Metsä Board Interim report
Solid performance in Profitability improved from the previous quarter Paperboard delivery volumes grew and price levels remained stable Production of coated paper ended at Husum mill After the review period: Metsä Board announced price increase in FBB in Europe Installation of new FBB machine in Husum began Investment decision in extrusion coating 14 12 1 8 6 4 2 ROCE, % (excl. non-recurring items) target is >12% from 217 3,4 4,8 6,4 9,1 12,1 211 212 213 214 Q1 Q3/15 2
Steady sales and improving margins 6 5 4 3 2 Sales EUR million 52 479 51 494 514 499 526 522 498 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 5 4 3 2 1 Operating result* EUR million and % of sales 19 29 36 28 35 37 43 47 55 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 15% 1% 5% % 5 4 3 2 1 Pre-tax result* EUR million and % of sales 9 18 21 2 27 32 32 4 48 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 15% 1% 5% % 3 *) excluding non-recurring items
Main operating result drivers in vs. Q2/215 Paperboard delivery volumes Lower FX hedging costs Negative profit impact from Gohrsmühle mill* was eliminated Strike in Finland Maintenance shutdown in Kemi Paper delivery volumes (planned) 4 *) Divested in May 215
Paperboard deliveries continued to grow in Annual average growth rate (CAGR) in 213 215E: 12% 1, tonnes 36 3 24 94 93 95 91 112 11 12 111 13 141 137 18 12 189 192 197 185 191 197 21 23 24 213 224 6 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 5 Folding boxboard Fresh forest fibre linerboard
1, tonnes Most important growth area is Americas 3 25 Actual and targeted deliveries to Americas 3 25 2 15 1 5 211 212 213 214 215E 218 target Folding boxboard Fresh forest fibre linerboard 6
EUR million EUR million Paperboard segment in : Sales increased and profitability improved 4 Sales 6 Operating result, excl. non-recurring items 16% 15% 16% 14% 16% 12% 13% 3 2 1 4 2 44 51 61 6 65 1% Operating result, M 7% Operating result, M 4% EBIT-% 1% Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15-2% highlights FBB deliveries increased compared to Q2/215 Price level remained stable Result was weakened by the strike in Finland and maintenance shutdown in Kemi 7
EUR million EUR million Non-core operations segment in : Sales decreased as expected Sales Operating result, excl. non-recurring items 15 2 2% 1-2,9-1,8-3,2-3,4-1,3 % Operating result, M Operating result, M EBIT-% 5-2 -1% -2% -2% Q3/14 Q4/14 Q1/15 Q2/15 Q3/15-4 -2% -3% -3% Q3/14 Q4/14 Q1/15 Q2/15 Q3/15-4% highlights Paper deliveries decreased as planned and prices declined slightly compared to Q2 215 Negative profit impact from Gohrsmühle was eliminated (divested in May 215) Coated paper production discontinued in Husum 8
Exchange rate changes during the last 12 months have been favourable Only minor positive impact on operating result after hedges in Q3 215 compared to previous quarter Duration of Metsä Board s hedges of the main foreign currency flows has been 4 6 months during the last 12 months Annual unhedged operating profit sensitivity of 1% change vs. euro EUR 45 million in USD EUR 2 million in GBP Reversed EUR 3 million SEK Segment figures reflect exchange rate changes rapidly but hedge accounting result in Other operations balance the impact 9
Strong balance sheet Equity ratio, % Net gearing, % Net debt, EUR million and Net debt/ebitda 5% 4% 3% 2% 1% % 46% 33% 27% 211 21 213 214 9/15 12% 1% 8% 6% 4% 2% % 16% 73% 7% Target 7% 51% 34% 211 212 213 214 9/15 1 8 6 4 2 4,4 3,4 2,9 1,8 783 625 597 427 344 211 212 213 214 9/15 1,2 5 4 3 2 1 Net debt, EUR million Net debt/ebitda 1
Financial costs are declining steadily Net financial costs and average interest rate EUR % 6 4 2 47 56 39 27 212 213 214 Q1 Q3 215 Net financial costs, EUR million Average interest rate, % 5,5 5, 4,5 4, 3,5 3, Net financial costs in January September totalled EUR 27 million (Q1 Q3/214: EUR 34 million) Declining costs due to the lower interest rates, credit margins and IB debt Average interest rate in IB debt in Q1 was 3.8% 11
Investment programme in Husum continued as planned Installation of new FBB machine started in October, production start-up in January 216 Paper machines PM6 and PM7 closed down in Q4 Husum will become a leading fresh forest fibre paperboard unit in Europe 12 Folding boxboard production (BM1) Capacity 4, t/a Deliveries mainly to Americas and Food service globally Full production capacity reached by the end of 216 Expected delivery volumes in 216 at least 2, tonnes Linerboard production (BM2) Capacity 3, t/a Deliveries to Europe and Americas Remaining uncoated paper* production to linerboard production by end of 217 *) current run-rate 15, tn/a
Completion of the transformation and expected impacts Transformation process in Husum mill, Sweden Annual Operating result impact +EUR 5 million Fully impact mostly in 217 and fully in 218 Expected impact on 216 is roughly one third of the total Gohrsmühle divestment Annual Operating result impact +EUR 2 million Roughly half materialises in 215 Reduces annual sales by EUR 9 million Total paperboard capacity after the transformation over 2 million tonnes All figures are based on company estimates and compared to FY214 figures 13
Metsä Board expands its offering in food and food service paperboards by investing in extrusion coating 14 Investment value EUR 38 million Will be implemented at Husum mill Start-up in Q1/217 with capacity of 1, t/a In 215 216 Metsä Board s paperboards are coated by external converter The company continues to develop other barrier solutions including biobased materials Food service packaging requires barrier features e.g. moisture and fat resistance
Significant recognitions for product quality and sustainability 215 Pro Carton ECMA awards Four carton packages using Metsä Board s paperboard won awards including the top honour of the sustainability award 15 215 CDP CDP recognised Metsӓ Board s climate change transparency with score of 1/1. The company was included on the Nordic Disclosure Leadership Index (CDLI) Metsä Board was also recognized as a world leader for sustainable use of water. ECMA is the International Network of Folding Carton Organisations; carton businesses, national carton associations and suppliers to the carton industry. CDP is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CDP works with market forces, including 767 institutional investors with assets of US$92 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them.
Near-term outlook for Q4/215 Paperboard delivery volumes are expected to decrease slightly due to the seasonally weaker December. Average price level is expected to remain stable Metsä Board announced price increase in FBB in Europe, effective from 1 December Paper delivery volumes will decrease clearly as planned Long fibre pulp supply and demand is expected to be in balance The earlier announced investment shutdown in Husum will have a negative impact on operating result of approximately EUR 15 million Average production costs are not expected to change materially in Q4/215 16
Profit guidance for Q4/215 Metsä Board s operating result excluding non-recurring items in Q4/215 is expected to decline compared to The result is weakened primarily due to the shutdown of the integrated mill related to Husum's investment programme 17
Summary Operating result in January September 215 already exceeded the full year operating result in 214 Paperboard delivery volumes continued to grow, a slight decline is expected in Q4/215 Metsä Board continues its extensive product development work and expands the product offering Transformation process to pure paperboard company is near to its completion 18
Appendix
% % ROCE-% and EBIT, % ROCE-%, excl. non-recurring items EBIT-%, excl. non-recurring items 14 12 12,1 14 12 1 9,1 1 9,4 8 6 4 2 3,4 4,8 6,4 8 6 4 2 2,4 3,6 5,2 6,8 211 212 213 214 9/215 211 212 213 214 9/215 21
EUR million EBITDA development 25 2 18 185 EBITDA, excl. non-recurring items 28 236 224 15 1 5 211 212 213 214 Q1 22
Other operations segment result Other operations segment include costs which are not allocated to units, e.g. head office costs Cost base of these is roughly EUR 4 5 million per quarter Result fluctuation is caused by hedge accounting result, which has had a negative impact of EUR 3 8 million per quarter during the past year In, the hedge accounting impact was EUR -5 million (H1/215: EUR -16 million). EUR million -3-6 -9-12 -15 Other operations segment: Operating result, excl. non-recurring items -2-6 -6-12 -14-9 -9 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 23
Diversified funding sources, strong liquidity Debt structure Total EUR 67 million 3 September 215 Available liquidity Total EUR 467 million 3 September 215 26 % 3% 7 % Bonds 3 % 33 % Loans from financial institutions Pension loans Finance leases Other loans 21 % 1 % 69 % Liquid assets and investments Revolving credit facility Undrawn pension loan Average interest rate of IB at the end of was 3.8%. 24
Market price development in Europe Folding boxboard and white-top kraftliner EUR/tonne 11 1 Folding boxboard 1/29 9/215 9 8 7 White-top kraftliner 1/29 9/215 6 5 29 21 211 212 213 214 215 Folding Taivekartonki boxboard Valkopintainen White-top kraftliner kraftlaineri 25 Q3 215
Paper and Pulp Market Prices in Europe 2 EUR/tonnes 11 NBSK, EUR 1 9 LWC 6g Offset CWF 1g Reels A4 B-Copy 8g sheet EUR/USD EUR/USD 1,7 1,6 1,5 1,4 8 7 6 5 4 1,3 1,2 1,1 1,9,8 26
Ownership structure on 3 September 215 Shares, % (total no. of shares 355,512,746) Votes, % (total no. of votes 1,37,53,115) Households Households Non-profit organisations Foreigners* 6,1 4,4 11,5 17,1 2,2 Non-profit organisations Foreigners* 2,1 1,8 14,5 1,1 4,1 6,6 Metsäliitto Cooperative Other companies 18,5 Metsäliitto Cooperative Other companies Finance and insurance companies Public sector organisations 4,2 Finance and insurance companies Public sector organisations 6,9 Source: Euroland * incl. nominee registered 27 5 November 215