Metsä Group Interim Report 1 January–30 June 2014 Stock Exchange Release 31 July 2014 at noon EET Result for the first half of 2014 – Sales amounted to EUR 2,519 million (1–6/2013: EUR 2,506 million). – Operating result excluding non-recurring items was EUR 197 million (183). Operating result including non-recurring items was EUR 230 million (184). – Result before taxes excluding non-recurring items was EUR 157 million (131). Result before taxes including non-recurring items was EUR 183 million (131). – Return on capital employed excluding non-recurring items was 11.3 per cent (9.8). – Cash flow from operations amounted to EUR 193 million (125). Result for the second quarter of 2014 – Sales amounted to EUR 1,265 million (4–6/2013: EUR 1,242 million). – Operating result excluding non-recurring items was EUR 92 million (94). Operating result including non-recurring items was EUR 160 million (89). – Result before taxes excluding non-recurring items was EUR 77 million (73). Result before taxes including non-recurring items was EUR 146 million (69). – Return on capital employed excluding non-recurring items was 10.3 per cent (9.7). – Cash flow from operations amounted to EUR 226 million (144). Events during the second quarter of 2014 – Metsä Group announced it was preparing to build a bioproduct mill in Äänekoski. The final investment decision will be made during the first half of 2015. – In April, Metsä Fibre sold a total of 170,000 of Pohjolan Voima Oy’s B shares to Kymppivoima Oy for EUR 75 million. – The USD price of softwood pulp continued to increase slightly in all markets. – Paperboard delivery volumes increased compared to the previous quarter. The average market price levels for paperboards remained unchanged. – The profitability of the wood products industry improved as a result of increased sales prices, efficiency programmes and seasonal changes in demand. – The share capital of Metsä Wood Eesti AS, the owner of the Reopalu sawmill, was sold to an Estonian wood products company. – Metsä Board Corporation’s Board of Directors appointed Mika Joukio, currently CEO of Metsä Tissue Corporation, as CEO of Metsä Board Corporation as of 1 December 2014 at the latest. “As expected, our operating result excluding non-recurring items for the second quarter of 2014 was slightly weaker compared to the previous quarter, mainly because of annual maintenance shutdowns, some of which were more extensive than usual. The European economy is yet to change for the better. Therefore, it is essential to ensure that our operations are competitive. At Metsä Group, this means continuous competence development, seeking productivity and efficiency, and investing in product areas with promising long-term growth prospects. Practical examples of our development measures include the efficiency programme that Metsä Wood launched last year and the plans we announced in April to build a bioproduct mill in Äänekoski, Finland. Industrial investment decisions need to be supported by proper actions from the government. The cancellation of the windfall tax is a positive sign, but further measures are needed. In addition to the sulphur directive, it seems that if implemented, the EU 2030 climate change and energy policy will significantly burden industry and households. We all benefit from lower emissions and climate change mitigation, but it is equally important to take care of the competitiveness of the domestic industry.” Kari Jordan, President & CEO, Metsä Group Metsä Group
| Income statement, EUR million The figures for 2013 are restated | 2014 1–6 | 2013 1–6 | 2014 4–6 | 2013 4–6 | 2013 1–12 |
| Sales | 2 519.2 | 2 505.5 | 1 264.9 | 1 241.9 | 4 938.7 |
| Other operating income | 124.3 | 39.2 | 88.2 | 23.3 | 81.0 |
| Operating expenses | -2 287.8 | -2 233.2 | -1 135.3 | -1 117.9 | -4 427.7 |
| Depreciation and impairment losses | -125.8 | -127.9 | -57.7 | -58.0 | -257.1 |
| Operating result | 229.8 | 183.7 | 160.2 | 89.2 | 335.0 |
| Share of results from associated | |||||
| companies and joint ventures | 15.3 | 9.5 | 7.9 | 2.9 | 9.6 |
| Exchange gains and losses | -1.2 | 0.0 | 0.9 | -0.2 | -4.6 |
| Other net financial items | -61.1 | -61.9 | -23.3 | -23.0 | -116.2 |
| Result before income tax | 182.9 | 131.3 | 145.7 | 68.9 | 223.8 |
| Income taxes | -41.2 | -34.8 | -35.8 | -18.8 | -35.1 |
| Result for the period | 141.7 | 96.6 | 109.9 | 50.1 | 188.7 |
| Profitability The figures for 2013 are restated | 2014 1–6 | 2013 1–6 | 2014 4–6 | 2013 4–6 | 2013 1–12 |
| Operating result, EUR mill. | 229.8 | 183.7 | 160.2 | 89.2 | 335.0 |
| - “ -, excluding non-recurring items | 196.6 | 183.0 | 91.5 | 93.7 | 342.9 |
| - “ - % of sales | 7.8 | 7.3 | 7.2 | 7.5 | 6.9 |
| Return on capital employed, % | 12.6 | 9.8 | 17.2 | 9.3 | 8.9 |
| - ” -, excluding non-recurring items | 11.3 | 9.8 | 10.3 | 9.7 | 9.1 |
| Return on equity, % | 14.4 | 10.4 | 22.4 | 10.7 | 9.9 |
| - ” -, excluding non-recurring items | 11.8 | 10.3 | 8.4 | 11.6 | 10.3 |
| Financial position The figures for 2013 are restated | 2014 30.6. | 2013 30.6. | 2014 31.3. | 2013 31.3. | 2013 31.12. |
| Equity ratio, % | 37.9 | 34.8 | 37.2 | 34.9 | 37.9 |
| Net gearing ratio, % | 70 | 90 | 83 | 90 | 77 |
| Interest-bearing net liabilities, EUR mill. | 1 389 | 1 669 | 1 614 | 1 695 | 1 510 |
Segments
| Sales and Operating result January–June 2014 (EUR mill.) | Wood Supply and Forest Services | Wood Products Industry | Pulp Industry | Paperboard and Paper Industry | Tissue and Cooking Papers |
| Sales | 814.4 | 473.7 | 654.7 | 995.2 | 502.7 |
| Other operating income | 2.8 | 4.0 | 27.5 | 39.4 | 2.9 |
| Operating expenses | -801.5 | -440.8 | -537.7 | -909.5 | -465.2 |
| Depreciation & impairment losses | -1.5 | -14.9 | -33.0 | -49.4 | -19.0 |
| Operating result | 14.2 | 22.0 | 111.6 | 75.7 | 21.5 |
| Non-recurring items | 1.5 | 1.0 | -20.3 | -11.3 | - |
| Operating result, excl. non-rec. items | 15.7 | 23.0 | 91.3 | 64.4 | 21.5 |
| - % of sales | 1.9 | 4.9 | 13.9 | 6.5 | 4.3 |
Near-term outlook Metsä Forest buys wood across the country, primarily thinning stands harvestable during the unfrosen period. Compared to the second quarter, sales in the wood products industry are expected to decrease due to seasonal changes. The demand outlook for spruce sawn timber in particular has weakened for the rest of the year because of increased supply. Slow construction in the main markets will have an effect on the delivery volumes of Kerto products in the third quarter. The market situation for other wood products is reasonable, and the market balance of birch plywood is good. The global demand for pulp is expected to continue to grow, and softwood pulp supply and demand are expected to be in a balance in the near future. Compared to the second quarter, the delivery volumes of folding boxboard and white-top fresh forest fibre linerboard are estimated to increase slightly in the third quarter of 2014. No material price changes are in sight. The delivery volumes of uncoated fine paper, coated papers and market pulp in the third quarter of 2014 are expected to remain at approximately the same level as in the previous quarter. No material changes are in sight in the price of paper. Demand in the tissue paper market is expected to continue to grow in all market areas and particularly in the Central-East Europe. Metsä Group’s operating result excluding non-recurring items for the third quarter of 2014 is expected to be at approximately the same level as in the second 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 2014 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, Communications, Metsä Group, tel. +358 (0)10 465 4541, +358 (0)50 522 0924 www.metsagroup.com Metsä Group is a responsible forest industry group whose products’ main raw material is renewable and sustainably grown northern wood. Metsä Group focuses on tissue and cooking papers, consumer packaging paperboards, pulp, wood products, and wood supply and forest services. Its high-quality products combine renewable raw materials, customer-orientation, sustainable development and innovation. Metsä Group’s sales totalled EUR 4.9 billion in 2013, and it employs approximately 11,000 people. The Group operates in some 30 countries. Metsäliitto Cooperative is the parent company of Metsä Group and is owned by approximately 123,000 Finnish forest owners.
