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VERY SUCCESSFUL DEVELOPMENT OF BUSINESS

• High capacity utilization in both Divisions
• As expected, half-year net income slightly below the previous year’s record level
• Positive outlook for the third quarter
• Swift price increase compensated significant rise in raw material costs
• Dynamics of private consumption to influence further development
 
Despite a weak economic environment the Mayr-Melnhof Group has been very successful during the first half-year of 2002.

As demand for non-durable consumer goods remained stable, the Packaging Division registered an on-going positive development of business. Consequently, cartonboard demand in Europe and Asia was better than expected, enabling the Cartonboard Division to almost fully utilize capacities during the first six months of 2002. As expected, the Mayr-Melnhof Group concluded the 2002 first half-year with a net result for the period which was slightly below the previous year’s record level. Net income amounted to EUR 43.5 million after EUR 48.5 million in 2001.
 
Due to the high capacity utilization as well as the previous year’s acquisitions, consolidated sales increased 7.4 %, reaching EUR 600 million (1st half of 2001: EUR 558.9 million), despite lower average sales prices.
 
At EUR 67.8 million, operating profit was 4 % below the previous year’s level of EUR 70.6 million. Despite sharply rising waste paper prices in the second quarter this difference could be kept to a minimum thanks to high utilization rates. Net interest increased to EUR -0.5 million (1st half of 2001: EUR -1.1 million).
Following non-recurring earnings from the disposal of business, other-net (including equity income) amounted to EUR 5.2 million in the previous year. At EUR 0.8 million for the first half of 2002 it was back on a “normal” level.
Therefore, income before income taxes and minority interests totaled EUR 68.1 million after EUR 74.7 million in the previous year. The effective Group income tax rate was approximately 36 % after 34 % in the first half of 2001.
Capital expenditures totaled EUR 30 million (1st half of 2001: 24,9 Mio. EUR).
 
 
Development in the 2nd Quarter 
 
Due to the favorable sales conditions on the European markets, capacity utilization was very healthy in both Divisions throughout the second quarter. This scenario was supported by anticipated purchases as the sharp increase in waste paper prices necessitated a cartonboard price increase of 10 %.

Higher raw material prices only put pressure on the end of the second quarter, as the implementation of the cartonboard price increase had already become effective by the beginning of July.

For this reason, and in conjunction with the fact that capacities were fully utilized, the Group‘s second quarter operating profit at EUR 33.3 million almost matched that of the first quarter (EUR 34.5 million).

The Packaging Division will pass on higher prices to end-users in the course of the third quarter.
 

CARTONBOARD DIVISION
 
Due to better than expected demand from Western Europe and increased sales to overseas markets the Cartonboard Division‘s capacities could be utilized by approximately 98 % during the first half-year of 2002 (1st half of 2001: 90 %). Partly influenced by the announcement of a price increase, the average order backlog was at 100,000 tons, twice the level during the identical period of the previous year (50,000 tons).

Cartonboard sales of approximately 758,000 tons were 20.9 % higher than in the 2001 first half-year (627,000 tons). About 79 % of this volume was delivered to Europe and 21 % to overseas markets (1st half of 2001: 82%; 18%). Production rose by 19.9 % to reach approximately 742,000 tons. This increase in production and sales mainly results from the high capacity utilization and the acquisition of the Gernsbach mill in the previous year.

Primarily resulting from a temporary peak in Asian demand, waste paper prices rose sharply since the beginning of April 2002, therefore necessitating an increase in European cartonboard prices of about 10 %. On the non-European markets, cartonboard prices have clearly increased, leading to continuously better pricing throughout the first half-year.
 
Although European pricing was kept stable, and except for some alterations in the product mix, the Cartonboard Division’s average sales price declined in comparison with the previous year due to the increased share of overseas business with structurally lower prices. Through the strong rise in sales volume, however, sales climbed by 10.5 % to EUR 396.7 million. As expected, operating profit amounting to EUR 50.1 million fell below last year’s level of EUR 54.6 million despite high utilization of capacities. This change particularly resulted from strongly increased waste paper prices in June as well as the previous year’s non-recurring operating income. The operating margin was at 12.6 % after 15.2 % in the first half of 2001.    

PACKAGING DIVISION
 
Due to a generally stable European demand for folding cartons the Packaging Division registered a sustained positive development of business throughout the first half-year of 2002. Primarily resulting from acquisitions, the tonnage processed during the first six months reached 177,000 tons, an increase of 7.3 % over the previous year’s level (1st half of 2001: 165,000 tons). For this reason, the decline in volume due to divestitures in 2001 could be more than compensated for.

The increase in sales from EUR 249.3 million to EUR 256.8 million is mainly attributable to the rise in volume. Due to on-going optimization measures, both the general packaging area as well as the cigarette packaging area achieved solid earnings development. The improvement in operating profit by 10.6 % to EUR 17.7 million (1st half of 2001: EUR 16 million) led to an operating margin of 6.9 % (1st half of 2001: 6.4 %).
 
 Production in the French packaging facility Copacarton was ceased by mid-year 2002 as the company could not reach a profitable size. The plant had a converting capacity of about 4,000 tons per annum and employed approximately 50 people. The company’s order volume will be transferred to more efficient MMP facilities. 
 
 
Outlook 
 
The price increases which were announced in the middle of the second quarter have become effective for both the Cartonboard and the Packaging Division. Therefore, a far reaching compensation of the strong rise in raw material costs can already be expected for the third quarter especially in the Cartonboard Division.

In view of the uncertainty regarding the economic development, customers in Europe and overseas tend to plan on a more cautious and short-term basis. The Cartonboard Division’s order backlog which leveled out at approximately 60,000 tons in mid-August (60,000 tons in the previous year) points to a continued satisfactory utilization at least also in the month of August.

On the international waste paper markets a high level of price stability followed the price explosion which occurred between April and July. Mayr-Melnhof will therefore aim to keep European prices stable following the implementation of the price increase.

The further development of business will be highly dependent on the dynamics of private consumption. As in the past, Mayr-Melnhof will adjust production to demand, if necessary. Current limitations to visibility allow us to expect a continuation of the positive business trend first of all for the third quarter of 2002.
 
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- The interim report for the 2002 first half-year is available on our homepage:
  http://www.mayr-melnhof.com.

- Results for the first three quarters of 2002 will be released November 19, 2002

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