Martela Oyj

Quarterly Report • Aug 4, 2011

MARTELA CORPORATION'S INTERIM REPORT, 1 JANUARY – 30 JUNE 2011

Consolidated revenue increased, operating result at previous year's level

Key figures:

	4-6	4-6	1-6	1-6	1-12
EUR mill.	2011	2010	2011	2010	2010
- Revenue	30.5	25.7	57.9	48.3	108.4
- Change in revenue, %	18.6	21.0	19.9	6.6	13.7
- Operating result	-0.9	-0.5	-1.6	-1.6	1.3
- Operating result %	-2.8	-2.0	-2.8	-3.3	1.2
- Earnings / share, EUR	-0.21	-0.13	-0.43	-0.38	0.16
- Return on investment, %	-12.0	-5.2	-10.4	-8.1	3.7
- Return on equity, %	-11.9	-7.0	-11.9	-10.0	2.0
- Equity-to-assets ratio, %			54.2	54.4	55.6
- Gearing, %			-4.2	-19.7	-14.1

Martela Corporation's revenue is estimated to grow and operating profit to be at previous year's level or to improve in 2011.

Market

Demand for office furniture increased in Finland and Sweden during the first half of the year. No significant change was noticed yet on the other main markets.

There have been signs of office construction recovering – especially the number of building permits granted. However, the number of completed and commenced office buildings remains significantly lower than in the comparison year. Statistics on office construction are available for the first quarter of 2011, and according to these, 48 per cent less office space was built in Finland in terms of square metres in the first quarter of 2011 than in the previous year. However, significantly more (+51%) building permits were granted in this period than in the previous year. Considerably fewer office building construction projects were commenced compared with the previous year (-49%).

Consolidated revenue and profit

Consolidated revenue for the second quarter was EUR 30.5 million (25.7), an increase of 18.6 per cent on the previous year. Revenue for January-June increased to EUR 57.9 million (48.3), representing growth of 19.9 per cent. The positive performance of the traditional sales channels in Finland, Sweden and Poland increased revenue. Factors increasing revenue also included the Martela Outlet sales channel that was acquired and launched in June 2010 and the Danish importer acquired in November. The comparable revenue growth without acquisitions was 15.0 per cent in the second quarter and 15.6 per cent in the first half of the year.

Operating result for the second quarter declined and was EUR -0.9 million (-0.5). Operating result for January-June remained at the previous year's level and was EUR -1.6 million (-1.6). The group has invested significantly in the development and growth of its operations by hiring new personnel and opening new sales offices. The investments focused in particular on strengthening the Group's service business and sales channels. The investments have not yet generated enough revenue to correspond to the rise in costs. Result was also reduced by poor business performance in Denmark.

Profit before taxes for January-June was EUR -2.0 million (-1.7), and profit after taxes was EUR -1.7 million (-1.5).

Segment reporting

The segments presented in the interim report comply with the company's segment division. The comparison year's figures have also been rendered in the same way. The business segments are based on the Group's internal organisational structure and internal financial reporting.

Sales between segments are reported as part of the segments' revenue. The segments' results presented are their operating profits, because tax items and financial items are not allocated by segment. The Group's assets and liabilities are not allocated or monitored by segment in the internal financial reporting. Revenue and operating profit are as recorded in the consolidated financial statements.

Business Unit Finland is responsible for sales and marketing, service production and manufacturing in Finland. Martela has an extensive sales and service network covering the whole of Finland, with a total of 28 service locations. The Business Unit's logistics centre is in Nummela.

Business Unit Sweden and Norway is responsible for sales in Sweden and Norway, handled through about 70 dealers. In addition, the Business Unit has its own sales and showroom facilities at three locations: Stockholm and Bodafors in Sweden and Oslo in Norway. The Business Unit's logistics centre and order handling are also located in Bodafors.

Business Unit Poland is responsible for the sales and distribution of Martela products in Poland and eastern Central Europe. In Poland, sales are organised through our own sales network, and in Hungary we have our own subsidiary and a sales centre. The company has altogether seven sales centres in Poland. The Business Unit's principal export countries are Ukraine, the Czech Republic and Slovakia, in each of which sales are handled by established dealers. Business Unit Poland is based in Warsaw, where it has its logistics centre and administration.

Revenue by segment

EUR million	Finland	Sweden & Norway	Poland	Other segments	Total
1.1.2011-30.6.2011
External Revenue Internal Revenue	39.0 0.3	10.2 0.7	4.9 0.0	3.8 6.9	57.9 8.0
Total 2011	39.3	11.0	4.9	10.7
1.1.2010-30.6.2010
External Revenue Internal Revenue	32.3 0.0	8.9 0.6	3.3 0.0	3.8 7.4	48.3 8.0
Total 2010	32.3	9.5	3.3	11.2
External revenue change %	20.6 %	15.6 %	46.5 %	0.7 %	19.9 %

"Other segments" includes the revenues of Kidex Oy and Business Unit International. The Business Unit is responsible for the Group's other export markets. The revenue of P.O. Korhonen was included in the figures in "Other segments" in 2010 and until the end of January 2011; however, these figures will no longer be included after this due to changes in the Group structure.

Change in segments' external revenue and percentage of consolidated revenue

	4-6	4-6		1-6	1-6			1-12
EUR million	2011	2010	Change- %	2011	2010	Change-%	Percentage	2010	Percentage
Finland Sweden &	20.5	17.2	19.2 %	39.0	32.3	20.6 %	67.3 %	71.8	66.2 %
Norway	5.6	4.8	16.0 %	10.2	8.9	15.6 %	17.7 %	18.6	17.1 %
Poland	2.6	1.8	45.2 %	4.9	3.3	46.5 %	8.4 %	9.3	8.6 %
Other segments	1.8	1.9	-4.6 %	3.8	3.8	0.7 %	6.6 %	8.7	8.1 %
Total	30.5	25.7	18.6 %	57.9	48.3	19.9 %	100.0 %	108.4	100.0 %

Operating profit by segment

EUR million	4-6 2011	4-6 2010	1-6 2011	1-6 2010	1-12 2010
Finland Sweden &	0.7	0.6	1.7	0.8	5.0
Norway	0.1	-0.1	-0.1	-0.4	0.0
Poland	-0.2	-0.5	-0.5	-0.9	-1.4
Other segments	-0.7	0.0	-1.7	-0.2	-0.5
Other	-0.6	-0.5	-0.9	-0.9	-1.8
Total	-0.9	-0.5	-1.6	-1.6	1.3

"Other segments" includes the operating profits of P.O. Korhonen, Kidex Oy and Business Unit International. The revenue of P.O. Korhonen was included in the figures in "Other segments" in 2010 and until the end of January 2011; however, these figures will no longer be included after this due to changes in the Group structure.

The item "Others" includes non-allocated Group functions and non-recurring sales gains and losses.

Financial position

The Group's financial position is strong. At the end of the review period, interest-bearing liabilities were EUR 4.6 million (7.2), and net liabilities were EUR -1.2 million (-5.7). At the end of the quarter, the gearing ratio was -4.2 per cent (-19.7) and the equity-to-assets ratio was 54.2 per cent (54.4). Net financial expenses were EUR 0.1 million (0.1).

Cash flow from operating activities in January-June was EUR 0.2 million (-2.2).

The balance sheet total at the end of the review period was EUR 51.4 million (53.2).

Capital expenditure

The Group's gross capital expenditure for January-June was EUR 1.8 million (1.3). The capital expenditure mainly concerned the ERP project and production replacements.

Personnel

The Group employed an average of 631 (584) persons, a year-on-year increase of 8.0 per cent.

Average personnel by region

	1-6	1-6	1-12
	2011	2010	2010
Finland	455	438	451
Scandinavia	75	54	54
Poland and Hungary	95	89	91
Russia	6	3	5
Group total	631	584	601

Product development, products and communications

Early 2011 Martela's collection was strongly renewed. The renewal of the collection has been continued, with the main focus on workstation furniture.

Martela has also made big efforts to implement corporate responsibility, and in connection with this, the creation of responsibility reporting in accordance with the GRI (Global Reporting Initiative) is in progress. Responsibility plays an important role in the Group, and GRI reporting indicators and actions followed by the indicators will be monitored systematically in the company.

Martela will participate in the Helsinki World Design Capital project as one of the main partners of the celebration year. The theme of the WDC 2012 event is Open Helsinki, and the event will be a visible part of the cityscape.

Group structure

Artek Oy Ab and Martela Corporation signed an agreement to establish a new company on 17 January 2011. On 1 February 2011, the new joint enterprise acquired the business of Martela's subsidiary P.O. Korhonen. The joint enterprise will focus on the manufacture of products marketed and sold by Martela and Artek. Martela has a 51-per cent stake in the new company while Artek's holding is 49 per cent. According to the shareholding agreement, Martela has no control of the company as defined in IFRS 3 and IAS 27. The new company, P.O. Korhonen, will operate as a contract manufacturer specialising in the production of formpressed wooden furniture. Of the new company's figures, Martela's consolidated income statement will only include the share of the company's profit according to Martela's holding, and it will be reported in the consolidated income statement on the row "result in associated undertakings".

There were no other changes in Group structure during the review period or during the same period of the previous year.

Shares

During January-June, 448,831 (535,720) of the company's A shares were traded on the NASDAQ OMX Helsinki Ltd exchange, corresponding to 12.6 per cent (15.1) of all A shares.

The value of trading turnover was EUR 3.6 million (4.0), and the share price was EUR 7.77 at the beginning of the year and EUR 7.30 at the end of the period. During January-June the share price was EUR 8.56 at its highest and EUR 6.56 at its lowest. At the end of June, equity per share was EUR 6.78 (7.11).

Treasury shares

The company did not purchase any Martela shares in January-June. On 30 June 2011, Martela owned a total of 67,700 Martela A shares, purchased at an average price of EUR 10.65. Martela's holding of treasury shares amounts to 1.6 per cent of all shares and 0.4 per cent of all votes.

The acquisition of shares related to the share-based incentive scheme and its management have been

outsourced to an external service provider. These shares have been entered under equity in the consolidated financial statements for 30 June 2011. On 30 June 2011, 38,647 shares under the incentive scheme were still undistributed.

2011 Annual General Meeting

The Annual General Meeting of Martela Corporation was held on Tuesday 15 March 2011. The meeting approved the financial statements for 2010 and discharged the members of the Board of Directors and the Managing Director from liability. The AGM decided, in accordance with the Board of Directors' proposal, to distribute a dividend of EUR 0.45 per share. The dividends were paid on 25 March 2011.

The number of members in the Board of Directors was confirmed as seven, and Heikki Ala-Ilkka, Tapio Hakakari, Jori Keckman, Heikki Martela, Pekka Martela, Pinja Metsäranta and Jaakko Palsanen were reelected. KPMG Oy Ab, Authorised Public Accountants, was elected again as the company's auditor.

The AGM also approved the Board of Directors' proposals, detailed in the meeting notice, to authorise the Board to acquire and/or dispose of Martela shares.

The new Board of Directors convened after the Annual General Meeting and elected Heikki Ala-Ilkka as Chairman and Pekka Martela as Vice Chairman.

Post-balance sheet events

No significant events requiring reporting have taken place since the January-June period and operations have continued according to plan.

Short-term risks

The greatest risk to profit performance is related to the continuation of general economic uncertainty and the consequent effects on the overall demand for office furniture.

Outlook for 2011

Martela Corporation's revenue is estimated to grow and operating profit to be at previous year's level or to improve in 2011.

TABLES

Accounting policies

This interim report has been prepared in accordance with IAS 34, Interim Financial Reporting, as approved by the EU. The accounting policies of the interim report are the same as those applied in the 2010 financial statements.

As the figures in the release have been rounded, the combined sum of individual figures may differ from the presented sum. This report is unaudited.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR 1 000)

	2011	2010	2011	2010	2010
	1-6	1-6	4-6	4-6	1-12
Revenue	57 906	48 290	30 524	25 727	108 392
Other operating income	211	149	61	77	252
Employee benefits expenses	-15 427	-13 591	-7 881	-7 167	-27 886
Operating expenses	-43 087	-35 078	-22 924	-18 475	-76 781
Depreciation and impairment	-1 243	-1 370	-638	-684	-2 664
Operating profit/loss	-1 640	-1 600	-858	-522	1 313
Financial income and expenses	-145	-109	-71	-69	-229
Share of result in associated undertakings	-225	0	-190	0	0
Profit/loss before taxes	-2 010	-1 709	-1 119	-591	1 084
Income tax	265	197	250	64	-446
Profit/loss for the period	-1 745	-1 512	-869	-527	638
Other comprehensive income:
Translation differences	-117	130	-61	-4	312
Total comprehensive income	-1 862	-1 382	-930	-531	950
Basic earnings per share, eur	-0,43	-0,38	-0,21	-0,13	0,16
Diluted earnings per share, eur	-0,43	-0,38	-0,21	-0,13	0,16
Allocation of net profit for the period:
To equity holders of the parent	-1 745	-1 512	-869	-527	638
Allocation of total comprehensive income:
To equity holders of the parent	-1 862	-1 382	-930	-531	950

GROUP BALANCE SHEET (EUR 1 000) 30.6.2011 31.12.2010 30.6.2010

ASSETS

Non-current assets
Intangible assets	2 690	2 051	1 188
Tangible assets	12 114	12 721	11 366
Investments	185	260	34
Deferred tax assets	366	298	348
Pension receivables	250	250	197
Receivables	105	17	0
Investment properties	600	600	600
Total	16 310	16 197	13 733
Current assets
Inventories	12 818	10 449	9 274
Receivables	16 485	19 793	17 383
Financial assets at fair value
through profit and loss	0	1 107	1 094
Cash and cash equivalents	5 784	9 142	11 718
Total	35 087	40 492	39 470
Total assets	51 397	56 689	53 203
EQUITY AND LIABILITIES
Equity
Share capital	7 000	7 000	7 000
Share premium account	1 116	1 116	1 116
Other reserves	117	117	117
Translation differences	-214	-97	-279
Retained earnings	19 755	23 496	21 346
Treasury shares	-1 050	-1 212	-1 212
Share-based incentives	717	747	576
Total	27 441	31 167	28 664
Non-current liabilities
Interest-bearing liabilities	2 175	3 197	2 699
Deferred tax liabilities	943	1 214	1 033
Other liabilities	178	240	0
Total	3 296	4 651	3 732
Current liabilities
Interest-bearing	2 443	2 670	4 456
Non-interest bearing	18 217	18 201	16 351
Total	20 660	20 871	20 807
Total liabilities	23 955	25 522	24 539
Equity and liabilities, total	51 397	56 689	53 203

STATEMENT OF CHANGES IN EQUITY (EUR 1 000)

Equity attributable to equity holders of the parent

	Share capital	Share premium account	Other reserves	Trans. diff.	Retained earnings	Treasury shares	Total
01.01.2010	7 000	1 116	117	-409	25 138	-1 200	31 762
Other change							0
Total comprehensive income				130	-1 512		-1 382
Dividends					-1 814		-1 814
Share-based incentives					110	-12	98
30.06.2010	7 000	1 116	117	-279	21 922	-1 212	28 664
01.01.2011	7 000	1 116	117	-97	24 243	-1 212	31 167
Other change							0
Total comprehensive income				-117	-1 745		-1 862
Dividends					-1 834		-1 834
Share-based incentives					-192	162	-30
30.06.2011	7 000	1 116	117	-214	20 472	-1 050	27 441

CONSOLIDATED CASH FLOW STATEMENT (EUR 1 000)	2011	2010	2010
	1-6	1-6	1-12
Cash flows from operating activities
Cash flow from sales	61 348	45 251	103 207
Cash flow from other operating income	155	109	225
Payments on operating costs	-60 817	-47 042	-102 873
Net cash from operating activities
before financial items and taxes	686	-1 682	559
Interest paid	-146	-169	-277
Interest received	17	23	47
Other financial items	-23	5	-31
Taxes paid	-293	-411	-361
Net cash from operating activities (A)	241	-2 235	-63
Cash flows from investing activities
Capital expenditure on tangible and	-1 276	-1 205	-4 354
intangible assets
Proceeds from sale of tangible and	349	118	459
intangible assets
Capital expenditure on associated undertaking	-150	0	-250
Proceeds from sale of other investments	0	0	31
Net cash used in investing activities (B)	-1 077	-1 086	-4 114
Cash flows from financing activities
Repayments of short-term loans	-421	-352	-506
Repayments of long-term loans	-1 361	-1 136	-2 297
Dividends paid and other profit distribution	-1 839	-1 813	-1 813
Net cash used in financial activities (C)	-3 621	-3 302	-4 616
Change in cash and cash equivalents ( A+B+C)	-4 457	-6 623	-8 793
(+ increase, - decrease)
Cash and cash equivalents in the beginning of period	10 249	19 304	19 304
Translation differences	-8	131	-261
Cash and cash equivalents at the end of period	5 784	12 812	10 249

SEGMENT REPORTING (EUR 1 000)

Segment revenue	2011 1-6	2010 1-6	2011 4-6	2010 4-6	2010 1-12
Business Unit Finland
external	38 975	32 289	20 538	17 197	71 780
internal	309	0	74	0	140
Business Unit Sweden and Norway
external	10 235	8 855	5 604	4 829	18 584
internal	715	648	346	349	1 001
Business Unit Poland
external	4 883	3 332	2 563	1 765	9 289
internal	0	0	-8	0	28
Other segments
external	3 813	3 814	1 819	1 936	8 739
internal	6 930	7 365	3 894	3 759	15 477
Total external revenue	57 906	48 290	30 524	25 727	108 392
Segment operating profit/loss	2011	2010	2011	2010	2010
	1-6	1-6	4-6	4-6	1-12
Business Unit Finland	1 662	771	637	586	5 024
Business Unit Sweden and Norway	-137	-426	68	-125	-34
Business Unit Poland	-531	-887	-255	-476	-1 371
Other segments	-1 733	-153	-687	84	-495
Other	-901	-905	-621	-591	-1 811
Total operating profit/loss	-1 640	-1 600	-858	-522	1 313

Other segments include Kidex Oy and Business Unit International, which is responsible for export markets.

Year 2010 and up till end January 2011 Other segments include P.O. Korhonen, which is no more included in the segment reporting in the future because of change in group structure.

The item "Other" includes non-allocated Group functions and non-recurring sales gains and losses.

TANGIBLE ASSETS 1.1-30.6.2011	Land areas	Buildings	Machinery & equipment	Other tangibles	Work in progress
Acquisitions	45	88	1 161	0	-245
Decreases	0	0	-296	0	0
TANGIBLE ASSETS 1.1-30.6.2010	Land	Buildings	Machinery	Other	Work in
	areas		& equipment	tangibles	progress
Acquisitions	0	39	453	0	198
Decreases	0	-73	-5	0	0

RELATED PARTY AND SHARE-BASED INCENTIVE PROGRAMME

The CEO and the group's management are included in a long-term share-based incentive scheme, extending from 2010 to the end of 2012.

KEY FIGURES/RATIOS	2011 1-6	2010 1-6	2010 1-12
Operating profit/loss - in relation to revenue	-1 640 -2,8	-1 600 -3,3	1 313 1,2
Profit/loss before taxes	-2 010	-1 709	1 084
- in relation to revenue	-3,5	-3,5	1,0
Profit/loss for the period	-1 745	-1 512	638
- in relation to revenue	-3,0	-3,1	0,6
Basic earnings per share, eur	-0,43	-0,38	0,16
Diluted earnings per share, eur	-0,43	-0,38	0,16
Equity/share, eur	6,78	7,11	7,74
Equity ratio	54,2	54,4	55,6
Return on equity *	-11,9	-10,0	2,0
Return on investment *	-10,4	-8,1	3,7
Interest-bearing net-debt, eur million	-1,2	-5,7	-4,4
Gearing ratio	-4,2	-19,7	-14,1
Capital expenditure, eur million	1,8	1,3	4,7
- in relation to revenue	3,2	2,7	4,4
Personnel at the end of period	655	590	625
Average personnel	631	584	601
Revenue/employee, eur thousand	91,8	82,7	180,4

Key figures are calculated according to formulae as presented in Annual Report 2010. * When calculating return on equity and return on investment the profit/loss for the period has been multiplied in interim reports.

CONTINGENT LIABILITIES	30.6.2011	31.12.2010	30.6.2010
Mortgages and shares pledged	14 824	14 899	14 704
Other commitments	199	385	256
RENTAL COMMITMENTS	7 883	8 086	7 299
DEVELOPMENT OF SHARE PRICE	2011	2010	2010
	1-6	1-6	1-12
Share price at the end of period, eur	7,30	6,63	7,77
Highest price, eur	8,56	8,60	8,60
Lowest price, eur	6,56	6,53	6,26
Average price, eur	8,03	7,54	7,57

Martela Corporation Board of Directors Heikki Martela Managing Director

Additional information Heikki Martela, CEO, tel. +358 50 502 4711 Markku Pirskanen, CFO, tel. +358 40 517 4606

Distribution NASDAQ OMX Helsinki Main news media www.martela.com