investor presentation 3q 2010 - m real

8/3/2019 Investor Presentation 3Q 2010 - M Real

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Investor presentation 3Q 2010

1

ContentsInvestment highlights and update2 Investment Highlights

3 Strategy17 Financial Targets19 3Q 2010 Results & Outlook33 Price Development

35 Dividend38 InvestmentsFunding and debt information41 Divestments

42 Funding and Debt48 Credit Facilities49 Rating History

General presentation50 General Info

57 Business Portfolio66 Operations72 Deliveries74 Sourcing

82 Owners85 Market Position


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2

Investment Highlights Strong core in high-quality cartonboards

M-real the European market leader in folding boxboard Good growth potential

Turn-around in profitability

Significant net debt reduction in recent years

Strategic review ongoing

M-real the forerunner in paper merchanting and coated papers industryrestructuring in Europe

Asset divestments Extensive cost savings and cash flow improvement programmes


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Strategy


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Consistent Strategic Direction Since 2006

Cartonboards for consumer packaging

the strategic core business

Divestment of underperforming paper

businesses

Major cost savings through complexity

reduction

Responsible and proactive approach to

increase prices


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5

Packaging Is One of the Biggest and Fastest

Growing Businesses in the World

One of the most important well-beingdrivers in the world

Product safety issues are crucial

Branding and information sharingincreasingly important

Criticism against bad packagingincreasing

Flexibleplastics

20 %

Metal

15 %

Glass7 % Others

6 %

Board

31 %

Rigid

plastics

21 %

Sources: Pira & M-real

Global Packaging Market ($634 Billion)

Virgin fibre

cartonboard ~7% oftotal


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Several Megatrends Supporting GoodPackaging

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


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Virgin Fibre Board Is the Best Example of GoodPackaging Lowest Carbon Footprint

Virgin fibre based lightweight

cartonboards the mostenvironmentally sound packagingmaterial

Wood fibre based productsreplace non-renewable materialslike plastic and aluminium

Virgin fibre board replaces alsorecycled fibre based packagingmaterials

0

2000

4000

6000

8000

10000

12000

14000

M-real's Carta

Solida

HDPE PET PLA (Biobased

polymer)

Aluminium

kg/tonne

Source: M-real and Sustainable Packaging Coalition - SPC

Cartonboard has the lowest carbon footprint


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Watch Your Weight!

For an order of 50.000 sheets (520 x 720 mm)

you will need 18.720 m2

of board:~13 mNm CD stiffness, ~500 m thickness

M-reallightweightpaperboardAverage

FBB(folding boxboard)SBB

(solid bleached board)WLC(white lined chipboard)


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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 toplinerboard as well as packaging related speciality papers

Access to wood raw material, superior fibre knowhow and pulp self-sufficiencyM-reals important competitive advantages


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M-real Well Equipped for Expansion of

Cartonboard Business

Excellent potential to increase the output of current

machines with modest investments Significant amount of excess pulp currently

New investments were announced by M-real in 3Q2010

Investigations ongoing to benefit growth potentialin Russia, Eastern Europe or Asia

Alone and together with the best selected local partners


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M-real is Investing in Its Cartonboard Business

26 M investment in 80 kton/a capacity expansion at Simpele

Simpeles cartonboard machine the most efficient in Europe

Simpele mills sheeting capacity will be expanded

To be completed in summer 2011

16 M investment in Kemiart Liners to modernize the coating

section

Increased share of high value added coated products

To be completed in autumn 2011

Evaluations regarding further development steps in

cartonboard business continue


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M-real Strategic Review- M-reals 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 forindustry consolidation and extensive restructuring

M-real took the leading role in European paper merchantingrestructuring in 2007

M-real also took the leading role in European coated paper industry

restructuring in 2008

Extensive internal profit improvement programmes


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Strategic Review of the Paper BusinessProceeds

M-real in strong position in participating

restructuring of the European uncoatedfine paper business

M-real Zanders is a leading Europeanspeciality paper producer

Potentially, also separate divestments ofthe non-profitable units


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M-real the Forerunner in Re-Engineering ofEuropean Paper and Board Industry

Most extensive efficiency improvementsin European paper and board industry

2006-2010

Divestment of Map Merchant Group2007

Divestment of Graphic Papers,

2008

New Mets-Botnia ownership structure anddivestment Uruguay pulp mill

2009

Need of structural changeAnd new strategic direction

2005

Pulp self-sufficiency2008


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2011 Result Expected to Be Boosted by 60 M vs.2010 Due to Own Already Implemented Measures

Cumulative

Profit impact vs. 2009, mtotaltarget 2010 2011

1 Profit improvement programme 2010 80 40 80

2 Rollover impact of 2009 programme 60 50 60

3 Rollover impact of 2008 programme 20 10 20Total 160 100 160


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M-real Is a Responsible CompanyCompleted closures in 2007

Sittingbourne: coated fine paper 210 ktons/a

Gohrsmhle 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

Gohrsmhle: 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

Total paper capacity 1 465 ktons/a

Total board capacity 70 ktons/a

Total pulp (incl. BCTMP) capacity 415 ktons/a

*In Gohrsmhle the speciality paper and uncoated fine paper reel and folio sheet production expanded after thediscontinuation of the standard coated fine paper production.


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Financial Targets


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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%

6,2%

2,1%1,6%0,5%0,9%

2,8%

-0,5%

-5,6%

8,0%10,2%

7,6%

99 00 01 02 03 04 05 06 07 08 09 1-3Q

10

Minimum target of 10%

184%

119%137%

82%95%

126%

99%90%84%81%83%

145%

99 00 01 02 03 04 05 06 07 08 09

3Q10

Maximum level of 100%

* Excluding non-recurring items


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3Q 2010 results and Outlook


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Key Events in 3Q 2010

Good profitability trend continued

Strong demand in all main grades

M-real continued to implement price increases

Investments in Simpele and Kemi were announced

Operative performance of Alizay paper mill improved

Partial divestment of Reflex mill

Credit rating upgrades by both Moodys and S&P

20


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Key Figures Quarterly

Sales Operating result excl. non-rec. items

623 585 618 606

859 829 826722

602676 662

250

500

750

1000

I II III IV I II III IV I II III

M M

-65

7-22

-70

143

-1

-51

39 4354

-75

-50

-25

0

25

50

75


M

Result before taxes excl. non-rec. items

20092008

-21-36 -34

-87

15

-62-83

-70

-1524

33

-100

-75

-50

-25

0

25

50


2010


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22

Operating Cash Flow Turned Positive in 3Q

M 3Q 2010 1-3Q 2010

EBITDA, excluding non-recurring items +85 +234

Change in ONWC -24 -132

Net investments +10 +7

Net financial costs -20 -59

Operating cash flow +51 +50


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Good Progress in Price Increases in ConsumerPackaging

310 305

0

100

200

300

400

2Q 2010 3Q 2010

SalesM

In comparison to 2Q 2010 profitability was negativelyimpacted by scheduled maintenance shut downs at all

board mills resulting in lower deliveries

Profitability improved due to implemented price increases

Demand continues strong. 4Q deliveries negativelyimpacted by seasonality

Price increases implemented to annual contracts asplanned, result impact mainly from 1Q 2011 onwards

Long delivery times and fully booked capacity in FBB still achallenge for daily business

New capacity increases announced

EBIT, excl non-recurring items

38 34

0

10

20

30

40

50

M

2Q 2010 3Q 2010

23


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Office Papers Result Improved Clearly

-4

9

-10

0

10

20

30

EBIT, excl non-recurring itemsM

153

164

0

50

100

150

200SalesM

2Q 2010 3Q 2010

2Q 2010 3Q 2010

Profitability improved due to implemented price increasesand better operating rates

Result was weakened by higher fibre price

Demand expected to continue strong, 4Q deliveries

negatively impacted by seasonality

Alizays operative performance improved by the permanentclosure of the pulp mill

Husums energy efficiency investments proceeding asplanned

New turbine in place in 1Q 2011, additional annual savings ofabout 12 m

24

E t i P fit I t A ti C ti d i


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Extensive Profit Improvement Actions Continued inSpeciality Papers

Result was weakened by lower operating rates anddecreased delivery volumes. Continued high pulp pricemaintains profitability challenges

Result was improved by price increases and implementedcost savings

Demand expected to remain stable

Positive price development continued in speciality grades

Full result impact of agreed productivity improvements from

1Q 2011 onwards. New measures are in the pipeline

Share of coated speciality grades still too low in Gohrsmhle Simpele speciality grades planned to be moved to Gohrsmhle Intensive actions to find new volumes continue

-5-7

-20

-10

0

10

20


8075

0

25

50

75

100SalesM

2Q 2010 3Q 2010

2Q 2010 3Q 2010

25


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Market Pulp and Energys Profitability Stable

16 16

0

5

10

15

20

25


126

93

0

50

100

150

200

SalesM

2Q 2010 3Q 2010

2Q 2010 3Q 2010

Profitability improved by increased pulp price

Profitability was negatively impacted by lower operatingrates due to maintenance shutdowns, lower deliveryvolumes and higher wood costs

Demand expected to continue strong, 4Q deliveriesnegatively impacted by seasonality

Good progress in technical sales actions to allocate moreKaskinen BCTMP volumes to Europe

Pulp price is expected to be slightly lower in 4Q than in 3Q

No radical decreases in sight

26


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M-real Is Showing Market Leadership

Board price increased slightly in 3Q and annual contract negotiations are proceeding well After agreed increases FBB and liner prices in excess of 10% higher than in the beginning of 2010

Result impact of new annual FBB contracts mainly from 1Q 2011

WFU prices were again increased in 3Q This year prices have increased in excess of 15 % in total

Further price increases are necessary to maintain profitability, however, possibilities seem limited

Carbonless and one-side coated speciality paper prices increased in 3Q Some potential for further increases exist, but no material changes in price levels are expected

Pulp price is somewhat lower in 4Q vs. 3Q, no material further decreases in sight

Estimates are based on current sales mix and currency rates


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M-real is Growing Its Cartonboard Business

26 M investment in 80 kton/a capacity expansion at Simpele

Simpeles cartonboard machine the most efficient in Europe

Simpele mills sheeting capacity will be expanded To be completed in summer 2011

16 M investment in Kemiart Liners to modernize the coating

section Increased share of high value added coated products

To be completed in autumn 2011

Evaluations regarding further development steps incartonboard business continue


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Recent Improvement Measures in Office Papers

Major complexity reduction in recent years including closures and divestments ofuncompetitive capacity

Actions implemented in 2010 improve results by over 30 M, fully from 2011 Energy efficiency investment worth 22 M under implementation in Husum

Personnel reduction of 200 in Husum

Closure of Alizay pulp mill

Streamlining of product portfolio Focus on high value added products

First deliveries of the new product SAVE! in September

Price increases

R t I t M i S i lit


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Recent Improvement Measures in SpecialityPapers

In recent years significant efficiency improvements and closures of uncompetitivecapacity

Discontinuation of Gohrsmhles former main business, standard WFC, in 2009

Intensive development of new speciality products to Gohrsmhle

Actions implemented in 2010 improve results by about 18 M, fully from 2011 Closure of two speciality paper machines at Reflex, product offering and business volumeunchanged

Personnel reduction of 220 in M-real Zanders

Planned continuation of Simpele speciality paper

production in Gohrsmhle

Partial divestment of the Reflex mill as part of thePaper Park concept


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Promising Further Profit Improvement Potential

All opportunities for new price increases will be utilised

Continue profitable growth in cartonboard business

New extensive profit improvement programme MRP11 focusing on paper units under

construction

Potential divestments of non-profitable assets

Next steps in implementation of Reflex Paper Park

Paper business strategic review continues


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Profitability Outlook

M-reals fourth quarter 2010 operating result,

excluding non-recurring items, is expected to

be temporarily weaker than in the third

quarter due to unfavourable exchange rate

development as well as seasonality


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Folding Boxboard Market Price in Europe

2000 9/2010EUR / tn Three month moving average

400

600

800

1000

1200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: M-real


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Paper and Pulp Market Price in Europe

1998 9/2010EUR / tn

Coated fine paper (100 g)

Uncoated fine paper (B-copy, 80 g)

Softwood pulp NBSK

Coated magazine paper LWC (60g)

Source: Foex, ReutersEUR/USD

EUR/USD

400

500

600

700

800

900

1000

1100

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0,8

0,9

1

1,1

1,2

1,3

1,4

1,5

1,6

1,7


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Dividend


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Dividend Policy Future dividends will take into account the need to achieve and

maintain sufficient financial flexibility

The Company remains committed to an attractive andcompetitive dividend

M-real's dividend policy is stable and rewarding toshareholders, and aims at paying a dividend of at least 1/3 ofthe Company's EPS on average over the business cycle,

nonetheless taking into account the Company's gearing target


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Dividend Yield

0,50

1,09 1,13

1,85

0,460,30

-0,79

-1,58

-1,09

0,26 0,37 0,380,51 0,51 0,51

0,25 0,00 0,00

-0,59

-1,21

-0,25-0,43

0,23 0,060,060,14 0,12 0,120,0%

4,3%

0,0%1,3%

1,4%

2,1%2,8%3,3%

4,1%

5,6% 5,5%

6,9%

8,6%

7,2%

-2

-1,5

-1

-0,5

0

0,5

1

1,5

2

2,5

3

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

pershare

-8 %

-6 %

-4 %

-2 %

0 %

2 %

4 %

6 %

8 %

10 %

12 %

Dividen

dyield,

%

Earnings per share Dividend per share Dividend yield

Dividend yield calculated from annual average B-share volume weighted price


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Investments


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Capital InvestmentsCapital Investments about 70 m in 2010

-1 500

-1 000

-500

0

500

1 000

1 500

2 000

2 500

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E

Million

Disposals

Acquisitions

Capitalexpenditure onfixed assets

*Indicative level for 2010


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Funding and debt information

Significant Divestments


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Significant Divestments

- EUR 3.4 billion in assets divested since 2001Year Divestiture Enterprise Value

300*2009 Mets-Botnias Uruguayn operations7502008 Graphic Papers

802008 100 000 B2 shares in PVO82**2008 New Thames mill

3822007 Map Merchant Group602007 Folding carton plants

EUR millions

2402007 Botnia (9%)1642005 Botnia (8%)

1632005 Forestia (95%)

202005 Savon Sellu

5702004 Mets Tissue

2352002 Papierfabrik Albbruck

3002001 MD Papier

Noviant (19%)2001 41

3,387

* Cash portion

**Incl. pension liabilities


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Loans and Interest Rate

At the end of 3Q 2010

Average maturity of long term loans 2,8 years

Average interest rate of loans (including derivatives) 5,0 %

Interest rate maturity of loans (including derivatives) 7,9 months

Of the loans about 83 per cent was subject to variable interestrates and 17 per cent to fixed interest rates


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Long-term Interest Bearing Liabilities5 %5 %3 %

7 %

20 %

60 %

MTN Programme

Bonds

Pension premium loansLoans from financial institutions

Finance leases

Other interest bearing liabilities

Total 1 123 m 30.9.2010


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Short term interest bearing liabilities

Short-term Interest Bearing Liabilities

Total 237 m 30.9.2010

2 %

98 %

Metsliitto Group

Short-term bank loans and other


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Interest bearing net liabilities 31.12.2003Interest Bearing Net Liabilities 30.9.2010

Long-term 1 123

Short-term 237Total interest bearing liabilities 1 360

Liquidity and other interest bearing receivables 539

Interest bearing net liabilities 821


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Long-term Interest Bearing Liabilities 30.9.2010

33

98

158

600

117

18 18

81

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 2015 2016 >2 016

EUR, million

Li idi


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Liquidity

Committed credit facilities

Liquid fundsM

0

200

400

600

800

1000

1200

1400

I/09 II/09 III/09 IV/09 I/10 II/10 III/10

Debt Programs


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Debt Programs

The following table sets forth the significant debt securities issued and outstanding of M-real as at Sept. 30, 2010:

Average

Long-te rm borrow ings Total am ount Outstanding Interest Ra te Maturity

USD 350 million Private Note Issue USD 350 USD 224 5.7% (1) 20122014

EUR 500 mil lion Bond Issue EUR 500 EUR 500 7.0% (1) 2013

EUR 400 mil lion Bond Issue EUR 400 EUR 0 2010

Global Medium-Term Note Program EUR 1 500

EUR 52 million private placements EUR 52 3,3 % 2011

EUR 131 mil lion bilateral loans EUR 131 EUR 131 1,5 % 20102013EUR 29 mil lion finance leases EUR 29 EUR 29 5,0 % 20102014

EUR 245 mil lion pension loans EUR 245 EUR 226 5.4% (1) 20102020

Sho rt-term funding pro gra mmes

EUR 350 mil lion domestic CP-program EUR 350 EUR 0

EUR 150 mil j. Belgian CP-program EUR 150 EUR 0

Average interest rate of all M-real Group interest bearing liabilities inc luding interest rate derivatives per 30.9.2010 is 5,0 %.

(1) The average interest rates take into account outstanding interest rate swaps and amortised arrangement fees.

(currency in million s)


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Ratings History2000

S&P: Short term ratings lowered to A3,Long term ratings placed to credit watchnegative

Moodys: Long and short term ratingsoutlook changed from stable to negative2001

S&P: Long term ratings lowered to BBB-,stable outlookMoodys: Long and short term ratingslowered to Baa3/P3, negative outlook

2003S&P: Downgrade to BB+, stable outlookMoodys: Downgrade to Ba1, negativeoutlook

2004S&P: Outlook changed from stable tonegative, ratings affirmedMoodys: Downgrade to Ba2, stable outlook

2005S&P: Downgrade to BB, stable outlookMoodys: Outlook changed from stable to negative,

ratings affirmed2006

S&P: Downgrade to BB-, negative outlookMoodys: Downgrade to Ba3, negative outlookMoodys: Downgrade to B2, negative outlookS&P: Downgrade to B+, negative outlook

2007Moodys: Downgrade to B3, negative outlook

S&P: Downgrade to B, negative outlookS&P: Downgrade to B-, stable outlook2008

S&P: Outlook to negative2009

S&P: Downgrade to CCC+, negative outlookMoodys: Downgrade to Caa1, outlook negative

2010S&P: Outlook to stableMoodys: Outlook to stableS&P: Upgrade to B-, stable outlookMoodys: Upgrade to B3, outlook to positive


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General presentation


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M-real in Brief Annual sales about EUR 2.5 billion.

Approximately 4,900 employees.

Present in over 70 countries.

13 production units in 5 Europeancountries.

Part of Metsliitto Group and listed onthe NASDAQ OMX Helsinki Ltd.

Metsliitto Group is one of the largestforest industry groups in the world,owned by a cooperative of 130.000private Finnish forest owners.

Consumer Packaging 40%Paper 40%

Market pulp and energy 20%

Sales breakdown 2009

Offering for Consumer Packaging,


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Communications and Advertising

Cartonboards and white-top kraftliners for packagingbeautycare, healthcare, cigarettes, food, consumer durables

etc. Graphic boards e.g. for book covers, postcards, greeting

cards, CD or DVD covers

Office papers from high-volume copying and printing to high-quality color presentations

Speciality papers for advertising and corporate materials,

flexible packaging, creative designs, labeling, self-adhesivelaminates and for wallcovering industry


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M-reals Customers

Publishers

Office productresellers

Brand owners

Printers andconverters

Paper merchants

Office paper users Advertising anddesign agencies


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Focus on Core Businesses

17 %

32 %

12 %

9 %

12 %

6 %

9 % 3 %

Paper Pulp

Paperboard Packaging

Tissue Mechanical Forest Products

Merchanting Chemicals

40 % 40 %

20 %

1995 Sales2.3 billion

2009 Sales2.4 billion

8 Businesses 3 Businesses


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M-real Restructuring Story

AcquisitionsModo Paper

Biberist Paper Mill

19971996 20001998

SimpeleMill

1995 1999

Divestments

Kyro Board Mill

UK Paper

Zanders

SawnGoods &

BuildingMaterials

ChemicalsBusiness

BotniaWood

CorrugatedPackaging

MD Papier MetsTissue

2001 2002 2003 2004

KemiartLiners (53 %)

Albbruck

2005

SavonSellu

Forestia

8% in

Botnia

2006 2007

PSM

9% inBotnia

Cartonplants

Map

100 000B2 shares

in PVO

20092008

NewThames

MBUruguay

GraphicPapers


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Annual Sales Development

2432

3236

4440

56245241

5460

60446564

6923

5898

33193014

2313

4044

0

1000

2000

3000

4000

5000

6000

7000

8000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EUR, million


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Business Portfolio


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Business PortfolioConsumer Packaging Office Papers Speciality

Papers

Market Pulp

and Energy

Consumer Packaging


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Mainly Folding Boxboard and Linerboard

Fibre-based high value-added packaging solutions for global brandowners in beautycare, healthcare, cigarette, food and consumer

electronics industries as well as for graphical end-uses Relatively high earnings stability

High segment consolidation

Competitive folding boxboard mills with end use specified production

Capacity Share (%)

8 %

9 %

10 %

25 %

32 %

0 % 5 % 10 % 15 % 20 % 25 % 30 % 35 %

IP

Careo

Mayr-Melnhoff

Stora Enso

M-real

No. 1 Folding Boxboard Producer in Europe

Office Papers


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Mainly Uncoated Fine Paper

Capacity Share (%)

9 %

10 %

11 %

14 %

14 %

0 % 5 % 10 % 15 %

M-real

UPM-Kymmene

Mondi

Stora Enso

Portucel

No. 5 Uncoated Fine Paper Producer in Europe

High quality uncoated fine papers for printing and photocopying aswell as for forms, envelopes, manuals and communication purposes

Diversified customer base, e.g. merchants, retail chains, officeequipment manufacturers and corporations

Leading European office paper brands like DataCopy and Evolve

Speciality Papers


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Speciality Papers

Leading European speciality paperproducer with strong focus on

packaging applications

Packaging specialities Flexible packaging Luxury packaging

Labels

Graphical specialities Premium fine papers Carbonless papers

Digital imaging papers

Uncoated fine papersPackaging specialities 50%

Graphical specialities 30%

WFU 20%

Speciality paper sales

Sales by Business Area


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M

80

153

126

310

107

75

164

305

0

50

100

150

200

250

300

350

Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy

2Q 2010 3Q 2010

Operating Result by Business Area*


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p g y

M

* excl. non-recurring items

-5

-4

16

38

16

-7

9

34

-20

-10

0

10

20

30

40

50


3Q 20102Q 2010



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64


M

279

411382

713

328

237

477

872

0

100

200

300

400

500

600

700

800

900

1000


1-3Q 20101-3Q 2009

Operating Result by Business Area*


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65

p g y

M

* excl. non-recurring items

-45-48 -45

35 41

-18

5

111

-60

-40

-20

0

20

40

60

80

100

120


1-3Q 20101-3Q 2009


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Operations

Production Capacity


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p y

1 800

1 200

2 100

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

Paper Board Pulp and BCTMP

1000 tons/a

M-real Production Locations


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Consumer Packaging: Simpele nekoski board and paper Kyro

Tako Kemi Joutseno

Office Papers: Alizay

Husum paper and pulp

Speciality Papers: Gohrsmhle Reflex

Market Pulp and Energy: Kaskinen Hallein

Alizay

Hallein

Husum

Gohrsmhle

and Reflex

nekoskiSimpele

Joutseno

Kemi

TakoKyro

Kaskinen

Paper and Board Capacity by Grade


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Paper and Board Capacity by Grade(1000 t/a)

BOARD M ILLS

Board Mil l Country Machines Fo lding

Box board L iner Total

Tampere Finland 2 205 205

Kyrskoski Finland 1 160 160

nekoski Finland 1 210 210

Simpele Finland 1 220 220

Kemi Finland 1 375 375

Total 6 795 375 1170

PAPER MILLSPaper Mill Country Machines Coated Coated Uncoated

Magazine Fine F ine Specia lty

Paper Pape r Paper Paper Total

nekoski Finland 1 180 180

Simpele Finland 1 55 55

Kyrskoski Finland 1 105 105

Bergisch Gladbach Germany 2 180 80 260

Dren Germany 2 20 20

Husum Sweden 3 275 435 710

Alizay France 1 310 310

Total 11 275 180 925 260 1640

Pulp Capacity


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Pulp Capacity(1000 t/a)

PULP MI LLS

Pulp Mil l Country Chem ical

Pulp BCTMP TotalHusum Sweden 690 690

Hallein Austria 160 160

Joutseno Finland 280 280

Kaskinen Finland 300 300

Total 850 580 1430

BOTNI A *

Mil l Country Chem ica l

Pulp Total

nekoski Finland 500 500

Kemi Finland 590 590

Rauma Finland 630 630Joutseno Finland 650 650

Total 2370 2370

* M-real share is 30% of the capacity

Personnel Development


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Personnel Development

46824903

6546

9508

1412515154

16490

203722107022237

17351

13885

12637

11463

15572

0

5000

10000

15000

20000

25000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 3Q10


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Deliveries

Annual Deliveries*


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Annual Deliveries

Uncoated fine paperCartonboard

32 %

6 %

18 %

44 %

Western- Europe Eastern- Europe Americas Asia & Pacific

8 %

86 %

5 %1 %

* Indicative numbers


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Sourcing

M-real Cost Structure 2009*


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(total annual costs in industrial operations ~ EUR 2 Billion)

Personnel

18 %

Other fixed

13 %

Delivery costs

16 %

Wood

21 %

Chemicals,

pigments and

fillers

15 %

Other

variables

7 %

Energy

10 %

Fixed costs

Variable costs

* Percentage of annual costs in industrial operations

Electricity Sourcing 2009 (total 3 400 GWh)


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y g ( )

Associated

company(PVO)

29 %Outsourced

generation

2 %

Owngeneration

43 %

Purchased

energy

26 %

Fuels Used 2009 (total 19,6 TWh)


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( , )

Wood-

based

60 %

Natural gas

13 %

Coal

9 %

Oil

4 %

Peat

1 %Hydropower

4 %

Nuclear

power9 %

Wood Sourcing by Country


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Wood Sourcing by Country

1 000 m3 2009

Finland 3488

Sweden 2272

Russia 563

France 133

Austria 524Latvia 228

Estonia 204

Lithuania 47

Total 7459

Development of Softwood PulpwoodCost at Mill, Wood for Chemical Pulping


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79

p g

1980 2Q 2010

Source: Pyry

0

10

20

30

40

50

60

1980198119821983198419851986198719881989199019911992199319941995199619971998199920

0020

0120

0220

0320

0420

0520

0620

0720

0820

09

2010

q2

EUR/m3sob, nominal

Finland, south, pine

Sweden, south, pine

Germany, south, pine

Chile, radiata pineUSA South, SYP

Canada East, SPF

Development of Softwood PulpwoodCost at Mill, Wood for Mechanical Pulping


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1980 2Q 2010

Source: Pyry

0

10

20

30

40

50

60

70

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

q2

EUR/m3sob, nominal

Finland, south, spruce

Sweden, south, spruce

Germany, south, spruce

Austria, spruceCanada East, SPF

USA Great Lakes, spruce

Development of Hardwood PulpwoodCost at Mill, Wood for Chemical Pulping


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81

1980 2Q 2010

Source: Pyry

0

10

20

30

40

50

60

1980198119821983198419851986198719881989199019911992199319941995199619971998199920

0020

0120

0220

0320

0420

0520

0620

0720

0820

09

2010

q2

EUR/m3sob, nominal

Finland, south, birchSweden, south, birchPortugal, E. globulus

Brazil, E. grandisSouth Africa, E. grandisUSA South, mixed hw


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Owners

M-real Shareholders 30.9.2010


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Non-Finnish nationals;

18 %

Non-profitmaking

organizations; 3 %

Other companies; 5

%

Metsliitto; 39 %

Households; 24 %

Public communities; 7

%

Financial and

insurance institutions;

4 %

M-real Voting Rights 30.9.2010


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84

Non-Finnish nationals;

6 %

Non-profitmaking

organizations; 4 %

Other companies; 2 %

Metsliitto; 61 %

Households; 12 %

Public communities;

14 %

Financial and

insurance institutions;

2 %


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Market Position

Folding Boxboard Capacities in EuropeBIG-5 = 84% of total


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0 100 200 300 400 500 600 700 800 900

Others

Holmen

IP

Careo

Mayr-Melnhof

Stora Enso

M-real

Source: Pyry Forest Industry Consulting

Capacity: tons/year (million)

32%

25%

10%

9%

8%

8%

8%

Uncoated Fine Paper Capacities in EuropeBIG-5 = 57% of total


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0 500 1000 1500 2000 2500 3000 3500

Others

Sappi

Arctic Paper

International Paper

M-real

UPM

Mondi

Stora Enso

Portucel 14%

14%

11%

10%

8%

8%

3%

3%

28%

Source: Pyry Forest Industry Consulting, M-real

Capacity: tons/year (million)


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Thank youwww.m-real.com

investor presentation 3q 2010 - m real

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