23/07/2009 Metsä Tissue reports good performance under a challenging business climate The sales of Metsä Tissue, a supplier of tissue and cooking papers, totalled EUR 435 million (461) and operating profit EUR 41 million (20) in January-June, 2009. Sales declined by -6% compared to the previous year. The decline resulted from adverse exchange rates (-4%) and lower sales volumes (-2%). The sales volume of the company's own brands was stable compared to the previous year. During the spring, both brands and private labels were supported by summer campaigns and seasonal products. The results of the efficiency improvement projects implemented during 2007 and 2008 have materialised as expected. This, together with the favourable development of input material costs compared to last year, contributed to the improved operating profit. Cash flow generation and liquidity was good. During the second quarter, Metsä Tissue announced the rebuild of paper machine 10 at the Mänttä mill. The rebuild will take place during the first half of 2010. The investment will further improve the quality of Metsä Tissue's branded products Lambi, Serla and Katrin in the Nordic area. The substantial investments in the company's Mariestad mill over a four-year period have yielded the expected quality improvements. The enhanced Scandinavian Serla products with increased consumer preference and a growth in sales are good examples of the outcome. Metsä Tissue has continued to improve its energy efficiency and sustainability through the development of its operations. Finnish and German operations were audited with regard to energy efficiency and both were granted Energy Efficiency Management certificates. The latest example of the work in this area is the company's decision to upgrade the insulations of its tissue machines for more optimal energy consumption. To support the company's reliability as a supplier and business partner, the enhancement of the business processes continued in the support functions assisted by new or improved ICT solutions. In Human Resources, for example, an SAP system is being taken into use during the year. In the same function, the staff survey proceeded to the next phase - drafting regional action plans. The European Works Council (EWC) agreement was renewed. Regardless of the economic crisis, the demand for tissue and cooking paper products is expected to remain fairly stable, although in developing markets growth has slowed down. The Away-from-Home business has been more affected by the recession than the consumer business, which has shown growth potential in some segments and product categories. Raw material costs reached their bottom in March. Since then, commodity prices have risen and are anticipated to further increase during the latter half of the year. Pulp prices, for example, have been rising by approximately 20% from the end of the first quarter whereas oil prices have increased nearly 100%. The increase of variable costs, together with moderate growth expectations, will make the latter half of the year more challenging than the first half. The company is prepared to secure continuous profitability by enhancing the efficiency of its businesses, deliveries, production and internal processes as well as by focusing on risk management. At the same time, Metsä Tissue is dedicated to continuously investing in both its processes and supply to ensure maximum customer benefit. Brand and product development continue to stay in focus. Metsä Tissue 1-6/09 1-6/08 Q2/09 Q2/08 1-12/08 Sales 435 461 217 231 930 EBITDA 62 49 33 23 98 - ” -, excl. non-recurring items 62 49 33 23 99 Depreciation and impairment -21 -29 -10 -13 -56 Operating result 41 20 22 11 42 - ” -, excl. non-recurring items 41 20 22 11 44 Investments 11 10 7 7 33 Personnel at end of period 3 278 3 385 3 278 3 385 3 222