Metsä Board Oyj — Interim / Quarterly Report 2012

Aug 2, 2012

Metsä Board Corporation Interim Report 1 January–30 June 2012 2 August 2012 at 12 noon

Metsä Board Corporation's operating result for the first half of 2012 excluding nonrecurring items was EUR 24 million

Result for the first half of 2012

• Sales were EUR 1,067 million (Q1–Q2/2011: 1,345).
• The operating result excluding non-recurring items was EUR 24 million (75). The operating result including non-recurring items was EUR 157 million (14).
• The result before taxes excluding non-recurring items was EUR 8 million (44). The result before taxes including non-recurring items was EUR 141 million (-22).
• Earnings per share from continuing operations excluding non-recurring items were EUR 0.03 (0.11) and including non-recurring items EUR 0.38 (-0.09).

Result in the second quarter of 2012

• Sales were EUR 522 million (Q1/2012: 545).
• The operating result excluding non-recurring items was EUR 19 million (5). The operating result including non-recurring items was EUR 161 million (-4).
• The result before taxes excluding non-recurring items was EUR 17 million (-9). The result before taxes including non-recurring items was EUR 159 million (-18).
• Earnings per share from continuing operations excluding non-recurring items were EUR 0.05 (-0.02) and including non-recurring items EUR 0.43 (-0.05).

Events in the second quarter of 2012

• Demand for paperboard normalised.
• Losses from the paper units under restructuring decreased considerably.
• Metsä Board sold approximately 7.3 percentage points of its holding in Metsä Fibre Oy to the Japanese Itochu Corporation for EUR 138 million and approximately 0.5 percentage points of its holding in Pohjolan Voima Oy to Metsä Fibre for EUR 64 million.
• Metsä Board signed an agreement on the refinancing of the EUR 500 million eurobond maturing on 1 April 2013.
• The capacity of the folding boxboard machine at the Äänekoski mill was increased.

"Our profitability improved in the second quarter of the year, primarily as a result of the reduced losses from the paper units under restructuring. The market situation and profitability of the paperboard business developed also favourably, but the result weakened slightly due to the production shutdown related to the capacity expansion at the Äänekoski folding boxboard mill. The paperboard order books and operating rates are at a good level but due to the general economic uncertainty in Europe, full capacity has, however, not been reached yet.

Metsä Board is Europe's leading producer of fresh forest fibre cartonboards, the world's leading manufacturer of coated white-top kraftliners, and a major paper supplier. It offers premium solutions for consumer and retail packaging, graphics and office end-uses. The company's sales network serves brand owners, carton printers, corrugated packaging manufacturers, printers, merchants and office suppliers. Metsä Board is part of Metsä Group and is listed on the NASDAQ OMX Helsinki. In 2011, Metsä Board's sales totalled EUR 2.5 billion. Metsä Board has approximately 3,600 employees.

In 2011 and 2012, we have successfully made investments at the Simpele, Kyro and Äänekoski mills to increase our annual folding boxboard capacity by a total of 150,000 tonnes. The expanded capacity is expected to be fully available from the beginning of 2013 when the renewed paperboard machines will be operating at the targeted efficiency levels."

Mikko Helander, CEO

Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon

KEY FIGURES	2012	2012	2011	2011	2012	2011	2011
	Q2	Q1	Q2		Q1 Q1-Q2 Q1-Q2		Q1-Q4
Sales, EUR million	522	545	660	685	1,067	1,345	2,485
EBITDA, EUR million	189	25	48	77	214	125	-23
excl. non-recurring items, EUR million	47	34	62	74	81	136	180
EBITDA, %	36.2	4.6	7.3	11.2	20.1	9.3	-0.9
excl. non-recurring items, %	9.0	6.2	9.4	10.8	7.6	10.1	7.2
Operating result, EUR million	161	-4	-32	46	157	14	-214
excl. non-recurring items, EUR million	19	5	32	43	24	75	59
EBIT, %	30.8	-0.7	-4.8	6.7	14.7	1.0	-8.6
excl. non-recurring items, %	3.6	0.9	4.8	6.3	2.2	5.6	2.4
Result before taxes, EUR million	159	-18	-53	31	141	-22	-281
excl. non-recurring items, EUR million	17	-9	16	28	8	44	0
Result for the period, EUR million	140	-15	-59	28	125	-31	-273
excl. non-recurring items, EUR million	14	-6	10	25	8	35	8
Result per share, EUR	0.43	-0.05	-0.17	0.08	0.38	-0.09	-0.83
excl. non-recurring items, EUR	0.05	-0.02	0.04	0.07	0.03	0.11	0.02
Return on equity, %	72.9	-8.4	-23.5	10.8	32.4	-6.3	-31.5
excl. non-recurring items, %	7.3	-3.1	4.2	9.5	2.1	7.0	0.9
Return on capital employed, %	35.9	-0.4	-6.1	8.4	17.7	1.4	-9.9
excl. non-recurring items, %	5.8	1.7	6.4	7.8	3.7	7.2	3.4
Equity ratio at end of period, %	31.0	27.8	33.9	33.6	31.0	33.9	27.4
Gearing ratio at end of period, %	138	154	120	125	138	120	154
Net gearing ratio at end of period, %	73	104	84	78	73	84	106
Shareholders' equity per share at end of period, EUR	2.46	2.21	2.92	3.11	2.46	2.92	2.23
Interest-bearing net liabilities, EUR million	595	758	809	799	595	809	783
Gross investments, EUR million	17	10	31	12	27	43	95
Deliveries, 1 000 tonnes
Paperboard	289	295	365	387	584	753	1,388
Paper	165	185	236	260	350	496	908
Personnel at the end of period	3,597	3,818	4,699	4,515	3,597	4,699	4,070

Deliveries are not fully comparable due to structural changes.

EBITDA = Earnings before interest, taxes, depreciation and impairment charges

Result for April–June compared to the previous quarter

Metsä Board's sales amounted to EUR 522 million (Q1/2012: 545). Comparable sales were down 1.4 per cent. The operating result was EUR 161 million (-4), and operating result excluding non-recurring items was EUR 19 million (5).

A net total of EUR +142 million was recognised as non-recurring items in the operating result for April–June, the most significant of them being:

• A sales gain of EUR 85 million under "Other operations" related to the sale of Metsä Fibre's 7.3 percentage point holding to Itochu Corporation.
• A sales gain of EUR 59 million before taxes (after taxes, EUR 44 million) under "Other operations" related to the sale of the 0.5 percentage point holding in Pohjolan Voima to Metsä Fibre. The transaction does not have an impact on the company's equity since the company will recognise an equivalent amount as an impairment of the fair value reserve.
• A sales gain of EUR 4 million under "Other operations" related to a property sale in Tampere.
• A EUR 4 million cost provision under "Other operations" related to the cleaning expenses of the land area of an industrial property in Nurmes.

The non-recurring items for the previous quarter totalled EUR -10 million net.

The operating result excluding non-recurring items improved compared to the previous period primarily as a result of the smaller losses from the units which were shut down or are under restructuring. The sales volumes of paperboard and pulp also increased slightly. The extensive production shutdown related to the capacity expansion at the Äänekoski mill weakened the result. The losses from the units to be shut down and restructured burdened the operating result excluding non-recurring items further by approximately EUR 6 million in the second quarter.

In April–June, the volume of paper deliveries totalled 165,000 tonnes (Q1/2012: 185,000). Deliveries in the Paperboard business area totalled 289,000 tonnes (295,000). The delivery volumes are not comparable due to the changes in the company's structure.

Financial income and expenses in the period totalled EUR -2 million (-14). Foreign exchange rate differences from trade receivables, trade payables, financial items and the valuation of currency hedging were EUR 0 million (2). Net interest and other financial income and expenses amounted to EUR -2 million (-16). Pohjolan Voima Oy paid a dividend of EUR 6 million in the review period. Other financial income and expenses include EUR 10 million of valuation gains on interest rate derivatives (a valuation gain of 0). EUR 8 million of the gain was generated by ending of the fair value hedge accounting in accordance with the IFRS as the USD-based loan and related currency agreement and an interest rate swap expired in June.

The result before taxes for the period under review was EUR 159 million (-18). The result before taxes excluding non-recurring items totalled EUR 17 million (-9). Income tax amounted to EUR -19 million (+3).

Unaudited Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon

Earnings per share were EUR 0.43 (-0.05). Earnings per share excluding non-recurring items were EUR 0.05 (-0.02). Return on equity was 72.9 per cent (-8.4); excluding nonrecurring items it was 7.3 per cent (-3.1). Return on capital employed was 35.9 per cent (-0.4); excluding non-recurring items, it was 5.8 per cent (1.7).

Result for January–June compared with the corresponding period last year Metsä Board's sales amounted to EUR 1,067 million (Q1–Q12/2011: 1,345). Comparable sales were down 15.6 per cent. The operating result was EUR 157 million (14), and the operating result excluding non-recurring items was EUR 24 million (75).

The net total of non-recurring items for January–June was EUR +133 million. The nonrecurring items recognised for the operating result of the corresponding period in the previous year came to EUR -61 million net.

The operating profit excluding non-recurring items compared to the previous year was weakened by the lower delivery volumes of paperboard and the decreased price of office paper and pulp. The result was improved by the reduced losses of units to be shut down and restructured as well as the strengthening of the US dollar and the British pound.

The total paper business delivery volume in January–June was 350,000 tonnes (496,000). Deliveries in the Paperboard business area totalled 584,000 tonnes (753,000). The delivery volumes are not comparable due to the changes in the company's structure.

Financial income and expenses totalled EUR -16 million (-32). Foreign exchange rate differences from trade receivables, trade payables, financial items and the valuation of currency hedging were EUR 2 million (2). Net interest and other financial income and costs stood at EUR -18 million (-34). Pohjolan Voima Oy paid a dividend of EUR 6 million in the review period. Other financial income and expenses included EUR 10 million of valuation gains on interest rate derivatives (valuation loss of 1). EUR 8 million of the gain is generated by ending of the fair value hedge accounting in accordance with the IFRS as the USD-based loan and a related currency agreement and an interest rate swap expired in June.

The result before taxes for the period under review was EUR 141 million (-22). The result before taxes and excluding non-recurring items was EUR 8 million (44). The impact of income tax was EUR -16 million (-9).

Earnings per share were EUR 0.38 (-0.09). Earnings per share excluding non-recurring items were EUR 0.03 (0.11). Return on equity was 32.4 per cent (-6.3), and 2.1 per cent (7.0) excluding non-recurring items. The return on capital employed was 17.7 per cent (1.4); 3.7 per cent (7.2) excluding non-recurring items.

Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon

Personnel

The number of personnel was 3,597 at the end of June (30 June 2011: 4,699), of whom 1,769 (1,959) people worked in Finland. During the period, Metsä Board employed an average of 3,743 people (2011: 4,653).

Investments

Gross investments in January–June totalled EUR 27 million (Q1–Q2/2011: 43).

Restructuring

Metsä Board's restructuring process from a paper company to a paperboard company has been completed. A strong paperboard business together with the Husum paper and pulp integrate create a strong foundation for further improvement of profitability. The focus of the operations has increasingly shifted from restructuring to development, as demonstrated by the investments at the Simpele, Äänekoski, Kyro and Kemi paperboard mills completed in 2011–2012.

In 2011, Metsä Board announced it would divest the Hallein mill and restructure its coated paper business. Announcements made in the first quarter of 2012 included the divestment of the Premium Paper operations of the Reflex mill as well as the completion of the negotiations with employees on shutting down the Alizay mill and the discontinuation of the unprofitable operations of the Gohrsmühle mill. Overall, the positive impact of these measures on the company's annual operating result excluding non-recurring items is estimated to be approximately EUR 110 million compared to the actual figures of 2011. The positive result impact is estimated to be realised mostly already in 2012 and in full starting from 2013. Relevant non-recurring items related to the measures were recognised in 2011.

Metsä Board continues its Chromolux specialty paper and paperboard business operations and launches folding boxboard sheeting operations at the Gohrsmühle mill. Measures to create a business park concept in Gohrsmühle continue in collaboration with employee representatives in order to create new jobs at the mill site.

A voluntary reindustrialisation project has been launched in Alizay. The project is being implemented in collaboration between Metsä Board, employee representatives and local authorities. The objective of the project is to create new jobs and business operations in the Alizay mill area.

In the second quarter of 2012, Metsä Board sold approximately 7.3 percentage points of its holding in Metsä Fibre Oy to the Japanese Itochu Corporation for EUR 138 million and approximately 0.5 percentage points of its holding in Pohjolan Voima Oy to Metsä Fibre for EUR 64 million. Metsä Board sold the 7.3 percentage point holding in Metsä Fibre in order to reduce its pulp surplus as well as to further strengthen Metsä Fibre's operations in the growing Asian market, in particular. After the divestments, Metsä Board owns 24.9 per cent of Metsä Fibre and approximately 2 per cent of Pohjolan Voima. The divestments of shares will have a negative impact of approximately EUR 15 million on the company's annual operating result compared to the actual figures for 2011.

Unaudited Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon

The Annual General Meeting held in spring 2012 changed the company's business name from M-real Corporation to Metsä Board Corporation and amended the company's line of business to correspond with its current business operations more accurately.

Financing

Metsä Board's equity ratio at the end of June was 31.0 per cent (31 December 2011: 27.4) and the gearing ratio was 138 per cent (154). The net gearing ratio was 73 per cent (106).

The change in the fair value of available-for-sale investments was approximately -71 million during the review period due to the decline in the fair value of Pohjolan Voima Oy's shares and the sales of part of Pohjolan Voima Oy's shares to Metsä Fibre in April.

Net interest-bearing liabilities totalled EUR 595 million at the end of June (783). Foreigncurrency-denominated loans accounted for 5 per cent; 70 per cent were floating-rate, and the rest were fixed-rate. At the end of June, the average interest rate on loans was 5.3 per cent and the average maturity of long-term loans 1.6 years. The interest rate maturity of loans was 11.9 months at the end of June. During the period, the interest rate maturity varied between 11 and 15 months.

Cash flow from operations amounted to EUR 6 million (Q1–Q2/2011: 56). Working capital decreased by EUR 32 million (increased by 5). In the cash flow statement, the net financing expenses of the period include the dividend of EUR 33 million (45) paid by Metsä Fibre and the dividend of EUR 6 million (0) paid by Pohjolan Voima Oy.

At the end of the period under review, an average of 4.6 months of the net foreign currency exposure was hedged. The degree of hedging varied between four and five months on average during the period. Approximately 3 per cent of the non-eurodenominated equity was hedged at the end of the period under review.

In May, Metsä Board signed a syndicated credit facility totalling EUR 600 million. The credit facility will refinance the EUR 500 million eurobond which matures on 1 April 2013 and further strengthen Metsä Board's liquidity. It consists of an immediately available EUR 100 million credit facility and loans totalling EUR 500 million that may be drawn at the end of March 2013. The immediately available credit facility will expire after three years. Of the loans, EUR 150 million (bridge financing) matures on 30 June 2014 and EUR 350 million on 31 March 2016. The credit is unsecured until the loans are drawn. The annual financing cost of the credit calculated for the duration of the loan and including all fees is approximately 6.5 per cent. Metsä Board has considerable headroom in respect of the covenant levels set in the loan agreements.

Metsä Board's liquidity has clearly strengthened due to the credit facility signed in the review period, as well as due to the reduction of shareholding in Metsä Fibre and Pohjolan Voima Oy. At the end of the review period, the available liquidity was EUR 539 million, of which EUR 100 million consisted of the Revolving Credit Facility signed in May 2012, EUR 20 million consisted of undrawn pension premium (TyEL) loans and EUR 419 million consisted of liquid assets and investments. At the end of June, EUR 250 million of the liquid assets and investments were assets deposited by other Metsä Group businesses in Metsä Finance. In addition, Metsä Board had other interest-bearing receivables totalling EUR 103 million. To meet its short-term financing needs, the Group had at its disposal

Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon

uncommitted domestic and foreign commercial paper programmes and credit facilities amounting to EUR 519 million.

Shares

In January–June, the highest price for Metsä Board's A share on NASDAQ OMX Helsinki Ltd. was EUR 2.84, the lowest EUR 1.52, and the average price EUR 2.35. At the end of June, the price of the A share was EUR 2.69. At the end of 2011, the price of the A share was EUR 1.50, while the average price in 2011 was EUR 2.87.

In January–June, the highest price of Metsä Board's B share was EUR 2.27, the lowest EUR 1.33, and the average price EUR 1.93. At the end of June, the price of the B share was EUR 2.00. At the end of 2011, the B share price was EUR 1.33, while the average price in 2011 was EUR 2.18.

The trading volume of the A share was EUR 1 million, or 1 per cent of the share capital. The trading volume of the B share was EUR 156 million, or 28 per cent of the share capital. The market value of the A and B shares totalled EUR 681 million at the end of June.

At the end of June, Metsäliitto Cooperative owned 40 per cent of the shares and the voting rights conferred by these shares was 61 per cent. International investors held 10 per cent of the shares.

The company does not hold any treasury shares.

Near-term outlook

The paperboard order books and operating rates are at a normal level. In the third quarter, the paperboard delivery volumes are expected to improve compared to the second quarter. Metsä Board increases linerboard prices by 5-8 per cent as of September 2012. Implementation of a folding boxboard price increases in early autumn is also under consideration.

Delivery volumes of uncoated fine paper and pulp are not expected to change significantly in the third quarter. Delivery volumes of coated paper are estimated to improve in the third quarter. Metsä Board has announced to increase uncoated fine paper prices by 6-8 per cent as of September 2012. No material changes in the prices of coated paper and pulp are in sight.

Extensive maintenance shutdowns at Husum and Kemi mills will have a negative impact on the result for the third quarter of 2012.

Production costs are not estimated to change significantly in the coming months.

Metsä Board's operating result for the third quarter of 2012, excluding non-recurring items, is expected to be slightly better than in the second quarter of 2012.

Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon

Near-term business risks

The risk of growth in the global general economy slowing down and economic growth in the euro region turning negative is high, which would result in a risk of weakened demand of paper products in particular, and a reduction in prices.

Because the forward-looking estimates and statements of this interim report are based on current plans and estimates, they contain risks and other uncertainties that may cause the results to differ from the statements concerning them. In the short term, Metsä Board's result will be particularly affected by the price of and demand for finished products, raw material costs, the price of energy, and the exchange rate development of the euro. More information on longer-term risk factors can be found on pages 29 and 30 of Metsä Board's 2011 Annual Report.

METSÄ BOARD CORPORATION

Further information: Matti Mörsky, CFO, tel. +358 10 465 4913 Juha Laine, Vice President, Investor Relations and Communications, tel. +358 10 465 4335

More information will be available starting from 1 p.m. on 2 August 2012. A conference call held in English for investors and analysts starts at 3 p.m. (EET). Conference call participants are requested to dial in and register a few minutes prior to the start of the conference call on the following numbers:

Europe: +44 (0)20 7162 0025 US: +1 334 323 6201

The conference ID is 918925.

BUSINESS AREAS AND MARKET TRENDS

Paperboard business area

	2012	2012	2011	2011	2011	2012	2011	2011
Paperboard	Q2	Q1	Q4	Q3		Q2 Q1-Q2	Q1-Q2	Q1-Q4
Sales, EUR million	274	281	275	322	338	554	697	1294
EBITDA, EUR million	35	40	-28	38	44	75	104	114
excl. non-recurring items	36	40	23	38	50	76	111	172
Operating result, EUR million	23	26	-57	24	17	49	63	30
excl. non-recurring items	23	26	8	24	36	50	82	114
excl. non-recurring items, %	8.4	9.3	2.9	7.4	10.7	9.0	11.8	8.8
Return on capital employed, %	14.0	15.8	-31.0	12.2	8.5	14.9	16.2	4.2
excl. non-recurring items, %	14.9	16.0	4.3	12.2	18.3	15.7	21.5	16.1
Deliveries, 1,000 tonnes	289	295	290	346	365	584	753	1,388
Production, 1,000 tonnes	286	282	295	342	367	569	766	1,403
Personnel at the end of period	2,028	2,002	2,034	2,082	2,325	2,028	2,325	2,034

Delivery and production amounts are not completely comparable due to structural change.

Result for April–June compared to the previous quarter

The operating result excluding non-recurring items for the Paperboard business area weakened slightly from the previous quarter and was EUR 23 million (Q1/2012: 26). The result was mainly caused by the investment shutdown at the Äänekoski folding boxboard mill. The result was improved by the slightly higher delivery volume of paperboards.

The result included EUR 1 million of non-recurring expenses related to the restructuring of production at Gohrsmühle. The result for the previous quarter did not include non-recurring items.

The deliveries of European folding boxboard producers were approximately 2 per cent higher than in the previous quarter. Deliveries of Paperboard's folding boxboard increased by approximately 5 per cent.

Result for January–June compared with the corresponding period last year The operating result excluding non-recurring items for Paperboard weakened compared to the corresponding period last year and totalled EUR 50 million (Q1–Q2/2011: 82). The most significant factor weakening the result was the lower delivery volume of paperboards.

The result of the corresponding period last year included EUR -19 million of non-recurring impairment losses and cost provisions related to the restructuring of Gohrsmühle.

The deliveries of European folding boxboard manufacturers fell by 7 per cent compared to the corresponding period last year. Paperboard's folding boxboard deliveries decreased by -2 per cent.

Paper and Pulp business area

	2012	2012	2011	2011	2011	2012	2011	2011
Paper and Pulp	Q2	Q1	Q4	Q3		Q2 Q1-Q2	Q1-Q2	Q1-Q4
Sales, EUR million	229	245	238	282	297	474	611	1132
EBITDA, EUR million	18	-2	-136	-4	-5	16	5	-135
excl. non-recurring items	18	2	-8	5	11	19	21	17
Operating result, EUR million	5	-16	-149	-27	-56	-11	-62	-237
excl. non-recurring items	5	-12	-19.7	-9.9	-4.0	-8	-10	-39.3
excl. non-recurring items, %	2.2	-4.9	-8.3	-3.5	-1.4	-1.7	-1.6	-3.5
Return on capital employed, %	3.0	-10.2	-91.0	-14.1	-27.9	-3.6	-15.2	-32.8
excl. non-recurring items, %	3.0	-8.1	-13.8	-5.1	-2	-2.5	-2.3	-5.7
Deliveries, Paper 1,000 tonnes	165	185	190	222	236	350	496	908
Deliveries, Pulp 1,000 tonnes	210	218	169	181	195	428	369	719
Production, Paper 1,000 tonnes	169	181	161	233	240	350	488	882
Production, Metsä Board Pulp 1,000 tonnes	297	313	235	309	325	610	665	1,210
Personnel at the end of period	986	1,253	1,471	1,514	1,778	986	1,778	1,471

Delivery and production amounts are not completely comparable due to structural change.

Result for April–June compared to the previous quarter

Operating result excluding non-recurring items for the Paper and Pulp business area improved from the previous quarter and was EUR 5 million (Q1/2012: -12). The result was improved by the significant decrease in the losses of the units which were shut down and those to be restructured, the increase in the average sales price of pulp, and the increase in pulp delivery volumes.

The result for the previous quarter included non-recurring items of EUR -3 million.

Total deliveries by European uncoated fine paper producers were down 4 per cent compared to the previous quarter. Paper and Pulp's delivery volume of uncoated fine paper decreased by -11 per cent.

Result for January–June compared with the corresponding period last year

The operating result excluding non-recurring items for Paper and Pulp improved slightly compared to the corresponding period last year and totalled EUR -8 million (Q1–Q2/2011: -10). The result was improved by the considerable decrease in losses in the units which were shut down and those to be restructured. The result was negatively affected by the decline in the prices of pulp and office papers.

The result of the corresponding period last year included a total of EUR -52 million of nonrecurring items, of which the most significant were EUR -49 million related to the sale of the Hallein pulp mill and EUR -4 million related to the personnel reductions in Reflex.

Total deliveries by European uncoated fine paper producers decreased by 4 per cent compared to the corresponding period last year. Paper and Pulp's delivery volumes for uncoated fine paper decreased by -30 per cent.

Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon

Sales and result by segment

	2012	2012	2011	2011	2011	2012	2011	2011
EUR million	Q2	Q1	Q4	Q3		Q2 Q1-Q2 Q1-Q2		Q1-Q4
Paperboard	274	281	275	322	338	554	697	1,294
Paper and Pulp	229	245	238	282	297	474	611	1,132
Other operations	89	89	75	89	104	178	201	365
Internal sales	-69	-70	-64	-77	-79	-139	-165	-305
Sales	522	545	524	616	660	1,067	1,345	2,485
Paperboard	35	40	-28	38	44	75	104	114
Paper and Pulp	18	-2	-136	-4	-5	16	5	-135
Other operations	136	-13	-9	-9	8	123	15	-2
EBITDA	189	25	-172	24	48	214	125	-23
% of sales	36.2	4.6	-32.8	3.9	7.3	20.0	9.3	-0.9
Paperboard	23	26	-57	24	17	49	63	30
Paper and Pulp	5	-16	-149	-27	-56	-11	-62	-237
Other operations	134	-15	-10	-10	7	119	13	-6
Operating result	161	-4	-215	-13	-32	157	14	-214
% of sales	30.8	-0.7	-41.0	-2.1	-4.8	14.7	1.0	-8.6
Non-recurring items in operating result
Paperboard	1	0	-65	0	-19	1	19	-84
Paper and Pulp	0	3	-129	-17	-52	3	52	-198
Other operations	-143	6	0	-2	7	-137	-11	9
Group	-142	10	-193	-18	-64	-133	61	-274
Paperboard	36	40	23	38	50	76	111	172
Paper and Pulp	18	2	-8	5	11	19	21	17
Other operations	-7	-7	-9	-7	1	-14	5	-11
EBITDA, excl. non-recurring items	47	34	8	36	62	81	136	180
% of sales	9.0	6.2	1.5	5.8	9.4	7.6	10.1	7.2
Paperboard	23	26	8	24	36	50	82	114
Paper and Pulp	5	-12	-20	-10	-4	-8	-10	-39
Other operations	-9	-9	-9	-8	0	-18	2	-15
Operating result,
excl. non-recurring items	19	5	-22	6	32	24	75	59
% of sales	3.6	0.9	-4.2	1.0	4.8	2.2	5.6	2.4
Operating result, excl. non-recurring items, % of sales
Paperboard	8.5	9.4	2.9	7.5	10.7	9.0	11.8	8.8
Paper and Pulp	2.0	-5.1	-8.4	-3.5	-1.3	-1.6	-1.6	-3.4
Group	3.6	0.9	-4.2	1.0	4.8	2.3	5.6	2.4

Metsä Fibre's net result is included in operating result at row "Share of results in associated companies" from 8.12.2009 on, before that Metsä Fibre was consolidated on proportionate basis line by line.

Return on capital employed %
Paperboard	14.0	15.8	-31.0	12.2	8.5	14.9	16.2	4.2
Paper and Pulp	3.0	-10.2	-91.0	-14.1	-27.9	-3.6	-15.2	-32.8

Unaudited Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon Group 35.9 -0.4 -43.3 -1.5 -6.1 17.7 1.4 -9.9 Capital employed, EUR million Paperboard 638 656 676 785 781 638 781 676 Paper and Pulp 612 615 614 724 775 612 775 614 Unallocated and eliminations 679 587 583 605 593 679 593 584 Group 1,929 1,858 1,873 2,114 2,149 1,929 2,149 1,873

The capital employed for a segment includes its assets: goodwill, other intangible assets, tangible assets, biological assets, investments in associates, inventories, accounts receivables, prepayments and accrued income (excluding interest and taxes), less the segment's liabilities (accounts payable, advance payments, accruals and deferred income (excluding interest and taxes).

Deliveries	2012	2012	2011	2011	2011	2012	2011	2011
1,000 tonnes	Q2	Q1	Q4	Q3	Q2	Q1-Q2	Q1-Q2	Q1-Q4
Paperboard	289	295	290	346	365	584	753	1,388
Paper	165	185	190	222	236	351	496	908
Market Pulp	210	218	169	181	195	427	369	719
Production	2012	2012	2011	2011	2011	2012	2011	2011
1,000 tonnes	Q2	Q1	Q4	Q3	Q2	Q1-Q2	Q1-Q2	Q1-Q4
Paperboard	286	282	295	342	367	569	766	1,403
Paper	169	181	161	233	240	350	488	881
Metsä Fibre pulp 1)	145	181	174	175	181	326	356	706
Metsä Board pulp	297	313	235	309	325	610	665	1,210

Delivery and production amounts are not completely comparable due to structural changes.

1) Corresponds to Metsä Board's ownership share of 32.0% in Metsä Fibre until 30 April 2012 and starting 1 May 2012 corresponds to Metsä Board's ownership share of 24.9% in Metsä Fibre.

Calculation of key ratios

Return on equity (%)	=	(Result from continuing operations before tax - direct taxes) per (Shareholders' equity (average))
Return on capital employed (%)	=	(Result from continuing operations before tax + interest expenses,net exchange gains/losses and other financial expenses) per (Shareholders' equity + interest-bearing borrowings (average))
Equity ratio (%)	=	(Shareholders' equity) per (Total assets - advance payments received)
Gearing ratio (%)	=	(Interest-bearing borrowings) per (Shareholders' equity)
Net gearing ratio (%)	=	(Interest-bearing borrowings - liquid funds - interest-bearing receivables) per (Shareholders' equity)
Earnings per share	=	(Profit attributable to shareholders of parent company) per (Adjusted number of shares (average))
Shareholders´equity per share	=	(Equity attributable to shareholders of parent company) per (Adjusted number of shares at the end of period)

FINANCIAL STATEMENTS

Unaudited interim condensed consolidated statement of comprehensive income

		Three months ended		ended		Year ended
		June 30			June 30	December 31
EUR million	Note	2012	2011	2012	2011	2011
Sales	2,7	522	660	1,067	1,345	2,485
Change in stocks of finished goods and
work in progress		-2	1	-24	6	-16
Other operating income	2,7	156	15	168	37	66
Material and services	7	-381	-493	-772	-1,020	-1,940
Employee costs		-65	-83	-131	-161	-418
Share of profits from associated companies	7	7	19	17	40	60
Depreciation, amortization and impairment losses		-28	-80	-57	-111	-191
Other operating expenses		-48	-71	-111	-122	-260
Operating result	2	161	-32	157	14	-214
Share of profits from associated companies		0	-4	0	-4	-7
Net exchange gains and losses		0	0	2	2	3
Other net financial items	2,7	-2	-17	-18	-34	-63
Result before income tax		159	-53	141	-22	-281
Income taxes	3	-19	-6	-16	-9	8
Result for the period		140	-59	125	-31	-273
Other comprehensive income
Cash flow hedges		-5	-4	-1	-7	-22
Available for sale financial assets	2	-76	5	-71	7	22
Translation differences		3	-6	5	-6	2
Share of profits from associated companies		-3	0	-2	0	0
Income tax relating to components of other
comprehensive income		20	0	18	0	5
Other comprehensive income, net of tax		-61	-5	-51	-6	7
Total comprehensive income for the period		79	-64	74	-37	-266
Result for the period attributable to
Shareholders of parent company		140	-59	125	-31	-273
Non-controlling interests		0	0	0	0	0
Total comprehensive income for the period attributable to
Shareholders of parent company		79	-64	74	-37	-266
Non-controlling interests		0	0	0	0	0
Total		79	-64	74	-37	-266
Earnings per share for result attributable to shareholders of parent company
(EUR/share)		0.43	-0.17	0.38	-0.09	-0.83

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

Unaudited condensed consolidated balance sheet		As of June 30		As of December 31
EUR million	Note	2012	2011	2011
ASSETS
Non-current assets
Goodwill		13	13	13
Other intangible assets		13	24	14
Tangible assets	4	916	961	941
Investments in associated companies		188	253	262
Available for sale investments		266	321	341
Other non-current financial assets	7	26	16	23
Deferred tax receivables		6	4	4
		1,428	1,592	1,598
Current assets
Inventories		294	377	335
Accounts receivables and other receivables	7	472	536	443
Cash and cash equivalents		419	262	305
		1,185	1,175	1,083
Assets classified as held for sale	5	2	70	7
Total assets		2,615	2,837	2,688
Equity attributable to shareholders of parent company Non-controlling interests		806 5	957 5	732 5
Total equity		811	962	737
Non-current liabilities
Deferred tax liabilities		135	181	154
Post-employment benefit obligations		76	79	81
Provisions	6	27	21	31
Borrowings		326	880	858
Other liabilities		24	11	28
		588	1,172	1,152
Current liabilities
Provisions	6	78	16	140
Current borrowings	7	792	268	279
Accounts payable and other liabilities	7	346	380	380
		1,216	664	799
Liabilities classified as held for sale			39
Total liabilities		1,804	1,875	1,951
Total shareholders' equity and liabilities		2,615	2,837	2,688

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

						Equity attributable to shareholders of parent company
		Share	Share pre mium	Trans lation differ	Fair value and other	Reserve for invested unstricted	Retained		Non control ling inter
EUR million	Note	capital	account	ences	reserves	equity	earnings	Total	ests	Total
Shareholders' equity, 1 January 2011		558	667	23	223	0	-476	994	5	999
Comprehensive income for the period Result for the period							-31	-31	0	-31
Other comprehensive income Cash flow hedges Available for sale					-7			-7		-7
investments Translation					7			7		7
differences Share of other comprehensive income of associated				-6				-6	0	-6
companies Income tax relating to components of other comprehensive income				0 0	0 0			0 0		0 0
Other comprehensive income total				-6	0		0	-6	0	-6
Comprehensive income total				-6	0		-31	-37	0	-37
Related party transactions Dividends paid									0	0
Shareholders' equity, 30 June 2011		558	667	17	223		-507	957	5	962

Unaudited consolidated statement of changes in shareholders' equity

						Equity attributable to shareholders of parent company
		Share	Share pre mium	Trans lation differ	Fair value and other	Reserve for invested unstricted	Retained		Non control ling inter
EUR million	Note	capital	account	ences	reserves	equity	earnings	Total	ests	Total
Shareholders' equity, 1 January 2012		558		25	228	285	-363	732	5	737
Comprehensive income for the period
Result for the period							125	125	0	125
Other comprehensive income
Cash flow hedges					-1			-1		-1
Available for sale investments Translation					-71			-71		-71
differences Share of other comprehensive				5				5		5
income of associated companies Income tax relating to components of other comprehensive				0	-2			-2		-2
income				0	18			18		18
Other comprehensive income total				5	-56		0	-51		-51
Comprehensive income total				5	-56		125	74	0	74
Related party transactions
Dividends paid									0	0
Shareholders' equity, 30 June 2012		558		30	172	285	-238	806	5	811

The accompanying notes are an integral part of these unaudited condensed financial statements.

Unaudited condensed consolidated cash flow statement

		Six months
		ended		December	Year ended Three months ended
			June 30	31	June 30
		2012	2011	2011	2012
EUR million	Note
Result for the period		125	-31	-273	140
Total adjustments	8	-151	92	300	-149
Change in working capital		32	-5	81	9
Cash flow from operations		6	56	108	0
Net financial items	8	-6	1	-20	-29
Income taxes paid		-4	-5	-5	-3
Net cash flow from operating activities		-4	52	83	-32
Acquisition of other shares				-5	0
Investments in intangible and tangible
assets		-27	-43	-90	-17
Disposals and other items	8	213	62	106	208
Net cash flow from investing activities		186	19	11	191
Other changes in equity				4
Changes in non-current loans and in other
financial items		-68	-216	-201	-8
Dividends paid		0	0	0	0
Net cash flow from financing activities		-68	-216	-197	-8
Changes in cash and cash equivalents		114	-145	-103	151
Cash and cash equivalents at beginning of
period		305	408	408	268
Translation difference in cash and cash
equivalents		0	0	0	0
Changes in cash and cash equivalents		114	-145	-103	151
Assets held for sale			-1
Cash and cash equivalents at end of period		419	262	305	419

The accompanying notes are an integral part of these unaudited condensed financial statements.

NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS

Note 1 – Background and basis of presentation

Metsä Board Corporation and its subsidiaries comprise a forest industry group whose main product areas are paperboards, office papers, speciality papers and pulp. Metsä Board Corporation, the parent company, is domiciled in Helsinki and the registered address of the company is Revontulentie 6, 02100 Espoo, Finland. Metsä Board's ultimate parent company is Metsäliitto Cooperative.

These unaudited interim statements have been prepared in accordance with IAS 34, Interim Financial Reporting and the same accounting policies have been applied as in the 2011 annual consolidated financial statements.

This interim report is unaudited.

All amounts are presented in millions of euros, unless otherwise stated.

This interim report was authorized for issue by the Board of Directors of Metsä Board on 2 August 2012.

Note 2 – Segment information

The Corporate Management Team is the chief operational decision-maker, which monitors the business operations based on the operating segments. Metsä Board, part of Metsä Group, announced on 19 January 2012 the renewal of its management and reporting structure to better reflect the company's strategy and focus on fresh forest fibre cartonboard. The company operates through two business areas that are also the company's reporting segments from the first quarter of 2012 onwards: Paperboard and Paper and Pulp.

The Paperboard business area includes the Kemi, Kyro, Simpele, Tako and Äänekoski board mills, Kyro wallpaper base machine and Joutseno BCTMP mill located in Finland as well as the Gohrsmühle mill in Germany. The Paper and Pulp business area includes Husum paper and pulp mill in Sweden, Alizay mill in France and Kaskinen BCTMP mill in Finland. The negotiations with employees on shutting down the Alizay mill and the discontinuation of the unprofitable operations of the Gohrsmühle mill were completed in March.

Accounting for ownership in Metsä Fibre (formerly Metsä-Botnia) remains unchanged. The associated company result of Metsä Fibre will continue to be allocated to business segments based on their respective pulp consumption and is reported in EBITDA. Approximately two thirds of the result impact of Metsä Fibre ownership is included in the Paperboard business area and the rest in the Paper and Pulp business area.

The sales of the reporting segments are mainly generated by sales of board and paper, but the sales of the Paper and Pulp operating segment includes sales of pulp to external customers.

The accounting principles for the segment information are equal to those of the Group and all inter-segment sales are based on market prices.

	Six months ended June 30, 2012			Six months ended June 30, 2011
	External	Internal	Total	External	Internal	Total
Paperboard	554	0	554	677	20	697
Paper and Pulp	474	0	474	610	1	611
Other operations	39	139	178	57	144	201
Elimination		-139	-149		-165	-165
Total sales	1,067	0	1,067	1,345	0	1,345

Sales by operating segments

	Year ended December 31, 2011
	External	Internal	Total
Paperboard	1,266	28	1,294
Paper and Pulp	1,132	0	1,132
Other operations	88	277	365
Elimination		-305	-305
Total sales	2,485	0	2,485

Operating result by operating segments

	Six months ended		Year ended
EUR million	June 30,		December 31,
	2012	2011	2011
Paperboard	49	63	30
Paper and Pulp	-11	-62	-237
Other operations	119	13	-6
Operating result total	145	14	-214
Share of profit from associated companies Finance costs,	0	-4	-7
net	-16	-32	-60
Income taxes	-16	-9	8
Result for the period	125	-31	-273

Operating result for the six months ended 30 June 2012 includes in the Paper and Pulp business area EUR 2 million in additional cost provisions related to the decision to close the Alizay mill and EUR one million in additional cost provisions related to the plans to close unprofitable operations at Reflex.

Other operations includes a EUR 85 million profit related to the sale of a 7.3. percentage point share in Metsä Fibre to Itochu Corporation and EUR 59 million profit before taxes (after taxes EUR 44 million) related to the sale of 0.5 percentage point share in Pohjolan Voima to Metsä Fibre. The sale did not affect equity, as the Group booked the same amount in decreases in fair value reserves and EUR one million in sales profit related to the sale of real estate in Tampere. Other Operations includes a EUR 8 million cost provisions related to soil contamination clean-up at Niemenranta in Tampere and a EUR one million cost provision reversal related to logistics agreements and the sale of graphic papers business.

Pohjolan Voima Oy paid out a EUR 6 million dividend during the reporting period. Other financial income and expenses included EUR 10 million in valuation gains on interest rate derivatives (valuation loss EUR 1 million). Of the valuation gain EUR 8 million was generated by valuations of the fair value hedge accounting in accordance with IFRS as the USD-based loan and related currency agreement and an interest rate swap expired in June.

Assets by operating segments

	Six months ended		Year ended
EUR million	June 30,		December 31
	2012	2011	2011
Paperboard	896	1,033	965
Paper and Pulp	814	988	869
Other operations	447	505	540

Unaudited
Metsä Board Corporation Interim Report 1 January-30 June 2012	2 August 2012 at 12 noon

Elimination	-86	-71	-75
Unallocated	544	382	389
Total	2,615	2,837	2,688

Segment assets include goodwill, other intangible assets, tangible assets, investments in associated companies, inventories, accounts receivables and prepayments and accrued income (excl. interest and income tax items).

Note 3 – Income taxes

Tax expense in the interim condensed combined income statement is comprised of the current tax and deferred taxes. Income taxes for the six months ended 30 June 2012 and 2011 and for the year ended 31 December 2011 are as follows:

	Six months ended		Year ended December 31
		June 30
EUR million	2012	2011	2011
Taxes for the current period	21	7	16
Taxes for the prior periods	0	-4	-4
Change in deferred taxes	-5	6	-20
Total income taxes	16	9	-8

The increase in tax expense during the reporting period is primarily related to the sale of a 0.5 per cent ownership share in Pohjolan Voima to Metsä Fibre.

Note 4 – Changes in property, plant and equipment

The following shows the components of changes in property, plant and equipment for the six months ended 30 June 2012 and 2011 and for the year ended 31 December 2011:

Changes in property, plant and equipment	Six months ended		Year ended
	June 30		December 31
EUR million	2012	2011	2011
Carrying value at beginning of period	941	1,063	1,063
Capital expenditure	27	43	92
Decreases	0	0	-1
Asset classified as held for sale	0	-30	-30
Depreciation, amortization and impairment losses	-55	-108	-185
Translation difference	3	-7	2
Carrying value at end of period	916	961	941

Note 5 – Assets held for sale

In the beginning of July Metsä Board sold its 48 percentage point share in its associated company Kirkniemen Kartano Oy to Metsäliitto Cooperative. These assets for sale, EUR 2 million, are classified as non-current assets held for sale according to IFRS 5, Non-current assets held for sale and discontinued operations.

Note 6 – Provisions

The following is a summary of changes Metsä Board's provisions during the six months ended 30 June 2012.

Unaudited Metsä Board Corporation Interim Report 1 January-30 June 2012 2 August 2012 at 12 noon

EUR million	Restructuring	Environmental obligations	Other provisions	Total
At 1 January 2012	109	18	44	171
Translation differences	0	0	0	0
Increases	11	11	3	25
Utilized during the year	-51	0	-25	-76
Unused amounts reversed	-6	-5	-4	-15
At 30 June 2012	63	24	18	105

The most significant increase in provisions in 2012 was a EUR 11 million environmental provision in Other Operations related to the soil contamination clean-up at Niemenranta in Tampere (EUR 8 million) and soil contamination clean-up in Nurmes (EUR 4 million). In Paper and Pulp there was a net increase of EUR 2 million in cost provisions related to the closure of the Alizay paper mill (restructuring provision was increased by EUR 11 million, EUR 5 million reversal of an environmental provision and EUR 4 million reversal of other cost provisions). In Paperboard, related to plans to close unprofitable operations in Gohrsmühle, there was a EUR 5 million reversal of a restructuring provision related to personnel costs and other provisions were increased by EUR 3 million related to logistics arrangements. In Other Operations there was a reversal of a EUR one million logistics provision, made in 2008 related to the sale of graphic papers business.

The non-current portion of provisions was some EUR 27 million and the current portion some EUR 78 million, total provisions being EUR 105 million. The non-current portion is estimated to be paid by the end of the year 2013.

Note 7 – Related party transactions

Metsä Board's Board of Directors, the Corporate Management Team, Metsäliitto Cooperative and its subsidiaries and Metsä Board's associated companies are considered related parties. Metsä Board enters into a significant number of transactions with related parties for the purchases of inventory, sale of goods, corporate services as well as financial transactions. Product and service transfers and interest between Metsä Board and the related parties have been made at arm's length prices.

Transactions between Metsä Board and related parties for the six months ended 30 June 2012 and 2011 and for the year ended 31 December 2011 are as follows:

Related party transactions

Transactions and balances with parent and sister companies

	Six months ended		Year ended
	June 30		December 31
EUR million	2012	2011	2011
Sales	30	32	61
Other operating income	61	3	6
Purchases	340	416	770
Share of profit from associated companies	17	40	60
Interest income	1	2	5
Interest expenses	1	2	2
Non-current receivables	5	4	4
Current receivables	127	90	72
Non-current liabilities	0	0	0
Current liabilities	289	118	151

Other operating income includes a EUR 59 million profit related to the sale of a 0.5 percentage point share in Pohjolan Voima to Metsä Fibre.

Metsä Fibre's net result is included within operating result line item "Share of profits from associated companies" and transactions with Metsä Fibre are included in transactions with sister companies beginning from 8 December 2009. Metsä Fibre paid a dividend of EUR 33 million to Metsä Board during the three months ended 31 March 2012.

Transactions with associated

companies

	Six months ended June 30		Year ended December 31
EUR million	2012	2011	2011
Sales	0	0	0
Purchases	3	3	7
Current receivables and other receivables	0	4	0
Current liabilities	2	3	3

Note 8 – Notes to condensed consolidated cash flow statement

Adjustments to the result for the period

	Six months ended		Year ended
	June 30		December 31
EUR million	2012	2011	2011
Taxes	16	9	-8
Depreciation, amortization and
impairment charges	57	111	191
Share of results in associated companies	-17	-40	-53
Gains and losses on sale of fixed assets	-152	-13	-19
Finance costs, net	16	31	60
Provisions	-71	-6	129
Total	-151	92	300

Net financial items

Net financial items in consolidated cash flow statement for six months ended 30 June 2012 include a dividend of EUR 33 million paid by Metsä Fibre and a dividend of EUR 6 million paid by Pohjolan Voima.

Disposals and other items

Six months ended 30 June 2012 include a EUR 138 million sales price related to the sale of a 7.3 percentage point share in Metsä Fibre to Itochu Corporation, EUR 63 million sales price related to the sale of a 0.5. percentage point share in Pohjolan Voime to Metsä Fibre, a EUR 7 million disposal of associated company Plastiroll Oy's shares, a negative EUR 3 million related to the disposal of Reflex business and EUR 8 million in other disposals.

Note 9 – Commitments and contingencies

Securities and guarantees

The following shows securities and guarantees for the six months ended 30 June 2012 and 2011 and for the year ended 31 December 2011:

Securities and guarantees

	Six months ended June 30		Year ended
			December 31
EUR million	2012	2011	2011
For own liabilities	193	187	194
On behalf of associated companies	0	0	0
On behalf of Group companies	13	14	13
On behalf of others	2	3	3
Total	208	204	210

Securities and guarantees include pledges, real estate mortgages, chattel mortgages and guarantee liabilities.

Metsä Board holds operating leases for certain vehicles and equipment. Leasing liabilities are part of table above.

Non-cancellable purchase agreements concerning property, plant and equipment were EUR 0 million for the six months ended 30 June 2012 and for the year ended 31 December 2011. For 30 June 2011 there were purchase agreements worth EUR 2 million. The liability disappeared as a result of M-real Hallein's disposal in September 2011.

Open derivative contracts

Six months ended		Year ended
	June 30		December 31
EUR million	2012	2011	2011
Interest rate derivatives	1,976	1,352	1,349
Currency derivatives	1,482	1,675	1,578
Other derivatives	116	85	124
Total	3,574	3,112	3,051

The fair value of open derivative contracts calculated at market value at the end of the review period was EUR -29.4 million (EUR -37.8 million 31 December 2011 and EUR -5.4 million 30 June 2011)