Contents Information for Shareholders 2 The Year in Brief and Main Events in 1998 3 President’s Review 4 Metsä-Serla Today 6 Structure of the Group 7 Paper Group 8 Packaging and Consumer Products Group 12 Packaging 12 Metsä Tissue Corporation 16 Sales network, Merchanting and Trading Group 18 Pulp Group 20 Metsä-Serla’s Brands 22 Environment 24 Personnel: a Key Corporate Resource 26 Research and Development 27 Treasury Management and Management of Financing Risks 28 Metsä-Serla’s Year 2000 Project 31 Quarterly Data 1997 - 1998 32 Report of the Board of Directors and Financial Reports 1998 33 Report of the Board of Directors 34 Consolidated Profit and Loss Account (FIM) 40 Consolidated Profit and Loss Account (EUR) 41 Consolidated Balance Sheet (FIM) 42 Consolidated Balance Sheet (EUR) 44 Consolidated Profit and Loss Account, Profit Analysis 46 Consolidated Balance Sheet, Balance Sheet Analysis 47 Cash Flow Statements 48 Parent Company Profit and Loss Account 49 Parent Company Balance Sheet 50 Accounting Principles 52 Notes to the Accounts 54 Shares and Shareholders 72 Calculation of Key Ratios 77 Ten Years in Figures (FIM) 78 Ten Years in Figures (EUR) 79 Board’s Proposal for the Distribution of Profits 80 Auditor’s Report 80 Corporate Governance 81 Board of Directors, Auditors 82 Executive Management Board 83 Production Capacity 1999 84 Metsä-Serla Worldwide 85 Addresses 86 1 Information for Shareholders ANNUAL GENERAL MEETING holders who are entered by 23 March 1999 the Group’s organization, products, sales The Annual General Meeting of Metsä- at the latest in the list of shareholders kept network and environmental issues can Serla Corporation will be held at Metsä- by Finnish Central Securities Depository Ltd. also be found on the Internet pages. Also, Serla’s Head Office, Revontulentie 6, Group publications can be ordered and 02100 Espoo, on Thursday 18 March 1999 FINANCIAL INFORMATION feedback sent via the Internet. beginning at 10.00 a.m. Finnish time. The financial reports are published in Finn- Shareholders wishing to take part in ish, Swedish, English and German. Copies SHARES the Annual General Meeting and to exer- can be obtained from Metsä-Serla Corpo- The company has a total of 138,999,425 cise their right to vote must be registered ration, Corporate Communications, shares. Each share has a nominal value of in the list of shareholders kept by Finnish Revontulentie 6, 02100 Espoo, Finland, tel. FIM 10. Information on Metsä-Serla’s Central Securities Depository Ltd by 12 +358 1046 94542, fax +358 1046 94355, shares is given on pages 72-76. March 1999 at the latest and should an- or via Metsä-Serla’s Internet pages, Metsä-Serla’s Series A and Series B nounce their intention to attend the meet- address: www.metsaserla.com. Metsä- shares are quoted on the Helsinki Stock ing before 16.30 p.m. Finnish time on 15 Serla’s Environmental Report can be Exchange. Quotations can be found on March 1999, either by telephoning Ms Eija ordered from the same address. Reuters with the following symbols: Niittynen on +358 1046 94530, by sending Metsä-Serla publishes an English-lan- Series A MESSa.HE and Series B a telefax to Ms. Eija Niittynen to +358 guage investor magazine Insight which MESSb.HE. Metsä-Serla’s Series B shares 1046 94529 or an e-mail message to comes out four times a year. are also quoted on the London Stock Ex- [email protected] or by writing On Metsä-Serla’s English-language In- change and on the Bavarian Stock Exchange. to Metsä-Serla Corporation, Ms Eija Niit- ternet pages, material of most interest to tynen, Revontulentie 6, 02100 Espoo, Fin- investors can be found in the Investor Re- SHARE REGISTER land. Any proxies should be submitted at lations service. Stock exchange announce- Shareholders are requested to inform the the time such shareholders notify the com- ments, interim reports and financial infor- book-entry register holding their book en- pany of their intention to attend. mation on these pages are updated in real try account of any changes of name, ad- The Board of Directors proposes that a time. A new feature is a company presen- dress or share ownership. dividend of FIM 2.60 for the 1998 financial tation that is regularly updated when finan- year be paid on 30 March 1999 to share- cial reports are published. Information on PUBLICATION DATES FOR METSÄ-SERLA’S INVESTOR RELATIONS: FINANCIAL REPORTS IN 1999 ARE THE FOLLOWING: Veli-Matti Mynttinen Executive Vice President & CFO 5 February UNAUDITED FIGURES FOR 1998 Tel. +358 1046 94655 Fax +358 1046 94141 Mobile +358 50 2895 Week beginning 1 March ANNUAL REPORT FOR 1998 E-mail: [email protected] Markko Ihamuotila Chief Business Analyst 29 April INTERIM REPORT FOR JANUARY-MARCH 1999 Tel. +358 1046 94373 Fax +358 1046 94529 Mobile +358 50 5987 014 E-mail: [email protected] 5 August INTERIM REPORT FOR JANUARY-JUNE 1999 Corporate Communications Tel. +358 1046 94368 28 October INTERIM REPORT FOR JANUARY-SEPTEMBER 1999 Fax +358 1046 94531 www.metsaserla.com 2 The Year in Brief and Main Events in 1998 Turnover, FIM mill. 25000 Metsä-Serla Group 1998 1997 Change 20000 Turnover, FIM mill. 20 948 19 182 9% Operating profit, FIM mill. 2 299 2 016 14% 15000 - % of turnover 11.0 10.5 Profit before extraordinary items, FIM mill. 1 824 1 008 81% 10000 - % of turnover 8.7 5.3 Retun on capital employed, % 11.0 11.2 5000 Return on equity, % 11.6 7.8 94 95 96 97 98 0 Interest bearing net liabilities, FIM mill. **) 7 333 6 289 17% Gearing ratio, % **) 60 57 Equity ratio, % **) 45.9 42.6 Operating profit, FIM mill. 2400 Earnings per share, FIM 7.57 4.30 76% Shareholders‘ equity per share, FIM 65 59 10% 1800 Dividend per share, FIM *) 2.60 1.80 44% Market capitalization at 31 December, FIM mill. 5 787 5 853 -1% 1200 Gross capital investments, FIM mill. 2 450 3 160 -22% Cash flow from operations, FIM mill. 2 093 2 565 -18% 600 Personnel at 31 December 15 221 14 078 8% 94 95 96 97 98 0 *) Board´s proposal to year 1998 Operating profit, % **) For calculation purposes, the convertible capital note issue has been added to shareholders´ equity. 20 15 MAIN EVENTS IN 1998 • Metsä-Serla diversified its financing alternatives in November when it 10 • In the spring, Metsä-Serla acquired signed a billion euro Medium Term 5 a 94 per cent holding in Medienos Note programme. At the same time, v Plausas, a Lithuanian corrugated board the Company received a Baa2 rating 94 95 96 97 98 0 mill. The acquisition strengthened from Moody´s, a credit rating Metsä-Serla’s position as the market institution, and a BBB rating from Return on capital employed, % leader in corrugated board products Standard and Poor´s. 20 in the Baltic countries. 15 • In December, Metsä-Serla’s subsidiary • In April, Metsä-Serla sold the entire Metsä Tissue acquired two German 10 shares outstanding in Oy Botnia tissue paper manufacturers, Halstrick Wood Ab to Oy Metsä Timber Ltd, and Strepp. The acquisitions made 5 a Metsäliitto Group company. Metsä Tissue the second largest producer in the German market. 94 95 96 97 98 0 • In November, Metsä-Serla bought UK Paper of Britain from Fletcher Challenge of New Zealand. By way of the acquisition of UK Paper, Metsä-Serla expanded its fine paper production to Britain and became the market leader in Europe’s largest fine paper market. The deal also included the paper merchant Guppy Ltd., an acquisition that enabled Metsä-Serla to strengthen its position as one of Great Britain’s leading paper merchants. 3 President’s Review Dear Shareholder, the partners to the position of third place in ing all the wood Metsä-Serla needs for its The good results of 1998 bear witness to the the world market. Within coated fine papers, manufacturing processes. Family forestry in speed of change that has enabled Metsä- the acquisition of UK Paper in Europe’s big- line with the principles of sustainable yield for- Serla to catch up with competitors. Our sales gest fine paper market has further enhanced est management gives Metsä-Serla a solid have doubled in only three years. Over the Metsä-Serla’s market position as the third raw material base on which the company can same period, our profitability measured by the largest supplier in Europe. build its future and which our customers in return on capital employed has almost Metsä-Serla has a clear hold on the num- Europe have learnt to appreciate. Metsäliitto’s doubled, the debt ratio has halved and the ber two spot as a supplier of folding boxboard nationwide wood procurement organization equity ratio has improved considerably. in Europe, and in wallpaper baseboard it is the is highly cost-effective and competitive. Metsä-Serla’s fast growth has been realized market leader. Metsä Tissue Corporation, Because forest owners are shareholders in mainly through acquisitions. The transforma- Metsä-Serla’s publicly traded subsidiary is the Metsä-Serla, they are a vital factor in creating tion is continuing and thanks to last year’s ac- leading tissue paper supplier in all of the Nor- stability, and they support a long-term quisitions, sales will grow by a further one bil- dic countries and it is now seeking market development strategy. The shareholder lion dollars. leadership in Poland. The acquisitions of both friendly dividend policy proposed by the Halstrick and Strepp in Germany have made Board of Directors to the Annual General DETERMINED WORK Metsä Tissue the second largest producer of Meeting well reflects this kind of thinking.