Metsäliitto Group s operating profit excluding non-recurring items EUR 178 million in the first half of the year

Transcription

1 1/16 Metsäliitto Group Interim Report January June Metsäliitto Group s operating profit excluding non-recurring items EUR 178 million in the first half of the year Result for the first six months of Sales EUR 4,426 million (EUR 4,672 million). Sales were 5 per cent down on the previous year due to divested and discontinued businesses. Comparable sales grew by 6 per cent. Operating profit excluding non-recurring items EUR 178 million (EUR 108 million) and including non-recurring items EUR 105 million (EUR 71 million). Result before tax and excluding non-recurring items EUR 66 million (EUR 22 million). Result for the second quarter of Sales EUR 2,182 million (EUR 2,314 million). Operating profit excluding non-recurring items EUR 81 million (EUR 26 million) and including non-recurring items EUR 70 million (EUR -11 million). Result before tax and excluding non-recurring items EUR 34 million (EUR -23 million). Events during the second quarter of M-real sold its carton plants in Finland and Hungary in May June. The debt-free price of the deals was approximately EUR 35 million. M-real booked a loss of approximately EUR 2 million in its result for the second quarter from the deals. The statutory negotiations related to the programme to improve profitability of M-real s operations in Finland were completed. The total reduction in person work years due to the programme will be approximately 600. The construction of a birch plywood processing line was begun in Suolahti. The line will start up at the beginning of The results of the hard work done in Metsäliitto Group for reversing the performance trend are beginning to show and this is also reflected in the result figures for the first half of the year. Meanwhile, the forest industry s operating conditions have become more difficult due to the scarcity of wood raw material and therefore the persistent work towards improved profitability must continue. The sale of Map Merchant to be implemented towards the end of the year will considerably improve M-real s financial standing and thus create a more solid basis for the company s further development. Kari Jordan, President and CEO, Metsäliitto Group Metsäliitto is the eigth largest forest industry group in the world with sales of EUR 8.5 billion and 25,000 employees. Its five business areas include wood supply, wood products industry, pulp, paper and board, and tissue and cooking papers. The Group s parent company Metsäliitto Cooperative and subsidiaries Metsä-Botnia, M-real and Metsä Tissue operate in 30 countries.

2 2/16 Metsäliitto Group Income statement (EUR mill.) Q2 Q Sales Other operating income Operating expenses Depreciation and impairment losses Operating profit Share of results in associates Net exchange gains / losses Other financial income & expenses Result before tax Income tax Result for the period Metsäliitto Group Key figures Q2 Q Return on capital employed, % , excluding non-recurring items Return on equity, % , excluding non-recurring items Equity ratio, % Net gearing ratio, % Interest-bearing net liabilities, EUR mill Capital expenditure, EUR mill Personnel at end of period Business areas Sales and Operating profit 1-6/ (EUR mill.) Wood Products Industry Paper and Board Industry Tissue and Cooking Papers Wood Supply Pulp *) Industry Sales Other operating income Operating expenses Depreciation & impairment losses Operating profit *) Represents 100%. The Metsäliitto Group consolidates 53% of the Pulp Industry s figures.

3 3/16 The Interim Report is unaudited METSÄLIITTO GROUP INTERIM REPORT 1 January 30 June Sales and result Metsäliitto Group s sales for January June were EUR 4,426 million (4,672). As a result of divestments and capacity closures, sales fell by 5 per cent from the corresponding period last year. Comparable sales grew by 6 per cent. Operating profit excluding non-recurring items was EUR 178 million (108). Non-recurring items totalled EUR -73 million (-37), of which EUR -62 million (0) were booked during the first quarter of the year. During the second quarter, non-recurring items came to EUR -11 million net, the majority consisting of cost provisions related to M-real s restructuring programme. In addition, the non-recurring items include costs incurred from divestments and capacity closures of approximately EUR -3 million and sales gains on fixed assets of approximately EUR 4 million. Operating profit including non-recurring items was EUR 105 million (71). Metsäliitto Group s net financial expenses were 2.5 per cent (1.8) of sales in January June. The increased financial expenses resulted from the increase in the general interest level and the change in the average interest on the loan portfolio. Financial income was EUR 25 million (15), income from associates was EUR 3 million (2) and financial expenses were EUR 136 million (106). Net exchange gains/losses booked in financial items were EUR -3 million (+2). At the end of June, the exchange rate of the US-dollar against the Euro was 6.2 per cent weaker and that of the pound sterling 2.6 per cent stronger than at the end of June last year. On average, the dollar weakened by 8.1 per cent and the pound strengthened by 1.8 per cent. The result before tax and excluding non-recurring items was EUR 66 million (22) and including non-recurring items EUR -6 million (-16). Taxes, including changes in deferred tax liability, were EUR -48 million (-25). The result for the period was EUR -54 million (-41), of which EUR 29 million (14) was attributable to the owners of the parent company and EUR -83 million (-55) to the minority. The Group s return on capital employed was 3.9 per cent (2.6) and return on equity was -4.7 per cent (-3.1). Excluding non-recurring items, return on capital employed was 6.2 per cent (3.7) and return on equity was 1.6 per cent (-0.3). Balance sheet and financing Metsäliitto Group s total liquidity at the end of June was EUR 1.6 billion (31 December : 2.0). Of this, 0.2 billion (0.2) was in terms of liquid assets and investments, and 1.4 billion (1.4) in binding credit facility agreements not included in the balance sheet. In addition, the Group can satisfy short-term financial needs with non-binding commercial paper schemes in Finland and abroad as well as credit lines amounting to approximately EUR 0.6 billion.

4 4/16 The Group s equity ratio was 27.6 per cent in June and net gearing ratio was 161 per cent (31 December : 28.0% and 150%, respectively). Interest-bearing net liabilities was EUR 3,647 million (31 December : 3,527).The equity ratio of the parent company, Metsäliitto Cooperative, was 56.0 per cent at the end of the period under review and gearing ratio 40 per cent (31 December : 51.7% and 23%, respectively). Metsäliitto Cooperative s members capital grew by EUR 9.7 million net in January June. The actual members capital grew by EUR 6.2 million, the additional members capital A grew by EUR 3.6 million and the additional members capital B decreased by EUR 0.1 million. Metsäliitto Cooperative had 130,902 members at the end of June (31 December : 131,139). At its meeting on 24 April, Metsäliitto Cooperative's Representative Council decided to pay interest of 6.0 per cent (6.5) on the members capital, 5.0 per cent (5.5) on the additional member s capital A and 3.5 per cent (4.0) on the additional members capital B. The interest on member s capital paid for totalled EUR 36.2 million (37.4). Personnel Metsäliitto Group employed an average of 24,551 people (29,359) during the period under review. The reduction in the number of personnel resulted from divestments and restructuring. The number of personnel was 24,523 (30,115) at the end of June. The parent company, Metsäliitto Cooperative, employed 3,453 people (3,404) at the end of the period. Organisation Metsäliitto Cooperative is reforming the organisation of Wood Supply in Finland. According to the plans, the area organisation as it exists in its present form will be abolished while wood supply districts will be reinforced. The aim of the reform is to simplify and streamline the organisation and secure the supply of wood raw material for the production plants competitively. The new organisation will be implemented from 1 January Investments, corporate/share acquisitions and divestments Metsäliitto Group s capital expenditure and corporate acquisitions totalled EUR 194 million (389). The share of Metsä-Botnia s total investments corresponding to Metsäliitto s holding was EUR 127 million (122) in January June. Capital expenditure The bleaching alteration investment at Metsä-Botnia s Rauma mill was introduced in June. The aim of the investment is to improve the quality characteristics of pulp, enhance costefficiency and increase the mill s production capacity. Corporate/share divestments On 31 May, M-real sold the entire share capital of its subsidiary Tako Carton Plant Ltd to Pyroll Oy. At the beginning of June, M-real sold the entire share capital of its subsidiary Petöfi Nyomda Kft to the German STI Group. The aggregate debt-free selling price of these carton plants, located in Finland and Hungary, was approximately EUR 35 million. As a result of these divestments, M-real booked a loss of approximately EUR 2 million in its result for the second quarter.

5 5/16 Metsäliitto Cooperative sold 18.3 per cent of Neomarkka plc s shares to Neomarkka s main owner, Reka Corporation. The selling price was EUR million and the sales gain for the deal approximately EUR 0.6 million. Pulp mill project in Uruguay Metsä-Botnia s Uruguay pulp mill investment is progressing as planned, and the mill will be ready for start-up in September. The project employed approximately 4,700 people for the construction stage in June. The training and orientation programmes for the process workers at the mill are continuing. Forestal Oriental S.A., Metsä-Botnia s subsidiary, continues to expand its planting and harvesting capacity. The company owns about 160,000 hectares of land, of which 60 per cent is cultivated or arable. Business areas Wood Supply Wood Supply sales were EUR 815 million (740) in January June, and operating profit came to EUR 22 million (23). Operating profit includes sales gains on fixed assets of EUR 2 million (4). Wood Supply Finland accounted for EUR 578 million (589) of the sales and EUR 14 million (13) of the operating profit. In Finland, wood trade had a brisk start early in the year and the purchase volume of the forest industry from private forests grew to 27.5 million cubic metres in January June, which is about 13 million cubic metres more than the corresponding figure for last year. In January June, wood purchasing outperformed plans and Metsäliitto s market share was normal. Prices have been rising steeply for nearly all wood assortments. At the beginning of April, Metsäliitto launched a campaign to promote thinning in the summer. Metsäliitto's purchasing target for is more than 17 million cubic metres. In Russia, the competition for wood was hard, and the warm weather hampered wood supply more than in other regions. Russia s announcement to raise export duties caused a disturbance in the already tight market. In January June, Metsäliitto s imports from Russia to Finland amounted to 0.9 million cubic metres (1.3). In the Baltic countries, the wood market overheated in the spring and the price level rose drastically. In Central Europe, storm damage gave a boost to the wood market and the mild winter weather relieved the pressure on prices generated by fuel wood supply. In the Baltic Sea region, winter was nearly a third shorter than normal, and deliveries to mills in Finland and Sweden did not reach the planned level. Sufficient quantities of wood were supplied to the mills, but special arrangements had to be resorted to in production by advancing maintenance shutdowns, among others things. Deliveries to the mills totalled 18.8 million cubic metres in the entire operating area during the first half of the year.

6 6/16 Wood Products Metsäliitto Wood Products Industry s sales stood at EUR 740 million (1,065), and operating profit was EUR 68 million (40). The decrease in sales is due to divestments, particularly the divestment of Moelven Industrier ASA, whose sales in the corresponding period last year amounted to slightly more than EUR 400 million. Wood Products Industry s comparable sales increased by 17 per cent during the period under review. The demand for wood products is still at a good level and price increases have continued in all product groups. The Industry s current challenges are related to the availability of logs and their price, which has risen considerably in Finland and elsewhere in Europe. The actual increase in log purchase prices does not yet show in full in the result for the first half of the year. During the year the sales function of the plywood division were reorganised in accordance with customer segments. The sales organisation of the Sawmilling and Upgrading was also reformed. The construction of a new birch plywood upgrading unit in Suolahti has begun. At the Boston mill in UK, the decision was made to invest in the renewal of the processing line to improve efficiency. In addition, a number of investments related to further processing of sawn timber are being prepared in Finland and abroad. Pulp Pulp Industry s sales stood at EUR 682 million (611), and operating profit was EUR 101 million (89). The improvement of sales and operating profit compared with the corresponding period last year resulted from a positive price development for pulp. Foreign-currency-denominated market prices for softwood pulp were, on average, 20 per cent higher in the first half of the year compared with the corresponding period last year. The average price of hardwood pulp increased by 9 per cent. The result was negatively affected by wood raw material price increases and the about 8 per cent weakening of the dollar against the Euro. The pulp market remained stable throughout the first half of the year and demand was at a good level. Both manufacturers and customers pulp stocks were at a normal level or below normal at the end of June. New eucalyptus pulp capacity came on to the market from Chile and Brazil. Towards the end of the year about 3.5 tonnes of additional short-fibre capacity will enter the market, but its impact will largely be seen in the first half of M-real s result includes 30 per cent (Q2/06: 39%) of the Pulp Industry s operating profit. In total, 53 per cent of the figures for Pulp Industry are consolidated into Metsäliitto Group s financial statements. Paper and Board Paper and Board Industry s sales totalled EUR 2,792 million (2,819), and operating profit excluding non-recurring items was EUR 35 million (14). Operating profit was affected positively by the about 9 per cent price increase for uncoated fine paper compared with last year s corresponding period, the higher delivery volumes of folding boxboard and the implemented cost-savings measures.

7 7/16 No significant changes took place in the market prices for coated fine paper, but the market prices for coated magazine paper decreased slightly. Due to the weakened dollar, the eurodenominated selling price for folding boxboard was also lower than last year in January-June. In addition to the weakened dollar, operating profit was negatively affected by the higher pulpwood price and the long maintenance shutdowns at the Alizay and Husum mills. Net non-recurring items totalled EUR +60 million net (-54) in January June. M-real s first quarter operating result included a non-recurring income of EUR 135 million from the sale of Metsä-Botnia s shares to Metsäliitto Cooperative and a total of EUR 62 million as nonrecurring expenses. The most important expense items were the EUR 14 million and EUR 29 million cost provisions for completing the closedown of mills at Sittingbourne and Wifsta, respectively. In addition, EUR 16 million was entered as an impairment loss. During the second quarter, M-real booked non-recurring expenses to a total of EUR 13 million, of which EUR 11 million represented cost provisions and impairment losses related to the programme to improve profitability of M-real s operations in Finland and EUR 2 million represented losses on the sale of the carton plants. Operating profit including non-recurring items was EUR 95 million (-40). Net interest and other financial expenses totalled EUR 75 million (59), income from associates was EUR -1 million (-1) and net exchange gains/losses booked in financial items were EUR -3 (+5). The result for the period before tax was EUR 16 million (-95), earnings per share were EUR 0.01 (-0.30) and return on capital employed was 4.6 per cent (-1.1). Excluding non-recurring items, the result was EUR -44 million (-41), earnings per share were EUR (-0.15) and return on capital employed was 2.0 per cent (1.1). The equity ratio was 32.8 per cent at the end of June and net gearing ratio was 117 per cent (31 December : 30.9% and 126%, respectively). Tissue and Cooking Papers Tissue and Cooking Paper Industry s sales stood at EUR 421 million (376), and operating profit was EUR 14 million (7). In January June, sales grew by about 12 per cent year on year. Growth was boosted by the Tento a.s. tissue paper company acquired in Slovakia in the spring of last year, the increase in selling prices and the good development of own brands. The rise in the price for the most important raw material, pulp, resulted in additional expenses of more than EUR 5 million compared with last year. Price increases and increased sales managed to compensate for a large part of the negative effect of the more expensive raw materials. Sales are expected to continue developing positively over the next few months. M-real s action plan In January, M-real sold 9 per cent of Metsä-Botnia s shares to Metsäliitto Cooperative for EUR 240 million, posting a gain of EUR 135 million. In addition, M-real sold the Tako and Petöfi carton plants in May June for a total of EUR 35 million.

8 8/16 The Meulemans carton plant selling process is continuing. The sale of the paper merchant Map Merchant Group was announced at the beginning of July. After the transaction has been finalised, M-real will have sold asset items for about EUR 650 million, thus exceeding the set target of EUR 500 million. The Sittingbourne fine paper mill in UK was closed down at the end of January. In Germany, the Gohrsmühle fine paper machines 6 and 7 were closed down at the end of February. The Wifsta fine paper mill in Sweden was closed down in July. Paperboard machine line 2 at the Tako Board mill in Tampere will also be closed down by the end of July. The statutory personnel negotiations related to the programme to improve profitability of operations in Finland were completed. The total reduction in personnel due to the programme will be about 500 person work years. In addition, changes to posts and other enhancement measures were agreed on so that the need for fixed-term and replacement labour will be reduced by about 100 person work years. The actions decided on and already implemented will achieve annual cost improvements of approximately EUR 40 million in Finnish operations with full effect from the beginning of Events after the review period At the beginning of July, M-real sold Map Merchant Group to Antalis, a wholly-owned subsidiary of Sequana Capital. The total value of the sale is EUR 382 million and M-real is expected to book a gain of approximately EUR 80 million for the transaction. M-real s net gearing ratio is estimated to decrease by 21 percentage points due to the deal. The deal will also have a significant impact on the net gearing ratio of the entire Metsäliitto Group. The deal is subject to approval by the competition authorities and is likely to be finalised in the third quarter. Map s sales were about EUR 1.4 billion in and it employs about 2,400 people. In May, M-real announced that it would exercise its purchase option for the gas combi power plant in Kyröskoski and the land on which the Kyröskoski mills are located. The acquisition is worth approximately EUR 13 million and was finalised on 1 July. Risks and uncertainties Since the forward-looking statements in this interim report are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to differ from those expressed in such forward-looking statements. Information regarding the risk factors is presented in the Metsäliitto Group s Annual Report. Outlook for the third quarter Demand for wood in Finland is good for all wood assortments and the price level is record high. Due to the low stock levels and the difficulties in Russian deliveries, the supply of wood to the Group s mills in the next quarter will be challenging, particularly in terms of pulpwood. Wood Products Industry s prospects for the near future are mainly positive. Demand is expected to remain at a good level and product prices are expected to continue rising

9 9/16 moderately. On the other hand, increased log prices will have a negative effect on the result for the third quarter and particularly the last quarter. The availability of pulpwood and increasing prices, as well as the weak US dollar, will burden pulp mill operations during the second half of the year. However, thanks to the increase in pulp prices during the first half of the year, the cost increases will not have a significant impact on the result in the near future. M-real has announced price increases for coated and uncoated fine paper next autumn. The price for folding boxboard was successfully raised in the second quarter and the aim is to make further increases, depending on the market conditions. The decline in the prices for coated magazine paper in Europe seems to have levelled off and any opportunities for increasing prices will be utilised when the market balance improves. The operating result of Paper and Board Industry excluding non-recurring items is expected to improve compared with the second quarter. In the third quarter, Metsäliitto Group s profitability will be burdened particularly by the increased prices for the raw materials of Wood Products Industry. However, the Group s operating profit excluding non-recurring items is anticipated to reach the level of the second quarter. Espoo, 26 July Metsäliitto Group Board of Directors For further information, please contact: Ilkka Pitkänen, Group CFO, Metsäliitto Group, tel Lauri Peltola, Group CCO, Metsäliitto Group, tel

10 10/16 Unaudited METSÄLIITTO GROUP Income statement (EUR mill.) Change Q2 Q Sales Other operating income Materials and services Employee costs Other operating expenses Depreciation and impairment losses Operating profit Share of results in associates Net exchange gains / losses Other financial income Other financial expenses Result before tax Income taxes Result for the period Attributable to Owners of parent company Minority interest

11 11/16 Unaudited Balance sheet ASSETS Non-current assets Intangible assets Tangible assets Biological assets Shares in associated and other companies Interest-bearing receivables Deferred tax receivables Other non-interest-bearing receivables Current assets Inventories Interest-bearing receivables Non-interest-bearing receivables Cash and cash equivalents Assets classified as held for sale TOTAL MEMBERS FUNDS AND LIABILITIES Members funds Minority interest Total members funds Non-current liabilities Deferred tax liabilities Retirement benefit obligations Provisions Other non-interest-bearing liabilities Interest-bearing liabilities Current liabilities Non-interest-bearing liabilities Interest-bearing liabilities Total liabilities Liabilities classified as held for sales TOTAL

12 12/16 Unaudited Change in members funds Fair value Share and Members premium other capital reserve reserves Translation differences (EUR mill.) Retained Minority earnings interest Total Members funds Translation differences -5-5 Dividends paid Increase in members capital Effects of financial instruments 0 Transfers between items Change in minority interest Other changes 0 Result for the period Members funds Members funds Translation differences 0 Dividends paid Increase in members capital Effects of financial instruments 0 Transfers between items Change in minority interest 2 2 Other changes Result for the period Members funds

13 13/16 Unaudited Cash flow statement (EUR mill.) Cash flow from operations Result for the period Adjustments total Change in working capital Cash generated from operations Finance costs, net Income taxes paid Net cash from operations Cash flow from investments Acquisitions Purchases of assets Sold assets and others Net cash from investments Cash flow from financing Increase in equity Change in long-term loans and other financial items Dividends paid Net cash flow from financing Change in cash and cash equivalents Cash at beginning of period Change in cash and cash equivalents Cash in assets classified as held for sale 3-1 Cash at end of period

14 14/16 Unaudited BUSINESS SEGMENTS Consumer Packaging I-II/07 I-II/06 QII/07 QII/06 I-IV/06 Sales EBITDA Depreciation & impairment losses Operating profit Papers I-II/07 I-II/06 QII/07 QII/06 I-IV/06 Sales EBITDA Depreciation & impairment losses Operating profit MAP Merchant Group I-II/07 I-II/06 QII/07 QII/06 I-IV/06 Sales EBITDA Depreciation & impairment losses Operating profit Wood Products I-II/07 I-II/06 QII/07 QII/06 I-IV/06 Sales EBITDA Depreciation & impairment losses Operating profit EBITDA = Result before depreciation and impairment losses Others I-II/07 I-II/06 QII/07 QII/06 I-IV/06 Operating profit of which Wood Supply Tissue and Cooking Papers Others and Group eliminations M-real includes 30% (: 39%) of the Pulp Industry s (Metsä-Botnia) operating profit and Metsäliitto a further 23% (: 14 %) in the segments Consumer Packaging and Papers. Production units I-II/07 I-II/06 QII/07 QII/06 I-IV/06 Paper, t Paperboard, t Sawn goods, m Processed timber, m Engineered Wood -products, m Pulp & CTMP, t (M-real) Pulp, t (Metsä-Botnia)

15 15/16 Unaudited Quarterly data (EUR mill.) QII QI QIV QIII QII QI Sales Consumer Packaging Papers MAP Merchant Group Wood Products Others & internal sales Group sales Operating profit Consumer Packaging Papers MAP Merchant Group Wood Products Others Group operating profit % of sales Share of results in associates Net exchange gains / losses Other fin. income & expenses Result before tax Income taxes Result for the period

16 16/16 Unaudited Change in tangible assets I-II/07 I-II/06 I-IV/06 Book value at beginning of period Company acquisitions Increase Decrease Depreciation and impairment charges Assets classified as held for sale Translation differences and other changes Book value at end of period Commitments QII/07 QII/06 QIV/06 On own behalf (incl. leasing liabilities) On behalf of associated companies On behalf of others Total Commitments related to fixed assets QII/07 QII/06 QIV/06 Payments due under 1 year Payments due in subsequent years Open derivative contracts QII/07 QIV/06 Interest rate derivatives Currency derivatives Other derivatives Total The market value of open derivative contracts at the end of the review period was EUR 11 million ( : EUR -4 million). Open derivative contracts also include closed contracts to a total amount of EUR 275 million (31.12.: EUR 871 million). Accounting policies The Interim Report was prepared in accordance with the IAS 34 standard Interim Financial Reporting and the accounting policies presented in Metsäliitto Group s Annual Report. Taxes include taxes corresponding to the result for the period under review. New and changed standards IFRS 7 Financial Instruments: Disclosures, and the complementary Amendment to IAS 1, Presentation of Financial Statements - Capital Disclosures, effective from 1 January. The adoption of this new standard will result in additional disclosures relating to financial instruments but does not affect their classification or valuation.