Espoo, Finland, Apr 23, 2008 - (ABN Newswire) - M-real Corporation Stock Exchange Release 23.4.2008 Â Result for the first quarter of 2008
*Â Sales were EUR 1,099 million (Q4/2007: 1,085). *Â Operating profit excluding non-recurring items was EUR 3 million (-6). Operating profit including non-recurring items was EUR 24 million (-245). *Â Result before taxes, excluding non-recurring items, was EUR -37 million (-49). Result before taxes including non-recurring items, was EUR -16 million (-288).
Events during the first quarter
*Â M-real divested as part of its EUR 200 million divestment programme announced in February, its office paper mill located in the UK to DS Smith Plc. In relation to the sale, a separate agreement was made on the UK industrial operation's pension liabilities. The combined positive result effect was approximately EUR 24 million and correspondingly the cash flow effect approximately EUR 82 million. *Â M-real closed Kangas paper machine 2 in February and Lielahti BCTMP mill in March. The closures were carried out ahead of the original schedule.
"Simplifying M-real's business concepts has started well. Our magazine paper customers have welcomed the new concepts, and our plans have also been moving ahead in other business areas. The situation regarding wood raw material continues to be challenging and the pulp production has been curtailed at the Metsä-Botnia's mills in Finland. The use of wood raw material is planned to be curtailed for the time being by 2 million cubic metres per annum which affects the pulp production at M-real's and Metsä-Botnia's mills in Finland and in Sweden. Despite the planned curtailments in pulp production, M-real's possibilities to maintain normal paperboard and paper production are good. Due to increased wood raw material costs the overall cost inflation can not be fully covered with our own profit improvement measures in 2008. New profit improvement programmes will be launched this year. The strength of the euro against the US dollar and the British pound has offset part of the earlier achieved paperboard and paper price increases in local currencies. Actions to increase paperboard and paper prices continue actively."  Mikko Helander, CEO, M-real Corporation Â
Key figures                      2008   2007 2007 2007 2007 2007  Q1 Q4 Q3 Q2 Q1  Sales, MEUR 1,099 1,085 1,102 1,096 1,157 4,440 EBITDA, MEUR 102 70 116 66 193 444  excl. non-recurring 81 78 111 366 items, MEUR 77 101 Operating profit, MEUR 24 -245 43 -15 97 -120  excl. non-recurring 3 -6 36 49 items, MEUR -2 21 Result before taxes         from continuing -16 -288 4 -273 operations, MEUR -44 55  excl. non-recurring -37 -49 -3 -104 items, MEUR -31 -21 Result for the period        from continuing -18 operations, MEUR -249 -5 -48 52 -250  from discontinued -1 operations, MEUR 57 -3 -1 2 55  Total, MEUR -19 -192 -8 -49 54 -195 Result per share         from continuing -0.06 -0.75 -0.02 -0.76 operations, EUR -0.15 0.16   from discontinued 0.00 operations, EUR 0.17 0.00 0.00 0.00 0.17  Total, EUR -0.06 -0.58 -0.02 -0.15 0.16 -0.59 Result per share excl. non-recurring items,       EUR -0.12 -0.07 -0.04 -0.12 -0.09 -0.32 Return on equity, % -4.4 -53.0 -2.3 -11.2 9.9 -14.0  excl. non-recurring -9.4 -0.4 -0.9 -5.9 items, % -2.4 -7.3 Return on capital 2.9 -24.4 4.4 -2.6 employed, % -1.1 9.7   excl. non-recurring 0.8 -0.3 3.7 1.4 items, % 0.2 2.5 Equity ratio at end of 32.2 32.1 32.7 32.1 period, % 32.8 32.9 Gearing ratio at end of 117 112 117 112 period, % 117 114 Interest-bearing net 1,892 1,867 2,187 1,867 liabilities 2,192 2,189 Gross investments, MEUR 21 81 66 62 50 259 Paper deliveries, 1,000 986 980 975 3,949 tonnes 965 1,029 Paperboard deliveries, 298 291 297 1,203 1,000 tonnes 313 302 Personnel at end of  9,122  9,508 9,508 period  12,449  13,302  14,509 EBITDA = Earnings before interest, taxes, depreciation and amortization
 Result January-March compared with the previous quarter  M-real's sales totalled EUR 1,099 million (Q4/07: 1,085). Comparable sales increased by 2 per cent. The operating result was EUR 24 million (-245) and the operating result excluding non-recurring items stood at EUR 3 million (-6). The net non-recurring items in the operating result for January-March totalled EUR 21 and were:
*Â EUR 24 million positive effect on the result for the Graphic Papers business area for the sale of New Thames mill and the agreement of pension liabilities from UK industrial operations and other liabilities related to the closure of the Sittingbourne mill. *Â EUR 2 million cost provision in the Graphic Papers business area for the completion of the closure of the Kangas paper machine 2 for coated magazine paper. *Â EUR 1 million cost provision in the Consumer Packaging business area for the completion of the closure of the Lielahti BCTMP mill.
In the previous quarter, the operating profit included non-recurring items of net EUR -239 million of which the most significant ones were:
*Â Net impairment loss of EUR 182 million which includes a EUR 185 million write-down of goodwill in the Office Papers business area and a EUR 3 million reversal of an impairment loss on the fixed assets of the Kyro paper mill in the Consumer Packaging business area *Â EUR 13 million reduction in cost provision for the closure of the Wifsta mill in Office Papers business area *Â EUR 68 million cost provision and write-down in the business areas; Consumer Packaging (11), Graphic Papers (49) and Office Papers (8).
In addition to the items recognised in the operating profit in the previous quarter, an estimated capital gain of EUR 76 million was recognised as a non-recurring item from discontinued operations from the sale of Map Merchant. The exact sales price will be determined later. Depending on the final amendment calculation, the exact sales price may, at maximum, be lowered by EUR 30 million. Lowering of the sales price, if realised, would have a negative effect on the result for the discontinued operations in 2008. Finalising the transaction will, anyhow, have a positive effect on M-real's cash flow in 2008.  The operating result excluding non-recurring items was improved compared with the previous quarter due to an increase in production volume of Metsä-Botnia's Uruguay pulp mill. The increased energy costs, the strength of the euro against the US dollar and the British pound and the production curtailments implemented at the Metsä-Botnia mills in Finland had a negative effect on the operating profit. The result from other operations was weakened by several factors, the most significant being the results from hedging related to energy and currency.  The paper delivery volume in January-March totalled 986,000 tonnes (980,000). Production was curtailed by 29,000 tonnes in line with demand (50,000). Paperboard deliveries amounted to 298,000 tonnes (291,000) and production curtailments to 1,000 tonnes (18,000).  Financing income and expenses totalled EUR -40 million (-40). Foreign exchange gains and losses from accounts receivable, accounts payable, financial income and expenses and the valuation of currency hedging were EUR 0 million (2). Net interest and other financing expenses stood at EUR -40 million (-42). Other financing expenses include a loss of EUR 3 million (3) from the valuation of interest rate hedging.  In January-March, the result from continuing operations before taxes was EUR -16 million (-288). The result from continuing operations before taxes, excluding non-recurring items, totalled EUR -37 million (-49). The effect of income taxes, including the change in deferred tax liabilities, was EUR -2 million (39).  Earnings per share were EUR -0.06 (-0.58). Excluding non-recurring items, earnings per share from continuing operations were EUR -0.12 (-0.07). Return on equity was -4.4 per cent (-53.0), and -9.4 per cent (-0.4) excluding non-recurring items. The return on capital employed was 2.9 per cent (-24.4), and 0.8 per cent (-0.3) excluding non-recurring items.  Result for January-March compared with the corresponding period previous year  M-real's sales were EUR 1,099 million (Q1/07: 1,157). Comparable sales decreased by 3 per cent. The operating profit was EUR 24 million (97) and the operating profit excluding non-recurring items was EUR 3 million (21).  Net non-recurring items recognised in operating profit were EUR 76 million. The non-recurring income totalled EUR 135 million and the non-recurring costs stood at EUR 59 million of which the most significant items were:
* Capital gain of EUR 135 million on the sale of Metsä-Botnia's shares to Metsäliitto Cooperative * EUR 14 million cost provision for the closure of the Sittingbourne mill and EUR 29 million for the closure of the Wifsta mill * Impairment loss of EUR 16 million due to the valuation of assets held for sale at the expected selling price in compliance with IFRS 5.
The operating result excluding non-recurring items compared with the corresponding period was negatively affected by the increased wood raw material and energy costs, the strength of the euro against the US dollar and the British pound as well as the production curtailments at the Metsä-Botnia mills in Finland. The implemented profit improvement actions and price increases as well as the start-up of Metsä-Botnia's Uruguay mill in November 2007 improved the result.  The paper delivery volume in January-March totalled 986,000 tonnes (1,029,000). Production was curtailed by 29,000 tonnes in line with demand (41,000). Paperboard deliveries amounted to 298,000 tonnes (302,000) and production curtailments to 1,000 tonnes (17,000).  Financing income and expenses in the review period totalled EUR -40 million (-42). Foreign exchange gains and losses from accounts receivable, accounts payable, financial income and expenses and the valuation of currency hedging were EUR 0 million (-5). Net interest and other financing expenses stood at EUR -40 million (-37). Other financing expenses include a loss from the valuation of interest rate hedging of EUR 3 million (1).  The result from continuing operations before taxes was EUR -16 million (55). The result from continuing operations before taxes, excluding non-recurring items, totalled EUR -37 million (-21). Income taxes, including the change in deferred tax liabilities, were EUR -2 million (-3).  Earnings per share were EUR -0.06 (0.16). Excluding non-recurring items, earnings per share from continuing operations were EUR -0.12 (-0.09). Return on equity was -4.4 per cent (9.9), and -9.4 per cent (-7.3) excluding non-recurring items. The return on capital employed was 2.9 per cent (9.7), and 0.8 per cent (2.5) excluding non-recurring items.  Personnel  On 31 March, 2008 the company had 9,122 employees (31 December 2007: 9,508), of which 3,333 (3,994) worked in Finland. On average, in January-March 2008, M-real had 9,265 employees (Q1/07: 13,664). The personnel figures include 30 per cent of Metsä-Botnia's personnel.  Investments  Gross capital expenditure in January-March totalled EUR 21 million (Q1/07: 50). This includes a EUR 7 million share of Metsä-Botnia's capital expenditure (35), based on M-real's ownership, which amounted to 30 per cent.  Structural change  M-real's profit improvement and business concept simplification programme launched in November 2007 has proceeded according to the targets. As part of the programme, the Lielahti BCTMP mill and Kangas mill's coated magazine paper machine 2 were closed. The Publishing and Commercial Printing business areas were combined under the Graphic Papers business area. At the same time, projects were launched to streamline the coated magazine paper business operations and the sales and marketing organisation. As part of the programme, M-real announced it is also prepared to take other measures, such as capacity cuts, if required by changes in the business environment. The aggregate annual profit improvement target of the programme is EUR 100 million by the end of 2009.  In February 2008, M-real announced an additional target of EUR 200 million from asset divestments, which should be achieved by the end of the first quarter of 2009. The target of EUR 200 million includes the sale of the New Thames mill in February. This transaction had a positive cash flow effect of EUR 82 million together with the arrangement on the pension liabilities of the UK industrial operations and a profit of approximately EUR 24 million was booked. Following this, M-real has no significant unfunded pension liabilities in the UK. Other asset items belonging to the divestment programme will be published later.  Financing  At the end of March, M-real's equity ratio stood at 32.2 per cent (31.12.2007: 32.1), and gearing at 117 per cent (112). In some of M-real's financing arrangements, a limit of 120 per cent has been set for gearing and a limit of 30 per cent for the equity ratio. At the end of March, gearing calculated in the manner defined in the financing agreements was approximately 98 per cent (95) and the equity ratio about 36 per cent (36).  Interest-bearing net debt stood at EUR 1,892 million at the end of March (1,867). Foreign-currency-denominated loans accounted for 10 per cent of long-term loans. Of these, 90 per cent were variable rate loans, and the rest were fixed-rate loans. At the end of March, the average interest rate on loans was 7.3 per cent and the average maturity of long-term loans was 3.3 years. At the end of March, the interest rate maturity of the loans was 4 months. During the period, the interest rate maturity has varied between 4 and 6 months.  Cash flow from operating activities amounted to EUR 40 million in January-March (Q4/07: 97). Working capital increased by EUR 33 million (decreased EUR 74 million).  At the end of the review period, an average of 5 months of net foreign exchange exposure was hedged. The level of hedging has varied between 5 and 6 months during the period. Approximately 98 per cent of non-euro-denominated equity was hedged at the end of the review period.  Liquidity is at a good level. At the end of the period under review, liquidity was EUR 1,053 million, of which EUR 856 million consisted of committed long-term credit facilities and EUR 197 million of liquid assets and investments. To meet its short-term financing needs, the company also had at its disposal uncommitted domestic and foreign commercial paper programmes and credit facilities amounting to about EUR 500 million.  Shares  In January-March, the highest price of M-real's B share on the OMX Nordic Stock Exchange Helsinki was EUR 3.28, the lowest price EUR 1.66, and the average price EUR 2.24. At the end of March, the price of the B share was EUR 2.12.  The trading volume of the B share was EUR 357 million, or 59 per cent of the shares. The market value of the A and B shares totalled EUR 710 million at the end of March. At the end of the review period, Metsäliitto Cooperative owned 38.6 per cent of the shares, and the voting rights conferred by these shares was 60.5 per cent. The foreign shareholders' share of the shares fell to 31.5 per cent.  On 15 January, 2008 M-real was informed that the shareholding of Norges Bank (Central Bank of Norway) in the company had on 9 January9, 2008 increased to 5.3 percent of the share capital and to 1.7 percent of the voting rights.  The Annual General Meeting on 13 March 2008 resolved to delete from the company's Articles of Association the stipulation on the minimum and maximum share capital, the record date provisions of the book-entry system and the section concerning the par value of company's share.  Dividend  The Annual General Meeting decided that a dividend of EUR 0.06 per share, approximately EUR 19.7 million in total is to be paid for the financial year ending on 31 December 2007. The dividend was paid on 27 March 2008.  Board of Directors and Auditors  The Annual General Meeting elected the following persons to M-real's Board of Directors: Mr Heikki Asunmaa, Counsellor of Forest Economy; Mr Martti Asunta, M.Sc. (Forestry); Mr Kari Jordan, President and CEO of Metsäliitto Group; Mr Erkki Karmila, LL.M.; Mr Kai Korhonen, M.Sc. (Eng.); Mr Runar Lillandt, Counsellor of Agriculture; Mr Juha Niemelä, Honorary Counsellor; and Mr Antti Tanskanen, Minister. The term of office of board members continues until the end of the next Annual General Meeting. At its organising meeting, the Board of Directors elected Mr Kari Jordan as Chairman and Mr Martti Asunta as Vice Chairman.  The Annual General Meeting decided to change the maximum number of board members from eight to ten.  PricewaterhouseCoopers Oy, a firm of authorised public accountants, was elected as M-real's auditor, and Mr Göran Lindell, APA, as principal auditor. The term of office of auditors continues until the end of the next Annual General Meeting.  Near-term outlook  Demand for M-real's paperboard and paper products is expected to be reasonably good in the second quarter of 2008 but will experience slight seasonal weakening. Thus, the average operating rates of the M-real machines are expected to decrease slightly.  Measures to raise product prices continue in all business areas. In the second quarter, price increases for the paperboard spot deliveries are being sought primarily in the UK and in markets outside Europe. Another objective is to increase the spot prices of coated magazine paper, thus creating the preconditions for the increase of contract prices in the latter half of the year. Closed capacities will support positive uncoated fine paper price development during the rest of the year, with increases being sought already in the second quarter. The most challenging situation is for coated fine paper, as excess capacity and the strong euro is making the situation more difficult.  M-real's objective is to cover the cost increases as much as possible with own profit improvement actions. Due to the increased wood raw material costs, the cost inflation can not be fully covered with its own profit improvement actions in 2008. New profit improvement programmes will be launched this year. The exceptionally mild winter in Northern Europe and the increases in export duties on wood from Russia have created difficulties in wood supply, and the price of wood has remained high. For the time being, the use of wood raw material is planned to be curtailed per annum by 2 million cubic metres, which affects production at M-real's and Metsä-Botnia's pulp mills in Finland and in Sweden. Despite the planned pulp production curtailments, M-real's possibilities to maintain normal paperboard and paper production are good.  The start-up of Metsä-Botnia's pulp mill in Uruguay in November 2007 was successful. The pulp from the Uruguay mill will significantly improve M-real's profitability this year. M-real's share of the output of the Uruguay mill will be used at M-real's own fine paper mills in Central Europe.  M-real's strategic review continues. The profit improvement and business concept simplification programme launched in November 2007 as the fourth phase of the strategy review is progressing according to plan, as is the divestment programme launched in February 2008.  The operating profit, excluding non-recurring items, for the second quarter of 2008 is forecast to remain approximately at the same level as in the second quarter of 2007.  Near-term business risks  If the uncertainty in the US economy continues for a longer period, it could spread worldwide and affect the operational preconditions of European paper and paperboard industry. As yet, no significant reduction in the demand for paper and paperboard has been observed in M-real's main markets in Europe. The risk of the euro becoming even stronger was realised during the first part of the year. Production input costs have also continued to increase. The risk of a need to implement more than currently planned production curtailments due to challenging wood supply situation, as well as the risk of the euro strengthening further, exists.  The eventual sales price of Map Merchant will be determined later. Depending on the final adjustment calculation, the exact sales price may, at maximum, be lowered by EUR 30 million. Lowering the sales price, if realised, would have a negative effect on the result for the discontinued operations in 2008. Finalising the transaction will, anyhow, have a positive effect on M-real's cash flow in 2008.  Because the forward-looking estimates and statements of this financial statements release are based on current plans and estimates, they contain risks and other uncertain factors which may lead the results to differ from the statements concerning them. In the short term, M-real's result will be influenced in particular by the price of, and demand for, finished products, the availability and price of wood, other raw material costs, the price of energy, and the exchange rate of the US dollar. More information about longer-term risk factors can be found on pages 28-29 of M-real's 2007 Annual Report.  M-REAL CORPORATION  Further information: Seppo Parvi, CFO, tel. +358 10 465 4321 Juha Laine, Vice President, IR and Communications, tel. +358 10 465 4335  Further information on April 23, 2008 from 1 pm (EET).  Consumer Packaging Â
+-------------------------------------------------------------------+ | Â | Â Â | Â | Â Â | Â | Â | | | | Â 2008 | Â 2007 | 2007 | Â 2007 | Â 2007 | Â Â Â 2007 | |------------------+-------+-------+------+-------+-------+---------| | Â | Q1 | Q4 | Q3 | Q2 | Q1 | Â | |------------------+-------+-------+------+-------+-------+---------| | Sales, MEUR | 235 | 225 | 231 | 243 | 235 | 934 | |------------------+-------+-------+------+-------+-------+---------| | EBITDA, MEUR | 36 | 24 | 45 | 28 | 39 | 136 | |------------------+-------+-------+------+-------+-------+---------| | Â excl. | 37 | | | | | | | non-recurring | | | | | | | | items | | 25 | 45 | 33 | 39 | 142 | |------------------+-------+-------+------+-------+-------+---------| | Operating | 18 | | | | | | | profit, MEUR | | 0 | 27 | 8 | 21 | 56 | |------------------+-------+-------+------+-------+-------+---------| | Â excl. | 19 | | | | | | | non-recurring | | | | | | | | items | | 8 | 27 | 15 | 21 | 71 | |------------------+-------+-------+------+-------+-------+---------| | Return on | | | | | | | | capital | | | | | | | | employed, % | 9.6 | 0.1 | 15.3 | 4.1 | 10.9 | 7.5 | |------------------+-------+-------+------+-------+-------+---------| | Â excl. | | | | | | | | non-recurring | | | | | | | | items, % | 10.1 | 4.3 | 15.3 | 7.9 | 10.9 | 9.5 | |------------------+-------+-------+------+-------+-------+---------| | Deliveries, | 298 | | | | | | | 1,000 t | | 291 | 297 | 313 | 302 | 1,203 | |------------------+-------+-------+------+-------+-------+---------| | Production, | | | | | | | | 1,000 t | 314 | 294 | 303 | 302 | 311 | 1,210 | |-------------------------------------------------------------------| | EBITDA = Earnings before interest, taxes, depreciation and | | amortization | +-------------------------------------------------------------------+
 Result for January-March compared to the previous quarter  The operating profit of the Consumer Packaging business area excluding non-recurring items of the Consumer Packaging business area improved and stood at EUR 19 million (Q4/07: 8). The profit improvement resulted from higher average sales price and increased delivery volumes while the production curtailments at the Metsä-Botnia mills in Finland had a negative impact.  A non-recurring item of EUR 1 million was recognised in the operating profit for completion of the closure of the Lielahti BCTMP mill.  In the previous quarter, non-recurring items of EUR -8 million were recognised in the operating profit.  Deliveries by Western European folding boxboard producers increased by 4 per cent, and M-real's deliveries by 10 per cent compared to the previous quarter.  The delivery volume of linerboard was at a lower level compared to the previous quarter. The average euro-denominated price increased slightly. The sales prices of wallpaper base paper have increased clearly.  Result for January-March compared with the corresponding period previous year  Consumer Packaging's operating profit excluding non-recurring items stood at EUR 19 million (Q1/07: 21). The result was weakened by clearly increased wood raw material costs, the weakened US dollar and British pound as well as production curtailments at the Metsä-Botnia mills in Finland. The average euro-denominated price of folding boxboard was at a higher lever despite the weakened US dollar and British pound.  Deliveries by Western European folding boxboard producers decreased by 2 per cent compared with the corresponding period previous year. M-real's folding boxboard deliveries increased by 2 per cent.  The delivery volume of linerboard was lower than in the corresponding period previous year. The sales prices of wallpaper base paper increased clearly from previous year.  Graphic Papers Â
+-------------------------------------------------------------------+ | Â | Â Â | Â | Â | Â | Â | Â | | | 2008 | Â 2007 | Â 2007 | Â 2007 | Â 2007 | Â 2007 | |--------------------+------+-------+-------+-------+-------+-------| | Â | Q1 | Q4 | Q3 | Q2 | Q1 | Â | |--------------------+------+-------+-------+-------+-------+-------| | Sales, MEUR | 560 | 569 | 574 | 548 | 577 | 2,268 | |--------------------+------+-------+-------+-------+-------+-------| | EBITDA, MEUR | 56 | 10 | 52 | 31 | 27 | 120 | |--------------------+------+-------+-------+-------+-------+-------| | Â excl. | | | | | | | | non-recurring | | | | | | | | items | 34 | 20 | 48 | 33 | 41 | 142 | |--------------------+------+-------+-------+-------+-------+-------| | Operating profit, | | | | | | | | MEUR | 14 | -71 | 16 | -12 | -14 | -81 | |--------------------+------+-------+-------+-------+-------+-------| | Â excl. | | | | | | | | non-recurring | | | | | | | | items | -8 | -22 | 8 | -9 | 0 | -23 | |--------------------+------+-------+-------+-------+-------+-------| | Return on capital | | | | | | | | employed, % | 2.9 | -14.1 | 3.2 | -2.1 | -2.5 | -3.9 | |--------------------+------+-------+-------+-------+-------+-------| | Â excl. | | | | | | | | non-recurring | | | | | | | | items, % | -1.5 | -4.1 | 1.7 | -1.6 | 0.2 | -0.9 | |--------------------+------+-------+-------+-------+-------+-------| | Deliveries, 1,000 | | | | | | | | t | 748 | 761 | 760 | 724 | 757 | 3,002 | |--------------------+------+-------+-------+-------+-------+-------| | Production, 1,000 | | | | | | | | t | 755 | 736 | 752 | 735 | 739 | 2,962 | |-------------------------------------------------------------------| | EBITDA = Earnings before interest, taxes, depreciation and | | amortization | +-------------------------------------------------------------------+
 Result for January-March compared with the previous quarter  In the first quarter, the operating profit of the Graphic business area, excluding non-recurring items was EUR -8 million (Q4/07: -22). The operating profit was improved by the substantially increased production volume of Metsä-Botnia's Uruguay pulp mill and the increased price of magazine paper. The increase in energy costs and as well as strengthened euro against the US dollar and British pound and production curtailments at the Metsä-Botnia mills in Finland had a negative effect on the profitability.  Net non-recurring items of EUR 22 million were recognised in operating profit for the first quarter:
*Â A positive effect of EUR 24 million on the result for the sale of New Thames mill and the agreement of pension liabilities from UK industrial operations and other liabilities related to the closure of the Sittingbourne mill. *Â EUR 2 million cost provision for the completion of the closure of the Kangas mill's paper machine 2, which produced coated magazine paper.
In the operating profit for the previous quarter net non-recurring items of EUR -49 million were recognised, comprising of EUR 10 million in cost provision connected to profit improvement programmes and EUR 39 million in write-downs of fixed assets.  Total deliveries by European producers of coated fine paper increased by 2 per cent from the previous quarter, and total deliveries by European producers of coated magazine paper decreased by 12 per cent. Total deliveries of M-real's Graphic Papers business area decreased by 2 per cent and included the impacts of capacity closures.  Result for January-March compared with the corresponding period previous year  Graphic Papers business area's operating profit excluding non-recurring items was EUR -8 million (Q1/07: 0). Profitability was weakened by increased wood raw material costs, the strengthened euro against US dollar and British pound as well as production curtailments at the Metsä-Botnia mills in Finland. Profitability was improved by the implemented profit improvement actions and the start-up of Uruguay pulp mill in November 2007.  A non-recurring item of EUR 14 million was recognised in the operating profit in the corresponding period previous year for completion of the closure of the Sittingbourne mill.  Total deliveries by European producers of coated fine paper decreased by 1 per cent and total deliveries by European producers of coated magazine paper remained at the same level. Total deliveries of M-real's Graphic Papers business area decreased by 1 per cent and included the impacts of capacity closures.  Office Papers Â
+-------------------------------------------------------------------+ | Â | Â Â | Â Â | Â Â | Â Â | Â Â | Â Â | | | Â 2008 | Â 2007 | Â 2007 | Â 2007 | Â 2007 | Â 2007 | |------------------+-------+--------+-------+-------+-------+-------| | Â | Q1 | Q4 | Q3 | Q2 | Q1 | Â | |------------------+-------+--------+-------+-------+-------+-------| | Sales, MEUR | 181 | 171 | 167 | 183 | 202 | 723 | |------------------+-------+--------+-------+-------+-------+-------| | EBITDA, MEUR | 16 | 25 | 21 | 15 | -8 | 53 | |------------------+-------+--------+-------+-------+-------+-------| | Â excl. | | | | | | | | non-recurring | Â | Â | Â | Â | Â | Â | | Â items | 16 | 20 | 21 | 15 | 22 | 78 | |------------------+-------+--------+-------+-------+-------+-------| | Operating | | | | | | | | profit, MEUR | 3 | -173 | 7 | 1 | -22 | -187 | |------------------+-------+--------+-------+-------+-------+-------| | Â excl. | | | | | | | | non-recurring | | | | | | | | items | 3 | 7 | 7 | 1 | 8 | 23 | |------------------+-------+--------+-------+-------+-------+-------| | Return on | | | | | | | | capital | Â | Â | Â | Â | Â | Â | | Â employed, % | 3.1 | -114.8 | 4.9 | 0.6 | -12.0 | -29.6 | |------------------+-------+--------+-------+-------+-------+-------| | Â excl. | | | | | | | | non-recurring | Â | Â | Â | Â | Â | Â | | Â items, % | 3,1 | 5,3 | 4,9 | 0,6 | 5,0 | 4,2 | |------------------+-------+--------+-------+-------+-------+-------| | Deliveries, | | | | | | | | 1,000 t | 238 | 219 | 215 | 241 | 272 | 947 | |------------------+-------+--------+-------+-------+-------+-------| | Production, | | | | | | | | 1,000 t | 200 | 213 | 223 | 257 | 280 | 973 | |-------------------------------------------------------------------| | EBITDA = Earnings before interest, taxes, depreciation and | | amortization | +-------------------------------------------------------------------+
 Result for January-March compared with the previous quarter  In the first quarter the operating profit excluding non-recurring items of the Office Paper business area was EUR 3 million (Q4/07: 7). The operating profit was weakened by the declined average sales price mainly due to exchange rate changes as well as higher production costs. The operating profit did not include non-recurring items.  In the previous quarter, net non-recurring items of EUR -180 million were recognised in operating profit of which EUR 185 million was in impairment losses, EUR 8 million in cost provisions connected to profit improvement programmes and EUR 13 million reduction in cost provision for the closure of the Wifsta mill.  Total deliveries by European producers of uncoated fine paper were up 9 per cent, and deliveries of the Office Papers business area increased by 9 per cent.  Result for January-March compared with the corresponding period previous year  The business area's operating profit excluding non-recurring items was EUR 3 million in the fourth quarter (Q1/07: 8). The operating profit did not include non-recurring items. Profitability was weakened by increased costs, especially wood raw material costs. The increase in average sales price increased profitability.  A non-recurring cost provision of EUR 29 million was recognised in the operating profit in the corresponding period previous year for the closure of the Wifsta mill.  Total deliveries by European producers of uncoated fine paper decreased by 6 per cent. The delivery volume of the Office Papers business area decreased by 13 per cent and included the effect of closure of Wifsta mill.  The financial statements are unaudited. Â
Condensed consolidated      income statement      Continuing operations, MEUR   2008   2007 Change   2007   2007  Q1 Q1    Q4 Sales 1,099 1,157 -58 4,440 1,085 Other operating income 60 155 -95 239 27 Operating expenses -1,057 -1,119 62 -4,235 -1,042 Depreciation and impairment      losses -78 -96 18 -564 -315 Operating profit 24 97 -73 -120 -245  % of sales 2.2 8.4  -2.7 -22.6 Share of results in associated      companies 0 0 0 -3 -3 Exchange gains and losses 0 -5 5 -3 2 Other net financial items -40 -37 -3 -147 -42 Result before taxes from continuing      operations -16 55 -71 -273 -288  % of sales -1.5 4.8  -6.1 -26.5 Income taxes -2 -3 1 23 39 Result for the period from continuing operations -18 52 -70 -250 -249  % of sales -1.6 4.5  -5.6 -22.9 Result from discontinued operations -1 2 -3 55 57 Result for the period -19 54 -73 -195 -192  -1.7 4.7  -4.4 -17,7
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Attributable to      Shareholders of              parent company                    -20 54 -74  -194 -192 Minority interest 1 0 1 -1 0       Earnings per share for result attributable to shareholders of parent company (EUR/share)       from continuing operations -0.06 0.16 -0.22 -0.76 -0.75  from discontinued operations 0.00 0.00 0.00 0.17 0.17 Total -0.06 0.16 -0.22 -0.59 -0.58
 Taxes include taxes corresponding to the result for the period under review.   Condensed consolidated balance sheet
  31.3.   31.3.  31.12.   2008    % 2007    % 2007    % MEUR       Assets Non-current assets       Goodwill 172 3.4 375 6.4 172 3.3 Other intangible assets 74 1.5 61 1.1 38 0.7 Tangible assets 2,680 53.1 2,991 51.4 2,820 54.3 Biological assets 44 0.9 41 0.7 47 0.9 Shares in associated and other companies 103 2.0 107 1.8 103 2.0 Interest-bearing receivables 26 0.5 34 0.6 27 0.5 Deferred tax receivables 5 0.1 31 0.5 4 0.1 Other non-interest-bearing       receivables 8 0.2 19 0.3 14 0.3  3,112 61.7 3,659 62.8 3,225 62.1 Current assets       Inventories 651 12.9 666 11.4 619 11.9 Interest bearing receivables 145 2.9 93 1.6 62 1.2 Non-interest-bearing receivables 942 18.6 1 181 20.3 908 17.5 Cash and cash equivalents 197 3.9 137 2.4 380 7.3  1,935 38.3 2,077 35.7 1,969 37.9 Assets classified as held for sale   86 1.5   Total assets 5,047 100 5,822 100 5,194 100        SHAREHOLDERS' EQUITY AND LIABILITIES       Shareholders' equity       Equity attributable to shareholders of parent       company 1,571 31.1 1,864 32.0 1,618 31.2 Minority interest 52 1.0 52 0.9 52 1.0  1,623 32.1 1,916 32.9 1,670 32.2 Non-current liabilities       Deferred tax liabilities 213 4.2 267 4.6 215 4.1 Post-employment benefit obligations 141 2.8 205 3.5 159 3.1 Provisions 61 1.2 99 1.7 72 1.4 Other non-interest-bearing liabilities 37 0.8 31 0.6 38 0.7 Interest-bearing liabilities 1,797 35.6 2,144 36.8 1,883 36.3  2,249 44.6 2,746 47.2 2,367 45.6 Current liabilities       Non-interest-bearing liabilities 712 14.0 825 14.2 704 13.5 Interest-bearing liabilities 463 9.3 304 5.2 453 8.7  1,175 23.3 1,129 19.4 1,157 22.2 Liabilities relating to assets    classified as held for sale   31 0.5   Total liabilities 3,424 67.9 3,906 67.1 3,524 67.8 Total shareholders'       equity and liabilities 5, 047 100 5,822 100 5,194 100
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Condensed consolidated cash flow statement MEUR  2008  2007  2007  2007  Q1 Q1  Q4 Result for the period -19 54 -196 -193 Total adjustments 92 37 479 216 Change in working capital -33 -27 42 74 Cash flow arising from operations 40 64 325 97 Net financial items -18 -27 -160 -72 Income taxes paid -13 -4 -38 -6 Net cash flow arising from     operating activities 9 33 127 19      Investments in tangible and     intangible assets -21 -50 -259 -81 Divestments of assets and other 57 240 628 396 Net cash flow arising from     investing activities 36 190 369 315      Share issue, minority interest 2 1 6 3 Changes in long-term loans and     other financial items -209 -247 -282 -84 Dividends paid -20 -20 -20 0 Net cash flow arising from     financing activities -227 -266 -296 -81 Changes in cash and     cash equivalents -182 -43 200 253      Cash and cash equivalents at beginning of period 380 182 182 128 Translation difference in cash and     cash equivalents -1 -1 -2 -1 Changes in cash and cash equivalents -182 -43 200 253 Assets held for sale, folding carton plants 0 -1 0 0 Cash and cash equivalents     at end of period 197 137 380 380
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Statement of changes in shareholders' equity     Fair        value       Trans- and Re- Mi-    Share lation other tained nority   Share pre- dif- re- earn- inter-  MEUR capital mium ference serves ings est Total Shareholders' equity 1.1.2007,        IFRS 558 667 3 10 605 63 1,906 Translation differences   -13    -13 Net investment hedge   12    12 Currency flow hedges,         recorded in equity    -16   -16  transferred to income  statement's sales    6   6         Interest flow hedges recorded in equity        Commodity hedges recorded in equity        Transferred to income statement's purchases    -2   -2 Tax on equity components   -3 3   0 Net expenses recognised directly in    equity   -4 -9   -13 Result for the period     54  54 Total recognised income and expenses for the      period   -4 -9 54  41 Related party transactions        Changes in minority interest        Sale of Metsä-Botnia shares (9%)      -11  Metsä-Botnia restructuring in Uruguay      1  Total      -10 -10 Dividends paid     -20 -1 -21 Related party transactions     -20 -11 -31 Shareholders' equity       31.3.2007,                                           IFRS 558 667 -1 1 639 52 1,916
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Shareholders'       equity                                         1.1.2008, IFRS 558 667 -11 13 391 52 1,670 Translation differences   -9   -2 -11 Net investment hedge   6    6         Currency flow hedges,        recorded in equity    7   7 transferred to income statement's   sales    -4   -4         Interest flow hedges        recorded in equity    -1   -1 transferred income statement's financial items    -1   -1         Commodity hedges         recorded in equity    -6   -6  transferred income  statement's   purchases    1   1 Tax on equity components   -1 1   0 Net expenses recognised     directly in equity   -4 -3  -2 -9 Loss for the period     -20 1 -19 Total recognised income and expenses for      the period   -4 -3 -20 -1 -28 Related party transactions        Changes in minority interest        Metsä-Botnia restructuring in  Uruguay      1        1 1 Dividends paid     -20  -20 Related party transactions     -20 1 -19         Shareholders' equity        31.3.2008, IFRS 558 667 -15 10 351 52 1,623
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Key ratios  2008  2007  2007  2007  Q1 Q1  Q4 Sales, MEUR 1,099 1,157 4,440 1,085 EBITDA, MEUR 102 193 444 70  excl. non-recurring items, MEUR 81 101 366 78 Operating profit, MEUR 24 97 -120 -245  excl. non-recurring items, MEUR 3 21 49 -6 Result from continuing operations      before taxes, MEUR -16 55 -273 -288  excl. non-recurring items, MEUR -37 -21 -104 -49 Result for the period      from continuing operations, MEUR -18 52 -250 -249  from discontinued operations, MEUR -1 2 55 57 Total, MEUR -19 54 -195 -192 Earnings per share      from discontinuing operations, EUR -0.06 0.16 -0.76 -0.75  from discontinued operations, EUR 0.00 0.00 0.17 0.17 Total, EUR -0.06 0.16 -0.59 -0.58 Earnings per share, excl. non-recurring items     from continuing operations, EUR -0.12 -0.09 -0.32 -0.07 Return on equity, % -4.4 9.9 -14.0 -53.0  excl. non-recurring items, % -9.4 -7.3 -5.9 -0.4 Return on capital employed, % 2.9 9.7 -2.6 -24.4  excl. non-recurring items, % 0.8 2.5 1.4 -0.3 Equity ratio at end of period, % 32.2 32.9 32.1 32.1 Gearing at end of period, % 117 114 112 112 Shareholders' equity per share at end of period, EUR 4.79 5.68 4.93 4.93 Net interest-bearing liabilities    at end of period, MEUR 1,892 2,189 1,867 1,867 Gross capital expenditure, MEUR 21 50 259 81 Paper deliveries, 1,000 t 986 1,029 3,949 980 Board deliveries, 1,000 t 298 291 1,203 291 Personnel at end of period 9,122 14,509 9,508 9,508 EBITDA = Earnings before interest, taxes, depreciation and amortization
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Securities and guarantees, MEUR Â Â Â Â Â Â Â Â 2008 Â Â Â Â Â Â 2007 Â Â Â Â 2007 Â Q1 Q1 Â For own liabilities 59 60 61 On behalf of associated companies 1 1 1 On behalf of Group companies 4 5 4 On behalf of others 3 3 3 Total 67 69 69
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Open derivative contracts, MEUR Â Â Â Â Â Â Â Â Â Â 2008 Â Â 2007 Â Â Â Â 2007 Â Q1 Q1 Â Interest rate derivatives 1,735 2,810 1,954 Foreign exchange derivatives 3,112 3,795 3,809 Other derivatives 150 167 133 Total 4,997 6,772 5,896
 The fair value of open derivative contracts calculated at market value was EUR 4.3 million at the end of the review year (EUR 14.7 million 31 December 2007).  The gross amount of open contracts also includes closed contracts, totalling EUR 2,326.8 million (31 December 2007: EUR 2,713.9 million). Â
Commitments related to fixed assets, Â Â Â MEUR Â Â Â Â Â Â Â 2008 Â Â Â Â Â 2007 Â Â Â Â Â 2007 Â Q1 Q1 Â Payments in less than a year 5 103 22 Payments later 1 10 4
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Changes in property, plant and equipment, MEUR Â Â Â Â Â Â Â Â Â Â 2008 Â Â Â Â 2007 Â Â Â Â Â 2007 Â Q1 Q1 Â Carrying value at beginning of period 2,820 3,156 3,156 Capital expenditure 21 49 250 Decrease -72 -114 -186 Depreciation and impairment losses -75 -77 -346 Translation difference -14 -23 -54 Carrying value at end of period 2,680 2,991 2,820
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Related-party transactions, MEUR          2008      2007      2007 Transactions with parent company   and sister companies Q1 Q1  Sales 11 8 34 Other operating income 1 135 138 Purchases 161 121 549 Interest income 1 1 3 Interest expenses 1 2 8 Non-current receivables 19 21 19 Current receivables 49 63 41 Non-current liabilities 0 1 1 Current liabilities 46 38 149     Transactions with associated companies    Sales 0 0 0 Purchases 1 1 4 Non-current receivables 2 7 0 Current receivables 8 0 7 Current liabilities 3 1 3
 Accounting policies  The interim report was prepared in accordance with the IAS 34 standard Interim Financial Reporting and the accounting policies presented in M-real's Annual Report 2007.  The figures in the financial statement release are unaudited.  Taxes include taxes corresponding to the result for the period under review.  Calculation of key ratios Â
(Profit from continuing operations Return on equity (%) =  before tax - direct taxes) per   (Total equity (average))    (Profit from continuing operations before tax + interest expenses, net Return on capital exchange gains/losses and other employed (%) =   financial expenses) per (Total assets - non-interest-bearing   liabilities (average))    Equity ratio (%) =   (Total equity) per (Total assets - advance payments   received)    (Interest-bearing liabilities - liquid funds - interest-bearing receivables) Gearing ratio (%) =  per   (Total equity)    (Profit attributable to shareholders of Earnings per share =   parent company) per   (Adjusted number of shares (average))    Shareholders' equity per (Equity attributable to shareholders of share =   parent company) per (Adjusted number of shares at end of   review period)
 Quarterly information Â
 Sales and result         by segment,  2008   2007   2007   2007   2007   2007 MEUR Q1 Q4 Q3 Q2 Q1  Consumer Packaging 235 225 231 243 235 934 Graphic Papers 560 569 574 548 577 2,268 Office Papers 181 171 167 183 202 723 Internal sales and       other operations 123 120 130 122 143 515 Sales 1,099 1,085 1,102 1,096 1,157 4,440        Consumer Packaging 36 24 45 28 39 136 Graphic Papers 56 10 52 31 27 120 Office Papers 16 25 21 15 -8 53 Other operations -6 11 -2 -8 135 135 EBITDA 102 70 116 66 193 444  % of sales 9.3 6.5 10.5 6.0 16.7 10.0        Consumer Packaging 18 0 27 8 21 56 Graphic Papers 14 -71 16 -12 -14 -81 Office Papers 3 -173 7 1 -22 -187 Other operations -11 -1 -7 -12 112 92 Operating profit 24 -245 43 -15 97 -120  % of sales 2.2 -22.6 3.9 -1.5 8.4 -2.7 Share of results in       associated companies 0 -3 1 -1 0 -3 Exchange gains and       losses 0 2 -2 2 -5 -3 Other net financial -40 items -42 -39 -29 -37 -147 Result from continuing       operations before tax -16 -288 4 -44 55 -273 Income taxes -2 39 -9 -4 -3 23 Result for the period       from continuing       operations -18 -249 -5 -48 52 -250 Result for period from       discontinued operations -1 57 -3 -1 2 55 Result for the period -19 -192 -8 -49 54 -195 Minority interest -1 0 1 0 0 1 Financial result       attributable to       shareholders of       parent company -20 -192 -7 -49 54 -194 Earnings per share, EUR -0.06 -0.58 -0.02 -0.15 0.16 -0.59
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Non-recurring items,        2008  2007  2007  2007  2007  2007 MEUR Q1 Q4 Q3 Q2 Q1  Consumer Packaging -1 -8 0 -7 0 -15 Graphic Papers 22 -49 7 -2 -14 -58 Office Papers 0 -180 0 0 -30 -210 Other operations 0 -2 0 -4 120 114 Non-recurring items in       operating result 21 -239 7 -13 76 -169 Non-recurring items in       financial items 0 0 0 0 0 0 Non-recurring items       total 21 -239 7 -13 76 -169        Consumer Packaging 37 25 45 33 39 142 Graphic Papers 34 20 48 33 41 142 Office Papers 16 20 21 15 22 78 Other operations -6 13 -3 -4 -1 4 EBITDA, excl. non-       recurring items 81 78 111 77 101 366  % of sales 7.4 7.2 10.1 7.0 8.7 8.2        Consumer Packaging 19 8 27 15 21 71 Graphic Papers -8 -22 8 -9 0 -23 Office Papers 3 7 7 1 8 23 Other operations -11 1 -6 -9 -8 -22 Operating profit excl.       non-recurring items 3 -6 36 -2 21 49 % of sales 0.3 -0.6 3.3 -0.2 1.8 1.1        Result before taxes,       excl. non-recurring       items -37 -49 -3 -31 -21 -104 % of sales -3.4 -4.5 -0.2 -2.8 -1.8 -2.3 Result per share, excl.       non-recurring items,       EUR -0.12 -0.07 -0.04 -0.12 -0.09 -0.32 Return on equity, excl.       non-recurring items, % -9.4 -0.4 -0.9 -2.4 -7.3 -5.9 Return on capital       employed, excl. non-       recurring items, % 0.8 -0.3 3.7 0.2 2.5 1.4
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Return on capital employed, Â 2008 Â Â Â 2007 Â 2007 Â 2007 Â 2007 Â 2007 % Q1 Q4 Q3 Q2 Q1 Â Consumer Packaging 9.6 0.1 15.3 4.1 10.9 7.5 Graphic Papers 2.9 -14.1 3.2 -2.1 -2.5 -3.9 Office Papers 3.1 -114.8 4.9 0.6 -12.0 -29.6 Continuing operations total 2.9 -24.4 4.4 -1.1 9.7 -2.6
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Capital employed, Â Â 2008 Â Â Â 2007 Â 2007 Â 2007 Â 2007 Â 2007 MEUR Q1 Q4 Q3 Q2 Q1 Â Consumer Packaging 781 731 742 741 777 731 Graphic Papers 2,025 1,907 2,046 2,042 2,077 1,907 Office Papers 475 518 681 665 669 518 Other equity 603 866 469 543 519 866 Continuing operations total 3,884 4,022 3,938 3,991 4,043 4,022
 The capital employed for a segment included its assets: goodwill, other intangible goods, tangible assets, biological assets, investments in associates, inventories, accounts receivables, prepayments and accrued income (excluding interest and taxes), less the segment's liabilities (accounts payable, advance payments, accruals and deferred income (excluding interest and taxes). Â
+-------------------------------------------------------+ | Personnel, average | 2008 | 2007 | 2007 | |-----------------------------+-------+--------+--------| | Â | Q1 | Q1 | Â | |-----------------------------+-------+--------+--------| | Consumer Packaging | 1,292 | 1,513 | 1,504 | |-----------------------------+-------+--------+--------| | Graphic Papers | 4,814 | 5,290 | 5,135 | |-----------------------------+-------+--------+--------| | Office Papers | 1,441 | 1,694 | 1,657 | |-----------------------------+-------+--------+--------| | Other continuing operations | 1,718 | 2,748 | 2,372 | |-----------------------------+-------+--------+--------| | Discontinued operations | Â | 2,419 | 2,007 | |-----------------------------+-------+--------+--------| | Total | 9,265 | 13,664 | 12,675 | +-------------------------------------------------------+
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    2008   2007   2007   2007   2007    2007 Deliveries, 1,000 t Q1 Q4 Q3 Q2 Q1  Consumer Packaging 298 291 297 313 302 1,203 Graphic Papers 748 761 760 724 757 3,002 Office Papers 238 219 215 241 272 947 Paper segments, total  986  980  975  965  1,029  3,949
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+-------------------------------------------------------------------+ | |  |   |   | | |   | |  |   2008 | 2007 | 2007 |    2007 |    2007 | 2007 | |----------------+--------+------+------+---------+---------+-------| | Production, | | | | | | | | 1,000 t | Q1 | Q4 | Q3 | Q2 | Q1 |  | |----------------+--------+------+------+---------+---------+-------| | Consumer | | | | | | | | Packaging | 314 | 294 | 303 | 302 | 311 | 1,210 | |----------------+--------+------+------+---------+---------+-------| | Graphic Papers | 755 | 736 | 752 | 735 | 739 | 2,962 | |----------------+--------+------+------+---------+---------+-------| | Office Papers | 200 | 213 | 223 | 257 | 280 | 973 | |----------------+--------+------+------+---------+---------+-------| | Paper mills, | | | | | | | | total | 955 | 949 | 975 | 992 | 1,019 | 3,935 | |----------------+--------+------+------+---------+---------+-------| | Metsä-Botnia | | | | | | | | pulp 1) | 252 | 235 | 203 | 200 | 203 | 841 | |----------------+--------+------+------+---------+---------+-------| | M-real pulp | 446 | 400 | 455 | 398 | 426 | 1,679 | +-------------------------------------------------------------------+
1) corresponds to M-real's share of 30 per cent in Metsä-Botnia  Â
LINK:
http://hugin.info/3071/R/1212448/251646.pdf
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M-real Oyj
http://www.m-real.comISIN: FI0009000665
Stock Identifier: XHEL.MRL
