Metsä Group Interim Report 1–6/2012, Stock Exchange Release 2 August 2012 at noon EET
Result in the first half of 2012
– Sales amounted to EUR 2,531 million (1–6/2011: 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 (4–6/2011: 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 2013.
– 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 2013.
– 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.
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
Metsä Group
| Income statement | 2012 1–6 | 2011 1–6 | 2012 4–6 | 2011 4–6 | 2011 1–12 |
| Sales | 2 531 | 2 806 | 1 247 | 1 403 | 5 346 |
| Other operating income | 37 | 49 | 16 | 20 | 95 |
| Operating expenses | -2 332 | -2 482 | -1 137 | -1 255 | -5 058 |
| Depreciation and impairment losses | -131 | -189 | -65 | -117 | -354 |
| Operating result | 105 | 185 | 61 | 51 | 29 |
| Share of profit from associates | 4 | 3 | 5 | 3 | 4 |
| Exchange gains and losses | 0 | 0 | -2 | 1 | 2 |
| Other net financial items | -47 | -75 | -13 | -31 | -133 |
| Result before income tax | 61 | 113 | 51 | 24 | -98 |
| Income taxes | -25 | -60 | -17 | -33 | -59 |
| Result for the period | 36 | 53 | 34 | -9 | -157 |
Metsä Group
| Profitability | 2012 1–6 | 2011 1–6 | 2012 4–6 | 2011 4–6 | 2011 1–12 |
| Operating result, EUR mill. | 105 | 185 | 61 | 51 | 29 |
| - “ -, excluding non-recurring items | 114 | 249 | 62 | 119 | 314 |
| - “ - % of sales | 4.5 | 8.9 | 5.0 | 8.5 | 5.9 |
| Return on capital employed, % | 6.0 | 9.4 | 7.1 | 5.5 | 1.1 |
| - ” -, excluding non-recurring items | 6.4 | 12.8 | 7.3 | 12.5 | 8.5 |
| Return on equity, % | 4.3 | 6.3 | 8.2 | -2.2 | -9.9 |
| - ” -, excluding non-recurring items | 5.5 | 14.4 | 8.6 | 14.5 | 8.6 |
| Financial position | 2012 30.6 | 2011 30.6 | 2012 31.3 | 2011 31.3 | 2011 31.12 |
| Equity ratio, % | 33.8 | 30.9 | 28.5 | 30.4 | 28.3 |
| Net gearing ratio, % | 94 | 121 | 132 | 112 | 131 |
| Interest-bearing net liabilities, EUR mill. | 1 705 | 2 051 | 1 993 | 1 933 | 1 953 |
Segments
| Sales and Operating result January–June 2012 (EUR mill.) | Wood Supply | Wood Products Industry | Pulp Industry | Paperboard and Paper Industry | Tissue and Cooking Papers |
| Sales | 789 | 471 | 626 | 1 067 | 479 |
| Other operating income | 4 | 4 | 5 | 168 | 8 |
| Operating expenses | -781 | -443 | -525 | -1 021 | -449 |
| Depreciation & impairment losses | -1 | -15 | -27 | -57 | -22 |
| Operating result | 11 | 16 | 79 | 157 | 16 |
| Non-recurring items | - | - | -2 | -133 | - |
| Operating result, excl. non-rec. items | 11 | 16 | 77 | 24 | 16 |
| - % of sales | 1.4 | 3.5 | 12.3 | 2.2 | 3.4 |
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.
Disclosure procedure
Metsä Group follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority and hereby publishes its Interim Report for January–June 2012 enclosed to this stock exchange release. Metsä Group’s complete Interim Report is attached to this release in pdf-format and is also available on the company's web site at www.metsagroup.com.
METSÄ GROUP
Group Communications
For further information, please contact:
Vesa-Pekka Takala, CFO, Metsä Group, tel. +358 (0)10 465 4260
Reeta Kaukiainen, SVP, Metsä Group Communications, tel. +358 (0)10 465 4541, +358 (0)50 522 0924
www.metsagroup.com
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 2011, and it employs approximately 12,500 people. The Group is present in some 30 countries.