Ceepackaging

Corporate

Mayr-Melnhof Group notes continuing growth

As already reported, the order backlog has come down again after the all-time high in
mid-2007. Against this backdrop the Mayr-Melnhof Group recorded however still
sound demand and high capacity utilization both in cartonboard and folding carton
production during the first months of 2008.
In the course of persistently high prices of raw materials and increasing inflationtriggered
slackening of private consumption the economy in Western Europe is visibly
continuing to slow down. Under these more challenging conditions MM relies on
additional productivity gains and price discipline to support high profitability for the
Group.

Within this context the expansion program for high performance sites is intensified by
concentrating volumes and investments on these units.
In this connection production will be shut down at the Bulgarian cartonboard mill in
Nikopol (capacity ~60,000 tons p.a.) and transferred to more cost efficient high
performance mills of MM Karton. Expenses for wound up activities amounting to
EUR 22.6 million have been recorded in the first quarter.
The divestment of the recovered paper company Joh. Spiehs as well as the stake in
the recovered paper companies “Papyrus-Group” and Parek was finalized. The gain
from the disposal of businesses totals EUR 20.0 million.
Consolidated sales increased by 7.5 % or EUR 31.6 million to EUR 452.9 million. This
increase resulted from rises in volume in both divisions and higher cartonboard prices.
The operating profit increased by 5.2 % to EUR 44.4 million. This improvement is attributable
to a rise in profit at both MM Karton and MM Packaging. The operating margin reached
9.8 % (Q1 2007: 10.0 %).
Profit before tax came in at EUR 42.4 million which is slightly below the previous year’s figure
(Q1 2007: EUR 42.9 million). Income tax expense was at EUR 15.1 million after
EUR 14.2 million in the first quarter of 2007. The effective Group tax rate went up from
33.1 % to 35.6 %. This rise is mainly attributable to the taxation of non-recurring income from
the disposal of businesses. For the following quarters a decrease in the effective Group tax
rate may be expected due to the lower German corporate tax rate in 2008.
OUTLOOK
In the course of progressing inflation and the strong appreciation of the Euro, the European
economy has noticeably slowed down during the first months of this year. Against this
backdrop our customers are planning clearly at shorter notice. As already indicated in
mid-March, business development during the first half-year of 2008 will be characterized by
unchanged high costs as well as demand and currency (British Pound) driven price pressure.
In cartonboard production first quarter capacity utilization could still be sustained at a very
high level due to increased sales to non-European markets. However, for the second quarter
more downtime is inescapable as we focus on price stability and sales possibilities outside
Europe are limited. On the cost side prices for the strategic raw material recovered paper
have started easing only at a very slow pace. In contrast, all crude oil price related input
factors are expected to face an upward trend. The first quarter operating margin will therefore
not be reached in the second quarter.
The overall utilization rate of the Western European folding carton industry is gradually
presenting a more heterogeneous picture. At MM Packaging we are however confident to
keep profitability at a consistently high level also in the second quarter due to gains of further
market shares and additional improvement in productivity.
From today’s perspective 2008 first half-year results are therefore expected to come in
slightly below last year’s level.
The path of expansion will be continued. The prospects are good.