Newsdetails

• Positive development of results

• High capacity utilization in both divisions

• Price increase implemented due to soared raw material costs

• Good prospects for full year results

As expected, the Mayr-Melnhof Group was able to benefit from the positive demand prevailing in the third quarter 2007 and to obtain new peak earnings in the first three quarters of 2007 with a profit for the period of EUR 92.7 million (1-3Q 2006: EUR 80.6 million). Since the beginning of the year, both cartonboard production and folding carton manufacturing have registered very high capacity utilization and recorded a gratifying increase in earnings. With new record values for sales and production, both divisions succeeded in benefiting above proportion from the overall conditions and gained additional market shares.

Because of the vigorous demand for raw materials, the price hikes for many industrial input factors, especially recovered paper, also persisted during the year. However, as cartonboard and folding cartons have sold at higher prices, it has been largely possible to absorb the cost increases so far occurred and to stabilize margins. The growth of earnings during the first three quarters of 2007 therefore resulted chiefly from the positive development in volume.

Mainly on account of a persisting rise in inflation, current economic forecasts point to a clearly more restrained economic trend in the near future. This has also had an impact on our principal markets, where dynamics in order intake have noticeably slowed down, in comparison to previous months.

Consolidated sales amounted to EUR 1,292.5 million, which was 16.1 % or EUR 178.8 million above the previous year’s figure (1-3Q 2006: EUR 1,113.7 million). The larger quantities sold by both divisions, as well as the higher cartonboard prices were major growth contributors. The most recent acquisitions, made last year, accounted for about 19 % of the increase.

We succeeded in improving the operating profit by 12.7 % or EUR 14.9 million to EUR 132.2 million. Both divisions were able to increase their earnings. The Group’s operating margin amounted to 10.2 % (1-3Q 2006: 10.5 %).

Profit before tax amounted to EUR 135.1 million, which is an increase of 14.6 % (1-3Q 2006: EUR 117.9 million). Income tax expense accounted for EUR 42.4 million (1-3Q 2006: EUR 37.3 million), resulting in a Group tax rate of 31.4 % (1-3Q 2006: 31.6 %).

Profit for the period achieved an increase of 15.0 % and reached a new peak value of EUR 92.7 million (1-3Q 2006: EUR 80.6 million).

Development in the Third Quarter

As expected, a sustained good capacity utilization in line with a high order backlog and corresponding sound volume development in both divisions characterized the third quarter.
A capacity utilization of 99.5 % at MM Karton marked a historical peak value (2Q 2007: 99 %, 3Q 2006: 93 %).

Prices for recovered paper once again went up clearly at the beginning of the summer months. Thus, MM Karton has been selling cartonboard at higher prices since the middle of the year, which has largely facilitated compensation of this rise in costs. MM Packaging attributed top priority to passing on the higher input prices for cartonboard to customers.

MM Karton obtained an operating margin of 8.2 % after 8.4 % in the second quarter (3Q 2006: 7.0 %). At 10.9 % the operating margin of MM Packaging was slightly above the figure achieved in the previous quarter (2Q 2007: 10.6 %, 3Q 2006: 11.3 %).

The Group’s operating profit amounted to EUR 46.7 million, after EUR 43.3 million in the second quarter (3Q 2006: EUR 37.8 million). The profit for the period reached a new record value of EUR 32.9 million (2Q 2007: EUR 30.8 million, 3Q 2006: EUR 26.1 million).

Divisions:

MM KARTON
In line with the general economic demand situation, the average order backlog of the board mills, which amounted to about 188,000 tons for the first nine months of 2007, was clearly above that of the previous year (1-3Q 2006: 84,000 tons). Given these positive overall conditions, MM Karton nevertheless succeeded in gaining further market shares in Europe.

MM Karton obtained new record levels, both in sales and production, during the first three quarters. The volume sold went up by 6.8 % to about 1,230,000 tons. At 85 %, sales to Europe were clearly higher than during the comparable period (1-3Q 2006: 79 %). The share of sales on markets outside of Europe therefore declined from 21 % to 15 %. With a production of about 1,270,000 tons (1-3Q 2006: 1,172,000 tons), the capacities of MM Karton were utilized at a rate of 98 % during the first three quarters of 2007 (1-3Q 2006: 93 %).

The generally vigorous demand manifested itself in an unabated rise of prices for almost all input factors. Recovered paper, also, recorded a dramatic price increase since the beginning of the year, which continued up to the summer months. Prices for cartonboard were consequentially raised as of the middle of the year, which almost compensated the preceding cost increases.

Sales went up by 13.6 %, both because of higher volume and higher prices, and amounted to EUR 683.1 million (1-3Q 2006: EUR 601.4 million). Operating profit could be improved by 16.4 % to EUR 56.0 million. The operating margin thus rose to 8.2 % (1-3Q 2006: 8.0 %).

MM PACKAGING
The sound economic development has generated positive overall conditions for all sales areas during the first three quarters of the year. On a country level, however, the dynamics are quite heterogeneous. Because of sufficient capacities, competition continued undiminished. Against this background, MM Packaging succeeded in gaining new business and in utilizing the capacities of its plants at a high level. Both in the food and in the non-food sector, especially in the areas of cigarette and detergent packaging, it was possible to generate clearly higher sales.

Approximately 490,000 tons of cartonboard were converted during the first three quarters. This is equivalent to an increase of 24.1 %, compared to the previous year (1-3Q 2006: 395,000 tons). This significant step in volume expansion results from the full utilization of the new rotogravure plants, set up in 2006, and the acquisitions in Russia and Tunisia during the previous year, as well as from gaining new business.

Parallel to the larger volumes, sales also recorded a marked rise of 19.4 %, amounting to EUR 716.5 million. About 29 % of this growth is attributable to the recent acquisitions. However, operating profit which rose by +10.1 % to EUR 76.2 million (1-3Q 2006: EUR 69.2 million) was more contained. This development is mainly due to higher cartonboard prices and the startup costs, incurred by the new rotogravure plants, as well as non-recurring income from a real-estate divestment in 2006. The operating margin therefore amounted to 10.6 % (1-3Q 2006: 11.5 %).

OUTLOOK

Sustained demand and high capacity utilization also characterized the beginning of the fourth quarter, for which we however expect a lower level of incoming orders compared to the preceding quarters, due to seasonality, especially in cartonboard production. Accordingly, MM Karton has scheduled the implementation of planned investment projects enhancing efficiency for the second half of December.

After a further marked price hike on recovered-paper markets in July, the situation has now shown first signs of stabilization. However, one cannot rule out that the bull market for recovered paper will not continue in 2008. This, though, will largely depend on the general development of demand. We will continue to pay great attention to the oil-price development, and the costs coupled to it. Accordingly, passing on costs will furtheron have to be addressed as a matter of urgency.

Overall, we can expect a gratifying development of the result for the entire 2007 business year.

Our objective is to continue the growth course, achieving high profitability on the capital employed in the core competence sectors – cartonboard production and folding carton manufacturing.

Financial results for 2007 will be released on March 13, 2008.