Consumables

M-real sells its New Thames paper mill in the UK

Monday 04. February 2008 - M-real Corporation, part of the Metsäliitto Group, has agreed to sell its New Thames office paper mill located in Kemsley, UK, to DS Smith Plc. The selling price is GBP 60 million.

The mill will continue to produce office paper on M-real’s account towards the end of 2008. After that it will cease to produce office paper and DS Smith will later start up the production of raw material for corrugated board in the mill.

Taking the uncovered pension liabilities of M-real’s UK mill operations into consideration, it is estimated that the transaction will have a positive impact of about EUR 60 million on cash flow, of which about EUR 40 million will arise when the transaction is completed and about EUR 20 million in the following 12 months. After the sale, M-real has no significant uncovered pension liabilities in the UK. In addition, M-real will be freed from about EUR 35 million pension liabilities and other closure costs previously provided for the period 2008-2015 related to the closure of the Sittingbourne mill.

No significant capital gain or loss is expected to arise from the transaction. The impact of the pension liabilities and the final result and cash-flow effect of the transaction will be clear by the end of the first half of 2008. The transaction has no significant impact on M-real’s operating profit excluding non-recurring items. The sale will be booked in the result for the first quarter of 2008.

“We are streamlining our office paper production by concentrating it on the newer mills. The continuation of the present production in the New Thames mill would require major investments. And it is also expected that the decision now made will contribute to positive price development in the office paper sector,” says Mikko Helander, CEO, M-real Corporation.

M-real New Thames mill’s paper machine has an annual capacity of 230,000 tonnes of office paper. The mill employs some 280 people and has sales of approximately EUR 160 million.

DS Smith Plc is an international Group focused on packaging. The Group’s revenue is about GBP 1.8 billion and it employs over 11,000 people in 16 countries.

The transaction is subject to approval by the competition authorities.