Contents Investment highlights and update General presentation 2 Investment Highlights 47 General Info 3 Strategy 54 Business Portfolio 15 Financial Targets 63 Operations 17 1Q 2011 Results & Outlook 69 Deliveries 29 Price Development 71 Sourcing 31 Dividend 79 Owners 34 Investments 81 Market Position Funding and debt information 37 Divestments 38 Funding and Debt 45 Credit Facilities 46 Rating History 1 4.5.2011 Investor presentation 1Q 2011
Investment Highlights • Strong growing core in high-quality cartonboards – M-real the European market leader in folding boxboard – Good growth potential • Material profitability turn-around in 2010 • Significant net debt reduction in recent years • Strategic review ongoing – M-real the forerunner in paper merchanting and coated papers industry restructuring in Europe – Asset divestments – Extensive cost savings and cash flow improvement programmes 2 4.5.2011 Investor presentation 1Q 2011
Strategy
Consistent Strategic Direction Since 2006 • Cartonboards for consumer packaging New profit improvement programme 2011 the strategic core business Profit improvement programme 2010 Divestment of • Divestment of underperforming paper Metsä-Botnia’s Uruguayan operations 2009 businesses Divestment of Graphic Papers 2008 • Major cost savings through complexity Self-sufficiency in pulp 2008 reduction and efficiency improvement New efficiency improvement programme 2007 • High pulp and energy self-sufficiency Divestment of Map Merchant Group 2007 Extension of the restructuring programme 2007 • Customer orientation and proactive approach to increase prices Extensive restructuring programme 2006 4 Investor presentation 1Q 2011
M-real Has Achieved Significant Results from Restructuring Capacity per employee in M-real’s pulp, • Productivity of the mills improved by paper and board mills 55% from 2006 1 200 tonnes/a/person 900 • Sales office locations reduced by almost 600 1 068 995 876 823 30%, logistics locations by 50% 687 300 0 2006 2007 2008 2009 2010 • Capacity closures of about 2 million tonnes/a M€ M-real’s net debt development 4000 3693 3482 3500 3109 • Divestments worth over EUR 2 billion 3019 3000 mainly of non-profitable paper 2403 2205 2500 2183 businesses 1867 2000 1500 1254 827 777 1000 • M-real’s net debt reduced to about one 500 third of the 2006 level 0 0 1 2 3 4 5 6 7 8 9 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 5 Investor presentation 1Q 2011
Packaging Is One of the Biggest and Fastest Growing Businesses in the World Global Packaging Market ($634 Billion) • One of the most important well-being Glass drivers in the world Metal Others 7 % 15 % 6 % • Product safety issues are crucial Flexible plastics Board • Branding and information sharing 20 % 31 % increasingly important Virgin fibre Rigid plastics cartonboard ~7% of 21 % total • Criticism against bad packaging increasing Sources: Pira & M-real 6
Several Megatrends Supporting Good Packaging • Demand for good packaging heavily increasing • Good packaging is environmentally sustainable – Made out of renewable raw material and recyclable – High energy self-sufficiency in production – Low carbon footprint – Lightweight • Good packaging is safe – Durable – No migration – Good printing surface • Good packaging is economical 7 Investor presentation 1Q 2011
Virgin Fibre Board Is the Best Example of Good Packaging – Lowest Carbon Footprint • Virgin fibre based lightweight cartonboards the most Cartonboard has the lowest carbon footprint environmentally sound packaging material 14000 12000 10000 • Wood fibre based products kg/tonne 8000 replace non-renewable materials 6000 like plastic and aluminium 4000 2000 • Virgin fibre board replaces also 0 M-real's Carta HDPE PET PLA (Biobased Aluminium recycled fibre based packaging Solida polymer) materials Source: M-real and Sustainable Packaging Coalition - SPC 8 2.3.2011 Investor presentation 1Q 2011
Watch Your Weight! For an order of 50.000 sheets (520 x 720 mm) you will need 18.720 m 2 of board: ~13 mNm CD stiffness, ~500 µm thickness M-real lightweight paperboard Average FBB SBB (folding boxboard) (solid bleached board) WLC (white lined chipboard) 9 2.3.2011 Investor presentation 1Q 2011
M-real Targets Growth in Its Core Business Packaging • Huge growth potential in wood fibre based packaging applications when replacing non-sustainable packaging materials • M-real a strong producer of virgin fibre based cartonboard and white top linerboard as well as packaging related speciality papers • Access to wood raw material, superior fibre knowhow and pulp self-sufficiency M-real’s important competitive advantages 10 2.3.2011 Investor presentation 1Q 2011
M-real is Investing in Its Cartonboard Business • 26 m€ investment in 80 kton/a capacity expansion at Simpele • 16 m€ investment in Kemiart Liners to increase the share of coated products • M-real invests 30 m€ to expand capacity annually by approximately 70.000 tonnes at Äänekoski and Kyröskoski – Potential to further increase capacity of existing mills by some 70.000 t/a • Evaluations regarding further development steps in cartonboard business continue 11 2.3.2011 Investor presentation 1Q 2011
M-real Strategic Review - M-real’s Response to the Changes in Business Environment • In March 2006, M-real's Board of Directors initiated a strategic review • M-real was the first major paper company to emphasize the need for industry consolidation and extensive restructuring • M-real took the leading role in European paper merchanting restructuring in 2007 • M-real also took the leading role in European coated paper industry restructuring in 2008 • Extensive internal profit improvement programmes 12 2.3.2011 Investor presentation 1Q 2011
Strategic Review of the Paper Business Proceeds • M-real in strong position in participating restructuring of the European uncoated fine paper business • M-real Zanders is a leading European speciality paper producer • Potentially, also separate divestments of the non-profitable units 13 2.3.2011 Investor presentation 1Q 2011
M-real Is a Responsible Company Completed closures in 2007 – Sittingbourne: coated fine paper 210 ktons/a – Gohrsmühle PM6 and PM7: coated fine paper 100 ktons/a – Wifsta: uncoated fine paper 175 ktons/a – Tako BM2: folding boxboard 70 ktons/a Closures in 2008 – Kangas PM2: coated magazine paper 100 ktons/a – Lielahti: BCTMP 105 ktons/a – New Thames: uncoated fine paper (divestment, grade conversion) 230 ktons/a Closures in 2009 – Hallein paper mill: coated fine paper 310 ktons/a – Gohrsmühle: standard coated fine paper * 250 ktons/a Closures in 2010 – Two machines in Reflex: Speciality paper 80 ktons/a – Alizay pulp mill: Chemical pulp 310 ktons/a – Simpele paper mill: Speciality paper 50 ktons/a Total paper capacity 1 515 ktons/a Total board capacity 70 ktons/a Total pulp (incl. BCTMP) capacity 415 ktons/a 14 *In Gohrsmühle the speciality paper and uncoated fine paper reel and folio sheet production expanded after the 2.3.2011 discontinuation of the standard coated fine paper production. Investor presentation 1Q 2011
Financial Targets
Financial Targets • ROCE target set at a minimum of 10% on average over the business cycle • Net gearing not to exceed 100% Minimum ROCE 10%* Maximum net gearing 100% 13,5% 184% 10,2% 7,8% 7,6% 7,6% 145% 137% Minimum target of 10% 6,2% 126% 119% 2,8% 2,1% 99%90%84%83% 82%95% 1,6% 0,9% 0,5% 78% 83% -0,5% Maximum level of 100% -5,6% 99 00 01 02 03 04 05 06 07 08 09 10 1Q 99 00 01 02 03 04 05 06 07 08 09 10 1Q 11 11 * Excluding non-recurring items 16 2.3.2011 Investor presentation 1Q 2011
1Q 2011 results and Outlook
Key Events in 1Q 2011 • Profitability improved from previous quarter • Consumer Packaging ’s result improved to EBIT 17 % of sales • Impact of accelerated cost inflation bigger than earlier expected in 1Q • Decisions to increase Äänekoski and Kyröskoski folding boxboard capacity in total by 70 000 tonnes per annum • New 70 m€ internal profit improvement programme was launched • Price increases announced in linerboard, uncoated fine and speciality papers • New plans to eliminate losses of paper business announced in May 18 18
Key Figures – Quarterly Sales Operating result excl. non-rec. items m€ m€ 75 1000 50 750 54 25 43 43 39 37 7 0 -22 500 I II III IV I II III IV I 685 -25 676 662 665 623 618 606 602 585 -65 -70 -50 250 -75 I II III IV I II III IV I m€ Result before taxes excl. non-rec. items 50 25 28 33 24 20 15 0 -15 -25 -62 -83 -70 -50 -75 2009 2010 2011 -100 I II III IV I II III IV I 19
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