leading suppliers of paperboard and related services, coated and uncoated fine paper and coated magazine paper.