Post on 31-Jul-2020
Metsä GroupInterim report Q1/2020
Ilkka HämäläPresident and CEO
29 April 2020
• The safety of Metsä Group’s employees, preventing any furtherspread of the pandemic as part of society and ensuring businesscontinuity are of primary importance
• The restrictions and recommendations issued by the authoritiesconcerning the pandemic are monitored continuously. The mostimportant is maintaining a physical distance
• Different functions have drawn up precautionary measures inadvance, so that they will be able to ensure the personnel’s safetyand business continuity
• Resource situation has remained normal throughout the pandemic• Production and deliveries have run normally, with the exception of
Metsä Wood’s units in the UK and partially the Metsä Svir sawmilland wood supply operations in Russia
29.4.2020 Metsä Group3
Impacts of thecoronavirus pandemic
Metsä Group – The coronavirus pandemic
• Sales EUR 1,253 million (Q1/2019: EUR 1,438 million)• Operating result* EUR 62 million (EUR 180 million)• Operating result* 5% of sales (12.5%)• Return on capital employed* 4.9% (13.8%)• Operating result was weakened mainly by lower pulp prices
and the strikes in Finland which impacted all Metsä Group’sbusiness areas
• Exchange rate fluctuations had a positive effect on the result• The coronavirus pandemic increased demand for tissue papers
and paperboard. The development of the pulp market wasmodestly positive
29.4.2020 Metsä Group4
Metsä Group’s result lowerthan a year ago
Metsä Group – Q1 2020
*Comparable
• Average long-fibre pulp price was stable and short-fibre pulpprice decreased slightly from Q4/2019. The prices were clearlylower than in Q1/2019
• The strikes had a roughly EUR 50 million negative result impact,of which EUR 45 million concerned Q1/2020
• Paperboard deliveries were on a higher level than in Q1/2019• Investment decision of the EUR 200 million sawmill in Rauma
was made• The environmental impact assessment of the Kemi bioproduct
mill was concluded• The permission to begin the construction of Husum’s new
recovery boiler was received• EUR 10 million investment in a new tissue paper line at Raubach
29.4.20205
Events during the first quarter
Metsä Group – Q1 2020
Metsä Group
29.4.2020 Metsä Group6
1,156 1,184 1,143 1,175 1,216 1,235 1,2601,328
1,428 1,4771,386 1,419 1,438
1,372 1,3741,290 1,253
0
200
400
600
800
1 000
1 200
1 400
1 600
Q1/16 Q2 Q3 Q4 Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20
Sales quarterlyEUR million
Metsä Group – Q1 2020
29.4.2020 Metsä Group7
109120
103 107128 119
134
185
208 210223
208
180
128110
7662
0
50
100
150
200
250
Q1/16 Q2 Q3 Q4 Q1/17 Q2 Q3 Q4 Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20
Metsä Group – Q1 2020
EUR million
Comparable operating result, quarterly
Change in comparable operating result
Metsä Group8
Metsä Group – Q1 2020
EUR million
Comparable operating result Q1/2019 180
Sales prices -92
Sales volumes -30
Exchange rates 17
Wood raw material -2
Raw materials, energy and other variable costs 5
Employee costs 8
Maintenance and other fixed costs -1
Change in inventory -14
Depreciation and other -9
Comparable operating result Q1/2020 62
29.4.2020
Items affecting comparability
Metsä Group9
Metsä Group – Q1 2020
EUR million Q1/2020
OPERATING RESULT (IFRS) 61.1
Items affecting comparability:
Metsä Tissue / Items related to the sales of napkin business 1.3
Items affecting comparability, total 1.3
COMPARABLE OPERATING RESULT 62.4
29.4.2020
29.4.2020 Metsä Group10
Comparable ROCEMetsä Group – Q1 2020
10.6
12.5
16.6
13.8
4.9
0
4
8
12
16
20
Q1/2016 Q1/2017 Q1/2018 Q1/2019 Q1/2020
%
Target > 12%
29.4.2020 Metsä Group11
Equity ratio
Metsä Group – Q1 2020
43.9 45.0
53.156.2 56.2
0
10
20
30
40
50
60
2016 2017 2018 2019 3/2020
%
29.4.2020 Metsä Group12
Interest-bearing net liabilities
Metsä Group – Q1 2020
1,033 993
463374
449
0
300
600
900
1 200
1 500
2016 2017 2018 2019 3/2020
EUR million
29.4.2020 Metsä Group13
Capital expenditure
Metsä Group – Q1 2020
EUR million
762
631
274 260
620
200
400
600
800
1000
2016 2017 2018 2019 Q1/2020
Full yearestimate
Includes investments in leased fixed assets.
29.4.2020 Metsä Group14
Personnel
Metsä Group – Q1 2020
9,300 9,126 9,310 9,265 9,154
0
3 000
6 000
9 000
12 000
2016 2017 2018 2019 03/2020
Wood delivery volumes decreased from last year• The prices of logs and pulpwood were stable• Due to the warm and wet winter, harvesting and
transport conditions were challenging• Wood harvesting and deliveries were carried out
according to plan with the exception of thetemporary halt due to the strikes
• A total of 7.9 million m3 of wood was delivered (9.4)• 80% advance funding for regeneration fellings
between February and April• 55% of wood acquired from private forest owners
was purchased digitally. In the sales of forestmanagement services, the figure was 57%
29.4.2020 Metsä Group15
Sales and comparable operating resultEUR million
Metsä Forest – Wood Supply and Forest Services
490 496471
526 526 508474 465
431
8.7
5.8
8.9 8.9
11.3
5.65.0
5.6
3.4
0
3
6
9
12
15
18
0
100
200
300
400
500
600
Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20
Sales Operating result
The delivery volumes and profitability of wood productsindustry declined due to the strikes in Finland• The delivery volumes of engineered wood products
declined in all product categories• Sales prices of spruce plywood and Kerto LVL
remained on the previous year’s level, whereas theprices of birch plywood declined
• The profitability of the UK business improved fromthe comparison period but the demand in the UKdeclined due to the coronavirus pandemic
• Production at Metsä Wood’s UK units has been at astandstill since 24 March due to the coronaviruspandemic
29.4.2020 Metsä Group16
Sales and comparable operating resultEUR million
Metsä Wood – Wood Products Industry
109 119106 108 111 119 111
93 87
6.2 5.5
2.8 2.2 1.83.3 3.1
-1.1
-3.3 -5
0
5
10
15
-40
0
40
80
120
Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20
Sales Operating result
Modestly positive development in the pulp marketin recent weeks• Result was weakened compared to Q1/2019 by
the lower pulp prices and the strikes in Finland• Delivery volumes of pulp and sawn timber declined
clearly• Exchange rate development had a positive impact• Demand for softwood pulp has grown compared to
Q1/2019 and the prices have recovered slightly.Demand for tissue papers has increased and forprinting papers declined during the pandemic
• Metsä Fibre made the decision to build the EUR200 million sawmill in Rauma
• The pre-engineering of Kemi bioproduct mill isproceeding as planned. Readiness to makeinvestment decision in the autumn of 2020
29.4.2020 Metsä Group17
Sales and comparable operating resultEUR million
Metsä Fibre – Pulp and Sawn Timber Industry
601 629 609 630 623556 567
490412144.9
164.9187.0
172.0
122.4
83.1
33.09.9
-21.3
-50
0
50
100
150
200
250
-150
0
150
300
450
600
750
Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20
Sales Operating result
29.4.2020 Metsä Group18
Price of pulp (PIX) in Europe and China
Metsä Fibre – Pulp and Sawn Timber Industry
400
600
800
1000
1200
1400
400
600
800
1000
1200
1400
´12 ´13 ´14 ´15 ´16 ´17 ´18 ´19 ´20
Hardwood/EUR Softwood/EUR Hardwood/USDSoftwood/USD Softwood/China/USD
USD EUR
Source: Fast Markets Foex
Paperboard business at a good level• Paperboard delivery volumes increased in Q1/2020
compared to Q1/2019 despite of the strike• Coronavirus pandemic has increased the demand
for paperboard• The price of folding boxboard in Europe was
unchanged and the price of white kraftliner slightlylower than a year ago
• The result was weakened by the lower prices ofmarket pulp and the strike in Finland
• Production costs declined due to lower of wood andenergy prices
• Investments in the modernisation of Husum pulpmill in Q1/2020 were EUR 24 million
29.4.2020 Metsä Group19
Sales and comparable operating resultEUR million
Metsä Board – Paperboard Industry
492519
475 458487 477 489 478 472
69.059.2
64.0 60.0 61.8
41.0 42.5 39.133.8
0
20
40
60
80
100
120
0
100
200
300
400
500
600
Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20
Sales Operating result
29.4.2020 Metsä Group20
600
700
800
900
1000
1100
1200
2012 2013 2014 2015 2016 2017 2018 2019 2020
Folding boxboard White-top kraftliner Sources: Fastmarkets RISI & Fastmarkets FOEX
Prices of folding boxboard and white-top kraftlinerin Europe 2011–Q1/2020EUR/tonne
Metsä Board – Paperboard Industry
Excellent result in tissue and greaseproof papers• Demand and sales increased substantially as a
result of the coronavirus pandemic• The result improved mainly by increased demand,
implemented efficiency measures and lower rawmaterial costs
• The strike affected production volumes in Finland• Metsä Tissue invested EUR 10 million in a new
tissue paper production line for professional use atits Raubach mill
• Metsä Tissue finalized the divestment of its napkinbusiness to keeeper Groupille in February 2020
29.4.2020 Metsä Group21
Sales and comparable operating resultEUR million
Metsä Tissue – Tissue and Greaseproof Papers
259 256 254270 267 266 263 264
293
12.3 11.5
6.4 6.110.5
13.5
22.826.6
40.5
0
10
20
30
40
50
60
0
50
100
150
200
250
300
Q1/18 Q2 Q3 Q4 Q1/19 Q2 Q3 Q4 Q1/20
Sales Operating result
• The declined sawn timber demand due to the coronaviruspandemic will reduce harvesting in the Baltic Sea region
• The order books for wood products are at a higher level than lastyear. The coronavirus pandemic will have a weakening impact
• Metsä Group’s sawn timber demand is expected to remain at thecurrent level
• High demand for tissue papers, the weaker availability of recycledpaper and other producers’ production curtailments keep supplyand demand of pulp in balance
• Paperboard deliveries in the Q2/2020 are expected to be roughly atthe same level as in the Q1/2020. The prices are forecast to remainstable
• Strong growth in for tissue paper demand is expected to level off inthe near future
29.4.2020 Metsä Group22
Summary
Market outlook
Metsä Group’s comparable operatingresult is in Q2 2020 expected toimprove from Q1 2020
29.4.2020 Metsä Group23
Near-term result outlook
Summary
• The total value of the agreements is approximately EUR500 million and their degree of Finnish content 70 per cent
• Equipment to Rauma sawmill will be delivered by VeistoOy, Nordautomation Oy, Heinolan sahakoneet Oy,C.Gunnarssons Verkstads AB and Renholmen AB
• A preliminary agreement on the delivery of the keytechnology and automation for all of the main productionlines of the Kemi bioproduct mill has been signed withValmet
These investments create well-being on many levels inFinland
29.4.2020 Metsä Group24
Event after the period
Main equipment purchases forRauma and Kemi agreed