Results 2Q 2009 presentation - Metsä Board

M-real
Results
2Q 2009

Key Events in 2Q 2009
• Operative cash flow neutral despite weak result
– ONWC reduced by about 130 m€ in 1H 2009 mainly based on own actions
• Changes in production portfolio and other restructuring has caused
significant extraordinary operating costs in 1H 2009
• Order inflows strengthened during the quarter
• Paper and board prices remained relatively stable except WFU
• Pulp price increased in USD
– Weakened USD diminished the positive impact in euros
• Major fixed and variable cost savings thanks to improvement programmes
• Production costs declined
2

Key Figures – Quarterly
Sales
800
EUR, million
Operating Result excl.
non-rec. items
25
EUR, million
Operating Result
50 EUR, million
600
400
200
623 585
0
-25
-50
1Q 2009 2Q 2009
-65
-70
0
-50
1Q 2009 2Q 2009
-73
-118
0
1Q 2009 2Q 2009
ROCE
%
0
1Q 2009 2Q 2009
-5
-10,2
-13,4
-10
-75
-100
Result before taxes excl.
non-rec. items
50 EUR, million
0
1Q 2009 2Q 2009
-50
-62
-83
-100
-150
Result before taxes
50
EUR, million
0
1Q 2009 2Q 2009
-50 -115
-97
-15
-100
-100
-20
-150
-150
3

Clean Operating Cash Flow Positive in 1H 2009 Mainly Due
to Own Actions
EUR million
EBITDA*, excluding non-recurring items -33
Change in ONWC** +133
Net investments -27
Net interest expenses -57
Clean operating cash flow +16
*Includes about EUR 25 million extraordinary operating costs related mainly to production portfolio changes and restructuring
** Inventories, trade accounts receivables and trade accounts payables including implemented restructuring measures
4

Pulp Down Cycle’s Impact on Profitability (1H 09 vs. 1H 08)
• Consumer Packaging - 12
• Office Papers - 14
• Speciality Papers - 7
• Market Pulp and Energy - 18
EUR million
TOTAL - 51
5

Consumer Packaging to Increase FBB Prices in the UK
• Profitability in 2009 negatively affected by lower operating
rates, weaker pulp result, lower valuation of wood and
pulp inventories and weaker GBP
MEUR
600
400
Annual sales
540
463
• Profitability improved by cost saving actions, price
increases and stronger USD
• Order books improved clearly during 2Q
– Currently at last year’s level
200
0
1-2Q 2008 1-2Q 2009
EBIT, excl non-recurring items
MEUR
40
• FBB price increase process started in the UK
– Price increase under consideration for the other European
markets
30
20
10
0
21
4
1-2Q 2008 1-2Q 2009
6

Office Papers’ Demand Situation Steadily Improving
• Profitability in 2009 negatively affected by lower demand
and paper prices, weaker pulp result as well as lower
valuation of wood and pulp inventories
MEUR
450
300
Annual sales
427
• Profitability improved by lower raw material costs and
implemented cost savings actions
150
278
• Order books improved clearly during 2Q
– Currently at last year’s level
– Improvement of underlying demand or seasonal impact?
• Seems possible that the price deterioration ends soon
– Price levels defended by production curtailments
• Production costs gradually decreasing, especially wood
– Alizay pulp mill standstill continues
0
1-2Q 2008 1-2Q 2009
EBIT, excl non-recurring items
MEUR
0
-9
-10
-20
-30
-35
-40
1-2Q 2008 1-2Q 2009
7

Speciality Papers Suffered from Extraordinary Operating
Costs in 1H 2009
• Hallein paper mill closed and Gohrsmühle standard WFC
production discontinued in April 2009
MEUR
400
300
Annual sales
322
• Profitability weakened in 2009 due to significant
extraordinary operating costs and demand decline
– Amount of extraordinary operating costs clearly less in 2H
2009
• Profitability has improved due to slightly higher prices and
implemented cost savings actions
200
100
0
1-2Q 2008 1-2Q 2009
EBIT, excl non-recurring items
MEUR
0
-4
-10
199
• Order books improved during 2Q
-20
-30
-40
-34
1-2Q 2008 1-2Q 2009
8

Gradually Turning Pulp Cycle Improving Market Pulp and
Energy’s Profitability in 2H 2009
• Profitability weakened by lower pulp demand and price
as well as lower wood and pulp inventory valuations
MEUR
400
300
Annual sales
322
• Profitability improved by lower wood costs
– Wood cost decline continues in 2H 2009
• Long fibre pulp price increased for several months
– Weaker USD diminished the impact in euros
200
250
100
0
1-2Q 2008 1-2Q 2009
EBIT, excl non-recurring items
MEUR
40
• Price increase expected to continue mainly due to
capacity closures and curtailments
– More meaningful increases as demand picks up
20
0
-20
-40
22
-31
1-2Q 2008 1-2Q 2009
9

M-real to Receive EUR 300 million Cash From the Divestment
of Metsä-Botnia Uruguay Operations
• M-real’s resource company Metsä-Botnia plans to divest its operations in Uruguay to
UPM-Kymmene
• Intention to change the way to consolidate Metsä-Botnia in M-real’s accounting from
line by line to equity method
• M-real’s total net debt reduction EUR 550 million
– EUR 300 million cash proceeds
– Decrease in the consolidated net debt by EUR 250 million
• M-real’s annual sales reduction about EUR 250 million
• Closing expected in 4Q 2009, subject to Board approvals, signing of final agreements,
financing arrangements and competition authorities’ approval
• New planned Metsä-Botnia ownership structure: Metsäliitto Cooperative 53%, M-real
30%, UPM-Kymmene 17%
10

Divestment of Uruguay Operations in Line with M-real’s
Strategy
• Finnish high-quality pulp the main raw material for M-real’s strategic core
Consumer Packaging
– Eucalyptus pulp not used in cartonboard
• Divestment of Graphic Papers at the end of 2008 reduced the need for eucalyptus
pulp considerably
• Paper business strategic review continues
– Possibly reducing short fibre pulp consumption further
• After the transaction pulp consumption and production in balance
– Pulp self-sufficiency very important in the long run
11

M-real’s Positive Net Debt Development Continues
• Net debt rather stable in the first half thanks
to ONWC reduction
4000
3500
3693
3482
Net Debt, EUR million
3109
3019
• Longer-term liquidity managed by
3000
2403
– EUR 60 million pension premium loan drawn
– M-real has reasons to believe that as a result
of their successful refinancing Sappi may pay
back a part of or in full the EUR 220 million
vendor note in 3Q 2009
2500
2000
1500
21832205
1867
12541276
– Metsä-Botnia Uruguay transaction’s expected
cash proceeds EUR 300 million
1000
~ 725
• Total net debt reduction EUR 550 million
500
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2Q 2009
Including
MB
transaction
12
12

Succesfull Paper Industry Strategic Review Proceeds
• Graphic Papers divestment, closed at year end 2008, the biggest restructuring
action in European paper industry of this decade
• In uncoated fine papers there is a clear need for consolidation
– Seems like the level of interest is increasing among industry players
• M-real committed to take part also in the speciality papers restructuring
– M-real Zanders (Gohrsmühle and Reflex) one of the major players
– Development in Gohrsmühle proceeding well
– This year result suffering from production portfolio changes
13

14
Appendix

Key Figures – Cumulative Comparison
Sales
2000
EUR, million
Operating Result, excl.
non-rec. items
50
EUR, million
Operating Result
200
EUR, million
1500
1000
500
1688
1208
0
-50
-100
13
1-2Q 2008 1-2Q 2009
-135
100
0
-100
108
1-2Q 2008 1-2Q 2009
-191
0
1-2Q 2008 1-2Q 2009
ROCE*
10
%
-150
Result before taxes, excl.
non-rec. items
50
EUR, million
-200
Result before taxes
100 EUR, million
5
0
-5
-10
7,3
1-2Q 2008 1-2Q 2009
-11,5
0
-50
-100
1-2Q 2008 1-2Q 2009
-57
-145
0
-100
-200
38
1-2Q 2008 1-2Q 2009
-212
-15
-150
-300
15
*from continuing and discontinued operations

Due to Extensive Own Actions Cash Flow Development In
Control Despite Negative Result*
2Q09 1Q09 Diff. 1-2Q09 2008
Net cash flow arising from operations, M€ -20 -7 -13 -27 -97
(including change in working capital)
Investments, M€ -16 -16 0 -32 -128
Disposals, M€ 3 2 1 5 483
Net investments, M€ -13 -14 1 -27 355
Net cash flow after investments, M€ -33 -14 -19 -54 258
Net gearing at the end of period, % 116 101 15 116 90
Covenant net gearing at the end of period, % 91 81 10 91 74
Equity ratio at the end of period, % 29,4 30,3 -0,9 29,4 30,8
Covenant equity ratio at the end of period, % 34 35 -1 34 36
* Cash flow figures including also non-recurring items and discontinued operations
16

Heavy Internal Profit Improvement Actions and Lower Costs
Improving the Situation in 2009
Profit impact vs. 2008, m€
Cumulative
total
target 2009 2010 2011
1 Profit improvement programme 2009 80 20 60 80
2 Profit improvement programme 2008 70 40 60 70
3 Cost savings programmes 2007 10 10 10 10
Total 160 70 130 160
Estimated cost change 2009 -30
Profit impact after cost change 100
17

Folding Boxboard Market Price in Europe
2000 – 2Q 2009
EUR / tn
Three month moving average
1200
1000
800
600
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: M-real
18

Paper and Pulp Market Price in Europe
1998 – 2Q 2009
EUR / ton,
1100
1000
900
800
700
600
500
EUR/USD
1,7
1,6
1,5
1,4
1,3
1,2
1,1
1
0,9
400
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
0,8
Coated magazine paper LWC (60g)
Uncoated fine paper (B-copy, 80 g)
Softwood pulp NBSK
Coated fine paper (100 g)
EUR/USD
Source: Foex, Reuters
19

Liquidity
1600
1400
1200
1000
800
600
400
200
EUR, million
Liquid funds
Committed credit facilities
0
I/08 II/08 III/08 IV/08 I/09 II/09
20

Balance Sheet Ratios*
Equity Ratio
Net gearing
%
40
35
30
35,0 36,5
32,5
30,8
30,3
29,4
140
120
100
%
100
100
114
90
101
116
25
20
15
80
60
10
40
5
20
0
I II III IV I II
0
I II III IV I II
2008
2009
21
*Closing of the Metsä-Botnia transaction announced in July 2009 expected to reduce net gearing by about
40 %-units and improve equity ratio by about 3 %-units. Closing expected in 4Q 2009.

Interest-Bearing Net Debt*
EUR, million
2000
1892
1888
1865
1800
1600
1400
1254
1243
1276
1200
1000
800
600
400
200
0
I II III IV I II
2008
2009
22
*Closing of the Metsä-Botnia transaction announced in July 2009 expected to reduce net debt by EUR 550
million. Closing expected in 4Q 2009.

Sales by Business Area
250
EUR, million
200
226
237
150
100
147
131
117
134
116
82
50
0
Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy
1Q 2009 2Q 2009
23

Operating Result by Business Area*
EUR, million
10
5
5
0
-5
-1
-10
-12
-12
-15
-17
-18
-19
-20
-25
Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy
-22
1Q 2009
2Q 2009
* excl. non-recurring items
24

Sales by Business Area
EUR, million
600
540
400
463
427
200
278
322
199
322
250
0
Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy
1-2Q 2008
1-2Q 2009
25

Operating Result by Business Area*
EUR, million
30
20
10
21
22
0
-10
4
-9
-4
-20
-30
-35
-34
-31
-40
Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy
1-2Q 2008 1-2Q 2009 * excl. non-recurring items
26

Consumer Packaging
Sales by Quarter
Operating Result by Quarter*
EUR, million
EUR, million
300
250
200
266
274
274
248
226
237
40
30
20
18
17
150
10
3
5
100
50
0
I II III IV I II
0
-10
-20
I II III IV I -1 II
-9
2008
2009
* excl. non-recurring items
27

Office Papers
Sales by Quarter
EUR, million
Operating Result by Quarter*
EUR, million
250
223
10
200
204
203
174
5
150
147
131
0
100
-5
-10
-2
-7
-6
50
-15
-14
0
I II III IV I II
2008
-20
-17 -18
I II III IV I II
2009
* excl. non-recurring items
28

Speciality Papers
Sales by Quarter
EUR, million
Operating Result by Quarter*
EUR, million
180
160
164
158 153 147
10
5
140
120
100
80
60
117
82
0
-5
-10
-15
-3
-1
-3
-8
-12
40
20
0
I II III IV I II
-20
-25
-22
I II III IV I II
2008
2009
* excl. non-recurring items
29

Market Pulp and Energy
Sales by Quarter
EUR, million
Operating Result by Quarter*
EUR, million
200
180
160
140
120
100
80
60
40
20
0
172
162 160
150
134
116
I II III IV I II
20
15
10
5
0
-5
-10
-15
-20
-25
10
12 12
-2
-12
I II III IV I
-19
2008
2009
* excl. non-recurring items
30

Quarterly Sales
EUR, million
1000
750
859 829 826
500
722
623
585
250
I II III IV I II
2008 2009
31

Quarterly Operating Result*
60
EUR, million
40
20
0
-20
-40
14
3
I II -1
III IV
-51
I II
-65
-70
-60
-80
2008
2009
* excl. non-recurring items
32

Quarterly Result Before Taxes*
40
EUR, million
20
0
-20
-21
-36 -34
-40
-87
-62
-83
-60
-80
-100
I II III IV I II
* from continuing operations excl. non-recurring items
2008 2009
33

Quarterly ROCE %*
%
10
8
6
4
2
0
-2
-4
-6
2,9
I -0,2 II
1,0
III IV I II
-6,2
-7,0
-8,3
-8
-10
2008
2009
* excl. non-recurring items
34

M-real Shareholders 30.6.2009
Non-Finnish nationals;
15 %
Other companies; 5
%
Non-profitmaking Financial and
organizations; 3 insurance % institutions;
4 %
Public communities; 9
%
Households; 27 %
Metsäliitto; 39 %
35

M-real Voting Rights 30.6.2009
Non-Finnish nationals; Non-profitmaking
5 % organizations; 4 % Financial and
Other companies; 2 %
insurance institutions;
1 %
Public communities;
14 %
Households; 13 %
Metsäliitto; 61 %
36