Contents Investment highlights and update General presentation 2 - - PowerPoint PPT Presentation

10.2.2011 Investor presentation 4Q 2010 1

Contents

Investment highlights and update 2 Investment Highlights 3 Strategy 15 Financial Targets 17 2010 Results & Outlook 31 Price Development 33 Dividend 36 Investments Funding and debt information 39 Divestments 40 Funding and Debt 47 Credit Facilities 48 Rating History General presentation 49 General Info 56 Business Portfolio 65 Operations 71 Deliveries 73 Sourcing 81 Owners 84 Market Position

10.2.2011 Investor presentation 4Q 2010 2

Investment Highlights

• Strong growing core in high-quality cartonboards

– M-real the European market leader in folding boxboard – Good growth potential

• Material profitability turn-around in 2010
• Significant net debt reduction in recent years
• Strategic review ongoing

– M-real the forerunner in paper merchanting and coated papers industry restructuring in Europe – Asset divestments – Extensive cost savings and cash flow improvement programmes

Strategy

10.2.2011 Investor presentation 4Q 2010 4

Consistent Strategic Direction Since 2006

New profit improvement programme 2011

• Cartonboards for consumer packaging

the strategic core business

• Divestment of underperforming paper

businesses

• Major cost savings through complexity

reduction and efficiency improvement

• High pulp and energy self-sufficiency
• Customer orientation and proactive

approach to increase prices

Profit improvement programme 2010 Divestment of Metsä-Botnia’s Uruguayan operations 2009 Divestment of Graphic Papers 2008 Self-sufficiency in pulp 2008 New efficiency improvement programme 2007 Divestment of Map Merchant Group 2007 Extension of the restructuring programme 2007 Extensive restructuring programme 2006

10.2.2011 Investor presentation 4Q 2010 5

M-real Has Achieved Significant Results from Restructuring

687 823 1 068 995 876

300 600 900 1 200 2006 2007 2008 2009 2010 tonnes/a/person

Capacity per employee in M-real’s pulp, paper and board mills

827 777 1254 2183 3109 3019 3482 3693 2205 2403 1867

500 1000 1500 2000 2500 3000 3500 4000

2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1

M-real’s net debt development M€

• Productivity of the mills improved by

55% from 2006

• Sales office locations reduced by almost

30%, logistics locations by 50%

• Capacity closures of about 2 million

tonnes/a

• Divestments worth over EUR 2 billion

mainly of non-profitable paper businesses

• M-real’s net debt reduced to about one

third of the 2006 level

5

10.2.2011 Investor presentation 4Q 2010 6

Packaging Is One of the Biggest and Fastest Growing Businesses in the World

• One of the most important well-being

drivers in the world

• Product safety issues are crucial
• Branding and information sharing

increasingly important

• Criticism against bad packaging

increasing

Flexible plastics 20 % Metal 15 % Glass 7 % Others 6 % Board 31 % Rigid plastics 21 %

Sources: Pira & M-real

Global Packaging Market ($634 Billion)

Virgin fibre cartonboard ~7% of total

10.2.2011 Investor presentation 4Q 2010 7

Several Megatrends Supporting Good Packaging

• Demand for good packaging heavily increasing
• Good packaging is environmentally sustainable

– Made out of renewable raw material and recyclable – High energy self-sufficiency in production – Low carbon footprint – Lightweight

• Good packaging is safe

– Durable – No migration – Good printing surface

• Good packaging is economical

10.2.2011 Investor presentation 4Q 2010 8

Virgin Fibre Board Is the Best Example of Good Packaging – Lowest Carbon Footprint

• Virgin fibre based lightweight

cartonboards the most environmentally sound packaging material

• Wood fibre based products

replace non-renewable materials like plastic and aluminium

• Virgin fibre board replaces also

recycled fibre based packaging materials

2000 4000 6000 8000 10000 12000 14000 M-real's Carta Solida HDPE PET PLA (Biobased polymer) Aluminium kg/tonne

Source: M-real and Sustainable Packaging Coalition - SPC

Cartonboard has the lowest carbon footprint

10.2.2011 Investor presentation 4Q 2010 9

Watch Your Weight!

For an order of 50.000 sheets (520 x 720 mm) you will need 18.720 m2 of board:

~13 mNm CD stiffness, ~500 µm thickness M-real lightweight paperboard Average FBB

(folding boxboard)

SBB

(solid bleached board)

WLC

(white lined chipboard)

10.2.2011 Investor presentation 4Q 2010 10

M-real Targets Growth in Its Core Business Packaging

• Huge growth potential in wood fibre based packaging applications when

replacing non-sustainable packaging materials

• M-real a strong producer of virgin fibre based cartonboard and white top

linerboard as well as packaging related speciality papers

• Access to wood raw material, superior fibre knowhow and pulp self-sufficiency

M-real’s important competitive advantages

10.2.2011 Investor presentation 4Q 2010 11

M-real is Investing in Its Cartonboard Business

• 26 M€ investment in 80 kton/a capacity expansion at Simpele

– Simpele’s cartonboard machine the most efficient in Europe – Simpele mill’s sheeting capacity will be expanded – To be completed in summer 2011

• 16 M€ investment in Kemiart Liners to modernize

the coating section

– Increased share of high value added coated products – To be completed in autumn 2011

• Evaluations regarding further development steps in

cartonboard business continue

10.2.2011 Investor presentation 4Q 2010 12

M-real Strategic Review

• M-real’s Response to the Changes in Business Environment
• In March 2006, M-real's Board of Directors initiated a strategic review
• M-real was the first major paper company to emphasize the need for

industry consolidation and extensive restructuring

• M-real took the leading role in European paper merchanting

restructuring in 2007

• M-real also took the leading role in European coated paper industry

restructuring in 2008

• Extensive internal profit improvement programmes

10.2.2011 Investor presentation 4Q 2010 13

Strategic Review of the Paper Business Proceeds

• M-real in strong position in participating

restructuring of the European uncoated fine paper business

• M-real Zanders is a leading European

speciality paper producer

• Potentially, also separate divestments of

the non-profitable units

10.2.2011 Investor presentation 4Q 2010 14

M-real Is a Responsible Company

Completed closures in 2007

– Sittingbourne: coated fine paper 210 ktons/a – Gohrsmühle PM6 and PM7: coated fine paper 100 ktons/a – Wifsta: uncoated fine paper 175 ktons/a – Tako BM2: folding boxboard 70 ktons/a

Closures in 2008

– Kangas PM2: coated magazine paper 100 ktons/a – Lielahti: BCTMP 105 ktons/a – New Thames: uncoated fine paper (divestment, grade conversion) 230 ktons/a

Closures in 2009

– Hallein paper mill: coated fine paper 310 ktons/a – Gohrsmühle: standard coated fine paper * 250 ktons/a

Closures in 2010

– Two machines in Reflex: Speciality paper 80 ktons/a – Alizay pulp mill: Chemical pulp 310 ktons/a – Simpele paper mill: Speciality paper 50 ktons/a Total paper capacity 1 515 ktons/a Total board capacity 70 ktons/a Total pulp (incl. BCTMP) capacity 415 ktons/a

*In Gohrsmühle the speciality paper and uncoated fine paper reel and folio sheet production expanded after the discontinuation of the standard coated fine paper production.

Financial Targets

10.2.2011 Investor presentation 4Q 2010 16

Financial Targets

• ROCE target set at a minimum of 10% on average over the business cycle
• Net gearing not to exceed 100%

Minimum ROCE 10%* Maximum net gearing 100%

13,5% 6,2% 2,1%1,6%0,5%0,9% 2,8%

• 0,5%
• 5,6%

7,6% 10,2% 7,6%

99 00 01 02 03 04 05 06 07 08 09 10

Minimum target of 10% 184% 119% 137% 82% 95% 126% 99%90%84%83% 83% 145%

99 00 01 02 03 04 05 06 07 08 09 10

Maximum level of 100%

* Excluding non-recurring items

2010 results and Outlook

10.2.2011 Investor presentation 4Q 2010 18

Key Events in 2010

• Significant profitability turnaround
• Strong demand in all main grades

– Production and delivery records at all board mills

• M-real increased prices of all main products
• Succesfull internal profit improvement actions

– Closures of Alizay pulp mill and Simpele speciality paper machine

• Partial divestment of Reflex mill
• M-real decided to increase cartonboard capacity

18

10.2.2011 Investor presentation 4Q 2010 19

Key Figures – Annual Comparison

*from continuing and discontinued operations

• 230

92

• 300
• 200
• 100

100 200 2009 2010

• 358

48

• 400
• 300
• 200
• 100

100 2009 2010

• 267

146

• 300
• 200
• 100

100 200 2009 2010

Operating result

m€

Result before taxes

m€

• 150

173

• 200
• 100

100 200 2009 2010

Operating result, excl. non-

• rec. items

Result before taxes, excl. non-rec. items

m€ m€

Sales

2432 2605 1000 2000 3000 4000 2009 2010 m€

ROCE*

• 8,9

5,7

• 10
• 5

5 10 2009 2010 %

Board of Directors is proposing to the AGM that dividend will not be paid for the financial year 2010

10.2.2011 Investor presentation 4Q 2010 20

Key Figures – Quarterly

Sales Operating result excl. non-rec. items

623 585 618 606 859 829 826 722 602 676 662 665 250 500 750 1000 I II III IV I II III IV I II III IV m€ m€ m€ Result before taxes excl. non-rec. items

2009 2008

• 65

7

• 22
• 70

14 3

• 1
• 51

39 43 54 37

• 75
• 50
• 25

25 50 75 I II III IV I II III IV I II III IV

• 21
• 36
• 34
• 87

15

• 15
• 70
• 83
• 62

33 24 20

• 100
• 75
• 50
• 25

25 50 I II III IV I II III IV I II III IV

2010

10.2.2011 Investor presentation 4Q 2010 21

Strong Performance of Consumer Packaging Continues

305 303 100 200 300 400 3Q 2010 4Q 2010

Sales

m€

• Profitability improved from 3Q by implemented price

increases

• Weakened USD vs. euro has negative result impact
• Demand continues strong
• Higher average prices improve results from 1Q 2011
• M-real is growing the Consumer Packaging business

– Production capacity to be increased in Simpele, Äänekoski and Kyröskoski EBIT, excl non-recurring items

34 38 10 20 30 40 50

m€

3Q 2010 4Q 2010

21

10.2.2011 Investor presentation 4Q 2010 22

Office Papers Has Announced a New Price Increase

9

• 10

10 20 30

EBIT, excl non-recurring items

m€

164 181 50 100 150 200

Sales

m€

3Q 2010 4Q 2010 3Q 2010 4Q 2010

• Result was weakened from 3Q by higher wood costs,

weaker sales mix resulting in lower average paper price as well as unfavourable currency rates

• Demand expected to continue stable
• M-real has announced an uncoated fine paper price

increase of 6-8 % effective of 14 March

• New measures planned to eliminate Alizay’s losses

22

10.2.2011 Investor presentation 4Q 2010 23

Share of Coated Speciality Grades Increasing in Speciality Papers

• Result was weakened from 3Q by seasonally lower delivery

volumes and higher production costs

• Result was improved by higher paper prices
• Demand expected to remain stable. No material near-term

changes in price level in sight

• Share of coated speciality grades increased in Gohrsmühle

– Actions to find more volumes continue

• Intensive actions ongoing to eliminate losses coming from

Speciality Papers

• 7
• 8
• 20
• 10

10 20

EBIT, excl non-recurring items

m€

75 66 25 50 75 100

Sales

m€

3Q 2010 4Q 2010 3Q 2010 4Q 2010

23

10.2.2011 Investor presentation 4Q 2010 24

Lower Pulp Price Weakened Market Pulp and Energy’s Profitability

16 12 5 10 15 20 25

EBIT, excl non-recurring items

m€

107 106 50 100 150 200

Sales

m€

3Q 2010 4Q 2010 3Q 2010 4Q 2010

• Profitability weakened from 3Q by lower pulp price partly

as a result of stronger euro and higher wood costs in Sweden

• Pulp demand expected to continue strong
• No material pulp price changes in sight

– 1Q 2011 average price slightly lower than in 4Q 2010

• Wood cost inflation a challenge in Sweden and Austria

24

10.2.2011 Investor presentation 4Q 2010 25

New 70 m€ Profit Improvement Programme Started

Profit improvement targets, %

Market Pulp and Energy 3 % Others 2 % Speciality Papers 30 % Office Papers 20 % Consumer Packaging 45 %

• Includes all business areas and support

functions

• Main focus is on improving paper business

profitability

• Profit impact of Simpele and Kemi

investments included

• Additionally, big profit improvement potential

especially in variable cost savings in coming years

10.2.2011 Investor presentation 4Q 2010 26

Positive Result Impact of Internal Actions Expected to be 90 m€ in 2011 vs. 2010

Cumulative Profit impact vs. 2010, m€ total target 2011 2012 1 Profit improvement programme 2011 70 30 70 2 Rollover impact of 2010 profit improvement programme 40 40 40 3 Rollover impact of older programmes 20 20 20 Total 130 90 130

M-real expects to mostly cover the accelerated cost inflation in 2011 by the profit impact of own actions

10.2.2011 Investor presentation 4Q 2010 27

Demand Growth for M-real’s Ecological and Safe Virgin Fibre Board in Food Packaging Faster than Expected

• Simpele 80 kt/a capacity increase not enough to

satisfy the customers’ growing demand

– Transfer from recycled fibre board to virgin grades larger that estimated

• M-real plans to invests 30 m€ to expand capacity

at Äänekoski and Kyröskoski

– Increase would in total be 70 kt/a, completed 4Q 2011-2Q 2012

• M-real has still potential to further increase the

cartonboard capacity at the existing mills

10.2.2011 Investor presentation 4Q 2010 28

M-real Board Proposes to the AGM a Transfer of Share Premium Reserve to Distributable Profits

• Share premium reserves in parent company were accumulated during last decades

from share issues with subscription value exceeding the nominal value of the share

• Law changed in 2006 allowing the transfer of the share premium reserve subject to

AGM decision and that creditors refrain objecting

– Many Finnish companies have completed similar transfers in recent years

• If proposal is approved it will positively impact on the capability of

the parent company to distribute dividends in the future

10.2.2011 Investor presentation 4Q 2010 29

Management Focus Areas in 2011

• Utilise all opportunities for new price increases
• Completion of cartonboard capacity expansion investments
• Implementation of the new 70 m€ profit improvement programme
• Potential divestments of non-profitable assets
• Renewed systematic approach to save variable costs in all businesses
• Identify new ways to continue the paper business strategic review

10.2.2011 Investor presentation 4Q 2010 30

Profitability Outlook

In the first quarter of 2011 M-real’s operating result, excluding non- recurring items, is expected to improve from the fourth quarter of 2010

10.2.2011 Investor presentation 4Q 2010 31

Folding Boxboard Market Price in Europe 2000 – 2010

EUR / tn Three month moving average 400 600 800 1000 1200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: M-real

10.2.2011 Investor presentation 4Q 2010 32

Paper and Pulp Market Price in Europe 1998 – 2010

EUR / tn Coated fine paper (100 g) Uncoated fine paper (B-copy, 80 g) Softwood pulp NBSK Coated magazine paper LWC (60g)

Source: Foex, Reuters

EUR/USD EUR/USD

400 500 600 700 800 900 1000 1100 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0,8 0,9 1 1,1 1,2 1,3 1,4 1,5 1,6 1,7

Dividend

10.2.2011 Investor presentation 4Q 2010 34

Dividend Policy

• Future dividends will take into account the need to achieve and

maintain sufficient financial flexibility

• The Company remains committed to an attractive and

competitive dividend M-real's dividend policy is stable and rewarding to shareholders, and aims at paying a dividend of at least 1/3 of the Company's EPS on average over the business cycle, nonetheless taking into account the Company's gearing target

10.2.2011 Investor presentation 4Q 2010 35

Dividend Yield

0,50 1,09 1,13 1,85 0,46 0,30

• 0,79
• 1,58
• 1,09

0,26 0,37 0,38 0,51 0,51 0,51 0,25 0,00 0,00 0,00 0,09

• 0,59
• 1,21
• 0,25
• 0,43

0,23 0,06 0,06 0,14 0,12 0,12

0,0% 0,0% 4,3% 0,0% 1,3% 1,4% 2,1% 2,8% 3,3% 4,1% 5,6% 5,5% 6,9% 8,6% 7,2%

• 2
• 1,5
• 1
• 0,5

0,5 1 1,5 2 2,5 3 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 € per share

• 8 %
• 6 %
• 4 %
• 2 %

0 % 2 % 4 % 6 % 8 % 10 % 12 % Dividend yield, % Earnings per share Dividend per share Dividend yield

Dividend yield calculated from annual average B-share volume weighted price In the graph 2010 Dividend is Board’s proposal to the AGM

Investments

10.2.2011 Investor presentation 4Q 2010 37

Capital Investments

Capital Investments about 100 m€ in 2011

• 1 500
• 1 000
• 500

500 1 000 1 500 2 000 2 500 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 E Million €

Disposals Acquisitions Capital expenditure on fixed assets *Indicative level for 2011

Funding and debt information

10.2.2011 Investor presentation 4Q 2010 39

Significant Divestments

• EUR 3.4 billion in assets divested since 2001

Year Divestiture Enterprise Value

300* 2009 Metsä-Botnia’s Uruguayn operations 750 2008 Graphic Papers 80 2008 100 000 B2 shares in PVO 82** 2008 New Thames mill 382 2007 Map Merchant Group 60 2007 Folding carton plants EUR millions 240 2007 Botnia (9%) 164 2005 Botnia (8%) 163 2005 Forestia (95%) 20 2005 Savon Sellu 570 2004 Metsä Tissue 235 2002 Papierfabrik Albbruck 300 2001 MD Papier Noviant (19%) 2001 41 3,387

* Cash portion **Incl. pension liabilities

10.2.2011 Investor presentation 4Q 2010 40

Strong Financing Situation Continues

• Current net debt 827 m€ and

net gearing 83 %

• ONWC level was unchanged in 4Q but

increased in excess of 100 m€ in 2010

– ONWC turnover days stable in 2010

• Liquidity 408 m€ at end 2010
• Average interest rate 5,1% at end 2010

827 777 1254 2183 3109 3019 3482 3693 2205 2403 1867 500 1000 1500 2000 2500 3000 3500 4000 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1

Net Debt, m€

10.2.2011 Investor presentation 4Q 2010 41

Loans and Interest Rate

At the end of 2010

• Average maturity of long term loans

2,7 years

• Average interest rate of loans (including derivatives)

5,1 %

• Interest rate maturity of loans (including derivatives)

9,4 months

• Of the loans about 83 per cent was subject to variable interest

rates and 17 per cent to fixed interest rates

10.2.2011 Investor presentation 4Q 2010 42

Long-term Interest Bearing Liabilities

5 % 5 % 2 % 7 % 21 % 60 % MTN Programme Bonds Pension premium loans Loans from financial institutions Finance leases Other interest bearing liabilities

Total 1 127 m€ 31.12.2010

10.2.2011 Investor presentation 4Q 2010 43

Short term interest bearing liabilities

Short-term Interest Bearing Liabilities

Total 223 m€ 31.12.2010

2 % 98 % Metsäliitto Group Short-term bank loans and other

10.2.2011 Investor presentation 4Q 2010 44

Interest bearing net liabilities 31.12.2003

Interest Bearing Net Liabilities 31.12.2010

• Long-term

1 127

• Short-term

223 Total interest bearing liabilities 1 350

• Liquidity and other interest bearing receivables

523

• Interest bearing net liabilities

827

10.2.2011 Investor presentation 4Q 2010 45

Long-term Interest Bearing Liabilities 31.12.2010

111 158 605 122 21 20 20 70 100 200 300 400 500 600 700 2011 2012 2013 2014 2015 2016 2017 >2 017

EUR, million

10.2.2011 Investor presentation 4Q 2010 46

Liquidity

Committed credit facilities Liquid funds

M€

200 400 600 800 1000 1200 1400 I/09 II/09 III/09 IV/09 I/10 II/10 III/10 IV/10

10.2.2011 Investor presentation 4Q 2010 47

Debt Programs

The following table sets forth the significant debt securities issued and outstanding of M-real as at Dec. 31, 2010:

Average Long-term borrowings Total amount Outstanding I nterest Rate Maturity

USD 350 million Private Note Issue USD 350 USD 224 5.7% (1) 2012–2014 EUR 500 million Bond I ssue EU R 500 EUR 500 7.2% (1) 2013 EUR 400 million Bond I ssue EU R 400 EUR 0 – 2010 Global Medium-Term Note Program EUR 1 500 EUR 52 million private placements EUR 52 3,4 % 2011 EUR 127 million bilateral loans EU R 127 EUR 127 1,7 % 2011–2013 EUR 28 million finance leases EUR 28 EUR 28 1,7 % 2011–2017 EUR 239 million pension loans EU R 239 EUR 233 5.4% (1) 2011–2020

S hort-term funding programmes

EUR 350 million domestic C P-program EU R 350 EU R 0 – – EUR 150 milj. Belgian CP-program EU R 150 EU R 0 – – Average interest rate of all M-real Group interest bearing liabilities including interest rate derivatives per 31.12.2010 is 5,2 %. (1) The average interest rates take into account outstanding interest rate swaps and amortised arrangement fees.

(currency in millions)

5,1 %

10.2.2011 Investor presentation 4Q 2010 48

Ratings’ History

2000 S&P: Short term ratings lowered to A3, Long term ratings placed to credit watch negative Moody’s: Long and short term ratings

• utlook changed from stable to negative

2001 S&P: Long term ratings lowered to BBB-, stable outlook Moody’s: Long and short term ratings lowered to Baa3/P3, negative outlook 2003 S&P: Downgrade to BB+, stable outlook Moody’s: Downgrade to Ba1, negative

• utlook

2004 S&P: Outlook changed from stable to negative, ratings affirmed Moody’s: Downgrade to Ba2, stable outlook 2005 S&P: Downgrade to BB, stable outlook Moody’s: Outlook changed from stable to negative, ratings affirmed 2006 S&P: Downgrade to BB-, negative outlook Moody’s: Downgrade to Ba3, negative outlook Moody’s: Downgrade to B2, negative outlook S&P: Downgrade to B+, negative outlook 2007 Moody’s: Downgrade to B3, negative outlook S&P: Downgrade to B, negative outlook S&P: Downgrade to B-, stable outlook 2008 S&P: Outlook to negative 2009 S&P: Downgrade to CCC+, negative outlook Moody’s: Downgrade to Caa1, outlook negative 2010 S&P: Outlook to stable Moody’s: Outlook to stable S&P: Upgrade to B-, stable outlook Moody’s: Upgrade to B3, outlook to positive

General presentation

10.2.2011 Investor presentation 4Q 2010 50

M-real in Brief

• Annual sales about EUR 2.6 billion.
• Approximately 4,500 employees.
• Present in over 70 countries.
• 13 production units in 5 European

countries.

• Part of Metsäliitto Group and listed on

the NASDAQ OMX Helsinki Ltd.

• Metsäliitto Group is one of the largest

forest industry groups in the world,

• wned by a cooperative of 130.000

private Finnish forest owners.

Consumer Packaging 45% Paper 38% Market pulp and energy 17%

Sales breakdown 2010

10.2.2011 Investor presentation 4Q 2010 51

Offering for Consumer Packaging, Communications and Advertising

• Cartonboards and white-top kraftliners for packaging

beautycare, healthcare, cigarettes, food, consumer durables etc.

• Graphic boards e.g. for book covers, postcards, greeting

cards, CD or DVD covers

• Office papers from high-volume copying and printing to high-

quality color presentations

• Speciality papers for advertising and corporate materials,

flexible packaging, creative designs, labeling, self-adhesive laminates and for wallcovering industry

10.2.2011 Investor presentation 4Q 2010 52

M-real’s Customers

Publishers Office product resellers Brand owners Printers and converters Paper merchants Office paper users Advertising and design agencies

10.2.2011 Investor presentation 4Q 2010 53

Focus on Core Businesses

17 % 32 % 12 % 9 % 12 % 6 % 9 % 3 % Paper Pulp Paperboard Packaging Tissue Mechanical Forest Products Merchanting Chemicals

45 % 38 % 17 %

1995 Sales €2.3 billion 2010 Sales €2.6 billion 8 Businesses 3 Businesses

10.2.2011 Investor presentation 4Q 2010 54

M-real Restructuring Story

Acquisitions

Modo Paper Biberist Paper Mill

1997 1996 2000 1998

Simpele Mill

1995 1999

Divestments

Kyro Board Mill UK Paper Zanders Sawn Goods & Building Materials Chemicals Business Botnia Wood Corrugated Packaging MD Papier Metsä Tissue

2001 2002 2003 2004

Kemiart Liners (53 %) Albbruck

2005

Savon Sellu Forestia 8% in Botnia

2006 2007

PSM 9% in Botnia Carton plants

Map

100 000 B2 shares in PVO

2009 2008

New Thames MB Uruguay Graphic Papers

10.2.2011 Investor presentation 4Q 2010 55

Annual Sales Development

2605 2432 3236 4440 5624 5241 5460 6044 6564 6923 5898 3319 3014 2313 4044 1000 2000 3000 4000 5000 6000 7000 8000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EUR, million

Business Portfolio

10.2.2011 Investor presentation 4Q 2010 57

Business Portfolio

Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy

10.2.2011 Investor presentation 4Q 2010 58

Consumer Packaging

Mainly Folding Boxboard and Linerboard

• Fibre-based high value-added packaging solutions for global brand
• wners in beautycare, healthcare, cigarette, food and consumer

electronics industries as well as for graphical end-uses

• Relatively high earnings stability
• High segment consolidation
• Competitive folding boxboard mills with end use specified production

Capacity Share (%) 8 % 9 % 10 % 25 % 32 % 0 % 5 % 10 % 15 % 20 % 25 % 30 % 35 % IP Careo Mayr-Melnhoff Stora Enso M-real

• No. 1 Folding Boxboard Producer in Europe

Source: Pöyry Management Consulting Oy

10.2.2011 Investor presentation 4Q 2010 59

Office Papers

Mainly Uncoated Fine Paper

Capacity Share (%)

9 % 10 % 11 % 14 % 14 % 0 % 5 % 10 % 15 % M-real UPM-Kymmene Mondi Stora Enso Portucel

• No. 5 Uncoated Fine Paper Producer in Europe
• High quality uncoated fine papers for printing and photocopying as

well as for forms, envelopes, manuals and communication purposes

• Diversified customer base, e.g. merchants, retail chains, office

equipment manufacturers and corporations

• Leading European office paper brands like DataCopy and Evolve as

well as revolutionary lightweight SAVE!

Source: Pöyry Management Consulting Oy

10.2.2011 Investor presentation 4Q 2010 60

Speciality Papers

• Leading European speciality paper

producer with strong focus on packaging applications

• Packaging specialities
• Flexible packaging
• Luxury packaging
• Labels
• Graphical specialities
• Premium fine papers
• Carbonless papers
• Digital imaging papers
• Uncoated fine papers

Packaging specialities 50% Graphical specialities 30% WFU 20%

Speciality paper sales

10.2.2011 Investor presentation 4Q 2010 61

Sales by Business Area

m€

75 164 107 305 106 66 181 303 50 100 150 200 250 300 350 Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy

3Q 2010 4Q 2010

10.2.2011 Investor presentation 4Q 2010 62

Operating Result by Business Area*

m€

* excl. non-recurring items

• 7

9 16 34 12

• 8

38

• 20
• 10

10 20 30 40 50 Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy

4Q 2010 3Q 2010

10.2.2011 Investor presentation 4Q 2010 63

Sales by Business Area

m€

352 543 508 968 434 303 658 1175 200 400 600 800 1000 1200 1400 Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy

2010 2009

10.2.2011 Investor presentation 4Q 2010 64

Operating Result by Business Area*

m€

* excl. non-recurring items

• 51
• 48
• 54

69 53

• 26

5 149

• 75
• 50
• 25

25 50 75 100 125 150 175 Consumer Packaging Office Papers Speciality Papers Market Pulp and Energy

2010 2009

Operations

10.2.2011 Investor presentation 4Q 2010 66

Production Capacity

1 800 1 200 2 100 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 Paper Board Pulp and BCTMP 1000 tons/a

10.2.2011 Investor presentation 4Q 2010 67

M-real Production Locations

Consumer Packaging:

• Simpele
• Äänekoski board and paper
• Kyro
• Tako
• Kemi
• Joutseno

Office Papers:

• Alizay
• Husum paper and pulp

Speciality Papers:

• Gohrsmühle
• Reflex

Market Pulp and Energy:

• Kaskinen
• Hallein

Alizay Hallein Husum Gohrsmühle and Reflex Äänekoski Simpele Joutseno Kemi Tako Kyro Kaskinen

10.2.2011 Investor presentation 4Q 2010 68

Paper and Board Capacity by Grade

(1000 t/a)

BOARD M I LLS Board Mill Country Machines Folding Boxboard Liner Total

Tampere Finland 2 205 205 Kyröskoski Finland 1 160 160 Äänekoski Finland 1 210 210 Simpele Finland 1 220 220 Kemi Finland 1 375 375

Total 6 795 375 1170 PAPER MI LLS Paper Mill Country Machines Coated Coated Uncoated Magazine Fine Fine Specialty Paper Paper Paper Paper Total

Äänekoski Finland 1 180 180 Kyröskoski Finland 1 105 105 Bergisch Gladbach Germany 2 180 80 260 Düren Germany 2 20 20 Husum Sweden 3 275 435 710 Alizay France 1 310 310

Total 10 275 180 925 205 1585

10.2.2011 Investor presentation 4Q 2010 69

Pulp Capacity

(1000 t/a)

PULP MI LLS Pulp Mill Country Chemical Pulp BCTMP Total

Husum Sweden 690 690 Hallein Austria 160 160 Joutseno Finland 280 280 Kaskinen Finland 300 300

Total 850 580 1430 BOTNI A * Mill Country Chemical Pulp Total

Äänekoski Finland 500 500 Kemi Finland 590 590 Rauma Finland 630 630 Joutseno Finland 650 650

Total 2370 2370

* M-real share is 30% of the capacity

10.2.2011 Investor presentation 4Q 2010 70

Personnel Development

4538 4903 6546 9508 14125 15154 16490 20372 21070 22237 17351 13885 12637 11463 15572 5000 10000 15000 20000 25000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Deliveries

10.2.2011 Investor presentation 4Q 2010 72

Annual Deliveries*

Uncoated fine paper Cartonboard

32 % 6 % 18 % 44 % Western- Europe Eastern- Europe Americas Asia & Pacific

8 % 86 % 5 % 1 %

* Indicative numbers

Sourcing

10.2.2011 Investor presentation 4Q 2010 74

M-real Cost Structure 2009*

(total annual costs in industrial operations ~ EUR 2 Billion)

Personnel 18 % Other fixed 13 % Delivery costs 16 % Wood 21 % Chemicals, pigments and fillers 15 % Other variables 7 % Energy 10 %

Fixed costs Variable costs

* Percentage of annual costs in industrial operations

10.2.2011 Investor presentation 4Q 2010 75

Electricity Sourcing 2009 (total 3 400 GWh)

Associated company (PVO) 29 % Outsourced generation 2 % Own generation 43 % Purchased energy 26 %

10.2.2011 Investor presentation 4Q 2010 76

Fuels Used 2009 (total 19,6 TWh)

Wood- based 60 % Natural gas 13 % Coal 9 % Oil 4 % Peat 1 % Hydropower 4 % Nuclear power 9 %

10.2.2011 Investor presentation 4Q 2010 77

Wood Sourcing by Country

1 000 m3 2009 Finland 3488 Sweden 2272 Russia 563 France 133 Austria 524 Latvia 228 Estonia 204 Lithuania 47 Total 7459

10.2.2011 Investor presentation 4Q 2010 78

Development of Softwood Pulpwood

Cost at Mill, Wood for Chemical Pulping

1980 – 2Q 2010

Source: Pöyry Management Consulting Oy

10 20 30 40 50 60 1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 q 2 EUR/m

3sob, nominal

Finland, south, pine Sweden, south, pine Germany, south, pine Chile, radiata pine USA South, SYP Canada East, SPF

10.2.2011 Investor presentation 4Q 2010 79

Development of Softwood Pulpwood

Cost at Mill, Wood for Mechanical Pulping

1980 – 2Q 2010

Source: Pöyry Management Consulting Oy

10 20 30 40 50 60 70 1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 q 2 EUR/m3sob, nominal Finland, south, spruce Sweden, south, spruce Germany, south, spruce Austria, spruce Canada East, SPF USA Great Lakes, spruce

10.2.2011 Investor presentation 4Q 2010 80

Development of Hardwood Pulpwood

Cost at Mill, Wood for Chemical Pulping

1980 – 2Q 2010

Source: Pöyry

10 20 30 40 50 60 1 9 8 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 q 2 EUR/m

3sob, nominal

Finland, south, birch Sweden, south, birch Portugal, E. globulus Brazil, E. grandis South Africa, E. grandis USA South, mixed hw

Source: Pöyry Management Consulting Oy

Owners

10.2.2011 Investor presentation 4Q 2010 82

M-real Shareholders 31.12.2010

Non-Finnish nationals; 14 % Non-profitmaking

• rganizations; 3 %

Other companies; 6 % Metsäliitto; 39 % Households; 25 % Public communities; 8 % Financial and insurance institutions; 5 %

10.2.2011 Investor presentation 4Q 2010 83

M-real Voting Rights 31.12.2010

Non-Finnish nationals; 5 % Non-profitmaking

• rganizations; 4 %

Other companies; 2 % Metsäliitto; 61 % Households; 12 % Public communities; 14 % Financial and insurance institutions; 2 %

Market Position

10.2.2011 Investor presentation 4Q 2010 85

Folding Boxboard Capacities in Europe

BIG-5 = 84% of total

100 200 300 400 500 600 700 800 900 Others Holmen IP Careo Mayr-Melnhof Stora Enso M-real

Source: Pöyry Forest Industry Consulting

Capacity: tons/year (million) 32% 25% 10% 9% 8% 8% 8%

Source: Pöyry Management Consulting Oy

10.2.2011 Investor presentation 4Q 2010 86

Uncoated Fine Paper Capacities in Europe

BIG-5 = 57% of total

500 1000 1500 2000 2500 3000 3500 Others Sappi Arctic Paper International Paper M-real UPM Mondi Stora Enso Portucel 14% 14% 11% 10% 8% 8% 3% 3% 28%

Source: Pöyry Forest Industry Consulting, M-real

Capacity: tons/year (million)

Source: Pöyry Management Consulting Oy

Thank you

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