m-real today and...• market capitalization of approximately eur 1.4 billion abn amro 25.11. 2005...

M-real TodayHannu Anttila

President & CEO

ABN Amro 25.11.2005

General

Overview• M-real is a leading producer and

supplier of paper and paperboard in Europe

• Focus on selected high growth products where customers appreciate service, quality and innovation

• Headquartered in Espoo, Finland, with a presence in over 70 countries and approximately 15,500 employees

• For the financial year 2004, M-real generated EUR 5.5 billion in turnover

• Market capitalization of approximately EUR 1.4 billion

ABN Amro 25.11. 2005

Focus on Core Businesses

ABN Amro 25.11. 2005

57 % 17 %

26 %

17 %

32 %

12 %9 %

12 %

6 %9 % 3 %

1995 Sales€2.3 billion

8 Businesses

PaperboardCorrugatedboard

MerchantingSawn GoodsTissue

Chemicals

2004 Sales€5.5 billion

3 Businesses

PaperPulp

M-real is Well Positioned• Focused producer with leading European market positions*

• #2 in Folding Boxboard, Coated Fine Paper and Uncoated Fine Paper• #4 in Coated Magazine Paper and #4 in Paper Merchanting

• Competitive production facilities strategically located in Europe’s main markets• Successful execution of capitalisation plan through

• Rights offering and Refinancing of bank facility• Divestments

• Action plan to improve operating performance• Organisational structure with clear profit responsibilities- up and running• Focus on profitability and efficiency improvement

• Self-sufficient in pulp, new BCTMP capacity and Uruguay improving competitiveness • Significant operating leverage to cyclical recovery

*Based on Jaakko Pöyry Consulting

ABN Amro 25.11. 2005

StrategicAction Plan

2004 ->

M-real’s Action Plan

ABN Amro 25.11. 2005

M-real as of 2005

Core business strategy clearly definedFocus on earnings improvement and financial returns

Strict investment criteriaBuild on leading market positions Operational leverage to recovery

Refined Strategic Focus

Roadmap for core businesses and non-core holdings

New management and organizational structure

Financial Strategy to Increase Flexibility

Financial targets and dividend policyCapital increase

Bank facility refinancingExtend debt maturity through DCM

Divestments

Cost & Efficiency Improvements

2001-2003 program completed2004 program to be completed

by 2007 - €230mNew savings potential to be identified

Core Portfolio Review• Core businesses are Consumer Packaging, Publishing, Commercial

Printing and Office Papers• Focus for strategic growth on segments where M-real’s competitive

advantage is strongest and financial returns are most attractive –Consumer Packaging, Publishing and Commercial Printing

Office Papers

Consumer Packaging

Publishing Commercial Printing

ABN Amro 25.11. 2005

Consumer Packaging • Fibre-based high value-added packaging solutions for global brand owners

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

Company Share (%)

7 %

9 %

9 %

30 %

32 %

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

Mayr-Melnhof

Cascades

Holmen

M-real

Stora Enso

No. 2 Folding Boxboard Capacity in Europe

ABN Amro 25.11. 2005

Publishing • Innovative magazine papers for general interest and special magazines,

supplements, directories and direct mail• High growth segments (e.g. special interest magazines - computers, lifestyle

etc.)• Many successful product innovations based on close cooperation with

publishers and an in-depth understanding of their business• Sales mainly directly to publishers and printers

Company Share (%)

10 %

12 %

12 %

17 %

27 %

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

Myllykoski

M-real

Burgo-Marchi

Stora Enso

UPM

No. 4 Coated Magazine Paper Capacity in Europe

ABN Amro 25.11. 2005

Commercial Printing• High quality fine papers for sales promotion, corporate communication,

annual reports, art books, brochures and other demanding customer applications

• Highly geared to European economic recovery• Well established product brands like EuroArt and Galerie Art• Sales mainly through merchant partners and to printers

Company Share (%)

13 %

14 %

14 %

15 %

18 %

0 % 5 % 10 % 15 % 20 %

UPM

Lecta

Stora Enso

M-real

Sappi Europe

No. 2 Coated Fine Paper Capacity in Europe

ABN Amro 25.11. 2005

Office Papers

Company Share (%)

11 %

11 %

12 %

15 %

16 %

0 % 5 % 10 % 15 % 20 %

Portucel

Mondi

IP

M-real

Stora Enso

No. 2 Uncoated Fine Paper Capacity in Europe

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

• Diversified customer base, e.g. merchants, retail chains, office equipment manufacturers and corporations

• Leading European office paper brands like DataCopy

ABN Amro 25.11. 2005

Map Merchant Group• Fine and magazine paper and paperboard merchanting for typical end-uses of M-real

products

• Provides close relationships with key customers

• Active in 22 European countries. Operation following arms length -principle

• M-real’s goal is to retain a strategic interest in European paper merchanting and to improve the profitability of the business. Map’s development will be continued as a part of M-real

Company Share (%)

11 %

11 %

16 %

17 %

20 %

0 % 5 % 10 % 15 % 20 % 25 %

Igepa

Map

Antalis

SE/Papyrus

Paperlinx

No. 4 Paper Merchant in Europe

ABN Amro 25.11. 2005

Increased Financial Flexibility• Rights offering 450 m€• Limiting investments according to cash flow (n. 50 % of depr.)• Divestment

• 8% shareholding of Metsä-Botniasta ~164 m€ (March 2005)• Savon Sellu ~20 m€ (January 2005)• Forestia ~163 m€ (January 2005)• Metsä Tissue ~570 m€ (January 2004)

• Acquisition of Kemiart Liners 53 % shareholding ~35 m€ (August 2004) • Renewal of syndicate loand (700 m€-> 500m€)

ABN Amro 25.11. 2005

M-realEquity Ratio Gearing

31.437.5

31.531.4

27.8

38.6 38.4 37.4

0

5

10

15

20

25

30

35

40

45

1.1.2004 I II III IV I II III

159

127 129

89

112

878581

0

20

40

60

80

100

120

140

160

180

1.1.2004 I II III IV I II III

%%

2004 2005

ABN Amro 25.11. 2005

Quarterly Gearing ratio-%

-50 %

0 %

50 %

100 %

150 %

200 %

Q1-00

Q2-00

Q3-00

Q4-00

Q1-01

Q2-01

Q3-01

Q4-01

Q1-02

Q2-02

Q3-02

Q4-02

Q1-03

Q2-03

Q3-03

Q4-03

Q1-04

Q2-04

Q3-04

Q4-04

Q1-05

Q2-05

Q3-05

M-real

UPM-Kymmene

StoraEnso

NorskeSkog

Holmen

Sappi

Portucel

ABN Amro 25.11. 2005

Source: Company reports

Liquidity Liquid funds

EUR, millionCommitted long term credit facilities

0

500

1000

1500

2000

2500

I/04 II/04 III/04 IV/04 I/05 II/05 III/05

ABN Amro 25.11. 2005

Capital Investments

440 500 500

-327

-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

Mill

ion

€

Disposals

Acquisitions

Capitalexpenditure onfixed assets

1996- 2004 total:3 053 MEUR

1996-2004 total:2 959 MEUR

1996-2004 total:-1 527 MEUR

Capital Investments, Indicative max. levels for 2006-2007

ABN Amro 25.11. 2005

Financial Targets• ROCE target set at a minimum of 10% on average over the business cycle• Gearing ratio not to exceed 100%

Minimum ROCE 10% Maximum Gearing 100%

ABN Amro 25.11. 2005

13.5%

5.8%

1.6%

-1.0%

0.2%

10.5%

6.9%

99 00 01 02 03 04 1-92005

Minimum target of 10% 184%

119%137%

87%82%83%

145%

99 00 01 02 03 04 1-92005

Maximum level of 100%

Make Real Profit Program 2004-2006Targets• Cost savings and efficiency improvements of 230 m€ by the end of 2006 vs.end

of 2003 • Further profitability improvement through business development projects to reach

peer group’s average level by 1Q 2007Follow-up• Detailed targets and project plans• Internal ”Project Office” to manage follow-upIncentives• Profitability focused target setting for all salaried employees: Group or Business

Area profits will decide 60 % of bonus• TIP for senior management with focus on reaching average profitability of peer

group’s average profitability• Share-based program for executive management based on EBIT and ROCE

ABN Amro 25.11. 2005

2004-2006 Savings Program

ACHIEVED TARGETS REMAININGEUR, million Q104-Q305 2004-2006

Consumer Packaging 20 30 10Publishing 20 30 10Commercial Printing 35 60 25Office Papers 15 30 15Map 3 10 7Corporate functions 7 40 33TOTAL 100 200 100

In addition, efficiency improvements will give savings of 30 m€ when operating rates >90%

Achieved cost savings are value of completed savings measures, not yet full cash flow impact

Achieved and targeted cost savings gross without deduction of one time costs

30 %

20 %

50 %

Savings Targets

Otherfixedcosts

Variablecosts

Personnelcosts

Savings program is being further expanded and specified

ABN Amro 25.11. 2005

Quarterly EBIT-%

-10 %

-5 %

0 %

5 %

10 %

15 %

20 %

25 %

30 %

Q1-00

Q2-00

Q3-00

Q4-00

Q1-01

Q2-01

Q3-01

Q4-01

Q1-02

Q2-02

Q3-02

Q4-02

Q1-03

Q2-03

Q3-03

Q4-03

Q1-04

Q2-04

Q3-04

Q4-04

Q1-05

Q2-05

Q3-05

M-real

UPM-Kymmene

Stora Enso

Sappi

NorskeSkog

Holmen

Portucel

ABN Amro 25.11. 2005

Source: Company reports

Significant Leverage Towards Cyclical Recovery• Earnings are highly geared towards changes in paper and paperboard

prices, volumes and exchange rates

Sensitivity of One Percent Change in:

Estimated Annual Effect on Profit Before Taxes (€m)

Paper pricesPaperboard prices

329

*Operating ratesDeliveries

1513

EUR/USD 5* One percentage point change in operating rates

ABN Amro 25.11. 2005 17

3Q 2005

3Q 2005 in ReviewPositive third quarter pre tax resultProfitability improved from the previous quarter mainly due to higher coated magazine paper price, increased coated fine paper deliveries and the end of the labour dispute in Finland Labour dispute in the Finnish mills affected negatively also the third quarter results. Revival in board deliveries has been slower than expectedOperating results of Consumer Packaging, Publishing and Commercial Printing improved from the previous quarterPaper and board demand was on a good levelPrices of coated magazine paper and lower grades of uncoated fine paper (cutsize) increased, coated fine paper and board prices were stable.EUR 230 million cost savings and efficiency improvement program announced in early 2004 proceeded as planned

ABN Amro 25.11. 2005

3Q / 2005 in short3Q 2005 2Q 2005

Sales, M€ 1 269 1 259 Operating result, M€ 20 -72 Non-recurring items -15Operating result, excl. non-recurring items, M€ 20 -57

Profit before taxes, M€ 1 -143Profit before taxes, excl. non-recurring items, M€ 1 -124

Earnings per share, € 0.01 -0.37 Earnings per share, excl. non-recurring items, € 0.01 -0.32

ABN Amro 25.11. 2005

3Q / 2005 in short (cont.)3Q 2005 2Q 2005

Roce, % 2.3 -5.7Roce, excl. non-recurring items, % 2.3 -0.3

Equity ratio at the end of the period, % 37.4 38.4Gearing at the end of the period, % 87 85

Deliveries, ktonsPaper 991 999Paperboard 226 231

ABN Amro 25.11. 2005

Folding Boxboard Market Price in Europe2000 – October 2005

400

600

800

1000

1200

2000 2001 2002 2003 2004 2005

EUR / tn Three month moving average

Source: M-real

ABN Amro 25.11. 2005

PaperEUR / tn,

Pulp USD/ tn

Paper and Pulp Market Price in Europe1998 – October 2005

400

500

600

700

800

900

1000

1998 1999 2000 2001 2002 2003 2004 20050.8

0.9

1

1.1

1.2

1.3

1.4

Coated fine paper

Uncoated fine paper

NBSK

LWCSource: M-real, Foex, ReutersEUR/USD

EUR/USD

ABN Amro 25.11. 2005

Near-Term outlookEconomic growth in Western Europe to continue slow, printed advertising expenditure growing at same pace as the economy Demand for M-real’s main products expected to continue good in the fourth quarterAverage prices of uncoated fine paper and coated magazine paper expected to increase somewhat in the fourth quarter. Coated fine paper and folding boxboard prices stable EUR 230 million cost savings and efficiency improvement program proceeds as plannedEnergy prices rising, oil based raw material as well as transportation costs remain high M-real’s fourth quarter pre tax result, excl. non-recurring items estimated not to differ significantly from the third quarter. Whole year pre tax result negative

ABN Amro 25.11. 2005

Thank you

ABN Amro 25.11. 2005

m-real today and...• market capitalization of approximately eur 1.4 billion abn amro 25.11. 2005...

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