SanomaWSOY's Interim Report 1 January - 31 March, 2003

SanomaWSOY's net sales increased to EUR 564.0 (559.0) million and operating profit grew to EUR 14.8 (14.0) million in the first quarter of 2003. EBITA amounted to EUR 47.2 (50.5) million. Result before extraordinary items decreased to EUR -0.1 (23.9) million and earnings per share decreased to EUR -0.05 (0.07) due to lower financial income. The first quarter is typically the weakest quarter for SanomaWSOY due to the nature of its business.

Outlook for 2003

The economy of the euro area will grow slowly in 2003. The Research Institute of the Finnish Economy forecast in March that GDP will grow in 2003 in the euro area by only one per cent and in Finland by 1.8%. Media advertising has grown during the first quarter of the year compared to last year, but is still on a sluggish trend.

SanomaWSOY's net sales are forecast to grow faster than GDP in Finland in 2003. The trend in newspaper, magazine and television advertising is crucial to this growth as they account for approximately a fifth of the Group's net sales. Operating profit will grow faster than net sales, due to operational streamlining and cost cutting.

Net sales

SanomaWSOY's net sales increased by about one per cent in the first quarter of 2003 and totalled EUR 564.0 (559.0) million. Growth was generated at SWelcom, Rautakirja and Sanoma. Sanoma Magazines' net sales decreased slightly, because the division's net sales did not include those of the BEAP Unit, a publisher of crossword puzzle magazines which was sold in April 2002. WSOY's net sales were on a par with the previous year's. The Group's advertising sales accounted for 20% (21%) of net sales.

Result

SanomaWSOY's operating profit improved more than net sales as a result of cost cutting and operational streamlining. Operating profit increased by 6% and totalled EUR 14.8 (14.0) million. The comparable operating result improved in all divisions, as in the first quarter of 2002 the Group's operating profit included some EUR 16 million gains on sales of assets. EBITA (operating profit before amortisation of goodwill, consolidated goodwill and immaterial rights) amounted to EUR 47.2 (50.5) million.

Result before extraordinary items decreased to EUR -0.1 (23.9) million and earnings per share decreased to EUR -0.05 (0.07) due to a downturn in financial income. Financial income decreased from the previous year, as there were no substantial gains on sales from realisation of the share portfolio this year. The Group's net financial items in the first quarter of 2003 amounted to EUR -14.9 (9.8) million. Financial income totalled EUR 4.7 (31.4) million and financial expenses amounted to EUR 19.6 (21.5) million. Financial expenses were comprised largely of interest expenses on interest-bearing liabilities, EUR 11.2 (17.0) million, and decreases in the value of securities, EUR 4.5 (2.3) million.

The Group's cash flow from operations was EUR 71.4 (72.7) million and cash flow per share EUR 0.50 (0.53).

Balance sheet and financial position

The consolidated balance sheet total decreased markedly compared to the previous year and was EUR 2,529.8 (3,004.8; 31.12.2002: 2,592.5) million at the end of March.

The Group's financial position continued to improve during the first quarter of the year and was good at the end of the financial period. The equity ratio, including capital notes, rose to 46.3% (40.1%; 31.12.2002: 45.2%). Capital notes have a positive impact of 8.6 percentage points on the equity ratio. Shareholders' equity excluding capital notes amounted to EUR 889.3 (826.8; 31.12.2002: 788.9) million. Interest-bearing liabilities declined and totalled, including capital notes, EUR 941.5 (1 360.5; 31.12.2002: 1 006.2) million. Net debt, including capital notes, was EUR 840.3 (1,008.6; 31.12.2002: 883.8) million.

The book value of securities and cash was EUR 101.2 (351.9) and their market value was also EUR 101.2 (388.0) million. The book value of investments in shares was EUR 34.6 (96.7) and their market value was also EUR 34.6 (132.0) million.

Investments

SanomaWSOY continued to invest cautiously, EUR 17.5 (17.8) million. The biggest investor (EUR 6.6 million) was Rautakirja, whose largest project was the construction of a multiplex movie theatre opened in Vilnius. R&D expenditure recorded as expenses totalled EUR 1.7 (6.9) million.

Market situation

According to Gallup Adex, media advertising grew in Finland by 5% during the first quarter of the year in spite of slow economic growth. Media advertising, excluding advertising for the parliamentary election, increased by some 2%. Of the major media, television grew the most, with sales of advertising up by 6% from the previous year. Newspaper advertising also did well and grew by 5%. Newspaper advertising, excluding advertising for the parliamentary election, increased by one per cent. However, job advertising continued to decline sharply, by 13%.

Magazine advertising declined during the first quarter of the year in most of the countries where Sanoma Magazines operates, although it grew in many Eastern Central European countries. In Finland, magazine advertising declined by slightly over one per cent, although advertising in consumer magazines grew by one per cent and in customer magazines by 11%. Advertising in Finnish professional and association magazines decreased by 8%, however.

The merger of Rautakirja

Rautakirja, of which SanomaWSOY previously held 57%, was merged into SanomaWSOY on 1 March 2003.

Rautakirja shareholders received a merger consideration of 5.3 new SanomaWSOY Series B shares for each Rautakirja A- or B-share. In cases where the shareholders would have received a fraction of shares, they were paid a cash consideration in the form of a fraction of EUR 9.21, the imputed price of SanomaWSOY Series B share. At the time of the merger Rautakirja Oyj was de-listed by the Helsinki Exchanges and Rautakirja's business operations were incorporated into the new Rautakirja Oy, which continues activities on the existing basis.

The merger will enable full usage of the Group's resources in international expansion projects and simplify the ownership structure. It will give more flexibility for potential reorganisation of the business and the restructuring of the Group while enhancing efficiency in financing and capital planning.

In the merger, SanomaWSOY issued 33,550,850 new Series B shares. The effect of the merger on the company's share capital is described in greater detail in the section Shares.

Corporate governance

Eija Ailasmaa, who had been the President (acting) of Sanoma Magazines B.V. since August 2002, was appointed the President & CEO of the company as of the beginning of March. Ailasmaa has previously served as the President of Sanoma Magazines Finland and the Executive Vice President of Sanoma Magazines B.V.

The Annual General Meeting held after the end of the first quarter elected ten members to the company's new Board of Directors. The new members elected were Ms Sari Baldauf, President of Nokia Networks, Mr Seppo Kievari, President of Sanoma Corporation, and Mr Sakari Tamminen, President & CEO of Rautaruukki Corporation as of 1 January 2004. The members re-elected to the new Board were Mr Jaakko Rauramo (Chairman of the Board), Mr Paavo Hohti (Vice Chairman), with Mr Robert Castrén, Ms Jane Erkko, Mr Kyösti Järvinen, Mr Robin Langenskiöld, and Mr Hannu Syrjänen as ordinary members. Mr Aatos Erkko, Mr Esko Koivusalo, Ms Marjukka af Heurlin, and Ms Rafaela Seppälä resigned from the Board.

According to the Articles of Association, the term of office of the Board members is three years. To achieve circulation among the members of the Board, Mr Kyösti Järvinen, Mr Seppo Kievari and Mr Hannu Syrjänen have announced that they will vacate their seats at the AGM in spring 2004. Mr Paavo Hohti, Mr Robert Castrén, Ms Jane Erkko, and Mr Robin Langenskiöld will vacate their seats in spring 2005.

Dividend

SanomaWSOY paid a dividend of EUR 0.40 per share for 2002. The date of record for the dividend payment was 4 April 2003 and the dividend was paid on 10 April 2003.

Shares

In connection with the merger of Rautakirja, SanomaWSOY issued a total of 33,550,850 new Series B shares, of which SanomaWSOY's subsidiaries Sanoma Corporation and Werner Söderström Corporation received as merger consideration a total of 18,773,018 Series B shares. SanomaWSOY's AGM decided to decrease the company's share capital by EUR 8,072,397.74 and to invalidate without consideration the shares which came into the possession of the above-mentioned subsidiaries in order to dismantle the intra-Group cross-ownership. The amount of EUR 8,072,397.74 equalling the aggregate book counter-value of the invalidated shares was transferred to the premium fund, and the decrease has thus no impact on the restricted equity of the company. The decrease in the share capital was entered into the Finnish Trade Register on 30 April 2003.

As a result of the invalidation, the share capital of SanomaWSOY Corporation decreased from EUR 77,001,151.78 to EUR 68,928,754.04, and the number of Series B shares was reduced from 155,851,954 to 137,078,936. The number of Series A shares remains at 23,220,492. After the invalidation, SanomaWSOY holds 7,187,276 of its own Series B shares through its subsidiary Tiikerijakelu Oy, equivalent to 4.48% of shares and 1.19% of voting rights.

If all the capital notes issued by SanomaWSOY in 2001 were converted into shares and if SanomaWSOY's 2001A and 2001B warrants were subscribed, the number of SanomaWSOY's Series B shares would rise to 151,384,246. The number of Series A shares will not change in this event. None of the convertible capital notes issued in 2001, the conversion period of which began on 2 January 2002, had been converted into shares by the end of the review period. The imputed conversion price of a share is EUR 15.91. The subscription period for 2001A warrants will begin on 1.11.2004 and end on 30.11.2007, and the period for 2001B warrants will begin on 1.11.2005 and end on 30.11.2008. After the dividend payment on April 2003, the imputed share price of 2001A warrants was EUR 11.83 and that of 2001B warrants was EUR 11.10.

In the first quarter of 2003, SanomaWSOY's Series A shares were traded at an average price of EUR 10.07, with a low of EUR 9.00 and a high of EUR 10.98. Series B shares were traded at an average price of EUR 8.38, with a low of EUR 7.70 and a high of 9.61. The turnover of shares totalled EUR 26.9 (35.6) million. Most of the shares traded were Series B, of which roughly 3.2 million shares were traded.

Authorisations of the Board of Directors

The AGM held on 1 April 2003 authorised the Board to decide, within one year of the AGM, on an increase of share capital by one or more rights issues, issuance of one or more convertible bond loans and/or option rights so that the new shares subscribed under the rights issue and/or converted against the convertible bonds, and/or the new shares subscribed under the option rights, shall be of Series B, and that their aggregate number may not exceed 29,104,319 shares and the total increase of share capital may not exceed EUR 12,514,857.17.

SANOMA MAGAZINES

Magazine publishing and press distribution. Sanoma Magazines is Europe's fifth-biggest magazine publisher. The division publishes some 220 titles and operates in nine different counties: the Netherlands, Belgium, Finland, Sweden, Hungary, the Czech Republic, Croatia, Romania and Slovakia. Aldipress is the biggest magazine distributor in the Netherlands.

Sanoma Magazines' net sales amounted to EUR 232.3 (236.2) million in the first quarter of 2003. Net sales at Sanoma Uitgevers totalled EUR 110.3 (110.7) million. Net sales at Sanoma Magazines Finland increased to EUR 41.1 (40.3) million and net sales at Sanoma Magazines Belgium to EUR 36.5 (36.0) million. Sanoma Magazines International's net sales decreased to EUR 22.4 (25.0) million due to divestment of the British crossword publishing unit BEAP in April 2002. Net sales at Aldipress totalled EUR 48.6 (50.1) million.

Sanoma Magazines' advertising sales decreased by 7% in the January - March period. Advertising sales decreased in several countries but grew in Finland and most of the Eastern Central European countries, and accounted for some 20% (21%) of Sanoma Magazines' total net sales for the first quarter.

Circulation sales developed better than advertising sales, and comparable circulation sales excluding the sales of BEAP went up by 3%. Circulation sales increased in the Netherlands, Finland, Hungary, the Czech Republic and Romania.

Sanoma Magazines' operating profit for the first quarter decreased to EUR 5.9 (7.7) million and EBITA amounted to EUR 26.5 (32.4) million. Comparable operating profit improved, however, and was contributed to by cost cutting programmes and lower paper prices. In 2002, the operating profit for the first quarter included the result of BEAP and gains on the sale of Sanoma Magazines Finland's business unit Blue Book in March.

During the first quarter Sanoma Magazines carried out two outstanding launches. The first local issue of National Geographic was launched in Hungary. In addition, the local version of Elle Decoration, an international decoration magazine, was launched in Croatia. Elle Decoration is Sanoma Magazines' fourth magazine in the country. Sanoma Magazines International acquired a 35% holding in Sanoma Magazines Zagreb and became the sole owner of the Croatian company.

Sanoma Magazines is estimated to achieve net sales of slightly above EUR one billion in 2003. Operating profit is expected to be about 6% of net sales.

SANOMA

Publishing and printing newspapers. Sanoma publishes and prints Finland's leading newspapers, Helsingin Sanomat and Ilta-Sanomat. Sanoma's newspaper titles also include the business daily Taloussanomat, regional and local papers in Southeast Finland, the free ad publications Keltainen Pörssi and Palsta, and the sports and sport betting weekly IS Veikkaaja.

Sanoma's net sales amounted to EUR 111.5 (110.3) million in January - March. The greatest growth was in the IS Business Unit, which boosted its net sales to EUR 23.1 (22.1) million as a result of the acquisition in 2002 of the IS Veikkaaja publication. Helsingin Sanomat's net sales were EUR 66.1 (65.7) million and those of Kymen Lehtimedia were EUR 12.7 (12.3) million.

Advertising sales increased by more than one per cent and accounted for 49% (49%) of Sanoma's net sales. Election advertisements boosted newspapers' advertising sales, but Helsingin Sanomat's job advertising continued to decline. The advertising sales of the IS Business Unit and Kymen Lehtimedia increased markedly, partly because of IS Veikkaaja and Kaupunkilehti Seiska, which was acquired in February 2002.

Circulation sales grew by 3%. Growth came mainly from a price increase. Taloussanomat increased its circulation by a clear margin from the previous year, but the circulations of other papers declined slightly. Exports of printed products continued to decline, and its proportion of Sanoma's net sales has fallen in recent years.

Sanoma's operating profit increased markedly and amounted to EUR 10.7 (7.9) million. This figure includes a EUR 1.0 (1.3) million share of the result of the associated company Rautakirja, which was in 2003 included in the operating profit only in January - February. Operating profit was improved by streamlining measures, savings, and a reduction in the cost of paper, and operating profit grew substantially for Helsingin Sanomat, the IS Business Unit and Kymen Lehtimedia. EBITA rose to EUR 12.5 (9.6) million.

After the review period, in April, Sanoma divested the operations of its distribution company Leijonajakelu Oy to Finland Post. As a result of the divestment, about 1,900 employees of Leijonajakelu will transfer to the service of Finland Post. Sanoma's intention is for the arrangement to secure high-quality and cost-efficient early-morning distribution also in the future. Leijonajakelu's net sales in 2002 totalled EUR 69.7 million, majority of which were internal sales of Sanoma. The transaction is subject to approval by the competition authorities.

The remainder of the year will continue to be marked by uncertainty over newspaper advertising, and there are no clear signs of a change in the economic cycle that would affect job advertising. Sanoma's net sales are forecast to grow slightly in 2003. Growth will be increased by IS Veikkaaja and others, but it will be decreased by the divestment of Leijonajakelu. Operating profit is forecast to improve more than net sales, due to long-range development measures. No share of Rautakirja's result will be included in Sanoma's operating profit as of the beginning of March.

WSOY

Publishing, printing and calendar operations. WSOY is Finland's biggest book publisher and the market leader for general literature, educational materials and several special publications. WSOY is also one of the biggest book printers in the Nordic region and the Finnish market leader for digital printing. It is also the leading calendar publisher in the Nordic countries.

WSOY's net sales were EUR 42.4 (42.2) million in January - March. The growth was generated by publishing, which improved its net sales to EUR 31.3 (30.3) million. Printing's net sales declined to EUR 15.1 (15.9) million due to a weak market situation. Calendar operations' net sales amounted to EUR 1.6 (1.7) million.

Sales to bookstores increased by 8%, particularly due to the success of non-fiction books, Finnish literature and children's books. Direct sales to consumers of multi-volume reference works and annuals also took a favourable turn, but book club sales decreased.

WSOY's operating result for the first quarter of the year improved to EUR -1.6 (- 2.1) million. This figure includes a EUR 1.4 (1.8) million share of the result of the associated company Rautakirja, which in 2003 was included in the operating profit only in January - February. The best improvement in the operating result was in publishing, whose results were improved by success in publishing printed books and through cutting costs in electronic publishing. Printing's operating result was on a par with the previous year's and that of calendar operations improved slightly. WSOY's EBITA was EUR

-0.9 (-1.0) million.

After the review period, in April, WSOY acquired 10% of the digital printer Dark Oy and became the sole owner of the company.

WSOY's net sales are expected to grow faster in 2003 than last year. The first quarter of the year is typically the weakest quarter for the company. Because of the nature of its business, WSOY's profit for the whole year will accumulate during the remaining part of the year. The operating profit of its own operations will improve, but the overall operating profit will be affected by the decrease in the share of Rautakirja's result, which will not be included in WSOY's figures as of the beginning of March.

SWELCOM

Electronic media. The SWelcom-owned TV channel Nelonen is the third most important advertising media in Finland. HTV (Helsinki Television) is Finland's biggest cable TV company.

SWelcom's net sales increased to EUR 24.9 (21.5) million in January - March. The growth was mainly driven by the success of HTV's broadband internet services, and HTV's net sales rose to EUR 9.2 (6.5) million. Sales of Nelonen's advertising time increased, and Nelonen's advertising sales grew faster than TV advertising in general. Nelonen's net sales amounted to EUR 13.6 (12.7) million. Advertising sales represented 54% (58%) of SWelcom's net sales.

Operating result improved markedly both at HTV and Nelonen, and SWelcom's operating loss decreased to EUR 1.1 (6.7) million. In addition to sales growth, the decrease was due to the halving of Nelonen's operating licence fee. Other factors in the improvement were that HTV's connection fees were recorded through the income statement as of the beginning of the year and that SWelcom's holding in Suomen Urheilutelevisio (Finnish Sport Channel) was reduced. SWelcom decreased its holding in Suomen Urheilutelevisio from 35% to 19.9% in February 2003. SWelcom's EBITA was EUR 6.7 (1.1) million.

SWelcom's net sales are expected to grow markedly in 2003 thanks to the increase of Nelonen's advertising sales, the trend in HTV connections, and the popularity of broadband internet. The most critical factor for growth is the trend in TV advertising, which is expected to increase more than other large media. Operating loss is expected to continue to decline significantly.

RAUTAKIRJA

Kiosk operations, press distribution, bookstores, movie theatre operations and restaurant operations. Rautakirja's R-kiosks form Finland's leading chain of convenience outlets, while Lehtipiste is the country's leading press distributor. Suomalainen Kirjakauppa is Finland's most extensive bookstore chain, and the movie theatre operations enterprise Finnkino is the market leader in its field. Rautakirja has expanded its activities into the Baltic countries and the Czech Republic. Rautakirja was merged into SanomaWSOY on 1 March 2003, after which time Rautakirja shares were no longer listed on the Helsinki Exchanges.

Rautakirja's net sales increased in January - March to EUR 180.8 (176.0) million. Comparable net sales were up by one per cent.

Kiosk operations' net sales in the first quarter were on a par with the same period last year, at EUR 88.3 (88.1) million. Press distribution's net sales grew to EUR 44.1 (38.7) million due to considerable expansion in Estonia and Latvia in 2002. The fact that Easter sales fell in the second quarter instead of the first had a distinct impact on the first quarter sales of both kiosk operations and press distribution. Movie theatre operations' net sales held steady at EUR 14.6 (14.6) million, although there was a downturn in the number of visits to movie theatres during the first quarter of the year. Bookstores' net sales grew to EUR 31.7 (30.8) million. Restaurant operations' net sales grew, largely due to new units, to EUR 13.4 (10.7) million.

Rautakirja's operating profit declined to EUR 7.3 (7.5) million. Operating profit was reduced by a downturn in gains on the sales of real estate assets and by the transfer of investment real estate to SanomaWSOY Corporation in the beginning of March. However, operational result improved. Operating profit improved in kiosk operations, press distribution and bookstores, but decreased in restaurant operations and movie theatre operations, as a drag on profits was exerted by the start-up costs of a multiplex movie theatre in Lithuania. Rautakirja's EBITA was EUR 8.6 (8.5) million.

After the review period, in May, Suomalainen Kirjakauppa acquired the newspaper and magazine subscription operations run by Academic Bookstore. In 2002, the net sales of the acquired operations totalled EUR 13 million.

In 2003, Rautakirja's net sales are forecast to grow faster than wholesale and retail business in general. It is estimated that about half of the growth will be generated in Finland and half abroad. When Rautakirja was merged into SanomaWSOY there were changes in Rautakirja's structure, mostly concerning real estate and financing operations, which will affect Rautakirja's results for 2003. The operational profit of the basic business operations is forecast to be on a par with 2002.

Helsinki, 8 May 2003

Board of Directors
SanomaWSOY Corporation

Interim Report Tables

Figures are unaudited.

SANOMAWSOY CORPORATION

Raija Kariola
Vice President
Investor Relations and Group Communications

DISTRIBUTION
Helsinki Exchanges

Principal media

Interim Report Jan - Mar 2003, slides