Metsä Group s operating result for January June EUR 114 million excluding non-recurring items

Transcription

1 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 1 (24) Metsä Group s operating result for January June EUR 114 million excluding non-recurring items Result in the first half of 2012 Sales amounted to EUR 2,531 million (1 6/: EUR 2,806 million). Operating result excluding non-recurring items was EUR 114 million (249). Operating result including non-recurring items was EUR 105 million (185). Result before taxes excluding non-recurring items was EUR 71 million (181). Result before taxes including non-recurring items was EUR 61 million (113). Result in the second quarter of 2012 Sales totalled EUR 1,247 million (4 6/: EUR 1,403 million). Operating result excluding non-recurring items was EUR 62 million (119). Operating result including non-recurring items amounted to EUR 61 million (51). Result before taxes and excluding non-recurring items was EUR 53 million (95). Result before taxes including non-recurring items came to EUR 51 million (24). Events in the second quarter of 2012 The Japanese trading company Itochu Corporation acquired a 24.9 per cent holding in Metsä Fibre from Metsä Group. The purchase price was EUR 472 million. In addition, Metsäliitto Cooperative purchased UPM-Kymmene s 11 per cent holding in Metsä Fibre s shares for EUR 150 million. At the beginning of May, Metsä Board signed a committed syndicated credit facility totalling EUR 600 million, in order to refinance a EUR 500 million bond maturing on 1 April Metsä Group announced that it will launch a feasibility study to increase the use and production of renewable energy sources at the Kemi pulp mill. Events after the period Metsä Wood decided to invest EUR 30 million in upgrading its Vilppula sawmill in Finland. The investment will be carried out in Metsäliitto Cooperative sold its holding in the German wood supply company Thosca Holz GmbH, a joint venture of Metsäliitto Cooperative and the Swedish company SCA. In the second quarter, the Group s performance developed in line with our expectations. The operating result excluding non-recurring items improved over the previous quarter, despite a slight drop in sales. The order books for paperboards are now at a normal level and pulp sales have increased from the previous year especially due to the pulp deliveries to China.

2 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 2 (24) The most important event in the period was the transaction concerning Metsä Fibre, carried out with Itochu Corporation. Itochu s investment of nearly half a billion euros is the largest investment in the Finnish forest industry for years. The deal strengthens our position in the global pulp market. Additionally, both parties will be able to pursue significant synergies, as our cooperation will be enhanced even further. The uncertainty over the world economy and the continuing euro crisis affect our and our customers business, as well as the consumption behaviour of end-users and demand for products. In addition, the decisions of the European Union and national authorities along with new regulations, such as the sulphur directive or increase in the waste tax in Finland, have a significant impact on the operating conditions of the forest industry. Amid these challenges, Metsä Group continues to determinedly implement its strategy in the selected product areas. Kari Jordan, President & CEO, Metsä Group

3 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 3 (24) Metsä Group Income statement Sales Other operating income Operating expenses Depreciation and impairment losses Operating result Share of profit from associates Exchange gains and losses Other net financial items Result before income tax Income taxes Result for the period Metsä Group Profitability Operating result, EUR mill , excluding non-recurring items % of sales Return on capital employed, % , excluding non-recurring items Return on equity, % , excluding non-recurring items Financial position Equity ratio, % Net gearing ratio, % Interest-bearing net liabilities, EUR mill Segments Sales and Operating result January June 2012 (EUR mill.) Wood Products Industry Paperboard and Paper Industry Tissue and Cooking Papers Wood Supply Pulp Industry Sales Other operating income Operating expenses Depreciation & impairment losses Operating result Non-recurring items Operating result, excl. non-rec. items % of sales Metsä Group is a responsible forest industry group whose products are part of people s everyday life and promote sustainable well-being. Metsä Group produces high-quality products mainly from renewable Nordic wood. The Group s business areas are tissue and cooking papers, board and paper, pulp, wood products as well as wood supply. Metsä Group s sales totalled EUR 5.3 billion in, and it employs approximately 12,500 people. The Group is present in some 30 countries.

4 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 4 (24) METSÄ GROUP The Interim Report is unaudited INTERIM REPORT 1 JANUARY 30 JUNE 2012 Sales and result Metsä Group s sales in January June totalled EUR 2,531 million (1 6/: EUR 2,806 million). Operating result excluding non-recurring items was EUR 114 million (249), or 4.5 per cent of sales (8.9). The weaker operating result was largely due to the drop in pulp prices, annual maintenance shutdowns at pulp mills and lower delivery volumes of board. The decrease in losses from closed and restructured units and the strengthening of the US dollar and pound sterling had a positive effect on the result. Second-quarter operating result excluding non-recurring items totalled EUR 62 million (1 3/2012: 52). Compared with the previous quarter, the most significant improvements in the operating result were seen in Metsä Board, EUR 14 million, and Metsä Wood, EUR 8 million. On the other hand, Metsä Fibre s operating result fell by EUR 8 million and Metsä Tissue s by EUR 3 million. Net non-recurring items in the second quarter totalled EUR -1 million (1 3/2012: -8). Net non-recurring items in January June amounted to EUR -9 million, of which income accounted for EUR 6 million and expenses for EUR 15 million. Of the non-recurring income, about EUR 4 million was related to a property sale and EUR 2 million to selling Kaskinen pulp mill s bark and oil boilers in Finland. The most significant non-recurring costs were the EUR 12 million cost provision related to land cleaning costs in Tampere and Nurmes in Finland and a EUR 2 million cost provision related to the closure of the Alizay paper mill in France. Operating result including non-recurring items was EUR 105 million in January June (185). The share of results in associated companies was EUR 4 million (3), financial income was EUR 11 million (5) and financial expenses were EUR 59 million (80). Financial income includes a EUR 8 million dividend from Pohjolan Voima Oy. Financial expenses include EUR 10 million of valuation gains on interest rate hedges (-1). EUR 8 million of the gain has resulted from the ending of fair value hedge accounting, after a US dollar-based loan of about EUR 100 million and the associated currency and interest rate swaps expired in June. Financial expenses in the reference period include dividends of approximately EUR 9 million paid on Metsä Fibre's shares under the redemption obligation. Result before taxes for the period under review was EUR 61 million (113) and taxes were EUR 25 million (60). Net result for the period was EUR 36 million (53). Excluding non-recurring items, the Group's return on capital employed was 6.4 per cent (12.8) and the return on equity was 5.5 per cent (14.4). Including non-recurring items, the return on capital employed was 6.0 per cent (9.4) and return on equity was 4.3 per cent (6.3).

5 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 5 (24) Balance sheet and financing Metsä Group s liquidity improved clearly in the second quarter. Total liquidity at the end of June was EUR 1,020 million (31 December : 855). This consisted of EUR 469 million (330) of liquid assets and investments and EUR 551 million (525) of committed credit facility agreements not included on the balance sheet. In addition, in order to meet its short-term financing needs, the Group had at its disposal uncommitted domestic and foreign commercial paper programmes and credit facilities amounting to EUR 527 million. The Group s equity ratio at the end of June was 33.8 per cent and the net gearing was 94 per cent (31 December : 28.3% and 131%). Interest-bearing net liabilities stood at EUR 1,705 million (31 December : 1,953). Cash flow from operations amounted to EUR 124 million (1 6/: 274). Compared with year-end, working capital has increased by EUR 28 million during the reporting year, while in the corresponding period last year the increase was EUR 75 million. In April, Metsäliitto Cooperative, Metsä Board and Itochu Corporation agreed on a transaction in which Itochu acquired a 24.9 per cent strategic stake in Metsä Fibre for EUR 472 million. The transaction was completed on 3 May After the transaction, holdings in Metsä Fibre are as follows: Metsäliitto Cooperative 50.2 per cent, Metsä Board 24.9 per cent and Itochu Corporation 24.9 per cent. At the same time, the parties entered into a commercial agreement whereby Itochu s sales agent position in selling Metsä Fibre s long fibre pulp in Asia and Metsä Fibre s sales agent position in selling Itochu s short-fibre pulp in Europe were renewed. Under the agreement, Metsä Fibre will sell 500,000 tonnes of pulp to Asia and Itochu 150,000 tonnes of pulp to Europe annually. In May, Metsä Board signed a committed syndicated credit facility totalling EUR 600 million in order to refinance a EUR 500 million bond maturing on 1 April It consists of an immediately available EUR 100 million revolving credit facility and term loans totalling EUR 500 million that may be drawn at the end of March The immediately available credit facility will expire after three years. Of the term loans, EUR 150 million will mature on 30 June 2014 and EUR 350 million on 31 March The credit is unsecured until the loans are drawn. The equity ratio of the parent company Metsäliitto Cooperative was 63.2 per cent at the end of June and net gearing was 22 per cent (31 December : 61.3% and 40%). In January June, Metsäliitto Cooperative s members capitals increased by a total of EUR 39.2 million. The actual members capital grew by EUR 1.9 million, the additional members capital A grew by EUR 32.2 million and the additional members capital B by EUR 5.1 million. After the period, EUR 17.5 million of the additional members capital fell due for refund on 2 July 2012 (1 July : EUR 14.0 million). On 3 May 2012, Metsäliitto Cooperative s Representative Council decided that for, interest of 5.5 per cent (5.5 for 2010) be paid on the statutory capital invested by its members. Interest of 5.0 per cent (5.0) is paid on additional members capital A, and interest of 4.5 per cent (4.5) on additional members capital B and C. Interest on members' capital paid totalled EUR 37.8 million (35.4).

6 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 6 (24) Personnel Metsä Group employed an average of 12,255 people (1 6 : 13,229). At the end of June, the number of personnel in the Group was 12,258 (31 December : 12,525), of whom 6,086 (5,660) worked in Finland and 6,172 (6,865) in other countries. The parent company Metsäliitto Cooperative employed 2,885 people at the end of June (31 December : 2,723). Members At the end of June, Metsäliitto Cooperative had 124,545 members (31 December : 125,144). Net cancellations of memberships this year amount to 599. Investments Metsä Group s capital expenditure totalled EUR 88 million (102). In and 2012, Metsä Board has increased its folding boxboard capacity by 150,000 tonnes. The investments have increased the total production capacity to 935,000 tonnes a year. The entire capacity is expected to be available from the beginning of The bark gasification plant at Metsä Fibre's Joutseno mill was introduced for trial use in July, and the project is progressing on schedule. Metsä Tissue s investment programme at the Krapkowice mill in Poland includes two new paper machines. The first machine will be started up in the third quarter and the second one in In addition, the programme includes a new upgrading line and modernisation of paper machine 6. Metsä Group withdrew from the planned biodiesel plant project in Kemi, Finland, on the basis of the feasibility study completed in June. From Metsä Group s point of view, the project was not feasible in terms of profitability. Business areas Wood supply Metsä Forest s sales for January June were EUR 789 million (1 6/: 770) and operating profit was EUR 11 million (14). The operating result for the second quarter was EUR 5 million (1 3/2012: 6). Metsä Forest actively purchased all timber grades through standing and delivery sales. With the help of special arrangements, large quantities of wood were also bought from the areas affected by storm damage in Western Finland. Supply and demand for log timber were in balance, and the log supply situation at sawmills was mainly good. Oversupply of pulpwood clearly decreased its prices. There was oversupply of energy wood throughout the Baltic Sea region. Wood deliveries to Metsä Group s production plants went as planned. Despite the late onset of winter, most winter stands were harvested and the wood was delivered to mills before the frost heave season. In January June, wood deliveries amounted to 16.0 million cubic metres (15.5).

7 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 7 (24) Considerable investments were made in the development of forestry services and sales of forestry services continued to increase steadily. A seminar tour throughout Finland was arranged to inform members of Metsäliitto Cooperative of the latest forestry methods and ways of increasing their income from the forest. After the period, Metsäliitto Cooperative sold its holding in the German wood supply company Thosca Holz GmbH, which used to be a joint venture of Metsäliitto Cooperative and the Swedish company SCA. Wood products industry Metsä Wood s sales in January June totalled EUR 471 million (502), and the operating result excluding non-recurring items was EUR 16 million (13). Business contracted slightly year-onyear. Thanks to efficient cost monitoring and management of capital employed, profitability was still reasonable. The operating result for the second quarter was EUR 12 million (1 3/2012: 4). Demand in the construction market remained weak. However, compared with the first quarter, sales picked up as construction sites became more active. The productivity of plywood products weakened due to contraction in the sales volume. Profitability was supported by the successful increase in added value for products and the positive development of average prices. The imbalance between supply and demand continued in the sawn timber market. Growth in the main markets was practically nonexistent, which will tighten the competition in exports. The seasonal peak in the spring improved the profitability of sawing in the second quarter. Demand for processed products in Europe remained low. Household consumption has not improved. Therefore, demand for home improvement and renovation products did not increase. Profitability improved as a result of internal efficiency improvement measures. New products were launched for industrial customers: fire-protected softwood plywood for demanding wall, roof and floor structures and surface-impregnated softwood plywood to protect structures in moist conditions. The construction of Finland s largest wooden apartment building quarter, based on the Metsä Wood Multi-Story System, was completed in Helsinki. Metsä Wood launched an investigation into upgrading the Vilppula sawmill in 2013 with EUR 30 million. The planned investment includes building a new sawmill line and a new processing plant for fresh wood, as well as renovating other parts of the sawmill. It was estimated that if the project is carried out, the need for personnel at the sawmill would decrease. Therefore the company initiated statutory labour negotiations at the end of May. On 4 July 2012, Metsä Wood announced that it will go ahead with the investment. Personnel will be reduced by 40 employees.

8 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 8 (24) Pulp Metsä-Fibre s sales fell by 8 per cent year-on-year to EUR 626 million (678). The sales volume of pulp increased by 5 per cent year-on-year, amounting to 1,109,000 tonnes (1,057,000). The operating result excluding non-recurring items was EUR 77 million (185). Non-recurring items totalled EUR +2 million and were related to the selling of the Kaskinen mill s bark and oil boilers in Finland. Weaker sales and operating result were primarily due to the drop in pulp prices compared with the first half of. In the first half of the year, foreign currency-denominated market prices fell by 16 per cent for softwood pulp and 13 per cent for hardwood pulp on average compared with the first half of. Two annual maintenance shutdowns in the second quarter contributed to the weakening of the result. The operating result for the second quarter of 2012 was EUR 35 million (1 3/2012: 43). In June, Metsä Fibre decided to invest EUR 15 million in the development of production process at the Joutseno mill. The mill will adopt a new pulp manufacturing process, polysulphide cooking. Metsä Fibre will launch a new type of softwood pulp on the market, which will improve customers cost-efficiency and the technical properties of the end products. At the same time, the production capacity of the Joutseno mill will increase by nearly 10 per cent and production efficiency will improve. Construction will begin in the autumn 2012, and the new process will be commissioned in the summer The bioenergy investment launched last summer, the bark gasification plant at Metsä Fibre's Joutseno mill, was introduced for trial use in July. The project is progressing according to schedule. Once the plant has been completed, the Joutseno mill will be the first carbon dioxide neutral pulp mill in Finland. This means that the mill will use wood-based fuels to produce all the energy it needs, and no external energy will be needed during normal operation. Metsä Fibre, Gasum and Helsingin Energia decided to investigate the possibility of building a biorefinery in Joutseno that generates biogas from wood. The studies conducted so far indicate that the project is technically feasible and the biogas production process can be integrated into Metsä Fibre s Joutseno pulp mill. Metsä Fibre also launched a feasibility study to increase the use and production of renewable energy sources at the Kemi pulp mill. One possible production technology being reviewed is a gasification plant to produce biofuel to replace the fossil fuel used in lime kilns, i.e. oil. A similar gasification plant will soon be commissioned at the Joutseno pulp mill. The feasibility study will be completed by year-end. Paperboard and Paper Metsä Board s sales in January June were EUR 1,067 million (1 6/: 1,345) and the operating result excluding non-recurring items was EUR 24 million (75). Compared with the previous year, operating result excluding non-recurring items was weakened by the lower delivery volumes of board and the lower prices of pulp and office paper. Result was improved

9 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 9 (24) by the decrease in losses from closed or restructured units and the strengthening of the US dollar and pound sterling. The operating result excluding non-recurring items for the second quarter totalled EUR 19 million (1 3/2012: 5). The result improved mainly because of smaller losses from closed and restructured units. Losses from these units burdened the operating result in the second quarter by approximately EUR 6 million (1 3/2012: 15). Delivery volumes of board and pulp also increased slightly. The extensive production shutdown related to the capacity expansion at the Äänekoski folding boxboard mill had a negative impact on the result. Non-recurring items recognised in the operating result in January June amounted to EUR +133 million net. The largest items were the EUR 85 million gain on the divestment of the 7.3 percentage point holding in Metsä Fibre to Itochu Corporation and the EUR 59 million gain on the divestment of the 0.5 percentage point holding in Pohjolan Voima to Metsä Fibre. In addition, non-recurring items include a EUR 12 million cost provision related to land cleaning costs in Tampere and Nurmes, a EUR 2 million cost provision related to the closure of the Alizay paper mill and a EUR 4 million gain on the sale of a plot in Tampere. The operating result including non-recurring items was EUR 157 million (14). Net interest and other financial expenses were EUR 18 million (34) and exchange gains/losses recognised in financial items were EUR +2 million (2). Financial expenses include EUR 10 million of valuation gains on interest rate hedges (-1). EUR 8 million of the gain has resulted from the ending of fair value hedge accounting after a US dollar-based loan and associated currency and interest rate swaps expired in June. Excluding non-recurring items, the result before taxes for the period was EUR 8 million (44), earnings per share were EUR 0.03 (0.11) and return on capital employed was 3.7 per cent (7.2). Including non-recurring items, the result before taxes was EUR 141 million (-22), earnings per share were EUR 0.38 (-0.09) and return on capital employed 17.7 per cent (1.4). At the end of June, Metsä Board s equity ratio was 31.0 per cent and net gearing was 73 per cent (31 December : 27.4 per cent and 106 per cent, respectively). Metsä Board s interim report was published on 2 August 2012 at 12:00 noon. Tissue and cooking paper Metsä Tissue s sales in January June totalled EUR 479 million (478). Own brand sales increased by 3 per cent year-on-year. In particular, sales of Serla and Lambi developed favourably. The operating result was EUR 16 million (10). The result improved slightly year-on-year, due to improved sales structure and the stabilisation of raw material market prices, mainly those of pulp and recycled fibre. The operating result for the second quarter of 2012 was EUR 7 million (1 3/2012: 10). Raw material prices increased in the second quarter, and the development of exchange rates was unfavourable with regard to the main raw materials.

10 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 10 (24) The investment programme at the Krapkowice mill in Poland is progressing on schedule. The investment programme includes two new paper machines, a processing line for Away-from- Home products, buildings, infrastructure and partial modernisation of paper machine 6. The first one of the new paper machines will be started up in the third quarter and the second one in The East European units in Poland and Slovakia implemented the company s joint ERP system and uniform business processes. This completed the project of more than three years that involved the entire company. Metsä Tissue has signed a preliminary agreement on leasing a new processing and logistics unit in Vorsino, Russia, in the Kaluga region about 90 kilometres from Moscow. The new premises will be taken into use in the third quarter. Events after the period Metsä Wood decided to invest EUR 30 million in upgrading its Vilppula sawmill. The investment will be carried out in It involves building a new sawing line and raw processing and renovating other parts of the sawmill. In a share transaction on 16 July 2012, Metsäliitto Cooperative sold its holding in the German wood supply company Thosca Holz GmbH, a joint venture of Metsäliitto Cooperative and the Swedish company SCA. In the share transaction, Thosca Holz GmbH redeemed its own shares from Metsäliitto Cooperative. The company will continue to supply wood to SCA s mills. Risks and uncertainties The estimates and statements in this interim report are based on current plans and estimates. They involve risks and uncertainties that may cause the results to differ from those expressed in such statements. In the short term, the price of and demand for end products, raw material costs, energy prices and the exchange rate development of the euro have an effect on the results of Metsä Group. In March, the state enterprise Metsähallitus filed a claim for damages at the District Court of Helsinki, demanding that Metsä Group and two other forest industry companies jointly pay compensation for alleged damage caused by prohibited cooperation with regard to prices in the raw wood market. The claim is related to the 3 December 2009 decision by the Market Court which states that the aforementioned companies have violated the act on competition restrictions in the raw wood market. In addition, some municipalities, parishes and a group of individuals in Finland have recently instituted similar proceedings. The total amount of all claims that Metsä Group is aware of and that were directed at Metsä Group and the other aforementioned companies jointly is approximately EUR 238 million, of which approximately EUR 87 million is directed at Metsä Group alone. In addition, the aforementioned proceedings are associated with interest and value added tax claims. Metsä Group s view is that the claims for damages are unfounded, and the company has not recognised any provisions regarding them.

11 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 11 (24) The risks related to the Group s business have been explained more extensively in Metsä Group s Annual report for. Near-term outlook In Finland, demand for summer-harvestable stands continues to be good, particularly with regard to log-dominated regeneration felling and thinning. The highest demand is seen for pine logs, pine-dominated thinning and energy wood sites. Seasonal fluctuation in demand, production shutdowns during the summer and high raw material prices in relation to the prices of end products will have a negative impact on Metsä Wood s business in the third quarter. The development of the European economy has a substantial effect on the pulp market. Currently, the predictability of the market is extremely poor. However, the utilisation rates of Metsä Fibre s pulp mills are expected to remain good in the third quarter. Metsä Board s paperboard order books and utilisation rates are at normal level, and delivery volumes in the third quarter are expected to improve compared to the second quarter. During the third quarter no significant changes are expected in delivery volumes of uncoated fine paper and pulp. Delivery volumes of coated paper are estimated to improve in the third quarter. The demand for tissue and cooking papers is forecast to remain stable. Metsä Tissue s strategic development programmes and the benefits gained from them will provide a more solid basis for profitable growth. The main goals for the rest of the year are to increase sales based on own brands as well as increase the cash flow and improve the operating result. Metsä Group's operating result excluding non-recurring items in the third quarter of 2012 is expected to be at approximately the same level as in the previous quarter. Espoo, Finland, 2 August 2012 Board of Directors For further information, please contact: Vesa-Pekka Takala, CFO, Metsä Group, tel (0) Reeta Kaukiainen, SVP, Communications, Metsä Group, tel (0) , +358 (0)

12 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 12 (24) SEGMENTS Wood Supply 1 6/12 1 6/11 4 6/12 4 6/ /11 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales Capital expenditure Personnel at end of period Wood Products Industry 1 6/12 1 6/11 4 6/12 4 6/ /11 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales Capital expenditure Personnel at end of period Pulp Industry 1 6/12 1 6/11 4 6/12 4 6/ /11 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales Capital expenditure Personnel at end of period Paperboard and Paper Industry 1 6/12 1 6/11 4 6/12 4 6/ /11 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales Capital expenditure Personnel at end of period

13 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 13 (24) Tissue and Cooking Papers 1 6/12 1 6/11 4 6/12 4 6/ /11 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales Capital expenditure Personnel at end of period Other operations 1 6/12 1 6/11 4 6/12 4 6/ /11 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items Capital expenditure Personnel at end of period Other operations include among others Metsä Group s service and holding functions as well as a 48.98% share of Kiinteistö Oy Metsätapiola s operations. Internal sales and eliminations 1 6/12 1 6/11 4 6/12 4 6/ /11 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items Metsä Group 1 6/12 1 6/11 4 6/12 4 6/ /11 Sales EBITDA , excl. non-recurring items Depreciation and impairment Operating result , excl. non-recurring items , % of sales Capital expenditure Personnel at end of period EBITDA = Operating result before depreciation and impairment losses.

14 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 14 (24) Quarterly data Sales Wood Supply Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Internal sales Sales total Operating result Wood Supply Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Eliminations Operating result total % of sales Share of results from associated companies Exchange gains and losses Other net financial items Result before income tax Income tax Result for the period Operating result excl. non-rec. items 4 6/12 1 3/ /11 7 9/11 4 6/11 1 3/11 Wood Supply Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations & eliminations Operating result total % of sales

15 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 15 (24) Calculation of key ratios Return on capital employed (%) = (Result from continuing operations before tax + interest expenses, net exchange gains/losses and other financial expenses) per (Balance total - non-interest-bearing liabilities (average)) Return on equity (%) = (Result from continuing operations before tax - income taxes) per (Members funds (average)) Equity ratio (%) = (Members funds) per (Balance total - advance payments received) Net gearing ratio (%) = (Interest bearing borrowings - liquid funds - interest-bearing receivables) per (Members funds)

16 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 16 (24) FINANCIAL STATEMENTS Unaudited METSÄ GROUP Condensed consolidated statement of comprehensive income, EUR mill. Note Change Sales Change in stocks of finished goods and work in progress Other operating income Material and services Employee costs Depreciation, amortization and impairment losses Other operating expenses Operating result Share of results from associated companies Exchange gains and losses Other net financial items Result before income tax Income taxes Result for the period Other comprehensive income Cash flow hedges Available for sale financial assets Currency translation differences Other items Income tax relating to components of other comprehensive income Other comprehensive income, net of tax Total comprehensive income for the period Result attributable to: Members of parent company Non-controlling interests Total comprehensive income attributable to: Members of parent company Non-controlling interests The notes are an integral part of these unaudited interim condensed financial statements.

17 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 17 (24) Unaudited Condensed consolidated balance sheet Note ASSETS Non-current Goodwill Other intangible assets Tangible assets Biological assets Investments in associated companies Available for sale investments Non-current financial assets Deferred tax receivables Current Inventories Accounts receivables and other receivables Cash and cash equivalents Assets classified as held for sale Total assets MEMBERS FUNDS AND LIABILITIES Members funds Members funds Non-controlling interests Non-current liabilities Deferred tax liabilities Post-employment benefit obligations Provisions Borrowings Other liabilities Current liabilities Provisions Current borrowings Accounts payable and other liabilities Liabilities classified as held for sale Total liabilities Total members funds and liabilities The notes are an integral part of these unaudited interim condensed financial statements.

18 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 18 (24) Unaudited Changes in members funds EUR million Equity attributable to members of parent company Fair Trans- value lation and Members differ- other Retained capital ences reserves earnings Total Noncontrolling interests Total Members funds Result for the period Other comprehensive income Cash flow hedges Available for sale financial assets Currency translation differences Other items Income tax relating to components of other comprehensive income Other comprehensive income total Total comprehensive income Transactions with owners Dividends paid Change in members capital Transfer from unrestricted to restricted equity Business arrangements Change in shares of non-controlling interests Members funds Members funds Result for the period Other comprehensive income Cash flow hedges Available for sale financial assets Currency translation differences Other items Income tax relating to components of other comprehensive income Other comprehensive income total Total comprehensive income Transactions with owners Dividends paid Change in members capital Transfer from unrestricted to restricted equity Business arrangements Change in shares of non-controlling interests Members funds

19 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 19 (24) Unaudited Condensed consolidated cash flow statement Note Result for the period Total adjustments Change in working capital Cash flow arising from operations Net financial items Income taxes paid Net cash flow arising from operating activities Acquisitions Investments in tangible and intangible assets Disposals and other items Net cash flow arising from investing activities Change in members funds Change in other equity Change in shares of non-controlling interests Change in long-term loans and other financial items Dividends paid Net cash flow arising from financing activities Change in cash and cash equivalents Cash and cash equivalents at beginning of period Translation difference Change in cash and cash equivalents Cash and cash equivalents in assets classified as held for sale Cash and cash equivalents at end of period The notes are an integral part of these unaudited interim condensed financial statements.

20 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 20 (24) NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS Note 1 Background and basis of presentation Metsäliitto Cooperative and its subsidiaries comprise a forest industry group ( Metsä Group or Group ), which operations are organized into five business segments: Wood Supply, Wood Products Industry, Pulp Industry, Paperboard and Paper Industry and Tissue and Cooking Papers. Metsä Group s parent company is Metsäliitto Cooperative. The parent company is domiciled in Helsinki and the registered address is Revontulentie 6, Espoo, Finland. These unaudited interim condensed financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, and the same accounting policies have been applied as in the annual consolidated financial statements. This interim report is unaudited. All amounts are presented in millions of euros, unless otherwise stated. This interim report was authorised for issue by the Board of Directors of Metsäliitto Cooperative on 2 August Note 2 Segment information The Group's operating segments are comprised of the Group's business areas. The business areas produce different products and services, and they are managed as separate units. The operating segments are reported uniformly with internal reporting submitted to the chief operational decision-maker. The President and CEO has been appointed as the chief operational decision-maker in charge of allocating resources to the operating segments and evaluating their performance. The same accounting policies are applied in segment reporting as for the Group as a whole. Transactions between segments are based on market prices. Sales by segments EUR million 1 6/2012 External 1 6/2012 Internal 1 6/2012 Total 1 6/ External 1 6/ Internal 1 6/ Total Wood Supply Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Elimination of internal sales Total sales EUR million 1 12/ External 1 12/ Internal 1 12/ Total Wood Supply Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Elimination of internal sales Total sales

21 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 21 (24) Operating result by segments EUR million Wood Supply Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Eliminations Operating result total Share of results from associated companies Finance costs, net Income taxes Result for the period Metsä Group s operating result includes non-recurring items net of EUR -9 million (1 6/: -64). The segment Other operations include among other things the parent company Metsäliitto Cooperative s sales profit of EUR 81 million related to the sale of Metsä Fibre s shares to Itochu Corporation. Eliminations include Metsä Board s EUR 59 million gain on the divestment of its holding in Pohjolan Voima to Metsä Fibre and the EUR 166 million gain on the divestment of the holding in Metsä Fibre to Itochu (Metsä Board EUR 85 million and Metsäliitto Cooperative EUR 81 million). From Metsä Group s perspective, the selling of the shares in Metsä Fibre has been processed in accordance with IAS 27 as a transaction between controlling and non-controlling shareholders in the parent company; the gains have been eliminated from the income statement and entered directly in shareholders equity. Net financial expenses include the EUR 8 million dividend from Pohjolan Voima Oy and EUR 10 million of valuation gains on interest hedges. EUR 8 million of the gain has resulted from the valuation of fair value hedge accounting after a US dollar-based loan and associated currency and interest rate swaps, which matured in June Assets by segment EUR million Wood Supply Wood Products Industry Pulp Industry Paperboard and Paper Industry Tissue and Cooking Papers Other operations Elimination Unallocated assets Total Segment assets include intangible and tangible assets, investments in associated companies, inventories, accounts receivables and other non-interest-bearing receivables (excl. interest and tax items)

22 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 22 (24) Note 3 Income taxes Tax expense in the income statement is comprised of the current tax and deferred taxes. EUR million Taxes for the current period Taxes for the prior periods Change in deferred taxes Total income taxes Note 4 Change in property, plant and equipment EUR million Book value at beginning of period Business acquisitions Investments Decreases Assets classified as held for sale Depreciation, amortization and impairment losses Translation differences and other changes Book value at end of period Depreciation and impairment losses include in 2012 a reversal of the previously recognised impairment loss of EUR 2 million for Metsä Fibre s Kaskinen mill, based on the selling of bark and oil boilers to Metsä Board. In addition, depreciation and impairment losses include an impairment loss of EUR 2 million related to the closure of Metsä Tissue s power plant and paper machine 5 in Poland. Note 5 Provisions EUR million Environmental Other Restructuring obligations provisions Total At 1 January, Translation differences Increases Utilized during the year Unused amounts reversed At 30 June, At 1 January, Translation differences Increases Utilized during the year Unused amounts reversed At 31 December, The most significant increase in provisions in 2012 was the EUR 11 million environmental provision related to the cleaning costs of Metsä Board s Niemenranta lot in Tampere (EUR 8 million) and the cleaning costs of the industry lot in Nurmes (EUR 4 million). Metsä Board recognised an additional net

23 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 23 (24) provision of EUR 2 million related to the closure of the Alizay Paper mill (restructuring provision EUR 11 million, environmental provision EUR -5 million and other provisions EUR -4 million). Related to Metsä Board s plans to discontinue Gohrsmühle s loss-making operations, EUR 5 million of restructuring provisions were reversed related to dismissals, and other provisions were increased by EUR 3 million, related to logistical arrangements. In addition, Metsä Board reversed EUR 1 million of logistics provisions made in 2008 related to the selling of Graphic papers. Of the total provisions of EUR 123 million, the non-current portion was EUR 42 million and the current portion EUR 82 million. The non-current portion will mostly be paid during Note 6 Related party transactions The sales of Metsäliitto Cooperative s wood deliveries to the Group subsidiaries totalled EUR 366 million in January June (360). Sales of wood deliveries to joint ventures and associated companies were EUR 7 million (7). Metsä Group s forest holdings are centralised in Finsilva Corporation, which is an associated company of Metsäliitto Cooperative (49.9%). Finsilva sells wood to Metsäliitto Cooperative. The value of wood deliveries in January June was EUR 9 million (9). Transactions with joint ventures Joint ventures have been consolidated using line-by-line method proportionate to the Group s holding. Significant joint ventures are Äänevoima Oy (56.25%) and Kiinteistö Oy Metsätapiola (48.98%). The Group s consolidated income statement and balance sheet include assets, liabilities, income and costs as follows: EUR million Sales Purchases Non-current assets Current assets Non-current liabilities Current liabilities Transactions with associated companies EUR million Sales Purchases Non-current receivables Current receivables Non-current liabilities Current liabilities 5 7 9

24 Metsä Group Interim Report 1 January 30 June 2012 Stock Exchange Release 24 (24) Note 7 Notes to condensed consolidated cash flow statement Adjustments to the result for the period EUR million Taxes Depreciation, amortization and impairment charges Biological assets Share of results from associated companies Gains and losses on sale of non-current financial assets Finance costs, net Pension liabilities and provisions Total Disposals and other items Disposals and other items for 1 6/2012 include EUR 7 million from the selling of Metsä Board s associate Plastiroll Oy, EUR 3 million negative sales price for the selling of Metsä Board s Reflex business and EUR 14 million of sales of fixed assets. Note 8 Commitments and contingencies Securities and guarantees 2012 EUR million On own behalf On behalf of associated companies On behalf of others Total Securities and guarantees include pledges, real estate mortgages, chattel mortgages and guarantee liabilities. The future costs for non-cancellable operating lease contracts were EUR 42 million at the end of June (31.12.: 49). Open derivative contracts 2012 EUR million Interest rate derivatives Currency derivatives Other derivatives Total The market value of open derivative contracts at the end of June was EUR -46 million (31.12.: -55). Note 9 Events after the period Metsä Wood decided to invest EUR 30 million in upgrading its Vilppula sawmill. The investment will be carried out in It involves building a new sawing line and raw processing and renovating other parts of the sawmill. In a share transaction on 16 July 2012, Metsäliitto Cooperative sold its holding in the German wood supply company Thosca Holz GmbH, a joint venture of Metsäliitto Cooperative and the Swedish company SCA. In the share transaction, Thosca Holz GmbH redeemed its own shares from Metsäliitto Cooperative. The company will continue to supply wood to SCA s mills.