Investment in Kotkamills

10 July 2012

POWERFLUTE

INVESTMENT IN KOTKAMILLS

Powerflute Oyj ("Powerflute" or the "Group"), the packaging and paper group, today announced that it has acquired a 10% interest in Kotkamills Oy ("Kotkamills"), an integrated forest products business located in Kotka in Eastern Finland. In order to facilitate the investment, Kotkamills has issued new shares representing 10% of its enlarged share capital to Powerflute in exchange for a direct cash injection of €1.5 million. The investment was funded from Powerflute's own cash resources.

Kotkamills is a leading producer of laminating papers for use in the manufacture of high pressure laminates for the construction industry. It has the capacity to produce up to 200,000 tonnes of saturating base kraft paper and 40,000 tonnes of impregnated papers annually. In addition, it produces up to 180,000 tonnes of specialised magazine papers and 230,000 m3 of sawn timber. In the year ended 31 December 2011, Kotkamills reported a loss before tax of €4.8 million on revenue of €255.2 million after charging exceptional and non-recurring expenses of €4.7 million relating to the costs of separation from a former owner.

Commenting on the investment, Powerflute's Chairman Dermot Smurfit said:

"We are delighted to have become a shareholder in Kotkamills. We regard this as a strategic investment for Powerflute and look forward to supporting the current owners and management in further improving the performance of the business and helping it to realise its full potential."

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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.