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 • Profit for the period increased by +10 %
 • Good capacity utilization due to positive development of demand 
 • Significant profit rise at MM Packaging  
 • Further increase of energy and crude oil related cost presses on results of MM Karton 
 • Gradual implementation of cartonboard price increase
 • Path of expansion will be continued 
 
 
As indicated, the Mayr-Melnhof Group could capitalize on the positive market demand also during the third quarter and achieved a profit for the period of EUR 80.6 million for the first three quarters of 2006. This is equivalent to an increase of 10.0 % compared to the previous year’s period. 
 
In the third quarter, the economic indicators in our core markets were up like in the second quarter. Against this background, both cartonboard production and converting registered an overall positive order intake and plant utilization. This constitutes an important basis for the second cartonboard price increase in this year which has been pursued since mid-year due to new peak levels in cost particularly for energy and transport. 
 
In both Divisions operating profit for the first three quarters was improved compared to last year. MM Packaging recorded a significant increase in profit resulting from distinct efficiency improvements and market success. At MM Karton, however, the on-going rise of input costs does not yet allow for a sustained margin increase despite progressing price improvement. 
 
Consolidated sales of the Group amounted to EUR 1,113.7 million which is a rise of 2.1 % or EUR 22.5 million compared to the previous year’s figure (Q1-3 2005: EUR 1,091.2 million). Improved volumes and prices in the cartonboard division essentially contributed to this increase.

The rise in operating profit by 9.7 % or EUR 10.4 million to EUR 117.3 million was mainly due to the significant earnings improvement in cartonboard converting. The Group’s operating margin advanced from 9.8 % to 10.5 %.

Profit before tax increased by 7.1 % from EUR 110.1 million to EUR 117.9 million. Income tax expense totaled EUR 37.3 million (Q1-3 2005: EUR 36.8 million), which results in an effective Group tax rate of 31.6 % (Q1-3 2005: 33.4 %).

Hence, the profit for the period was up from EUR 73.3 million to EUR 80.6 million and basic earnings per share from EUR 6.48 to EUR 7.15.

 
Development in the Third Quarter

As expected, the third quarter was characterized by continuous healthy demand in both divisions. Due to the significant further rise of all crude oil related cost, MM Karton has started a further price increase since mid-year. As the implementation can only be effected on a step by step basis, full compensation of the recent cost hikes, such as for transport, could not yet be realized in the third quarter. Thus, the operating margin in cartonboard manufacturing came in below the level in the previous quarter. In order to support our price increase efforts temporary downtime at the Bulgarian cartonboard mill Nikopol was continued also in the third quarter. In line with the resumption of production after a repair related hold-up at the Dutch Eerbeek mill, capacity utilization of MM Karton climbed from 92 % in the second to 93 % in the third quarter (Q3 2005: 91 %).

Despite elevated expenses in connection with the start-up of production at the three newly built rotogravure plants, MM Packaging managed to maintain a high level of profitability. Increased productivity and sound growth, particularly in Eastern Europe, characterized the current business.

The Group’s operating profit amounted to EUR 37.8 million after EUR 39.4 million in the second quarter (Q3 2005: EUR 36.3 million). The profit for the period came in at EUR 26.1 million (Q2 2006: EUR 27.1 million, Q3 2005: EUR 24.0 million).

Divisions:

MM KARTON

Consistent with the positive economic environment, European demand for cartonboard demonstrated an overall friendly picture during the first three quarters of this year. Due to prevailing overcapacity on the market, competition intensity has, however, not diminished. As a consequence, price increases, which have become necessary owing to the ongoing surge of costs, in particular of energy and crude oil price related input factors, can only be implemented on a step by step basis.
Against this background, MM Karton decided to temporarily cease production at the Bulgarian mill MM Nikopol during the first three quarters in order to support cartonboard price increases. On the other hand the Division capitalized on the positive market situation in gaining market share and achieving new production records at its high performance mills.

At approximately 84,000 tons, the mills’ average order backlog was clearly above the previous year’s level (Q1-3 2005: approximately 55.000 tons). According to schedule, a new yankee cylinder was installed at the Dutch Eerbeek mill following an insured damage which occurred last year. Since then, the mill’s reintroduction to the market is on the way. As in the previous year, capacities of MM Karton were utilized at 93 % during the first three quarters. At approximately 1,172,000 tons, the volume produced was 2.3 % up as compared to the last year (Q1-3 2005: 1,146,000 tons).

Procurement markets registered an ongoing steep price increase for energy and crude oil price related input factors while recovered paper prices developed fairly stable.

The volume sold increased by 2.2 % to approximately 1,152,000 tons (Q1-3 2005: approximately 1,127,000 tons), of which Europe accounted for 79 % and non-European markets for 21 % (Q1-3 2005: 80 %; 20 %).

Due to higher volume and average prices, sales went up by 5.6 % from EUR 569.3 million to EUR 601.4 million. Operating profit was improved by 2.6 % to EUR 48.1 million. The operating margin therefore amounted to 8.0 % (Q1-3 2005: 8.2 %).

MM PACKAGING

Along with the improved economic climate, European demand for folding cartons has picked up markedly since the beginning of this year, with Eastern Europe still continuing a dynamic development. Against this backdrop, capacities of our folding carton plants registered a consistently sound utilization rate throughout the first three quarters of this year. Within stiff crowding out competition it has been possible to gain market share. Rationalizations and efficiency improvements characterized current operations with the aim to further foster MM Packaging’s competitiveness. In this connection, investments in state-of-the-art high performance technology have been consequently continued.

Particular attention has been focused on the ramp-up of the three newly constructed rotogravure plants in Turkey, the Ukraine, and Germany. Due to the fast intake of new business, good plant utilization can be already expected for the coming year. Investment projects for further expansion are already in a planning stage.

The ongoing increase of cartonboard prices has constituted a main challenge since the start of the year, as intensive competition allows only for a rather slow passing-on to end-customers.

Based on enhanced productivity and successful cooperation with international customers, both margins and volume could be noticeably increased during the first nine months of this year.

Operating profit was improved by 15.3 % to EUR 69.2 million (Q1-3 2005: EUR 60.0 million). Resulting from a permanent discontinuation of a trading business, sale came in below the previous year’s figure (Q1-3 2005: EUR 607.2 million) and reached EUR 599.9 million. Thus, the operating margin moved up from 9.9 % to 11.5 %. The tonnage processed increased by 15,000 tons to 395,000 tons (+3.9 %).

 
OUTLOOK

 
Healthy demand and good plant utilization marked also the beginning of the fourth quarter. At MM Karton highest priority still centers on the implementation of the price increase as the soar of costs, particularly of energy and transport, burdens the margins. Due to seasonality, selective downtime is to be expected for the second half of December. At the Bulgarian Nikopol mill test runs have been undertaken for a new cartonboard application following several months’ downtime. The outcome of these will decide on the future orientation of the mill. In all, fourth quarter capacity utilization of MM Karton should reach a similar level as in the previous course of this year.

In cartonboard converting we expect to keep so far achieved earnings levels also in the fourth quarter. Emphasis will remain on gradually passing on the cartonboard price increases.

Important growth momentum for 2007 can be particularly expected from the three newly built rotogravure plants as well as the recent acquisitions in Russia and Tunisia. Due to the short forecast horizon, an estimate for the demand situation at the beginning of the next year is not possible at the current point of time.

We adhere to the target to expand our operations either by acquisitions or newly constructed production sites as well as to maintain an attractive yield based on cost optimizations and highest possible productivity.

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The report for the first three quarters of 2006 is available on the Company website
http://www.mayr-melnhof.com 
 
Financial results for 2006 will be released on March 14, 2007.

For further information please contact:
Stephan Sweerts-Sporck, Investor Relations, Mayr-Melnhof Karton AG, Brahmsplatz 6, A-1041 Vienna
Tel.: +43/ 1 50136 - 91180, Fax. +43/ 1 50136 - 91195
E-mail: investor.relations@mm-karton.com; Web Site: http://www.mayr-melnhof.com