Accelerating our renewable future. CFO Seppo Parvi 29 November 2017

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1 Accelerating our renewable future CFO Seppo Parvi

2 Disclaimer It should be noted that and its business are exposed to various risks and uncertainties and certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by believes, expects, anticipates, foresees, or similar expressions, are forward-looking statements. Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the group s targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the group s patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the group s products and the pricing pressures thereto, price fluctuations in raw materials, financial condition of the customers and the competitors of the group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the group s principal geographic markets or fluctuations in exchange and interest rates. All statements are based on management s best assumptions and beliefs in light of the information currently available to it and assumes no obligation to publicly update or revise any forward-looking statement except to the extent legally required. 2

3 The renewable materials growth company Everything that s made with fossil-based materials today can be made from a tree tomorrow 3

4 at a glance Leading producer of board, pulp, wood products and paper We know the origin of all the wood we use. 100% comes from sustainable sources. 35 countries 9.8 BEUR sales % Operational ROCE excl. transformational investments projects % EBIT margin Q3/ Net debt to operational EBITDA Q3/17 67% of sales from growth businesses in 2016 We employ people

5 Forest assets Northern and Southern hemisphere Fair value of 3.4 BEUR Bergvik Skog, Sweden 2.3 million ha of land in Sweden, ha in Latvia (ownership of 49%) Tornator, Finland ha of land in Finland, ha in Estonia, and ha in Romania (ownership 41%) Guangxi, Southern China (leased) ha of land of which ha eucalyptus, ha other species Rio Grande do Sul, Brazil ha of land of which ha eucalyptus plantations Note: Fair value of Biological assets and Group s indirect share of forest assets is as of 31 Dec 2016, in total MEUR 5 Veracel plantations, Brazil ha of land of which ha eucalyptus plantations (ownership of 50%) Montes del Plata, Uruguay ha of land of which ha planted (ownership of 50%) In addition, leased plantations: - Laos: trial plantation, ha - Russia: ha

6 Forests are a strategic asset for the future 31 Dec 2016 Biological assets SCA Holmen UPM Klabin 3.4 BEUR 3.2 BEUR 1.8 BEUR 1.7 BEUR 1.1 BEUR Exchange rates, European central bank 31 Dec 2016 SEK/EUR BRL/EUR

7 intends to acquire forest assets of Bergvik Skog To secure our competitive raw material supply in the long term would transform 49% ownership to approximately 70% of the value of the forest assets in Bergvik Väst Financial impacts estimate for Bergvik Väst consolidated as a subsidiary Cash out effect of MEUR Debt would increase by 800 MEUR Net debt to operational EBITDA ratio would increase by 0.6 Capital employed would increase by 1 BEUR resulting a decrease in ROCE of 1%-point 7

8 We are well-positioned for growth Consumer Board Packaging Solutions Biomaterials Wood Products Sales Sales 2016 EUR and % of group s sales 2.3 BEUR 1.0 BEUR 1.4 BEUR 1.6 BEUR Market growth for virgin board: Europe 1.8%, North America 1.2%, Latin America 3.3%, China 4.3%, Rest of Asia 3.4%, Africa 2.5% High quality SC fluting 1-3%; Kraftliner 2 3% excl. North Am; Testliner 3 4% Eastern Europe 1st Qtr 2nd Qtr Market pulp 2.5% or 1.7 Mt/year; Fastest growth 3rd Qtr in textiles (3%) and hygiene (3.6%) 4th Qtr Global sawn softwood 2 3%, European new construction 3.5% Paper 3.2 BEUR 33% Declining 3 5% annually 24% 11% 14% 16% 8

9 with strong market positions Consumer Board Packaging Solutions Biomaterials Wood Products Position #1 in LPB, FSB and CUK in Europe or the world #6 in containerboard in Europe Widest pulp grades portfolio #1 in Europe in fluff #1 in Europe and #4 in the world in supplying wooden construction material Relative market share* 110% LPB Global 110% LPB Europe 130% CUK Europe 50% FSB Global 157% FSB Europe 62% Unbleached virgin fibre based containerboard 85% Corrugated Central Eastern Europe 62% Corrugated Russia 107% Corrugated Nordics 19% BHKP 47% NBSK 10% Fluff 11% Dissolving Pulp 210% Classic sawn Europe 110% CLT Global 150% Industrial components (Nordic, Baltic, Poland) 84% Construction beam in Europe Paper #2 in Europe 63% in Europe *Paper has calculated the relative market share figure from capacities and others from market size, Consumer Board from market volume 9

10 Profitable growth Improving sales and innovation MdP Mill investment Beihai Mill investment Varkaus Mill conversion Murów sawmill investment Varkaus LVL investment Imatra de-bottlenecking Sunila bio-refinery Innovation Centre Helsinki Innovation Centre Stockholm NXP and Rennovia JDA Launch of first MFC product Intelligent packaging Launch of Performa Brilliance Launch of CKB Nude Launch of Natura life LPB Launch of fibre-cup Launch of Multicopy Zero Launch of FlyoBrite Product & Sales Management, S&OP, CRM Asset transformation Innovation & customer focus 9

11 Developing further in the bioeconomy PRODUCT / TECHNOLOGY CUSTOMER USE EXAMPLES R&D PILOTING SCALING FULLY ADOPTED BY MARKETS ADOPTED BY MARKETS 1. BIO-BASED CHEMICALS INDUSTRIAL INTERMEDIATES REPLACING FOSSIL MATERIALS IN PRODUCTS 2. Lignin Xylose Biomass polymers Dissolving pulp Modified fibres Building systems Modified wood Replace phenol Sweetener, personal care Replace oil-based plastic Textiles, packaging Performance chemicals Personal care ingredients Micro-fibrillated Bio-barrier in food cartons cellulose Lightweight board Strengthening liner Biocomposites Building & construction Lignin bio-carbon fibre Lightweight structures, energy storage, transportation High rise buildings Cladding, decking ENABLING 3. INNOVATIONS OF NEW CONSUMER EXPERIENCES 11 Nano cellulose Digitalisation Transparent / Electronic Programmable / Foam / Spheres Material with in-built monitoring and tracking capabilities for intelligent packaging

12 These are our drivers for accelerating renewable growth Biocomposites Intelligent packaging In 2017, close to 5% of our sales comes from NEW products and services High-quality packaging solutions Bio barriers Building components and systems Future biochemicals Next generation liquid and food packaging 12

13 Selective M&A to strengthen our business Acquisitions to be considered in the following areas: To strengthen relative market share in focused areas To strengthen existing synergies New products and technologies supporting our strategies Supporting sustainable profitable growth 13

14 Consumer Board has high quality board for premium consumer applications A broad range of solutions to fit customer demands 14

15 Virgin fibre board grades 2.6% CAGR until % (5.3 mt) +1.2% (6.9 mt) +4.3% (7.3 mt) +3.3% (1.4 mt) +2.5% (0.2 mt) +3.4% (3.3 mt) Virgin fibre board grades: Coated Unbleached Kraft (CUK) Solid Bleached Sulphate (SBS) Liquid Packaging Board (LPB) Folding Box Board (FBB) Food Service Boards (FSB) Source: Pöyry 15

16 Packaging Solutions strategic roadmap Growth in attractive product segments Innovation and customer value creation Operational, supply chain and sourcing excellence Digitalisation 16

17 We have strong market position and growth in our home packaging markets Europe China Using virgin fibre boards from Beihai and Europe Nordics Nordics 0.7 BEUR 0 1% CAGR #1 107%* Source: analysis Note: CAGR * Relative market share, measured as a share of largest competitor 17 Poland & Baltics 1.5 BEUR 3 5% CAGR #2 85%* Corrugated packaging Russia Russia 1.7 BEUR 3% CAGR #4 62%* China Russia 1.8 BEUR 5 6% CAGR #5 ~20%* Corrugated & consumer packaging

18 Biomaterials three focus areas Maximize value from eucalyptus pulp Continue to improve production efficiency Improve cost competitiveness in Montes del Plata Differentiate our Nordic pulp business Reduce exposure in softwood Grow in fluff and dissolving pulp Continue to improve production efficiency Innovate on pulp applications with current customers Create new platforms for growth We build and develop strong business on: -Improved pulp properties -Regenerated cellulose and MFC -Lignin -Bio-based chemicals -Extraction and separation technologies 18

19 Biomaterials is differentiating pulp mix Maximize value from eucalyptus pulp Today Target % 15% 37% 42% Improve competitiveness of our Nordic mills (Fluff and dissolving) 42% Softwood Hardwood Fluff/dissolving 43% 19

20 Pulp demand is growing in strategic segments Pulp demand to 2021 in million tonnes (Mt) by end-uses CAGR: + 2.5% ~ million tonnes (Mt)/year Grade Mt Hardwood 4.2 Softwood Source: Hawkins Wright, Pöyry, 20 Fluff 1.1 Dissolving Pulp 2.4 TOTAL 8.4

21 Balanced pulp market expected Hardwood and softwood average capacity growth (Mt/year) Cash cost CIF Europe (USD/tonne) Cash cost by country Mt/y (90% ratios) Solid Not sustainable Best in class Mt/y Announced capacity growth : 6.2 Mt (1.2 Mt/year) Cumulative capacity, thousand tonnes/y Q Softwood 2.4Mt Hardwood 3.8Mt Source: Pöyry, Hawkins Wright 21

22 Wood Products continues to build on strength #1 in Europe in supplying wooden construction material 210% Classic sawn Europe 110% CLT global 150% Industrial components Europe #4 in the world in supplying wooden construction material Increased ROOC target from 18% to 20% 22

23 Innovations taking wood to new heights PEFC-certified house Mäihä, Finland Ris de Orangis, Paris, France Student homes Haugesund, Norway Photo: Lendlease International House Sydney, Australia Trummens Strand, Sweden Crome Court, UK Green Office Enjoy, France. BBCA-certified Wine Museum, Bordeaux, France 23

24 Paper continues to deliver good cash flow Focus is on delivering good cash flow for group s sales and innovation transformation Positive cash flow after investing activities In order to maintain cash flow Concentrate on selected product segments Ensure each machine is cash generating Improve efficiencies Continue reducing costs Continue to make selected divestments Free cash flow after investments target is more than 7% to sales Cash flow after investing activities Cash flow after investing activities to sales 24

25 Sales grew for third consecutive quarter; operational ROCE above strategic target Summary financials Q3/2017 EUR million Q3/17 Q3/16 Change % Change % Q3/17/ Q3/17/ Q3/16 Q2/17 Q2/17 Sales % % Operational EBITDA % % Operational EBITDA margin 16.3% 14.3% 13.5% Operational EBIT % % Operational EBIT margin 11.6% 9.2% 8.7% Profit before tax excl. IAC % % EPS excl. IAC, EUR EPS (basic), EUR Operational ROCE 13.9% 10.1% 10.3% Operational ROCE excl. Beihai operations 16.3% 13.5% 12.4% Cash Flow from Operations % % Net debt/last 12 months operational EBITDA

26 Strategic targets Group targets Q3/16 Q3/17 Dividend To distribute 50% of net income over the cycle Growth* To grow faster than the relevant market 1.8% (YoY) 11.3% (YoY) Net debt to operational EBITDA <3.0x Fixed costs to sales <20% 25.5% 23.8% Debt to equity <80% 52% 43% Operational ROCE >13% 10.1% 13.9% Operational ROCE excl. Beihai op. 13.5% 16.3% Divisional targets Q3/16 Q3/17 Consumer Board Operational ROOC > 20% 12.9% 17.7% Consumer Board excl. Beihai op. 42.3% 40.5% Packaging Solutions Operational ROOC > 20% 9.6% 22.4% Biomaterials Operational ROOC > 15% 6.7% 14.8% Wood Products Operational ROOC > 20% 17.5% 21.3% Paper Cash flow after investing activities to sales > 7% 11.7% 0.8% *Excluding Paper 26

27 Guidance for Q4/2017 Compared to Q3/2017 Sales are estimated to be similar to or slightly higher than the amount of EUR million recorded in Q3/2017 Operational EBIT is expected to be somewhat lower than or even in line with the EUR 290 million recorded in Q3/2017 The operational EBIT estimate for Q4/2017 includes the negative EUR 7 million impact of the ramp-up of the Beihai operations Beihai Mill expected to reach operational EBITDA break-even in Q4/2017 The impact of annual maintenance shutdowns is expected to be approximately EUR 10 million higher than in Q3/2017, and it is included in the above guidance 27

28 Transformation journey Growth businesses 71% of sales and 90% of operational EBIT Sales 2006 Sales Q3/2017-3% 21% 30% 29% 1% 25% 71% 12% 70% Operational EBIT % 17% 15% Operational EBIT Q3/2017 Consumer Board Packaging Solutions 1 Biomaterials Wood Products Paper 2 Other & eliminations -3% 35% 38% 10% 3% 10% 30% 90% 1 In 2006 included in Consumer Board 2 In 2006 includes merchants 62% 6% 30% 17% 28

29 A step change in our transformation Sales growth three consecutive quarters Strategic projects in China, Varkaus and Murów drive sustainable profitable growth Sales growth 4.8%, excl. paper 11.1% ROCE 13.9% at the highest level since Q1/2001 Solid cash flow generation Net debt/ebitda 1.8 Moving from asset transformation to innovation and sales transformation 29

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