Newsdetails

• Good start to the new fiscal year
• High capacity utilization in both Divisions 
• Significant earnings rise at MM Packaging
• Persistent pressure on costs requires further price increase move at MM Karton 

Group Key Indicators
IFRS, unaudited, consolidated in millions of EUR
 
                                                      Q1/2006                  Q1/2005                   +/-
Sales                                                 377.0                      357.1                   +5.6%
Operating profit                                    40.1                        36.4                 +10.2%
Operating margin                                 10.6%                     10.2%
Profit before tax                                   40.4                        37.4                   +8.0%
Income tax expense                            (13.0)                     (12.1)
Profit for the period                              27.4                        25.3                   +8.3%
in % sales                                             7.3%                       7.1%
 

The Mayr-Melnhof Group concluded the first quarter of 2006 with a profit for the period of EUR 27.4 million. This is an increase of 8.3 % compared to the previous year (Q1 2005: EUR 25.3 million). Both MM Karton and MM Packaging registered a positive development in sales, resulting in high capacity utilization for both segments. 

While MM Packaging achieved significant profit growth particularly due to increased productivity, the recovery of margins in cartonboard production however develops in stages despite successive price improvements, due to ongoing high input costs and temporary downtime at the Nikopol cartonboard mill in Bulgaria.

Signs of a temporary improvement in the economy in Western Europe, particularly in Germany, did not have any appreciable influence on household consumption and thus on packaging needs in the first three months of 2006. The economies in Central and Eastern Europe continued with strong, sustained demand for cartonboard and folding cartons. 

In line with the unchanged trend in demand, the recovered paper markets were characterized by largely stable prices during the first quarter of 2006. In contrast, the crude oil price registered another significant increase, with corresponding consequences on the associated input factors. 

Consolidated sales of the Mayr-Melnhof Group amounted to EUR 377.0 million in the first quarter of 2006 and thus exceeded the previous year’s figure by EUR 19.9 million or 5.6 %. This increase mainly results from cartonboard production which recorded a significantly higher sales performance following investment related downtime in the previous year’s first quarter. 

The operating profit was improved by 10.2 % to EUR 40.1 million. The increase is mainly attributable to the strong growth of results in cartonboard converting. Correspondingly the Group’s operating margin reached 10.6 % (Q1 2005: 10.2 %).

Profit before tax was at EUR 40.4 million after EUR 37.4 million (+8.0 %). Income tax expenses totaled EUR 13.0 million (Q1 2005: EUR 12.1 million), resulting in an effective Group tax rate of 32.2 % (Q1 2005: 32.4 %).

The earnings per share reached EUR 2.44 (Q1 2005: EUR 2.23).

DIVISIONS

MM KARTON

Demand on the cartonboard markets progressed thoroughly and steadily in the first quarter of 2006 under unchanged strong competition. MM Karton succeeded in securing volume growth in both Western and Eastern Europe. In the hard-fought markets outside Europe volumes were defended successfully. As a result, cartonboard sales of 388,000 tons were up by 7.2 % on the previous year, which fell temporarily due to investments in the Eerbeek and Nikopol plants (Q1 2005: 362,000 tons). Around 80 % of the sales volume came from Europe and 20 % from non-European markets (Q1 2005: 78 %; 22 %). The average order backlog reached 82,000 tons after approximately 70,000 tons in the first quarter of 2005. 

Production volume amounted to 388,000 tons (Q1 2005: 373,000 tons), which resulted in a capacity utilization of about 94 % (Q1 2005: 93 %).

Since the start of the year 2006, main emphasis was placed on the successive implementation of the price increase, which had already been announced at the end of the previous year following the massive rise in energy costs. The decision to temporarily stop the machine in Nikopol, Bulgaria, in order to stabilize the market, proved to be right in this context.

The development in the first quarter indicates that the average price was already successfully raised noticeably compared to both the first and fourth quarter of 2005.

Thus the 10.0 % increase in sales from EUR 185.5 million to EUR 204.0 million resulted from both higher volume and better prices. The operating profit rose from EUR 16.9 million to EUR 17.1 million. This led to an operating margin of 8.4 % (Q1 2005: 9.1 %). 

MM PACKAGING

The demand for folding cartons remained stable going into the new year and also progressed positively in the first quarter of 2006. Overcapacity and the wide use of tendering in the purchase of packaging however kept prices permanently under pressure.

Against this backdrop, MM Packaging managed to clearly increase its revenues once again in the first quarter of 2006 following further gains in productivity. 

At an almost unchanged sales level of EUR 201.3 million (Q1 2005: EUR 200.8 million) MM Packaging generated an operating profit of EUR 23.0 million. This is equivalent to an increase by 17.9 % compared to the previous year (Q1 2005: EUR 19.5 million), leading to an operating margin of 11.4 % after 9.7 % in the first quarter of 2005.

The tonnage processed moved up by 4.0 % to 130,000 tons (Q1 2005: 125,000 tons).

OUTLOOK

The demand for cartonboard and folding cartons continues to be robust under the currently more friendly economic conditions in Europe. Accordingly both Divisions are expecting capacities in the second quarter to be utilized at similar levels as in the first quarter of 2006. 

Due to the further increase of all costs driven by the crude oil price, a few days ago cartonboard customers were given notice of another price increase, due at the beginning of the summer months. If economic recovery sustains, an eye will have to be kept on fiber prices in the coming months.

Passing on the increase in cartonboard prices is being pursued with the highest priority at MM Packaging. The expenses connected with starting production at the three newly built rotogravure sites in Trier, Izmir, and Cherkassy will have increasing impact from the second quarter onwards.

Acquisition projects are being pursued in both cartonboard production and cartonboard processing.

Please find our detailed Interim Report on the 1st Quarter of 2006 on the Internet at http://www.mayr-melnhof.com.

Forthcoming results: August 17, 2006 Results for the 1st Half -Year of 2006

For further information please contact:

Mayr-Melnhof Karton AG, Brahmsplatz 6 A-1041 Vienna
Stephan Sweerts-Sporck, Investor Relations; Tel.: +43/ 1 50136 1180, Fax. +43/ 1 50136 1195, e-mail: investor.relations@mm-karton.com;  Web Site: http://www.mayr-melnhof.com