POWR.L Regulatory News (POWR)

2 July 2012

POWERFLUTE

TRADING STATEMENT

Powerflute Oyj ("Powerflute" or the "Group"), the packaging and paper group, today provided the following update on trading during the six month period ended 30 June 2012 and on the outlook for the remainder of the financial year.

Trading update

Demand remained reasonably good throughout the second quarter and the average pricing levels achieved, although lower than in the first quarter, were better than expected. Trading conditions became tougher towards the end of the quarter as the uncertain economic environment affected consumer confidence in key European markets and reductions in recovered paper prices resulted in increased competition from producers of recycled fluting products. Despite this, we continued to experience good order intake and remain optimistic that there will be some improvement in conditions in the seasonally stronger second half.

The major programme of capital investment in the pulp and paper mill completed during the second half of 2011 has delivered the expected improvements in quality, manufacturing cost and daily productivity. However, there has been an increased frequency of mechanical failures in some of the areas where investments were made. An unplanned maintenance stop was taken during the second quarter and based upon performance since then, we are confident that most of the issues have been successfully addressed. Any further work required will be undertaken during the planned routine maintenance stop in the second half. As a result of the above, production volume for the first half was below our expectations and only comparable with that of the same period of the prior year, which also included a maintenance stop.

Due to the production challenges encountered at the mill and the resultant decision to take an unplanned maintenance stop during the first half, we now expect the result for the first half to be approximately €2 million below our initial internal expectations.

Acquisition related activity

We remain focused on our strategy of acquisitive growth in the paper and packaging sector and continue to evaluate interesting opportunities as they arise and to search for potential targets which meet our demanding acquisition criteria.

During the second quarter, we looked closely at the potential acquisition of a large, integrated pulp and paper mill, incurring due diligence and other costs of approximately €0.5 million. We ultimately withdrew from the transaction because of issues identified during the course of due diligence. The costs of the aborted transaction will be reported within operating profit and will have an impact on the results for the year.

We continue to examine a number of other acquisition opportunities which could be of interest, although there can be no certainty that any of these will result in a transaction.

Transactions in own shares and delisting from First North Finland

In accordance with the authority granted by shareholders at the Annual General Meeting held on 26 April 2012, Powerflute has purchased and transferred into Treasury 5,000,000 of its own shares and depositary interests. The most recent purchases were made on 18 June 2012, and as Powerflute is now in a closed period no further purchases will be made until after the announcement of the interim results in mid-August. The number of shares in issue (excluding shares held in Treasury) is now 284,818,174.

As previously announced, Powerflute received the consent of NASDAQ OMX Helsinki for delisting of its shares from First North Finland. The final day of trading in the Powerflute's shares on First North Finland was 29 June 2012.

Outlook

While market conditions remain challenging, we continue to experience good demand for our products and we are optimistic that there will be some improvement in the pricing environment as the second half progresses due to normal seasonal factors. However, speculation on the future of the Eurozone, the general weakness in Southern European economies which are major markets for our products, together with the low price of recovered paper which benefits producers of competing products, all represent significant challenges. Subject to the impact of any change in market conditions due to the factors outlined above, we continue to expect that the Group will perform well during the second half of the year.

Powerflute continues to be profitable and cash generative, with a strong balance sheet and considerable cash resources, and is well placed financially and strategically to take advantage of opportunities as they arise.

- Ends-

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About Powerflute

Powerflute Oyj ("the Company" or "Powerflute") is a paper and packaging group quoted on the AIM market of the London Stock Exchange (Ticker: POWR). Through its subsidiary Savon Sellu Oy, the Group operates a paper mill in Kuopio, Finland which produces a specialised form of semi-chemical fluting made from locally sourced birch. Corrugated boxes manufactured using Nordic semi-chemical fluting demonstrate strength and moisture resistance and are used for transportation of fruit and vegetables, high-value industrial goods such as electrical appliances and automotive components. The Kuopio mill is one of only three suppliers of Nordic semi-chemical fluting in Europe.