Interim Results

6th August 2008
                                   POWERFLUTE OYJ
                                   INTERIM REPORT
                       for the six months ended 30 June 2008

Powerflute Oyj (the "Company" or “Powerflute”), a manufacturer of premium
quality Nordic semi-chemical fluting for use in the production of high-quality
corrugated board for food and other demanding packaging applications, today
announced results for the six months ended 30 June, 2008. Powerflute is listed
on the AIM market of the London Stock Exchange (Ticker: POWR) and on the First
North list, the alternative market of the OMX Nordic Exchange Stockholm AB
(Ticker POW1V) 

Financial highlights

• Turnover at € 55.6m (2007 - € 55.9m), reflecting improved pricing offset by
lower volumes due to planned annual maintenance shutdown 
• Operating profit increased by 15% to € 4.6m (2007 - € 4.0m) 
• Profit before tax increased by 42% to € 3.5m (2007 - € 2.5m)
• Basic EPS increased by 45% to 2.9 cents per share (2007 - 2.0 cents per share)
• Interim dividend of 1.681 cents per share as previously stated
• Net borrowings reduced to € 24.4m (€ 25.6m at 31 December 2007)

Operating highlights

• First North listing February 2008 - alternative market of the OMX Nordic
Exchange Stockholm 
• New head-box installed during planned annual maintenance shutdown
• Wood supply joint venture established to secure supply and improve
efficiencies 

Powerflute Chairman, Dermot Smurfit commented:

 “We are pleased with our performance in the first half of 2008 given the
challenging economic environment and the difficult conditions within the forest
products and corrugated packaging sectors. During the first half, efficiencies
at the mill improved and the installation of the new head-box, which was a
major capital project for the Company, was successfully completed on time and
within budget.” 

“We expect conditions in the second half to be more difficult due to weaker
demand and increasing wood and energy costs. However, Powerflute is well
positioned for growth in the longer-term due to our strong market position in
an attractive and premium paper grade.” 
 
Contacts
For additional information please contact:

Powerflute OYJ
Dermot Smurfit (Chairman)
Don Coates (Chief Executive Officer)		
c/o Billy Clegg, Financial Dynamics
+44 (0)20 7269 7157

Collins Stewart Europe Ltd:
Nick Ellis		
+44 (0)20 7523 8319

E.Öhman J:or Fondkommission AB:
Ms Arja Väyrynen		
+358 9 8866 6029

Financial Dynamics:
Billy Clegg
Georgina Bonham		
+44 (0)20 7831 3113

K Capital Source
Mark Kenny
Jonathan Neilan		
+353 (1) 631 5500

About Powerflute

Powerflute Oyj  operates a paper mill in Kuopio, Finland where it manufactures
Nordic semi-chemical fluting for use in the production of high-quality
corrugated board for food and other demanding packaging applications.
Powerflute is a public company and its shares are traded on the AIM market of
the London Stock Exchange and on First North, the alternative market of the OMX
Nordic Exchange Stockholm AB. For further information, please visit
www.powerflute.com 

Forward Looking Statements

Some statements in this announcement are forward-looking. They represent
expectations for Powerflute's business, and involve risks and uncertainties.
These forward-looking statements are based on current expectations and
projections about future events. The Company believes that current expectations
and assumptions with respect to these forward-looking statements are
reasonable. However, because they involve known and unknown risks,
uncertainties and other factors, which are in some cases beyond the Company's
control, actual results or performance may differ materially from those
expressed or implied by such forward-looking statements. 


POWERFLUTE OYJ
INTERIM FINANCIAL INFORMATION
for the six months ended 30 June 2008
CHAIRMAN'S STATEMENT

INTRODUCTION

The first half of 2008 has brought challenging trading conditions for all of
those involved in forest products and corrugated packaging. Across the
industry, margins are under pressure due to rising wood costs and increasing
energy prices and the deteriorating economic environment has made it more
challenging to pass cost increases along the supply chain. Against this
background, we are pleased with the underlying performance of the business in
the first half but now expect performance in the second half to be below our
previous expectations. 

OPERATING REVIEW

Demand for Nordic semi-chemical fluting was reasonably strong during the first
quarter. Delivered and produced volumes held up well for most of the second
quarter despite some toughening of conditions in global containerboard markets
towards the end of the period. The mill performed well in the first half,
offsetting substantial cost increases through improved production efficiencies
and better pricing. 

Sales for the six months ended 30 June 2008 were virtually unchanged at € 55.6m
(2007 - € 55.9m). This reflects the achievement of significantly better average
selling prices on sales volumes which were lower than the previous year
principally due to the planned annual maintenance shutdown in May. 

The annual maintenance shutdown for 2008 took place during the first half of
the year; whereas in 2007 it took place during the second half. This year's
shutdown was also longer than usual due to the extra time required for
installation of the new head-box on the paper machine. We took advantage of
this additional downtime to carry out other maintenance procedures and upgrades
which will improve the efficiency and performance of the mill over the
medium-term. 

Contribution margins improved compared with the prior year, indicating that we
were successful in recovering increases in raw material and energy costs
through productivity gains and more effective pricing. However, the benefit of
this was offset by the volume and cost impact of the maintenance shutdown and
to a lesser extent by the increased cost of disposing of process waste and
by-products in an environmentally responsible manner. 

The extended maintenance shutdown resulted in eight days less production than
in the prior year, reducing production volumes by some 6,000 tonnes and gross
margin by some €1.0m. As a result, underlying profit from operating activities
before interest and taxation and non-recurring items reduced by 16% to € 5.7m
(2007 - € 6.8m), while the underlying EBITDA from operating activities also
reduced to € 8.5m (2007 - € 9.3m). 

Profit before tax increased by 42% to € 3.6m (2007 - € 2.5m). However, this was
in part due to the results for 2007 being impacted by non-recurring items such
the costs of the Initial Public Offering which took place in May 2007. 
 
CAPITAL EXPENDITURE

The investment of € 4.4m in a new head-box for the paper machine at Savon Sellu
was successfully completed during the planned annual maintenance shutdown in
May. The initial results from the investment are very encouraging and include a
marked improvement in manufacturing tolerances and paper strength which results
in better performance on our customers' production lines. 

LIQUIDITY

During the six months ended 30 June 2008, net debt reduced to € 24.4m (from €
25.6m at 31 December 2007). Cash flow generated from operating activities
improved to € 10.4m (2007 - € 6.1m). The principal uses of funds were capital
expenditure (€ 5.0m), payment of dividends (€ 3.0m) and payment of interest and
other finance costs (€ 1.2m). 

WOOD PROCUREMENT

In February 2008, we announced the establishment of a joint venture with
Myllykoski Corporation, one of the world's leading producers of publication
papers. The new business, which is to be called Harvestia Oy, will manage the
wood procurement requirements of both companies and will provide Powerflute
with security and continuity of supply when its current wood procurement
contract expires in December 2009. We expect Harvestia's wood procurement
activities to commence later this year. 

ACQUISITIONS

Powerflute continues to pursue its strategy of achieving growth through the
acquisition of underperforming forest products businesses. During the first
half of the year a number of potential acquisition opportunities were
evaluated. In each case, the Board concluded that the returns available were
not sufficient to justify the assumption of additional business risk or
leverage in the current uncertain economic environment. 

In recent months, there has been a marked softening in sellers' price
expectations in response to the deteriorating economic climate. We continue to
believe that opportunities will arise to grow through acquisition and to
realise value for our shareholders. 

ACCOUNTING POLICIES

Powerflute uses derivative instruments to hedge risks associated with
fluctuations in foreign currency, interest rates and the price of certain
commodities. International Financial Reporting Standards require that such
derivatives should normally be valued at fair market value at the balance sheet
date and any notional gain or loss recognised as revenue or cost in the income
statement. 

The recent escalation in energy prices has resulted in very significant
notional gains on derivative instruments used to hedge exposure to electricity
prices. At 30 June 2008, the notional gains on commodity derivatives were in
excess of € 2.3m (€ 0.7m at 31 December 2007) and if accounted for on the
normal basis would materially distort the reported operating performance.
Accordingly we have decided to take a more conservative alternative approach
which is permitted under International Financial Reporting Standards and to
adopt hedge accounting for such derivatives. 

Under hedge accounting, notional gains and losses on derivatives used to hedge
against fluctuations in energy prices will be taken to a hedging reserve within
equity and transferred to the income statement during the period in which the
hedged cost is incurred. The impact of adopting this approach in the six months
ended 30 June 2008 is to reduce reported profit before tax by € 2.3m and
underlying EBITDA by € 1.6m. 

DIVIDEND

As previously stated in the Annual Report for the year to 31 December 2007 and
as authorised by the Annual General Meeting held in April 2008, the Board of
Directors intends to pay an interim dividend for the year ending 31 December
2008 of 1.681 cents per share.  This dividend is expected to be paid before the
end of October 2008. 

OUTLOOK

Demand during the seasonally quieter summer months has been considerably weaker
than in the same period of 2007, most noticeably in the important southern
European markets. Although the autumn fruit harvest is currently predicted to
be good, we expect trading conditions to remain challenging throughout the
second half of 2008. 

The second half will benefit from the absence of an extended maintenance
shutdown. However, wood and energy costs are expected to continue to rise and
we anticipate strong competition due to the weak market conditions. 

In the absence of a strong recovery in demand and an improvement in the
competitive environment, the Board believes that profit from operating
activities for the year ending 31 December 2008 will be some way below that of
the previous year. However, we are confident that we are well positioned for
growth in the longer-term due to our strong market position in an attractive
and premium paper grade. 

Dermot Smurfit
Chairman
6 August 2008